Tax season is upon us and with it comes a variety of challenges, especially for immigrants. Taxes— at least in the American way— are more often than not a foreign concept for immigrants. From learning how to file overly complicated forms to the possibility of dealing with a language barrier, filing taxes can come at a great challenge, and with it a large amount of stress.
Before the April 15 deadline comes around, it is important to have some basic knowledge on how to file your taxes, or, at the very least, have a useful list of resources that can help you decide where to go and how to get some help.
That is why we have compiled a comprehensive list of what you should know to file taxes to the IRS if you are an immigrant.
Understanding Tax Obligations for New Immigrants
If you recently moved to the United States, you may be wondering if you need to file taxes. The simple answer is yes.
U.S. citizens aren't the only ones who are required to pay taxes in the country. Immigrants that are authorized to work in the United States must pay the same state and federal income taxes that citizens do.
But here is where the law starts to become slightly more specific. The Internal Revenue Service (IRS), the department responsible for taxes, defines residency differently than other U.S. Immigration departments might.
In short, the IRS divides immigrants into two categories— resident aliens and non-resident aliens.
Tax Obligations for Resident Aliens
The IRS considers resident aliens those immigrants who have either:
- Received a Green Card to authorize their right to live and work in the US as a non-citizen permanently
- Or have passed a Substantial Presence Test, which clears that you have been physically present in the United States for at least 31 days during the current year and 183 days during the three-year period that includes the current year and the two years prior
The filing requirements for resident aliens are the same as those for United States citizens.
Tax Obligations for Non-Resident Aliens
A non-resident alien is a non-citizen who "has not passed the green card test or the substantial presence test," according to the IRS.
People who are not U.S. citizens and do not qualify for either of these tests are required to file a tax return if they own a business in the United States or they have a United States income that wasn't taxed enough by their employer. Temporary visa holders may also want to consider filing an income tax return to receive a refund for tax withheld.
As a rule of thumb, all working immigrants are required to file a tax return. In some cases, you may qualify under both types as a Dual Status Individual. This is most common during the year that you enter or leave the country.
Completing the W-4 Form for Immigrants
The W-4 Form is a crucial document for immigrants that will file taxes, as it will allow your employer to determine how much tax should be withheld from your weekly, monthly, or annual paycheck.
The W-4 Form includes worksheets that help you figure out how many "allowances" to claim. Every allowance that you have reduces the amount taken out of your pay. You may have one allowance for yourself, one for your spouse, and one for every dependent that you claim.
W-4 Forms can be completed at any time, while all immigrant workers are advised to seek amendments from their employer whenever their tax situation changes due to marriage, divorce, family birth, or family death. This ensures that the right level of tax will be deducted.
To access a W-4 Form, click here.
Getting a SSN or ITIN
Some countries allow the government to withhold taxes without any personal filing requirements. However, the process in the United States is trickier.
You can only pay taxes in the United States if you have either a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
People who are authorized to work in the United States by the Department of Homeland Security are eligible to apply for a SSN before they arrive in the United States. Alternatively, immigrants can visit a Social Security office and complete the Application for Social Security Card.
On the other hand, ITINs are for immigrant workers that are not able to get an SSN. ITIN applicants must file Form W-7 along with their application for an IRS ITIN. A number of identification documents and foreign status documents should be submitted too.
Filing the Correct Forms
In addition to acquiring your identification numbers and documents, immigrants must also be aware of which forms they need to file, depending on their immigration status and individual circumstances, according to the IRS.
Resident Aliens can use the same tax forms as US citizens. Payments for the previous tax year are due in mid-April.
Resident Aliens need to post Form 1040. For people earning under $100,000 that also meet other requirements, it may be possible to use Form 1040A or Form 1040EZ instead.
Self-employed and individuals who owe household employment tax will be required to use Form 1040.
Non-Resident Aliens use Form 1040-NR.
Resident Aliens are required to record all earnings from both inside and outside the US, but it is often possible to gain an exemption. Form 2555 is used to identify the Foreign Earned Income figure and dictate how this impacts the tax form.
Bottom Line
Filing taxes as an immigrant is highly important. While it will not generate Social Security benefits, it is the only way to receive refunds on any tax overpayments. It is also the best way to claim Child Tax Credits and insurance premium tax credits for children that are U.S. citizens.
Taxes are a documented record of your presence in the US as well as your work history in the country. They could potentially help with Green Card applications in the future and the process to become a citizen.
While it is true that the process is complex, it is always important to discuss your case with a tax professional so they can best advise you. For more information on taxes, you can visit the IRS website.
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