[beagle3]

Anyone here aware of tax implications of the parole status?

Usually, "us taxpayer" status is only triggered with a proper visa (H1B, L1, O1, etc.) or permanent resident status (green card). I've never met any mention of tax status on parole.

To someone who has any non-trivial financial life outside the US (which I expect to be true for most people who would apply for this), a us taxpayer status is a horrible curse:

You might get a call from your bank/broker/insurer back home, telling you that they have to close all of your accounts except perhaps a checking and 1 simple saving (and perhaps those too). If you accrued any benefits in your pension plan, you have to report them each year _and_ plan to pay yearly and/or dearly (because it is a PFIC[0]) for any profit made in that account, even though you cannot touch it for 30 years.

Also, if you own another business outside the US -- e.g. you had a previous startup, or operated through some kind of personal LLC providing services -- the "us taxpayer" status means that you have to start filing financial reports to the IRS as if those business were operated in the US (that is, according to US financial standards, regardless of where it operated - and that might mean double taxation despite any treaties in place).

Sure, you can just ignore it, and if your startup fails, no one will come after you. But of course, you plan to succeed, so be sure to read on PFICs, FATCAs, FBARs, and consult a US accountant that specializes in international taxation.

As a general rule, the US tax system assumes any financial dealings you have outside the US are an attempt to evade taxes, and penalizes that (whether by forms or by actual tax). Once it is assumed you plan to make the US the center of your life (green card, H1B, L1), those assumptions, through the "us taxpayer" status, affect you. If it is assumed you won't stay (e.g. F1 visa for studying), they don't.

So, what taxpayer status will parole put you in?

[0] https://en.wikipedia.org/wiki/Passive_foreign_investment_com...

[winter_blue]

With a few exceptions, immigration status is irrelevant to US tax status. US tax status is determined by the Substantial Presence Test: https://www.irs.gov/individuals/international-taxpayers/subs...

Certain visas (specifically A, G, F, J, M, Q) are exceptions to the general rule. For example, the F (student) visa allows you to treat yourself as a non-resident for tax purposes for up to 5 years.

But everyone else, including undocumented immigrants all get treated as "U.S. residents for tax purposes" once they meet the timeline for the substantial presence test.

[beagle3]

Thanks, but IIRC that is not the whole story:

Once you receive a green card, tax days retroactively go back to the first day in which you were legally in the country that year in the status that switched you to a green card - even if you fail the substantial presence test; e.g., you get married to an american citizen outside the US, you both move into the US on 1-Apr, apply for a marriage-based green card, move out of the US a month later*, come back december 20th and receive the green card -- at that point, even though you only spent 40 days in the US (thus failing the substantial presence test), your "us tax payer date" goes back to 1-Apr, which would make you a (partial year) US tax payer for 8 months.

How that interacts with visas or parole, I have no idea, but I know someone whose tax issues were very complicated because of such an issue.

I guess you are right in that the substantial presence test is the default, and some visas have exceptions one way, and green card the other - but I would urge anyone who might be affected by these issues to be very very diligent with respect to tax laws.

And .. we haven't touched state tax laws, which are similar but not exactly the same as federal laws (and vary between states). And there's also the concept of domicile, which makes everything even crazier.

[vmarsy]

You're right, that's an important thing to consider!

Usually you just have the "substantial presence test" to determine if you are a us taxpayer. which is : If you spent >180 days in the US this year, you are considered resident for tax purposes. Otherwise you're non resident.

Visa like the Student visa give you a 5 year exemption, where during that time you only have to report money made in the US, it would be great if that entrepreneur parole status had the same rules.

I tried quickly looking for keywords (IRS, tax, substantial, resident, non-resident) in those 155 pages of proposal but couldn't find anything.

People writing comments to the DHS docket should discuss this.

[arcticbull]

That's not how substantial presence test works exactly. SPT only counts time spent on a qualifying visa type (TN, O1, H1B, L1, etc) and not time spent on F/J/M/Q/A/G, which is I think what OP was alluding to. It's also not >180 days, it's if:

QualifyingDaysThisYear > 31 AND

QualifyingDaysThisYear + 1/3(LastYear) + 1/6(YearBefore) > 183

For further information: https://www.irs.gov/individuals/international-taxpayers/subs...

[vmarsy]

you're right, I was making the assumption of a simple case: you're coming as an Entrepreneur, you spend the full year in the US, so 365 > 183 , there's no need to even count further 1/3 and 1/6 as you weren't in the US before this.

Running a start-up by spending only a few hundred days a year in the US could be challenging, but if the law allows you to, why not.

F/J (Idk anything about M/Q/A/G) are only exempt 5 years. I have friends who did their undergrad and are on their Phd on F-1 who are still on F-1 but are now considered "us resident for tax purposes" because the 5 exempt calendar years are now used up, so they fall back to the 183 days rule.

[beagle3]

Optimizing start day and end day could make a huge difference:

Starting on 1/jan and finishing on 31/dec would make you a taxpayer each of the 2..5 years.

Starting on 1/jul and finishing on 30/jun, taking strategically timed trips outside the US could easily make the first year, and in some cases the last year, fail the substantial presence test.

I always find it surprising that people rarely optimize tax when moving between countries (or for that matter, even when starting a business in their country). Some do, of course, but as a general rule most don't -- even though to a person in technology, taxes are by far the largest expense, often 30-50% of the take home.

Especially when being a business owner (much less so as a salaried employee), changing your tax jurisdiction is likely to result in much worse taxation than you'd expect unless you optimize for it. Even when there are tax treaties, you can easily get doubly taxed by differing classification -- e.g. something that is regarded as a capital gains in one jurisdiction but ordinary income in the other, or e.g. preferential treatment to 401K-equiv in one jurisdiction causes PFIC-equiv treatment in the other.

[geomark]

You raise a very good point. When I first saw this announcement I thought it was a great deal for foreign founders. But as a US expat I know what a curse it is to be a "US taxpayer". Foreign founders who end up being US taxpayers without planning for the consequences could suffer greatly. That scenario of your home bank closing your account is very real in countries that refuse to submit to the FATCA reporting requirements.