International Taxpayers FAQs
Below are questions we’re frequently asked. To view an answer, just click on the question.
What do I need to file taxes in the US?
Year-end statements from banks and financial institutions (such as Forms 1098 and various Forms1099s), year-end statements from employers (such as Forms W2, Forms 1099), social security numbers (SSN) for tax identification numbers (ITN) for your source and dependents, an SSN or ITIN for yourself, and tax identification numbers for any business entities you own. You will also need detailed information on any overseas accounts you own with more than $10,000 in them.
I’m a non-resident alien. What happens if I don’t file my federal tax returns?
If you owe taxes and don’t file, the IRS can assess penalty and interest and seize U.S. bank assets for repayment. Fines and penalties can often amount to more than the original tax debt.
There can also be immigration consequences for failing to file taxes. Applicants for permanent residency “green cards” are frequently asked to show proof of tax filing for previous years in the U.S.
Who should apply for an ITIN?
Any one that is in one of the following categories and does not have, never has had or is ineligible for a U.S. Social Security Number:
- A Nonresident alien required obtaining an ITIN to claim a tax treaty benefit
- A Nonresident alien filing a U.S. tax return and not eligible for an SSN
- A Nonresident alien filing a U.S. tax return only to claim a refund
- A U.S. resident alien (based on days present in the United States) filing a U.S. tax return and not eligible for an SSN
- Nonresident alien student, professor, or researcher filing a U.S. tax return
Can I use an ITIN for anything except tax returns and other IRS filings?
Can I apply for an ITIN while abroad?
Yes, but it is difficult. In addition to all the usual requirements, you will need to have your supporting documents verified at a U.S. Consulate, or at a foreign IRS center (which are located in a small handful of cities around the world). You might also be well served by securing the involvement of a Sates-side Certified Acceptance Agent.
Is GPL Tax & Accounting a Certified Acceptance Agent for Form W7 documentation?
What is Form 5471?
This is an informational form that may have to be filed with your personal tax return if you held a director-level or higher position with a foreign corporation, owned more than 10% of shares in a foreign corporation, or otherwise controlled a foreign corporation for more than 30 days.
What is Form 5472?
It is an informational form that may have to be attached to your business tax return if your company owned a 25% or greater portion of a foreign corporation.
By what date must Form 5471 by filed?
The due date of the tax return.
By what date must Form 5472 by filed?
The due date of the tax return.
What is the penalty for failing to file Forms 5471 or 5472?
$10,000 each year the form isn’t filed, plus up to an additional $50,000 for instances of continued failure to file. Additionally, the foreign tax credit is reduced by 10% in years where the forms aren’t filed
I’m a student on an F-1 or J-1 visa. I had no U.S. earned income or scholarships. Do I need to file?
Yes. You must file IRS Form 8843 (Statement for Exempt Individuals and Individuals With a Medical Condition). Dependents in F-2 and J-2 status must also file IRS Form 8843.
I arrived in the U.S. in December and I didn’t work. Do I still have to file something?
Yes. If you were in the U.S. even 1 day during the tax year, you must file Form 8843.
I only worked a short time in the U.S. Do I still have to file a tax return?
Maybe. If your earnings were in excess of the personal exemption, you must file a tax return, usually Form 1040NR or Form 1040NR-EZ. If you had taxes withheld on your wages, you want to file a tax return to your refund.
What is the deadline for filing my tax return?
If you are filing Form 1040NR-EZ or Form 1040NR, the deadline to file is April 15. If you are filing Form 8843 only, the deadline is June 15.
I’m unable to file by the deadline, what do I do?
File Form 4868 (Extension of Time to File) that extends the deadline to file until August 15th. If you owe any taxes, you must still mail your tax payment by April 15 or you will be assessed penalty and interest as of April 15th, Mail Form 4848 and payment check to: Internal Revenue service, P.O. Box 1302 Charlotte, NC 28201-1302. Be sure to sign and date the forms and keep copies for your records. If not making a payment mail Form 4868 to: Dept. of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0045. Be sure to sign and date the forms and keep copies for your records.
I just received my W-2 for the wages I earned last year. Can I file my taxes now?
Not necessarily. If you are from a country that has a tax treaty with the U.S., or you received a U.S.-based scholarship or fellowship, you may also receive Form 1042-S. This form is generally mailed around March 15th. You may need to have both forms before you can file your taxes.
I am married to another nonresident alien who is also here in the U.S. Can I claim an exemption for my spouse?
Generally no. Some nations have special tax treaties that may allow it, however.
My young children live with me. Can I claim the Child Care Tax Credit?
Generally, no. Only those students and scholars in non-resident tax status who are from one of the countries that can claim dependents (Mexico, Canada, Korea and India) can claim the Child Care Tax Credit.
I am from a country with a tax treaty that allows me to claim exemptions for my spouse and dependents. Can I claim them if they don’t have a social security number or ITIN?
I am a student from India. Can I claim the standard deduction?
Yes. Due to a tax treaty provision, ONLY students from India may claim the standard deduction on the nonresident forms. Visiting Scholars and Researchers from India cannot claim the standard deduction.
My country has a tax treaty with the U.S. I earned below $5000, which is the amount of wage exempt by my treaty. Do I still need to file a tax return?
Yes. You must file Form 1040NR-EZ or Form 1040NR. In the case where you earned more than the exempt amount of your treaty, you may receive both a Form W-2 and Form 1042-S or you may just receive only a Form 1042-S.
I had bank interest on my checking or savings accounts, is that earned income and must I file other tax forms?
No. Simple bank interest and interest on CD’s are not considered earned income for non-resident aliens, and therefore are not reportable. Your bank generally reports this interest on Form 1099 and you should retain this form for your records, but not mail it with your tax filing. If you file taxes as a “resident alien”, bank interest is taxable income.
Can an S Corporation have shareholder-employees working outside the U.S.?
Can an S Corporation shareholder-employee working outside the U.S. exclude the foreign income on the U.S. tax return?
Yes, if certain conditions are met. The foreign earned income exclusion says that anyone working outside the country can exclude roughly $100,000 of income earned outside the country as long as the person is a bona fide resident of a foreign country for the entire year or as long as the person is physically present in a foreign country for at least 330 days in a twelve month period of time. (The actual exclusion amount is adjusted annually for inflation.)
What are my tax responsibilities as a green card holder if I have been absent from the United States for a long period of time?
You are still required to file a U.S. income tax return and report worldwide income no matter where you live. However, if you surrender your green card, or the U.S. Citizen & Immigration takes it away from you, you will need to follow the nonresident alien requirements for filing Form 1040NR or Form 1040NR-EZ.
I am a green card holder. May I claim residence in a foreign country under a tax treaty and obtain benefits under the tax treaty?
As a green card holder, you are generally considered as a U.S. resident for tax purposes. However, the definition of residency under U.S. tax laws does not override tax treaty definitions of residency. If you are a dual-resident taxpayer you can still claim the benefits under an income tax treaty.
What does it mean to be a dual-status alien?
Dual status means that during a particular tax year, you are considered a resident of both the United States and another country under each country’s tax laws.
For the part of the year you are considered a resident of the United States, you are taxed on all income sources, from inside and outside the U.S.
For the party of the year you are considered a non-resident alien, you are taxed only on income from sources inside the U.S.
I am surrendering my green card. Do I still have to pay taxes on my worldwide income?
Yes. For the part of the year you are a U.S. resident (green card holder) you are taxed on your worldwide income. The year you surrender your green card, you are a dual-status alien.
I’m a U.S. citizen living and working in a foreign country. What deductions and/or credits am I allowed on my U.S. income tax return?
U.S. citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a foreign tax credit on foreign income taxes or an itemized deduction for eligible foreign taxes. However, if you take the foreign earned income exclusion your foreign tax credit or deduction will be reduced.
If eligible, you can claim a foreign tax credit on foreign income taxes owed and paid by filing Form 1116 with your U.S. income tax return.
What is considered foreign earned income?
Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country or countries.
If my foreign earned income is below the foreign earned income exclusion threshold amount, am I still required to file a U.S. individual income tax return?
Yes, since the foreign earned income exclusion is voluntary, you must file a tax return to claim the foreign earned income exclusion. It does not matter if your foreign earnings are below the foreign earned income exclusion threshold.
Do I need to have a tax home in a foreign country in order to claim the foreign earned income exclusion?
Yes. To be eligible for the foreign earned income exclusion, you must have a tax home in a foreign country and be a U.S. citizen or resident alien. You must also be either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year (Bona Fide Residence Test), or you must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months (Physical Presence Test).
U.S. citizens may qualify under either test. But, there are specific definitions for U.S. resident aliens under each test.
What is the requirement for the Physical Presence Test?
To meet this test, you must be a U.S. citizen or resident alien who is physically present in a foreign country or countries, for at least 330 full days during any period of 12 consecutive months. A full day means the 24-hour period that starts at midnight.
What is the requirement for the Bona Fide Residence Test?
To meet this test, you must be one of the following:
- A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1-December 31, if you file a calendar year return), or
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1-December 31, if you file a calendar year return).
Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay. Evidence of your intention may be your words and acts. If these conflict, your acts carry more weight than your words. Generally, if you go to a foreign country for a definite temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country.
Can foreign pensions be excluded on Form 2555?
No. Form 2555 is used to exclude foreign earned income. Pensions are not earned income.
How do I know if the U.S. has an income tax treaty in force with another country?
The IRS makes available the list of countries with which the U.S. currently has income tax treaties in force. Refer to IRS Publication 901 for more information regarding United States tax treaties.
What is FIRPTA?
FIRPTA stands for the Foreign Investment in Real Estate Act. It is a federal law designed to insure that taxes are collected when foreign owners and investors sell real property or shares in entities that own real property. Generally, purchasers are required to withhold 10 percent on the sales price. They must report the withheld amount to the IRS on Form 8288 or 8288-A and pay over the money within 20 days of the transaction closing.
What happens if a buyer of U.S. real estate from a foreign investor doesn’t withhold 10 percent?
The purchaser may become liable for the taxes.
What is a FIRPTA affidavit?
It is a statement that is commonly attached to real estate closing documents that states the seller is not a foreign person.
How do I claim a pro-rata unified credit pursuant to a tax treaty on an estate return?
On Form 706NA , complete the entries for Lines 1 through 3 in Schedule B on the second page of the return. Attach a statement to the return that refers to the particular treaty applicable to the estate, and write that the estate is claiming its benefits. Show your computation of the pro-rata unified credit in the statement, and enter that figure in the Tax Computation on Line 7 on the front page of the return. Attach to the Form 706NA a copy of the return filed with the treaty partner. If no estate or inheritance tax return has been filed with the treaty partner, explain in your statement why no foreign return was due. If there was no foreign return, attach a copy of an inventory that sets forth the decedents assets and their values at the date of death, and explains how the figure shown on Line 3 of Schedule B was computed.
How do I claim an exemption from U.S. estate or generation skipping tax pursuant to a tax treaty?
Use Form 706NA. In Schedule A of the return, list the estates U.S. assets, but show no values for those that are exempt from U.S. estate tax pursuant to a treaty. Attach a statement to the return that refers to the particular treaty applicable to the estate, and write that the estate is claiming its benefits. Entries for the gross estate in the U.S., the taxable estate, and the tax amounts, should be “0” if all of the decedents U.S. assets are exempt from U.S. estate tax pursuant to the applicable treaty. Attach to the Form 706NA a copy of the return filed with the treaty partner. If no estate or inheritance tax return has been filed with the treaty partner, explain in your statement why no foreign return was due.
What is an FBAR?
An FBAR is a Report of Foreign Bank and Financial Account. The form number is TD F 90-22.1.
Who must file an FBAR?
Any United States person who has a financial interest in or signature authority, or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
What is a United States person?
A United States person is:
- A citizen or resident of the United States
- A domestic partnership
- A domestic corporation
- A domestic estate or trust
What is a financial account?
A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution.
What constitutes signature or other authority over an account?
A person has signature authority over an account if such person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained. Other authority exists in a person who can exercise comparable power over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.
What does “maximum value of account” mean (for Box 22 on the FBAR)?
The maximum value of account is the largest amount of currency and non-monetary assets that appear on any quarterly or more frequent account statements issued for the applicable year. If periodic account statements are not issued, the maximum account value is the largest amount of currency or non-monetary assets in the account at any time during the year. Convert foreign currency by using the official exchange rate at the end of the year. The value of stock, other securities or other non-monetary assets in an account reported on TD F 90-22.1 is the fair market value at the end of the calendar year. If the asset is withdrawn from the account, the value is the fair market value at the time of the withdrawal.
Is an FBAR required if the account generates neither interest nor dividend income?
How do I report my foreign accounts to the IRS?
The holders report their foreign accounts by completing boxes 7a and 7b on Form 1040 Schedule B and completing Form TD F 90-22.1.
When is the FBAR due?
The FBAR is due by June 30th of the year following the year that the account holder meets the $10,000 threshold.
I don’t have all the information on my foreign accounts, but I filed an extension with the IRS. Can I fie my FBAR in October?
The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. There is no extension available for filing the FBAR. If an account holder does not have all the available information to file the return by June 30th, they should file as complete a return as they can and amend the document when the additional or new information becomes available.
Is there a help line for questions about completing the form?
You can get answers to questions concerning the FBAR form by calling 1-800-800-2877, option 2.
Where do account holders file the FBAR?
They must be submitted electroniclly directly to the Dept of the Tresury. The FBAR is not to be filed with the filer’s Federal tax return.
How do I amend a previously filed FBAR?
FBAR filers can amend a previously filed FBAR by adding the correct information and by submitting it. If the amendment is for a delinquent FBAR, the filer should also attach an explanation giving the reasons why the form was not filed timely.
What is the statute of limitations for assessing civil penalties for violations of the FBAR requirements?
Civil penalties can be assessed anytime up to six years after the date of the violation.
How long should I keep records of the foreign accounts?
Records of accounts required to be reported on an FBAR must be retained for a period of five years. Failure to maintain required records may result in civil penalties, criminal penalties, or both.
What happens if I need to file an FBAR but don’t?
Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties, or both.
A fiduciary who is a U.S. person has control as a trustee for an IRA with a foreign account. Should an FBAR be filed?
Yes, because the fiduciary is a U.S. person.
Does the term “other authority over a financial account” mean that a person, who has the power to direct how an account is invested, but who cannot make disbursements to the accounts, has to file an FBAR?
No, an FBAR is not required because the person has no power of disposition of money or other property in the account.
Does more than one form need to be filed for a husband and wife owning a joint account?
No, if the names and social security numbers of the joint owners are fully disclosed on the filed FBAR. This practice only applies to joint owners who are husband and wife and who reside at the same address. Other joint owners must file separate FBARs.
I have over 25 foreign accounts. What should I enter in Part ll of the FBAR?
If you hold financial interest in more than 25 accounts, indicate the number of accounts in box 20. Do not complete any further items in Part II. Sign the form in box 36 and enter the date signed in box 37. Any person who lists more than 25 accounts in item 20 must provide all the information called for in Part II when requested by the Department of the Treasury.
I’m a non-resident alien living in the U.S. and I own several foreign accounts. Does I have to file an FBAR?
Not at this time. The current instructions for the FBAR form do not include non-resident aliens in its definition of United States persons. Section 5314(b)(1) of Title 31 gives the Secretary of the Treasury the discretion to exempt groups of persons identified in section 5314(a) from the FBAR filing requirements. Issuing instructions for the FBAR form is one way the Secretary may exercise this discretion. Since the FBAR instructions do not require non-resident aliens to file FBARs, they do not have to file FBARs. (Note: You may be considered a U.S. person if you live in the U.S. for 180 days or 30 days with no strong tax home.)
What are the exceptions to the FBAR filing requirement?
Accounts in U.S. military banking facilities, operated by a United States financial institution to serve U.S. Government installations abroad, are not considered as accounts in a foreign country. For this reason, these accounts do not have to be reported on an FBAR. An officer or employee of a bank which is subject to the Supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation need not report that he has signature or other authority over a foreign bank, securities or other financial account maintained by the bank, if the officer or employee has NO personal financial interest in the account. An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, need not file a report concerning the other signature authority over a foreign financial account of the corporation, if he has NO personal financial interest in the account and he has been advised, in writing, by the chief financial officer of the corporation that the corporation has filed a current report, which includes that account.
I recently got my green card. Do I need to declare the income from my foreign rental to the IRS?
Yes. U.S. citizens and residents are taxed on all income, world-wide. You declare your rental income on Schedule E. However, you can write off the expenses you incurred in the normal operation of the rental, as well as the mortgage interest and property taxes you paid.
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