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Ties to the US? Tax compliance is paramount

The topic of discussion this week is the United States Supreme Court opinion rendered on February 21, 2012 in the matter of Kawashima v Holder. The Supreme Court affirmed a Ninth Circuit decision that held that a couple's convictions for making a false statement on a (tax) return and aiding the preparation of a false (tax) return, constitute deportable offences, finding that the offences involve fraud or deceit and are aggravated felonies under 8 USC section 1101(a)(43)(M)(i) when the loss to the government exceeds $10,000.

The case of Kawashima v Holder can found in great detail on the web, and directly at the Supreme Court of the United States website for your perusal. www.supremecourt.gov/opinions/slipopinions.aspx?Term=11

In summary, Mr and Mrs Kawashima, both Japanese citizens, came to the United States in 1984 as green card holders. They established lives, families, and operated successful businesses. In 1991, the couple made false statements on their corporate tax returns. Six years later, they were convicted, fined almost $250,000 dollars, with one serving some prison time.

The case did not end at that point, however, in 2001, US Immigration and Naturalisation Service brought charges for aggravated felony against the couple in immigration court, where conviction means automatic removal deportation from the United States. Eleven long years later, after appeals and various court trials, the US Supreme Court concurred with the deportation decision. One-third of their lives gone, from the culmination of bad decisions. How very, very sad.

With this decision, the United States ramps up the ante and the message again that full tax disclosure and tax compliance by Long Term Permanent Residents (a.k.a green card holders) and other resident aliens is required to maintain the right to US residency.

Why the interest in this case? Anecdotally, there are thousands of Bermuda residents with US connections.

It is difficult to estimate the total number of those with US ties here in Bermuda, for many and varied reasons. Hundreds of international business guest workers (with US affiliations or citizenships) swelled the ranks, but have since left the island as per the recent article in

The Royal Gazette in an interview with The American Society. Local residents born in Bermuda (or elsewhere outside the US) with Bermudian citizenship may have derived dual citizenship (through a parent or parents) with the US, but don't consider themselves US persons.

Others, who were born in the US, acquired Bermudian citizenship many years ago (by marriage, etc) have allowed their US passport renewals to lapse.

US connections may be acquired by family sponsorship, working or investing in the US under certain types of visas, some of which can culminate in the receipt of a green card. Others become US residents for income tax purposes under sometimes inadvertent circumstances, due to overstaying their welcome. All US connections come with responsibilities and a range of rights.

Who is a green card holder (permanent resident)?

USCIS website states that: “A Green Card holder (permanent resident) is someone who has been granted authorisation to live and work in the United States on a permanent basis. As proof of that status, a person is granted a permanent resident card, commonly called a 'Green Card'."

The Right to Reside on a Permanent Basis.

Holding a green card entitles a person to residency in the US, although the right to reside in country is not as alienable as may be thought. There are stipulations as to the amount of time spent within the US, as well as travel outside of the country. Much weight is placed on intentions of being a permanent resident, that is, going to visit abroad only temporarily, whether the person maintained US family and community ties, maintained US employment, filed US income taxes as a resident, or otherwise established his/her intention to return to the US as his/her permanent home.

A sort-of, but-not-really United States citizen. Thus, if you are a candidate for a green card, you will have the right to reside in the US and subject to the same responsibilities as a United States citizen, even though you are not a US citizen. Meeting those responsibilities, adhering to, and obeying laws of the US, the states, and localities, filing your income tax returns and meeting your tax compliance obligations, living as a law-abiding resident, and registering with the US Selective Service, if you are a male age 18-25, are part of the program to implicitly earn your way to full citizenship.

Gift horses. For some, a green card is not regarded as a gift, or a horse at a race. Individuals possessing a green card range the gamut. Some may find it superfluous to their current lifestyle, or are very conflicted as to their ultimate, long-term decision to keep this right. For others, absolutely desperate to live and work in the United States, a green card is a precious vital cherished gift, to be treated with great care when received. Sponsorship by an existing green card holder (or US citizen) relative, depending upon the closeness of the association, may be short term, or can take more than ten 15 years, to come into effect.

Renunciation of green card status may still be the bottom-line decision for some individuals. These renunciation processes have their own sets of regulations and compliance procedures under both US tax and US immigration laws that must be adhered to very carefully. Allowing a casual lapse upon leaving the borders of the US may impact an individual with situations of indeterminate personal consequences, such as denial of future residence in the US, but still liable for IRS tax filing and reporting liabilities.

So, it is simple really. Don't let life happen to you. Planning for your current and future lifestyle encompasses all aspects of your personal financial profile: cash flow management, insurance, pensions and retirement, estate and legacy decisions, investment independence, and tax compliance. If you are a green card holder (or US citizen), international tax compliance dominates and affects every other phase of your financial plan. Get it right, get out, or decide to stay compliant. You can sleep at night.

The information contained within this article is for general educational purposes only and is not intended for you, or persons related to you, nor can it be used by you as personal tax, retirement, estate, insurance or investment advice for your personal financial plan. You should seek the advice of qualified credentialed experienced international planning professionals for your personal financial planning needs.

Martha Myron, CPA CFP (US) TEP JP is an international Certified Financial Planner™ providing Financial Counsel for Cross Border Living™ on international tax, estate, and retirement strategies for Bermuda residents with US connections, and US citizens living and working abroad. Member of the American Citizens Abroad Professional Tax Advisory Council. www.americansabroad.org Contact mmyron[AT]patterson-partners.com or 296 3528 at Patterson Partners Ltd.

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Published March 24, 2012 at 9:00 am (Updated March 24, 2012 at 9:04 am)

Ties to the US? Tax compliance is paramount

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