L-1 Visa Holder Moving to the U.S.: What Happens to Your Foreign Income and Businesses?

The client’s situation: an L-1 transfer to Florida

The client held minority and controlling interests in family businesses, foreign bank accounts and an investment portfolio containing locally marketed funds. His Florida employer would handle U.S. payroll, but neither payroll nor the relocation package addressed those other assets.

This anonymized case concerns tax planning, not immigration advice. His L-1 immigration classification and his U.S. tax residency required separate analyses; the visa alone did not establish when worldwide income would become taxable.

What went wrong

The main risk was assuming only money transferred to a U.S. account would be taxable. Once U.S. tax residency begins, foreign income generally must be reported even if retained overseas. Company ownership can also create information reporting and, in some cases, income inclusions without a cash distribution.

His planned arrival date was not necessarily his tax residency starting date. Earlier business trips could affect both the substantial presence calculation and the first resident day.

The tax or reporting requirement

Tax residency generally follows the green card test or substantial presence test. The latter generally requires at least 31 days in the current year and 183 weighted days: all current-year days, one-third of the preceding year and one-sixth of the second preceding year. Special exempt-individual rules exist for certain F/J/M/Q visitors; L-1 days ordinarily count.

When substantial presence establishes residency, the starting date is generally the first day present that year, subject to specific exceptions. A first-year dual-status return may divide nonresident and resident periods. Elections and applicable treaty positions, potentially disclosed on Form 8833, require separate review.

During the resident period, worldwide income generally enters the U.S. return. Foreign corporations may trigger Form 5471 and CFC/GILTI analysis depending on ownership, attribution and the applicable year. Foreign funds may be PFICs requiring Form 8621.

Forms potentially involved:

• Form 1040 and, when applicable, dual-status Form 1040-NR statement
• Form 5471; Form 8621; Form 1116 for eligible foreign tax credits
• FinCEN Form 114 (FBAR); Form 8938; potentially Form 8833

The potential IRS exposure

Missing information returns can create penalties even if foreign taxes reduce the income tax due. Certain Form 5471 failures can begin with a $10,000 penalty. PFIC rules may impose unfavorable tax and interest treatment, while FBAR exposure depends on the facts and conduct.

An FBAR generally applies when aggregate foreign accounts exceed $10,000 at any time in the calendar year. Form 8938 is separate; for a single filer living in the United States, thresholds generally are more than $50,000 at year-end or $75,000 at any time. Other filing statuses have different thresholds.

How Chirino USA analyzed the situation

Chirino USA reconstructed three years of travel, reviewed the proposed move calendar and identified the potential resident period. We asked for ownership charts, financial statements, share acquisition dates and information about relatives whose holdings could affect attribution.

We reviewed fund prospectuses rather than relying on account labels. We also separated dividends, interest, gains and company earnings, and examined foreign taxes by income category and timing. A foreign tax credit is not a blanket exemption and does not replace information returns.

How we addressed the issue

We recommended gathering corporate records and historical investment basis before arrival. We also recommended considering the timing of genuine dividends or asset sales before residency starts, after comparing foreign tax, U.S. sourcing, recognition rules and commercial needs. There is no automatic basis step-up simply because someone moves.

The client received a reporting calendar covering individual returns, foreign entities and accounts. We explained that Florida has no individual state income tax, but that does not eliminate federal international tax obligations. Any visa questions were reserved for immigration counsel.

The result

The recommended strategy was to finalize the residency timeline before executing transactions and keep supporting records for both portions of the move year. This was a planning outcome, not a promise of tax savings or IRS acceptance. The client could coordinate foreign advisers and U.S. preparers using the same asset inventory.

What other taxpayers in similar situations should know

• Review earlier U.S. trips before selecting a residency date.
• Foreign business ownership may matter even without distributions.
• Review foreign mutual funds before the first resident return.

How Chirino USA can help

Chirino USA Accountants & Advisors specializes in U.S. international tax matters for foreign nationals moving to, working in, or investing in the United States. We can review your days in the U.S., your income and your assets abroad, and tell you which U.S. returns and reports apply to you. We advise on taxes only; questions about your visa or immigration status should go to an immigration attorney. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• IRS — Publication 519, U.S. Tax Guide for Aliens
• IRS — Instructions for Form 5471
• FinCEN — Report of Foreign Bank and Financial Accounts
• IRS — Comparison of Form 8938 and FBAR Requirements
• IRS — Instructions for Form 8621