Non-U.S. born taxpayers (Aliens)

TAX RETURNS FOR ALIENS

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We are were “Immigration and Tax Meet.” One of the principals is an experienced income tax practitioner and immigration lawyer. He frequently provides training to other immigration lawyers and publishes articles that involve the the intersection of U.S. income taxation and immigration law.

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The definition of a “tax resident” will determine whether a U.S. alien will be required to file as a non-resident or resident. Tax non-residents file their taxes on a 1040-NR and residents file a 1040 or 1040A. Therefore, the first step in analysis of determining how to file for an individual who is not a U.S. Citizen or Lawful permanent resident is to determine whether the person qualifies as a “tax resident” under the substantial presence or “green card tests.”

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The definitions of a “non-resident” under Immigration and Nationality Act (INA) and the Internal Revenue Code (IRC) are different. Mistakenly, individuals and practitioners believe that an individual is a tax non-resident simply because they have a non-resident visa, such as a H-2A, H-2B, H-1B, H-3, O, P, E, or L visas or status. The tax residency of individuals who have a non-resident visa will determined by the substantial presence test. The exception is individuals or enter or who remain in the U.S. on F and J visas, who are always considered non-residents for tax purposes.

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Tax residency will determine the tax benefits and what income is subject to U.S. taxation. Tax residents must declare all worldwide income. Tax non-residents only have to pay U.S. tax on U.S. source income. However, tax residents generally have broader tax benefits, can claim the Earned Income and other credits and their dependents.

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High income workers who are coming to the U.S. on a visa must be aware that their entire worldwide income will be subject to U.S. taxation after the person is deemed to be a tax resident. Also, individuals will be deemed to be a tax resident on the first day of the year the individual becomes a lawful permanent resident. After becoming a tax resident then the individual could use the Foreign Tax Credit and Foreign Income Exclusions.

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Individuals who do not have substantial income abroad are more likely to want to be tax residents. An individual can be deemed to be a tax resident based upon the substantial presence test even if the individual entered the U.S. without authorization. The IRS assigns Individual Tax Identification Numbers (ITIN) to individuals who are required to file a tax return because they had U.S. income but who are not eligible to obtain a Social Security Number. Undocumented individuals can obtain an ITIN for themselves, their spouses and dependents.

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Having many years in the tax preparation industry, we understand how to properly file your tax returns. If you are in the U.S. on a visa or without documentation, then you should be cautious about who and how your returns are prepared. The IRS and General Office of Accounting estimate that over 25% of claims to the Earned Income Tax Credit are incorrect. Thus, you should understand based upon that objective data that many tax preparers are preparing returns in a manner that is not correct.

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Most of our clients are by referral. But accept clients from all states. We will work with you by mail, fax and internet. Our fees are the same and sometimes less than retail tax preparers.