When an athlete signs with a US team, one of the most common
questions I hear is: "How do I get a green card?" In most
cases, the athlete does not know why he wants it, or is unaware of
the obligations that come with holding a green card. Let us take a
As a green card holder, you are considered a US resident and are
required to file a US tax return, irrespective of where you live.
This means you report your worldwide income and may have to pay US
tax on that income. For example, a hockey player living in Canada
possessing a green card would be subject to taxation in both Canada
and the United States and he would effectively pay the higher of
the two rates.
In addition, there would be an annual requirement to file a
report of foreign bank and financial accounts (FBAR). An FBAR is
required when a green card holder has either $10,000 or more in
bank or investment accounts outside of the US at any time in a
calendar year. The form is also required should you have signing
authority over such accounts. This yearly filing does not result in
additional tax but failure to file can result in onerous penalties
Future Planning & Estate Tax
Asset protection and estate planning is a challenge for green
card holders due to US gift and estate tax. For example, estate tax
may apply on the value of your worldwide assets (including RRSPs
and life insurance proceeds) if you die while holding a green card.
This could severely limit the ability to pass on wealth to your
Inability to access tax incentives
Obtaining a green card could also impact your RRSP deductions,
Canadian exploration expenses, and taxes on the sale of your
principal residence (which is normally tax exempt in Canada). Other
factors need to be examined, such as the effect upon Retirement
Compensation Arrangements (RCA), should a player apply for a green
card while payments are being made on his behalf by the team.
Leaving Canada can trigger an array of tax consequences. On
departure, almost all of your personal property will be considered
to be disposed of at its fair market value. This triggers capital
gains tax even if you do not sell the property or investment and
continue to hold it after you leave Canada. Further, if you
purchased a home in Canada and used your Home Buyers Plan to fund
the purchase, the remaining balance due would have to be repaid to
your RRSP within 60 days of your departure or earlier.
The decision to apply for a green card should not be taken
lightly. The onerous tax consequences as a result of obtaining a
green card may outweigh the benefits. Once you obtain your green
card not only may you be subjecting yourself to unintended tax
consequences, but relinquishing it may lead to further tax
obligations to the IRS.
There may be better options for Canadians playing on U.S. teams
such as various types of work visas. The decision to move forward
and obtain a green card should consider your current circumstances,
plans, and tax consequences for not only yourself but also your
immediate family members.
An examination of all the factors should be undertaken with your
tax and legal advisors prior to making the decision so that the
future consequences are well understood and in your best
JEFFREY STEINBERG is a partner in the Audit
& Advisory Group and established the firm's Sports &
Entertainment Group. Jeffrey deals with Canadian, American and
International clients handling a variety of issues including tax
compliance and filing, cross-border and residency planning,
investment review and due diligence.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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