Tax Tip Tuesday: Form 5471 for Green Card Holders- Plan Before Your Overseas Company Becomes a U.S. Tax Problem

Congratulations — the green card is approved. Your immigration attorney has handled the visa. But if you own a company overseas, there is a second deadline most new residents never hear about: the day you become a U.S. tax resident, your foreign company becomes part of your U.S. tax picture.

For many business owners, that means Form 5471 — and decisions that are much cheaper to make before your residency start date than after.

When Does Your U.S. Tax Clock Start?

For most green card holders, U.S. tax residency begins on the first day you are physically present in the United States as a lawful permanent resident. From that day forward, the U.S. taxes you on your worldwide income — including what your overseas company means for you.

If you were already in the U.S. long enough to meet the "substantial presence" test, your residency may start even earlier. Your first year is often a "dual-status" year, part nonresident and part resident.

What Changes for Your Foreign Company

1.     You likely file Form 5471 in your first year. Becoming a U.S. person while owning 10% or more of a foreign corporation is itself a filing trigger.

2.     If U.S. owners hold more than 50%, it's a controlled foreign corporation (CFC). Once you are a U.S. resident, your ownership counts. If you own a majority, the company becomes a CFC, and you generally file Form 5471 every year.

3.     Company income can become taxable to you — even if it isn't paid out. Certain income of a CFC (Subpart F income and "net CFC tested income," formerly GILTI) can be included on your U.S. return annually, whether or not the company distributes it.

4.     If the company isn't a CFC, other rules may apply. A foreign company with mostly passive income or assets can be a passive foreign investment company (PFIC), which has its own form and tax regime.

5.     More forms follow. Your company shares and any foreign accounts you own or have signature authority over may also need to be reported on Form 8938 and the FBAR.

Why Timing Matters: An Example

Mr. Lin receives an EB-5 green card and lands in Los Angeles as a permanent resident on May 1, 2026. He owns 70% of a manufacturing company in Taiwan that has accumulated $2.4 million of retained earnings over the years.

•        If the company pays a dividend before May 1 while he is still a nonresident, that dividend is generally outside the U.S. tax system.

•        If the same earnings are paid out after May 1, his 70% share — $1.68 million — can be taxable in the U.S. At the top federal rates (37% plus the 3.8% net investment income tax), that could approach $685,000, before any foreign tax credits.

Same company. Same money. A different date on the payment.

Not every company should distribute earnings before residency — local taxes, cash needs, and business plans matter. The point is that the decision should be made deliberately, before the date passes.

Pre-Residency Planning Options to Discuss

These are decisions to evaluate with a cross-border tax advisor, ideally months before your residency start date:

•        Distributing accumulated earnings while you are still a nonresident

•        Reviewing the company's U.S. tax classification — some foreign entities can elect to be treated as partnerships or disregarded entities, with very different results

•        Reviewing ownership structure among family members and other shareholders

•        Documenting the company's value and your basis as of your residency date

•        Setting up bookkeeping that can produce U.S.-style financials, since Form 5471 requires a balance sheet and income statement converted to U.S. dollars

Planning Takeaways

1.     Find out your residency start date as soon as your green card timeline is clear.

2.     Inventory every foreign company you own 10% or more of, with ownership percentages and retained earnings.

3.     Meet with a cross-border tax advisor before you land — not after your first U.S. tax return is due.

4.     Expect Form 5471 in your first U.S. tax year and plan for the records it will require.

MKHS Tax Group works with new U.S. residents and their immigration attorneys on pre-residency tax planning and first-year Form 5471 compliance. Email us at info@mkhstaxgroup.com to schedule a pre-residency review.

Immigration attorneys: we're glad to coordinate with your office so your clients' tax planning keeps pace with their green card timeline.