It is reported that the implementation rules of the Foreign Account Tax Compliance Act (FATCA) issued by the U.S. Internal Revenue Service (IRS) state that U.S. citizens and green card holders with overseas assets exceeding $50,000 must truthfully report them to the IRS. Failure to do so may result in fines of up to $10,000 or even $50,000. This has caused concern for many people preparing to immigrate to the United States. In this regard, experts state that U.S. global taxation is not as daunting as imagined; as long as one clearly understands the characteristics of U.S. taxation, one can plan personal assets early and reasonably avoid double taxation.
Tax experts suggest that the following property planning issues must be considered before immigration: 1. In whose name should the primary applicant obtain the U.S. green card; 2. The status of assets, income, and overseas income tax payments of the primary applicant and co-applicants before obtaining the green card; 3. What is the source of funds for U.S. investment; 4. How to plan the inflow of funds into the United States; 5. How to plan assets so that the primary applicant and co-applicants pay the least amount of tax after immigration.
Experts suggest that before immigrating to the United States, one can consult with a professional accountant to prepare a current asset allocation table, a five-year capital budget, etc., in order to make comprehensive immigration asset plans.
Tax experts offer the following suggestions for pre-immigration tax planning:
1. The spouse with lower income and fewer assets should be the primary green card applicant. For example, when a couple applies for immigration, the spouse with lower income and fewer assets can be the primary applicant. If only the wife applies for the green card, the husband's assets outside the United States will not be subject to overseas income tax.
2. Consider the differences in disposing of assets before immigration. For example, real estate or stocks can be sold before immigration to obtain cash, which can then be repurchased after immigration, or gifted to family members to avoid related tax issues.
3. After immigration, conduct tax planning by establishing a Living Trust, an Irrevocable Life Insurance Trust (ILIT), or an Intentionally Defective Grantor Trust (IDGT) in the United States.
4. Work overseas to benefit from U.S. tax exemptions.
5. Make good use of non-U.S. citizen overseas gift exemptions and U.S. citizen gift tax exemptions.