Today, we’re excited to share a guest post from Law and Visas, a trusted firm that provides virtual financial planning, investment management, and tax preparation services specifically for immigrants. Whether you’re just starting your life in the U.S., entering your middle years, planning for your retirement, or settling down, Law and Visas are here to guide you through every stage of your personal finance journey!
If you’re an immigrant working in the United States, you might wonder whether you’re required to pay federal income taxes. The short answer is yes – immigrants do need to pay taxes, and they often face unique challenges such as language barriers and the complexities of filing taxes for the first time.
For example, individual federal income tax returns for the 2022 tax year were due by April 18, 2023. To help simplify the tax process, we’ve created this easy-to-understand guide to assist immigrants with filing their taxes in the U.S.
Who Must File Taxes?
U.S. citizens aren’t the only ones required to pay taxes. Immigrants who are authorized to work in the United States must pay the same state and federal taxes as U.S. citizens.
For tax purposes, the Internal Revenue Service (IRS) treats immigration status differently than U.S. immigration law. Immigrants are classified as either resident aliens or nonresident aliens based on specific criteria.
Resident Aliens
If you’re not a U.S. citizen, the IRS will consider you a resident alien if you meet one of these two tests:
- Green Card Test: If you’ve received a green card (officially known as an Alien Registration Card) from U.S. Citizenship and Immigration Services (USCIS), you’re a resident alien for tax purposes.
- Substantial Presence Test: If you have been in the U.S. for at least 31 days during the current year and 183 days over the last three years (including the current year), you meet this test and are considered a resident alien.
As a resident alien, your tax obligations are the same as those of U.S. citizens.
Nonresident Aliens
A nonresident alien is someone who has not passed either the Green Card Test or the Substantial Presence Test. If you don’t qualify as a resident alien, you may still need to file taxes if:
- You own a business in the U.S.
- You receive income from the U.S. that wasn’t taxed enough by your employer.
- Temporary visa holders might also want to file for a potential tax refund if too much was withheld.
What is a W-4?
If you work in the U.S., your employer will ask you to complete a W-4 form. This form helps determine the amount of tax that will be withheld from your paycheck. You’ll be asked to claim “allowances” which reduce how much is deducted. For example, you can claim an allowance for yourself, your spouse, and any dependents you have.
How to Pay Taxes in the U.S.
In some countries, taxes are automatically deducted from your income with no personal filing required. In the U.S., the tax process is more complex. For example, if you invest in opportunity zones, freelance, or own foreign assets, you might have additional tax obligations that need to be reported.
Here’s what you’ll need to file taxes in the U.S.:
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN): You’ll need one of these numbers to file taxes in the U.S. If you’re eligible to work in the U.S., you can apply for an SSN even before you arrive, or you can visit a Social Security office for help. If you’re not eligible for an SSN, you can apply for an ITIN by completing Form W-7.
Which Forms Should You File?
The tax forms you use will depend on whether you’re a green card holder or you have a temporary visa.
- Green Card Holders: Use Form 1040 (U.S. Individual Income Tax Return), the same form used by U.S. citizens. This form is usually due around April 15 each year, but in 2023, the deadline was April 18.
- Temporary Visa Holders: Use Form 1040-NR (U.S. Nonresident Alien Income Tax Return). This form has the same filing deadline as Form 1040.
Reporting Income from Outside the United States
If you earn income from outside the U.S., you’re required to report it on your U.S. tax return. Green card holders must disclose foreign income, but you may be able to exclude part of it from being taxed. To check if you’re eligible for exclusions, use Form 2555 (Foreign Earned Income).
Additionally, if you decide to leave the U.S., be aware that you may be subject to an exit tax.
Why Should You Pay Taxes?
Filing a tax return in the U.S. and paying taxes brings several benefits, even for non-citizens:
- It proves you are following U.S. tax laws.
- It demonstrates “good moral character,” which can help if you’re applying for a green card or U.S. citizenship.
- It documents your presence and work history in the U.S.
- It can provide access to tax benefits, like the Child Tax Credit or Insurance Premium Tax Credits for U.S. citizen children.
Get Help Filing Taxes as an Immigrant
If you find the tax filing process overwhelming, the IRS Volunteer Income Tax Assistance (VITA) program offers free help for immigrants who need assistance, including language support or ITIN applications.
Visit the IRS Free Tax Prep website, and enter your ZIP code to find a nearby VITA site. Make sure to read Publication 3676-B to learn more about VITA’s services and what documents you need to bring with you.
If you need personalized assistance, don’t hesitate to reach out to a qualified tax professional. They can help you navigate the process, ensure you’re taking advantage of all available deductions, and set you on the right path for future tax filings.
Frequently Asked Questions
What if I don’t have a Social Security number?
If you don’t have an SSN, you’ll need to apply for an ITIN by completing Form W-7. You can submit this form to the IRS along with documents verifying your identity and foreign status.
Can I claim my dependents on my tax return?
Yes, if you have dependents living with you in the U.S., you may be able to claim them on your tax return. However, you must meet certain requirements, including providing more than half of their financial support.
What if I earn income outside the United States?
If you receive foreign income, you’ll likely need to report it on your U.S. tax return. There may also be certain deductions or credits available for foreign income. If you’re unsure, it’s a good idea to consult a tax expert.
Filing taxes in the U.S. can be complicated, especially for immigrants unfamiliar with the tax system. By understanding your responsibilities and knowing where to get help, you can ensure you’re fulfilling your obligations and making the most of any tax benefits available. For more details, check out our full guide on filing taxes as an immigrant.
