Navigating the U.S. tax system as a new immigrant can be daunting. This guide provides a comprehensive overview of your federal income tax responsibilities, procedures, and rights as a resident of the United States. Understanding these obligations is crucial for a smooth transition and financial well-being. This guide serves as a starting point to understanding the complexities involved.
Residency Status and Taxation
Your tax obligations in the U.S. depend largely on your residency status. Understanding the definition of residency under U.S. tax law is the first step in fulfilling your tax obligations.
Generally, U.S. tax residents are taxed on their worldwide income, similar to U.S. citizens. Non-residents, however, are usually taxed only on income sourced within the U.S. or effectively connected with a U.S. trade or business.
An immigrant who is granted a green card is considered a lawful permanent resident. For U.S. income tax purposes, this means they are treated as a U.S. tax resident. For clarity on your specific status, refer to determining alien tax status.
Determining Your Residency Starting Date
The date your residency begins is important for tax purposes. Usually, it’s the first day you are physically present in the United States as a lawful permanent resident within a calendar year. This usually coincides with the United States Citizenship and Immigration Services (USCIS) approving your petition to become an immigrant.
If you received your green card while outside the U.S., your residency starting date is the first day you are physically present in the United States after receiving your green card. For detailed information, please refer to residency starting and ending dates.
For tax years where you hold both U.S. tax resident and non-resident status, consult taxation of dual-status aliens.
Taxation of U.S. Tax Residents
As a U.S. tax resident or U.S. citizen, the rules for filing income, estate, and gift tax returns, as well as paying estimated taxes, are generally the same whether you are in the United States or residing abroad. Your global income is subject to U.S. income tax, regardless of your place of residence. It’s important to note that these rules apply even to income generated outside of the United States.
For detailed information on tax responsibilities for U.S. tax residents, please consult taxation of U.S. resident aliens and Publication 519, U.S. Tax Guide for Aliens.
If you are a U.S. tax resident or U.S. citizen living or working abroad, or if you have income earned in a foreign country, refer to taxpayers living abroad and Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Those with income from Guam, the Commonwealth of the Northern Mariana Islands (CNMI), American Samoa, the U.S. Virgin Islands, or Puerto Rico may be required to file tax returns with both the territory’s tax department and the U.S. Internal Revenue Service. See individuals living or working in U.S. territories/possessions for further details.
Reporting Foreign Assets
U.S. tax residents and U.S. citizens are required by federal law to report their worldwide income, including income from foreign trusts and foreign financial accounts. Transparency in reporting financial information is key for compliance.
Taxpayers generally must complete and attach Schedule B to their tax return. Part III of Schedule B specifically addresses the existence of foreign accounts, such as bank and securities accounts, and mandates reporting the country where each account is located.
A U.S. person, encompassing citizens, tax residents, domestic corporations, partnerships, limited liability companies, trusts, and estates, must also report specific foreign financial accounts, including bank accounts, brokerage accounts, and mutual funds, to the Treasury Department. This is done through filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114. Additional information can be found at Report of Foreign Bank and Financial Accounts (FBAR).
Furthermore, some taxpayers may need to complete and attach Form 8938, Statement of Specified Foreign Financial Assets to their tax return. Generally, U.S. tax residents, citizens, and certain nonresidents must report specified foreign financial assets if the total value of these assets exceeds defined thresholds. Refer to the instructions for Form 8938 for comprehensive details.
U.S. persons may also have other filing obligations. Understanding these responsibilities is vital for ensuring compliance with U.S. tax laws.
Navigating the U.S. Tax System
Understanding your tax obligations as a new immigrant is a continuous learning process.
For assistance, refer to let us help you for online tools, resources, and IRS telephone numbers based on the type of assistance you need. By understanding and fulfilling your tax obligations, you contribute to the U.S. and establish a strong financial foundation for your future.
