As a potential EB-5 investor, you may have many questions concerning U.S. tax requirements. Will I have to file a tax return? How do I file my tax return? And how much taxes will I have to pay?
In short, as long as you earn income as a resident or citizen of the U.S., you have to file a tax return. All U.S. residents, citizens, and those eligible to pay taxes have to pay their stated fair share of the tax burden, enforcement of which is strictly adhered to.
Any income derived from participation in a regional center, whether on a profit or paid-out basis, may be subject to U.S. income tax or withholding. In addition, while an EB-5 investor’s home country may exclude income earned abroad from being taxed, or may allow their citizens to avoid taxation by residing abroad for a portion of the tax year, the U.S. taxes residents on all income earned in the U.S. and levies an estate tax on all worldwide holdings.
U.S. Tax for EB-5 Investors
It is highly recommended that all potential EB-5 investors seek a qualified and licensed tax professional who is well-versed in U.S. tax laws as well as the tax laws of the foreigner investor’s home country, allowing the foreigner to plan for the best tax program, and who can organize the applicant’s affairs prior to applying for conditional permanent residency status. All tax planning must be done before a foreigner becomes a conditional resident of the U.S.
That being said, here is a brief overview of what every potential EB-5 investors should be aware of with regards to paying taxes in the United States:
Once your I-526 immigration application has been approved, you will receive temporary permanent residency in the U.S. With conditional permanent residency, although you may not reside in the United States, you will be considered as a U.S. tax resident and will be subject to the same tax requirements as a U.S. citizen.
This means that each year, you will be required file a tax return declaring your total amount of income from the date of admission into the U.S. or adjustment of status to become a conditional permanent resident. Regardless of where you live, you will be required to report worldwide income and pay applicable taxes on that income.
If you fail to accurately report your income, it can affect your ability to obtain (unconditional) permanent residency status and your ability to become a U.S. citizen. You are, therefore, strongly advised to become familiar with basic immigration and tax requirements before you receive permanent residency in the U.S. This will enable you to avoid any serious tax issues. It is also a felony and large fines and/or jail time can be imposed on tax evaders.
Once you invest in the United States, the investment company will send you a Form K-1 or other tax forms each year. This form will indicate that you are an investor who has earned income in the U.S. and enable you to report this income to the Internal Revenue Service (IRS) on either Form 1040NR (Non-Resident) for investors who are still waiting for their conditional permanent residency or Form 1040 once you have your conditional permanent resident status. It is important to be careful of which form you use to file. If an EB-5 investor who has already obtained a green card continues to file Form 1040NR, their residency and green card can be put in jeopardy as proof of residency in the U.S. (through tax filings) is an absolute requirement.
The deadline for filing a tax return in the U.S. is April 15th each year. Residents of the U.S. will have to file a Form 1040 and pay their income taxes. The filing deadline for overseas residents is on or before June 15th each year. Individuals with financial accounts of more than $10,000 US in non-U.S. accounts have until June 30th of each year to do their overseas financial reporting using Form TD F90-22.1. Of particular importance is the fact that the U.S. requires tax forms to be filed for any overseas account containing any equivalent amount of $10,000 US or more. This includes not only account’s under a foreign investor’s name, but also includes accounts that a foreign investor has signing authority over.
Contact an Experienced EB-5 Immigration Attorney
All foreign investors must plan ahead to successfully deal with the U.S. tax system. Proper tax planning prior to receiving conditional permanent residency can enable the EB-5 investor to significantly reduce their U.S. tax liability before immigrating. For more information and/or assistance with locating a qualified tax professional, contact our EB-5 immigration attorneys at David Hirson & Partners, LLP today.
Disclaimer: No statements made in this blog are to be considered formal/legal recommendations. No attorney-client relationship is made herein and statements made herein are not to be relied upon without first seeking advice from the reader’s own professional advisers and counsel prior to making any decision.