I have an elderly relative living on pension in Canada. They got approved for a green card after the interview this week and will move to the US once they get the stamped passport in their hands from the US consulate in Montreal.
If they enter the US for the first time with the new immigrant visa a week before the end of this month (December 2024), will they be required to file taxes with the IRS for 2024 for their pension income in Canada? They have no income from the US in 2024 or in the past.
Or should they wait until January 1st, 2025 to land in the US so that they don’t have to deal with filing taxes in the US for 2024, since they never lived in the US for a single day in 2024? They will be filing taxes in Canada as usual for 2024 since they were there most of the year and their pension income was earned in Canada.
Definitely wait until after December 31st. This will save a lot of hassle, even though they won’t owe any US taxes for 2024.
If they come in earlier, they’ll have to file as married filing separately (MFS), declare all their 2024 income, file a Dual-Status tax return, and exclude their pre-immigration income from the 1040. If the IRS doesn’t handle this correctly, the pre-immigration income could end up in the 1040 by mistake.
I know someone who went through this and ended up paying $30k in taxes and penalties, only for it to be corrected three years later.
Entering the US after January 1st would avoid all these issues.
While they wait, they can study up on any good tax moves before they immigrate.
Edit: If the relative is single, they would file Single, not MFS.
I disagree. I can’t find any requirement that a taxpayer needs to report non-US income for the part of the year when they are a nonresident alien. The general rule is you don’t report income that isn’t taxable unless you’re told to do so.
The confusion at the IRS might come from reporting that income, but you could avoid it by simply not reporting it.
You must file Form 1040 if you’re a dual-status taxpayer who becomes a US resident during the year and are a resident on the last day of the tax year. Write ‘Dual-Status Return’ on top of the return. Attach a statement to show the income for the part of the year you’re a nonresident. You can use Form 1040NR, but write ‘Dual-Status Statement’ across the top."
@Zuri
Yeah, and I’d say if the income isn’t reportable on Form 1040-NR, it shouldn’t be reported on the Dual-Status Statement either. The Form 1040-NR instructions say:
Gross income means all income you received in money, goods, property, and services that isn’t exempt from tax. In most cases, it includes only income from US sources.
@Zuri
They have confirmed what u/TheHeroExa said. See p. 47 of IRS Pub 519 where it talks about Dual-Status Aliens:
"Income Subject to Tax
For the part of the year you’re a resident alien, you’re taxed on income from all sources. Income from sources outside the US is taxable if you receive it while you’re a resident alien. Even if you earned it while you were a nonresident alien or became a nonresident after earning it, it’s taxable. Income from non-US sources that isn’t effectively connected with a US trade or business isn’t taxable when you’re a nonresident alien."
The issue is what needs to be ‘reported’ in the dual-status 1040 filing, not what’s taxable. Logic supports u/TheHeroExa’s view. If it’s not taxable, why report it?
Why should even pre-immigration US-sourced income be reported? That would have been filed on a 1040NR.
The IRS rules are binding, but they seem vague. It’s better to err on the side of caution, especially for someone new to the US tax system.
@Zuri
Thank you for your response and advice. That’s what I was thinking too – too much hassle for just coming a week early to the US, and since they are elderly, it’s better to avoid unnecessary trouble.
I’m so sorry your family member went through all that hassle for 3 years just because of an IRS mistake!
I think the easiest solution is to arrive exactly on January 1, 2025.
If they arrive in 2024, the taxpayer will likely be a dual-status alien for 2024. They might not need to file a return if they don’t earn income in the US in 2024, but they may still need to file FBAR and other forms.
If they arrive later in 2025, the taxpayer might be a dual-status alien for 2025. But dual-status aliens can’t take the standard deduction and miss out on some tax benefits.
@Harlem
Thank you for your response ! I also think flying to the US on January 1, 2025, is the best move to avoid any tax complications. As per the link you shared, the Green Card test says that if you’ve been a resident for even a day in the US, you’re considered a resident for tax purposes that year. This means they might have to file taxes for 2024 even if they come at the very end of the year.
