Green Card Tax Guide for Australian Expats in the US in 2024

As a Green Card holder, you’re required to file an annual US tax return regardless of which country you live in. 

But if you file your US tax return incorrectly, you could get fined or end up paying more tax. 

Uptrend Advisory provides tax advice and prepares US tax returns for Australian expats.

Our extensive knowledge of the US and Australian taxation systems gives you peace of mind and makes US tax compliance effortless and efficient for you.

  • If you’re switching from another visa to a Green Card, do you know if you’re a resident or non-resident for tax purposes—and why it matters?

  • If you haven’t filed your US taxes in three or more years, do you know how to reduce—or avoid—fines?

  • Do you know how to avoid paying double taxes? 

  • If you plan to relinquish your Green Card, did you know you may need to pay exit tax—and how to avoid this?

Get (back) on track with your US tax returns—at all stages of your Green Card journey.

 
“As an Australian citizen and US resident, Uptrend Advisory recently helped us through the complexities of completing our US tax return. They were very responsive, professional and had a high level of specialist knowledge across the US and Australian tax systems. Thank you!”
— Michael B.

Green Card Resident vs. Non-resident Tax Status

When you obtain a Green Card, you’re a permanent resident for immigration purposes and you’re considered a resident alien for tax purposes.

Tax Residency Status For Your First Year As a Green Card Holder

Your status as a resident alien for tax purposes generally starts the day you were physically present in the US after you received your Green Card. If you were a non-resident for tax purposes in the same financial year prior to obtaining your Green Card, you can file either as a dual-status alien or a full-year resident in the changeover year.

Impact of Covid Travel Restrictions

If you resided outside the US for an extended period in the year you obtained your Green Card due to Covid travel restrictions you will still be taxed as a US resident. However you may have additional filing requirements depending on your individual circumstances. Get in touch if you’re in this situation and need help.

Unsure of your residency status for tax purposes or how to handle your US taxes as a dual-status alien?

US Tax Basics for Green Card holders

  • As a Green Card holder, you pay the same income taxes as a US citizen including federal, state, and local taxes, plus Social Security and Medicare taxes.

    The exemptions you declare on your W-4 Form reduce the taxes withheld from your employer income. Don't claim more allowances than you’re entitled to though because you may end up with a tax bill after your US tax return is processed.

  • To claim a child tax credit or the credit for other dependents for dependent children, you need:

    Social Security Number (SSN) for US-born children, or

    Individual Taxpayer Identification Number (ITIN) for overseas-born children

  • The US-Australia Tax Treaty means you don’t pay tax twice in the US and Australia.

    But you must report worldwide income on your US tax return. Plus you must also file a Foreign Bank and Financial Accounts Report (FBAR) to report any foreign financial accounts you hold. Finally, you might be required to file other foreign forms if you’ve lived or worked outside the US as a Green Card holder or due to other circumstances. So if you’re not sure drop us a line and we can review your specific situation.

    Be aware that some US states, including New York and California, don't abide by the US-Australia Tax Treaty. This means you might get taxed on Australian sourced income, depending on which US state you live in.

  • You need to file an FBAR if the total balance of all your foreign financial accounts reached US$10,000 at any time during the tax year.

    This includes bank accounts, stock portfolios, shares, and other assets. And you must list all accounts on your FBAR, including zero balance accounts and accounts that individually didn't reach the US$10,000 threshold.

  • IRS guidelines on reporting Australian superannuation aren’t clear. It's a grey area and even tax professionals have conflicting views. But the IRS can impose fines for misreporting your US tax return so it’s important to get it right.

U.S. Tax Filing for Green Cards

  • The due date for filing your US tax return is April 15th for the financial year ending the previous calendar year. You can request an extension with the IRS and your due date is extended October 15th. However, if you owe US taxes you must still pay them by April 15th.

  • As a Green Card holder, you’re required to file an annual US tax return as a non-resident alien otherwise, it may affect your permanent residency status, as well as potential for fines.

  • If you’re a Green Card holder with a spouse, although you can file US tax returns separately, it’s typically more advantageous to file a joint return.

  • You can file your US tax return yourself using:

    IRS forms, or

    Electronically using IRS or US tax preparation software.

    You can use a tax service to prepare and electronically file your US tax return. Uptrend Advisory is an Australian expat tax service based in the US, founded by an Australian expat, Jason Stoch, CPA, CA.

Applying for your Green Card and US Tax Compliance

  • When applying for a Green Card, you’re required to submit copies of filed US tax returns for the previous 3 years (and longer in some circumstances) as part of your application.

  • The sponsoring spouse is required to submit copies of their US tax returns for the previous 3 years.

  • If you failed to file a US tax return after becoming a permanent resident, you’re required to include all related correspondence with the IRS as part of your application or renewal.

  • If you owe any state, local, or federal overdue taxes, as part of your Green Card application or renewal you’re required to include all correspondence with the IRS including details and current status of your repayment plan.

Relinquishing your Green Card and Exit Tax

  • If you renounce your US permanent residency, you might be liable to pay expatriation tax.

    The IRS uses a set of tests to determine if you're a covered expatriate and whether the exit tax will apply to you. As a covered expatriate you’re subject to exit tax tests. However, under specific conditions you can avoid this exit tax.e. One of the requirements for this is that you must meet all federal US tax obligations for 5 years prior to expatriation. If you haven’t, you’ll automatically be subject to exit tax provisions, even if you don’t meet the other criteria for being a covered expatriate.

    In order to formally relinquish your Green Card and determine if you’re a covered expatriate, you need to file a Form 8854 Initial and Annual Expatriation Information Statement. Also, you may need to file other forms depending on your circumstances.

    The rules and filing requirements around expatriation tax are complex and the consequences can be severe if you get it wrong or fail to properly comply. So it’s an area where you should definitely seek advice from an experienced expat tax specialist.

  • You must still file a US income tax return for the financial year in which you gave up your Green Card. The substantial presence test determines your US residency status for tax purposes.

    If you plan to cash out your 401(k) or IRA in the US, taxes and fees may apply.

Australian Tax Topics for Expats on Green Cards

  • Generally, you still need to file an Australian tax return if you earn income, but exceptions apply. Learn more here.

  • If you own Australian investment property you must declare rental income to the ATO by filing an Australian tax return.

    If you're planning on selling your Australian investment property, consult an Australian tax specialist. That’s because the ATO has rules around paying capital gains tax on investment properties that specifically relate to Australian expat tax obligations. Learn more here.

  • If you have a HECS/HELP debt, you need to declare any worldwide income to the ATO, regardless of your tax residency status. Learn more here.

What if you get US Tax wrong on a Green Card?

If you fail to meet US tax compliance the IRS can impose fines.

But as a Green Card holder, your permanent residency status could be affected. Also if you wish to obtain a Green Card, your application could be jeopardized. Or if you’re relinquishing your Green Card you could be subject to substantial exit taxes if you’re not compliant with your US tax obligations.

So it’s vitally important to take action if you’re in any of these situations: 

  • I’m applying for a Green Card (or renewal) and I haven’t filed US tax returns for 1 or more years.

  • I’m applying for a Green Card by marriage (or renewal) and my spouse hasn’t filed their US tax returns for 1 or more years.

  • I’m applying for a Green Card (or renewal) and owe taxes.

  • I'm late filing my US tax return.

  • I haven't filed any US tax returns because I didn't know I needed to.

  • I haven't filed any FBARs because I didn't know I needed to.

  • The IRS sent me an inquiry.

  • I had help with my US tax return but it contained errors/wasn’t filed properly.

Uptrend Advisory has helped hundreds of Australian expats at all stages of their Green Card journey navigate through issues like these for more than 10 years. 

If you're late filing your US tax return you can apply to the IRS for an extension. 

If you haven’t filed your taxes in three or more years, you may be eligible for the IRS Streamlined Procedures, an amnesty program that can reduce or eliminate your penalties.

If you have any immigration-related concerns, contact an immigration lawyer.

If you’re a Green Card holder in a complex US tax situation, it’s essential to get expert advice. Get in touch and we’ll advise how to best resolve your issue.

If you’re an employer sponsoring an employee on a Green Card, connecting them with our experienced expat tax services at the start of their employment with you, means they can avoid US tax compliance issues before they occur. Drop us a line to learn more.

UpTrend Advisory Makes US Tax Easy For You

As Aussie expats ourselves, we know how overwhelming the US tax system can be. For your convenience and peace of mind, we offer US tax preparation and filing services for Green Card holders.

We also offer tax advice for meeting your US taxation compliance in preparation for your Green Card application and if you renounce your Green Card.

With our extensive knowledge of the dual US and Australian tax systems, you can trust us to prepare and file your US tax returns compliantly, accurately, and on time.

Our services include:

  • Preparation and filing of US tax returns

  • Preparation and filing of Foreign Bank and Financial Accounts Report (FBAR)

  • IRS Amnesty Program (Streamlined Filing Procedures)

  • Tax advice to meet US tax obligations at all stages of the Green Card journey, including:

    • Applying for your Green Card

    • Switching from another visa to your Green Card

    • Relinquishing your Green Card 

We’re easy to reach and stay in regular contact with you, especially during tax time. This leaves you to focus on the important reasons you pursued permanent residency in the first place—whether it’s advancing your career or starting the next exciting chapter of your life together with your spouse.

Or, if you’re a Green Card sponsoring employer, by connecting your employee to our experienced tax services, you’re offering them peace of mind and efficiency for their US tax filing. That way, your valued employee can focus their unique expertise to help your business thrive rather than being distracted from worrying about their US tax compliance.

Uptrend Advisory does not provide immigration-related advice, so if you need help with your Green Card application or other immigration matters, contact an immigration lawyer such as California-based Green and Spiegel.