Moving to the U.S. as a Tech Employee

Tax Residency, Foreign Investments, and Planning Considerations

As global tech talent increasingly relocates to the United States, understanding the U.S. tax system is critical for non-U.S. employees. U.S. tax residency triggers worldwide income taxation and extensive reporting requirements, making pre-move planning essential—especially for those with foreign investments or complex financial arrangements.

U.S. Tax Residency Rules

Non-U.S. tech employees become U.S. tax residents—and are taxed on their worldwide income—if they:

  • Obtain lawful permanent resident status (a green card) at any time during the year, or

  • Meet the substantial presence test, which generally requires 183 days of U.S. presence over a three-year period (counting all days in the current year, 1/3 of days in the prior year, and 1/6 of days in the year before that).

Exceptions may apply if you maintain a closer connection to another country or if a tax treaty provides otherwise. Once classified as a U.S. tax resident, you are subject to U.S. tax on all income from all sources worldwide.

Foreign Investments: U.S. Tax and Reporting Considerations

Upon becoming a U.S. tax resident, you must report and pay U.S. tax on income from all foreign investments, including:

  • Passive Foreign Investment Companies (PFICs): Many foreign mutual funds are PFICs, subject to a punitive tax regime unless you make a Qualified Electing Fund (QEF) or mark-to-market election. Both require annual reporting (Form 8621) and, in some cases, cooperation from the foreign fund.

  • Foreign Retirement Accounts: These are not automatically tax-advantaged in the U.S. and may be subject to U.S. tax and reporting unless a tax treaty provides otherwise. If the account holds PFICs, additional reporting may be required.

  • Reporting Requirements: You may need to file:

  • Form 8621 for PFICs,

  • Form 8938 (FATCA) for specified foreign financial assets,

  • FBAR (FinCEN Form 114) for foreign accounts exceeding $10,000,

  • Forms 3520/3520-A for certain foreign trusts or retirement accounts.

Pre-Residency Planning Steps

While it depends on your country of origin as well as your specific circumstances, to minimize adverse U.S. tax and reporting consequences, consider these steps before moving:

  1. Accelerate Income and Recognize Gains: Receive bonuses, deferred compensation, or investment income, and realize gains on appreciated assets before U.S. residency begins to avoid U.S. tax on pre-residency income.

  2. Postpone Deductions and Losses: Delay deductible expenses and loss recognition until after U.S. residency to maximize U.S. tax benefits.

  3. Review and Restructure Foreign Holdings: Consider selling or restructuring PFICs, foreign corporations, or trusts to avoid punitive U.S. tax regimes and complex reporting.

  4. Complete Gifts and Trust Funding: Make gifts of foreign assets or fund foreign trusts before U.S. residency to avoid U.S. transfer taxes and reporting.

  5. Document Timing: Keep detailed records of your residency start date and all pre-immigration transactions.

  6. Prepare for U.S. Reporting: After arrival, be ready to comply with extensive U.S. reporting for foreign accounts and assets, with significant penalties for noncompliance.

Other Considerations

  • State Tax Residency: U.S. states have their own residency rules, which may trigger state income tax even before federal residency is established.

  • Tax Treaties: Review applicable tax treaties for relief from double taxation or special treatment of foreign pensions and investments.

Conclusion

Non-U.S. tech employees moving to the U.S. face complex tax and reporting obligations, especially regarding foreign investments and accounts. Advance planning—ideally before U.S. residency begins—can help minimize tax exposure and compliance burdens.

For more details on how to apply these to your situation, check the IRS guidelines or click Contact to schedule a call with a cross-border tax specialist.