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As Benjamin Franklin once said: “Two things are certain in this life: death and taxes.” Unfortunately, preparing and filing your taxes in the US can be quite confusing if you’re an immigrant, especially since there are so many different elements to consider.
Given the potential repercussions of either failing to file your taxes or filing them incorrectly, it’s important that you get it right. The following FAQs should provide the knowledge needed to file your taxes as an immigrant with greater confidence, while also ensuring that the best outcomes are achieved for yourself as well as the Internal Revenue Service.
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Who Has To Pay Tax In The US?
If you are earning an income (full or partial) from US-based activities, you will be required to pay taxes and satisfy the country's tax laws. Your visa may also stipulate that an income tax return is needed.
Failure to file your tax return will prevent you from receiving extra money withheld from your paycheck by your employer. Conversely, if you owe taxes and do not complete the return, it will result in financial penalties.
What About Non-Earning Immigrants?
Dependents and H4 Visa holders should also file a tax return to claim dependent status and gain the applicable tax benefits. Claiming them may allow you to obtain tax exemptions, credits, and deductions.
Exemptions are when your income is not taxed and does not contribute to your overall earnings.
Deductions are the expenses that can be subtracted from your earnings to reduce the tax.
Tax credits are subtracted directly from the tax liabilities.
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Why Do People Keep Calling Me An Alien?
Don’t panic, the term “Alien” in relation to taxation in the United States of America simply means that you are not yet a US Citizen. If you are born in the US (including US overseas territories) or have gained citizenship, you’ll pay tax differently.
If you do not qualify as a US citizen, you will be classified as either a Resident Alien or a Non-Resident Alien.
What Is The Difference Between Resident Alien & Non-Resident Alien?
A Non-Resident Alien is any immigrant that has not yet gained a Green Card or passed the Substantial Presence Test. If you all under the Non-Resident Alien category, you’ll only need to pay tax on income gained in the US.
Meanwhile, Non-Resident Aliens are often able to qualify for treaty exemptions and may also secure special rates.
Conversely, a Resident Alien is a term used to define immigrants that have spent at least 31 days of the current year and a total of 183 days over the past three years. Those 183 days can be distributed unevenly, so you don’t have to have spent 61 days of each year in the country.
Resident Aliens usually stay in the US on Visas including the H1B, H4, and L1 documents. Resident Aliens pay tax in a very similar way to US residents but are also required to supply details of their worldwide income.
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Will I Always Be One Or The Other Type Of Alien?
Not necessarily - It is also possible to become a Dual Status Individual. This means that you file taxes as both a Resident Alien and a Non-Resident Alien. It usually occurs during the tax year of your arrival or departure from the country.
Your situation may also change if you become a US Citizen on a Green Card Application. In the meantime, though, you’ll need to show an appreciation of the current tax rules that apply to your situation.
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Which Tax Form Do I Need To Submit?
The main purpose of confirming your status as a Resident Alien or Non-Resident Alien is that it’ll tell you which tax forms need to be submitted.
Resident Alien Forms
Form 1040EZ is, unsurprisingly, the easiest option. There are several IRS requirements that must be met to use this form. Most notably, you must be under 65 and earn no more than $100,000. The full details can be found on the IRS website.
Form 1040A is a little longer and tougher than the 1040EZ, but shorter than Form 1040. The main plus point of using it revolves around the ability to claim certain adjustments. You can also post this as the head of house rather than using a single status.
The upper limit is still set to $100,000, but you can claim dependents and take tax credits for child and dependent care, retirement savings, earned income, premium tax, and education.
Form 1040 is the longest option, but it can be used by all Resident Alien taxpayers, regardless of whether they qualify for Form 1040EZ or Form 1040A. The IRS tool will help you determine which option is best.
Self-employed and individuals who owe household employment tax will be required to use Form 1040.
Non-Resident Alien Forms
Form 1040NR-EZ is the quicker option but is aimed at those with a lower income and who do not require the complications of certain claims. Whichever option is required, the form must be signed and posted. Email is not allowed.
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Am I Married Or Unmarried For Tax Purposes?
The status of your tax files will affect your ability to make tax deductions, and choosing the right option is essential. It needs to be accurate, but should also consider your best interests.
Married taxpayers may file a Joint Married tax return with their spouse or opt for a Separately Married filing. Unmarried taxpayers can use Single, Head of Household, and Qualifying Widow or Widower.
While a Joint Married tax return gains the biggest deduction, it won’t necessarily outweigh the deductions of two separate tax files, especially when one of you can file as the Head of Household. Joint Married taxpayers may qualify for other tax benefits, though.
It should be noted that Non-Resident Aliens and Dual-Status Aliens do not qualify for standard deductions and must claim their tax deductions in an itemized manner.
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What Dates Do I Need To Remember?
In the US, a tax year runs from January 1st to December 31st. Taxes are filed for the previous year, with the following dates playing a central role.
January 31st: Employers have to send out W2 tax forms to all employees, including immigrants working on a Visa.
Mid-April: Immigrants have to submit the previous year’s Form 1040, 1040A, or 1040EZ. Alternatively, they can request an extension via Form 4868.
Mid-October: The extension deadline for Form 4648 filing.
The exact dates of the April and October deadlines will vary from year to year. So, you must conduct the necessary research to give yourself enough time.
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What If The Deadlines Are Missed?
If the deadline has been missed, it’s important to act quickly to reduce fines and repercussions. It is particularly important to do this if you miss an extension.
You can find the full details relating to penalties and the various brackets that you may fall under depending on personal circumstances.
When the government owes you money, penalties for lateness are unlikely. Conversely, though, lateness and failure to file taxes can impact Green Card application statuses and can lead to criminal prosecutions for anyone on a non-immigrant Visa.
Even if you cannot make a complete payment, it’s better to file the tax return and pay what you can. A clear display of wishing to improve the situation will work in your favor.
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