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Our daughter-in-law is a Guatemalan citizen and a ‘green card’ holder since 2014 (the year she married our son- a U.S. citizen).

They are foreign missionaries and have lived in Guatemala since 2015. She works for a U.S. non-profit that employs her for services rendered solely in Guatemala.

As such, I believe she fell from ‘resident alien’ to ‘non-resident alien’ status in 2015 and is not subject to self-employment taxes. She does have a SSN. The taxes filed for 2015 & 2016 were “married-filing jointly”, but did not list her income. Wouldn’t have made a difference tax-wise since they are well below the foreign exclusion threshold.

I believe the 2015 & 2016 Taxes need to be amended to have our son file as ‘head of household’ or ‘married filing separately’. Do I have the correct interpretation ? Any other considerations ?

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Once she became a US permanent resident, she continues to meet the Green Card Test (and thus be a resident alien for US tax purposes) until either she becomes a citizen, she voluntarily signs a form to relinquish her permanent residency, or it is taken away from her by an immigration judge, or an official determination is made that she has abandoned her residence. Absent one of these, she continues to be a resident alien forever even if she has been gone so long that she would not likely be allowed entry if she tried to enter as a permanent resident, and even if her physical green card is expired.

See Green Card Test in Publication 519:

You continue to have resident status under this test unless the status is taken away from you or is administratively or judicially determined to have been abandoned.

Resident status taken away.

Resident status is considered to have been taken away from you if the U.S. government issues you a final administrative or judicial order of exclusion or deportation. A final judicial order is an order that you may no longer appeal to a higher court of competent jurisdiction.

Resident status abandoned.

An administrative or judicial determination of abandonment of resident status may be initiated by you, the USCIS, or a U.S. consular officer.

If you initiate the determination, your resident status is considered to be abandoned when you file either of the following with the USCIS or U.S. consular officer.

  • Your application for abandonment.

  • Your Alien Registration Receipt Card attached to a letter stating your intent to abandon your resident status.

You must file the letter by certified mail, return receipt requested. You must keep a copy of the letter and proof that it was mailed and received.

CAUTION

Until you have proof your letter was received, you remain a resident alien for tax purposes even if the USCIS would not recognize the validity of your green card because it is more than ten years old or because you have been absent from the United States for a period of time.

If the USCIS or U.S. consular officer initiates this determination, your resident status will be considered to be abandoned when the final administrative order of abandonment is issued. If you are granted an appeal to a federal court of competent jurisdiction, a final judicial order is required.

Assuming she did not submit Form I-407 to voluntarily relinquish permanent residency, and assuming she was not removed from the US by an immigration judge, she is still a resident alien for US tax purposes, and have been all these years. As a resident alien, her worldwide income needs to be reported for US taxes no matter where she lived. Although she would be able to use the Foreign Earned Income Exclusion, she would still have needed to report that income on her US tax return and then file Form 2555 to use the exclusion on her foreign earned income.

Regardless of whether she was a resident alien or non-resident alien according to the tests, they would have been able to file Married Filing Jointly anyway, because one spouse was a US citizen or resident alien, so they could always use the Nonresident Spouse Treated as Resident option to file jointly if it happens that the other spouse was a nonresident alien (which it appears she wasn't).

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A green card holder is a tax resident of the US and all his/her global income is taxable income for US tax purposes. There is a tax credit for tax paid to foreign authorities for income from nonUS sources which will reduce the tax payable to the US. The only question is whether your daughter-in-law forfeited her green card status by not being physically present in the US for at least 30 days in each year. This rule is, and has been, invoked when both spouses are green card holders, but I think that the fact that your son is a US citizen trumps that: noncitizen green-card holding spouses of US citizens are on a special fast track for US citizenship. Of course, with the current President and the nonNorwegian citizenship of your daughter-in-law, all bets are off.

I don't believe that amending your son's income tax returns to change his status to Head of Household or Married Filing Separately is the honorable thing to do: he is essentially abandoning his spouse, unfamiliar as she presumably is with US tax laws to the tender mercies of the IRS. I am not sure that such changes (MFJ to HoH or MFS) are even possible with a amended tax return. But, your mileage (or ethics) may vary..

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