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Everyone that earns an income in the United States is required to pay tax. However, immigrants who are yet to gain citizenship face a number of unique challenges. This can consequently cause a lot of stress. In truth, the toughest task is knowing where to start.
Filing your taxes as an immigrant for the first time can be daunting, but the following advice should put you on the road to success. By the end of this guide, you should have a far clearer idea of what to expect with tax filing procedures.
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Firstly, Do All Working Immigrants Need To File Their Taxes?
In a word, yes. Immigrants who are permitted to work in the US will be governed by the same federal and state income tax laws as citizens. However, the manner in which immigrants post their taxes will largely depend on which classification you are given.
Working immigrants can fall under one of two categories, Resident Aliens and Non-Resident Aliens. For tax purposes, the term alien simply relates to non-citizens.
Resident Aliens will 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. To meet the latter rule, you must have spent at least 183 days of the last three years, including 31 days of the current year, in the United States.
Non-Resident Aliens are those that have the right to work in the country but do not meet either of the above criteria. They are required to file tax returns if they own a business that earns money from US-based endeavors, or if they work for a US company and did not have enough tax withheld by their employer.
As a rule of thumb, then, 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.
The tax year runs from January 1st to December 31st, with the appropriate taxes being due the following year by the set deadlines.
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What Is The W-4 Form?
Before filing your taxes, immigrant employees should familiarize themselves with the W-4 Form. This is a crucial document that will allow your employer to determine how much tax should be withheld from your weekly, monthly, or annual paycheck.
The W-4 form isn’t restricted to handling your income. It’ll additionally aim to identify any allowances that can be claimed against your earnings to reduce your overall tax contribution. You can make one allowance for yourself, another for your spouse, and another for each child dependent.
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.
The Internal Revenue Service (IRS) has an online withholding calculator that can provide accurate insight before filling in the allowance worksheets that are included in the W-4 tax form.
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How To Pay US Tax As An Immigrant
If you are an immigrant that has previously worked in your birth country or another nation, you may be familiar with the idea of tax being withheld by the government. However, US tax requirements do not end here.
To successfully file your returns to confirm the right figure has been paid, you will need to:
- Receive an SSN or ITIN
- File the correct forms
- Record earnings from outside the US
Getting An SSN Or ITIN
Before making a tax payment in the US, you will need either a Social Security number (SSN) or an individual taxpayer identification number (ITIN).
To apply for an SSN, immigrant workers that have gained authorization from the Department of Homeland Security can get the process before arriving in America. Alternatively, they can visit a US Social Security office.
An SSN can only be awarded after the completion of the Form SS-5, an Application for a Social Security Card, and submission of the necessary documents. The list includes personal identification, work authorization confirmations.
The 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.
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Filing The Correct Forms
Perhaps the biggest reason for the confusion among immigrant workers stems from the fact that there are several tax forms to navigate. The right one for you will depend on your individual circumstances, including your family and living situation as well as your status as an immigrant.
Resident Aliens can use the same tax forms as US citizens. Payments for the previous tax year are due in mid-April, but this will be extended to mid-June if you are out of the country on this date. Meanwhile, it is possible to file Form 4868 to ask for an extension to November.
Either way, 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. Form 1040A allows you to post as the Head of House too.
Self-employed and individuals who owe household employment tax will be required to use Form 1040.
Non-Resident Aliens use Form 1040-NR. The same dates for filing are used during an extension via being out of the country or using Form 4868 is possible too.
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Record Earnings From Outside The US
Resident Aliens are required to record all earnings from both inside and outside the US, but it is often possible to gain an exemption. This means that outside earnings won’t increase your income total and subsequent tax commitments.
Form 2555 is used to identify the Foreign Earned Income figure and dictate how this impacts the tax form.
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Tax Implications For Undocumented Immigrants
Undocumented immigrants may work legally under Deferred Action for Childhood Arrivals (DACA) protections. No matter what, it’s still necessary to pay tax on earnings made in the US.
Despite fears of the IRS passing details onto immigration enforcers, there is no threat due to data protection rules. Giving information to the Treasury Department for tax compliance investigations is the only exception where they can pass on data.
Language barriers and other obstacles can cause a problem, but the IRS will help where possible through its Volunteer Income Tax Assistance (VITA) service. However, immigrants are also invited to take on the challenge themselves by using their preferred tax filing software.
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Why Should Taxes Be Filed?
Filing a tax return as an immigrant worker won’t generate Social Security benefits. However, making the claim is your 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 US citizens.
Taxes are a documented record of your presence in the US as well as your work history within the country. This can subsequently help with Green Card applications and the process to become a citizen. Aside from abiding the laws, it shows that you uphold an ethical character.
Failure to file taxes on time will lead to fines and penalties. In cases where the payments are avoided, you can face legal and federal consequences too. Above all else, the peace of mind gained from filing your taxes in the right manner can make a world of difference to your daily life.