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From CIS to IRS: Tax Issues for Immigrants

By Subhani & Subhani Email By Subhani & Subhani
April 2009
From CIS to IRS: Tax Issues for Immigrants

The tax process to the normal American citizen is a confusing maze of loopholes, complicated rules, and uncertainty. To the non-citizen residing here either temporarily or with a permanent intent, it is even more fraught with anxiety and hidden dangers. From accountants unfamiliar with the special rules for foreign nationals, to the worry that USCIS and the IRS will be closely scrutinizing the tax return, it is imperative that you ensure that your taxes are prepared as accurately as possible. Although USCIS is not legally permitted to access information submitted to the IRS, if you provide USCIS with information voluntarily (such as with part of a filing), you can expect a very close review of your documentation.

The first issue is who should file, and in what capacity. Any person who is not a U.S. citizen is considered either a Resident Alien or Nonresident Alien for tax purposes. The tax guidelines for Resident Aliens are almost the same as those for U.S. citizens. Tax guidelines for Nonresident Aliens are different. You are a Resident Alien for tax purposes if you have a green card, or you have been in the U.S. for a substantial period of time (www.irs.gov lays out the “substantial presence” test for determining if you fall into this category). If you do not meet these criteria, you are a Nonresident Alien. No matter what your alien status is, you must file a return if you owe any taxes to the IRS. You must also file if your income level requires you to file a tax return. For Resident Aliens, when figuring out your income, you must count income from sources within the U.S. as well as from sources outside of the U.S.; Nonresident aliens only count income from sources within the U.S. However, e-filing is not available for Nonresident Aliens, and two Nonresident Aliens cannot file jointly as residents.

Next, how do you file if you do not have a social security number? Each person listed on a federal tax return (the filer, spouse, and dependents) must have a proper taxpayer identification number. If you or anybody else on the return does not have an SSN and is not eligible to get an SSN, then you must each apply for an Individual Taxpayer Identification Number (ITIN). An ITIN is not for someone who is eligible for an SSN, such as a person who is allowed to work legally in the U.S. The issuance of an ITIN does NOT: Allow you to work legally in the U.S.; Entitle you to get the Earned Income Credit or to be a qualifying child for the Earned Income Credit; Entitle you to Social Security benefits; or change your immigration status. You can obtain an ITIN through www.irs.gov.

Another issue that arises involves personal exemptions. In order to claim more than one personal exemption amount, Nonresident Aliens must be U.S. nationals or residents of Canada, Mexico, or South Korea. Nonresident Alien students and business apprentices from India may claim a spousal exemption (if the spouse meets certain restrictions) and exemptions for children who are U.S. citizens or resident aliens. In order for a dependent to be claimed for a personal exemption by a Resident Alien taxpayer, the dependent must be a U.S. citizen, resident alien, or U.S. national, or a resident of Canada or Mexico at some point during the tax year in question.

This just covers a handful of the issues that arise for the non-citizen taxpayer. As the tax filing deadline approaches, we urge you to find accountants who are experiences in dealing with the intricate issues surrounding your tax process, or to proceed with caution if preparing your own returns!

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