Taxation of: U.S. Foreign Nationals

Size: px
Start display at page:

Download "Taxation of: U.S. Foreign Nationals"

Transcription

1 Taxation of: U.S. Foreign Nationals 2017 Edition ZanderSterling.com

2 1 The information contained in this publication is provided for general informational purposes only and is based on U.S. income tax law applicable to taxable years ending on or before December 31, It is not intended to be and should not be construed as written advice concerning one or more federal tax matters subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230. Since tax laws change frequently, the application of the information contained within this publication to specific situations should only be determined through consultation with your tax advisor. You are strongly encouraged to consult with your tax advisor prior to undertaking any significant financial transactions. Zander Sterling, LLC is a CPA firm focused exclusively on global mobility tax matters impacting employers and employees. Accordingly, it does not provide legal services.

3 2 Introduction As currently written, everyone in the world is technically subject to the U.S. Internal Revenue Code. The degree to which a foreign citizen or national is actually taxed, however, depends on his or her U.S. resident status. The United States has adopted a highly-complex, self-assessing system of taxation. Under this system each individual is responsible for preparing his or her own personal income tax return, computing tax owed and the timely remittance of tax. This means taxpayers do not receive annual tax assessments from tax authorities as is the case in many countries. In general, the U.S. tax year is the calendar year, January 1 through December 31. There are, in general, three jurisdictions of income taxation within the U.S.: federal, state and local. Each of these tax jurisdictions are administered separately and has their own governing tax laws. In addition to income taxes, the U.S. also imposes a federal-level social tax commonly known as FICA. The federal income tax is administered by the Internal Revenue Service (IRS), an agency within the U.S. Department of Treasury. State and local income taxes are administered by each respective state or local jurisdiction where applicable. U.S. social tax is co-administered by the U.S. Social Security Administration (SSA) and the Internal Revenue Service where the IRS s role is largely limited to the collection of the social tax. Due to the complexity of the U.S. income and social tax laws - and the number of exceptions within them - the primary scope of information provided within this publication has been limited to those areas of federal-level taxation most frequently of interest to individuals relocating to the United States. Note: If you are participating in a corporate-sponsored international assignment program, you may be covered by either a tax equalization or tax protection policy. While these types of policies are conceptually similar from one company to the next, the details surrounding tax computations, payment of taxes, and administrative responsibilities can vary a great deal. Accordingly, you should obtain and review the details of any such policy with your employer, if applicable, to ensure you have a complete understanding of how your personal tax obligations will be computed and managed.

4 3 Table of Contents Chapter 1 U.S. Tax Status: Nonresident Alien or Resident Alien... 7 Aliens... 7 Alien Classifications: Nonresident, Resident and Dual-Status... 7 Nonresident Alien... 7 Resident Alien... 7 Dual-Status Alien... 7 U.S. Tax Residency Tests... 8 Lawful Permanent Resident Test... 8 Substantial Presence Test... 8 Special Elections...11 Election to Be Treated as a Resident Alien for Part of Arrival Year (First Year Only)...11 Election to Treat Nonresident Alien Spouse as a Resident (Married Taxpayers Only)...11 Election to Treat Dual-Status Alien as a Full-Year Resident (Married Taxpayers Only)...12 Tax Treaty: Residency Tie-Breaker...12 U.S. Residency Termination...13 Tax Residents Meeting the Lawful Permanent Resident test (i.e., green card test)...13 Tax Residents Meeting Only the Substantial Presence Test...13 Tax Residents Meeting Both the Green Card and Substantial Presence Tests...13 Chapter 2 Nonresident Aliens...14 Filing Status...14 Personal Exemptions...14 Income Subject to U.S. Taxation...14 Sourcing of Income...14 Taxation of U.S. Source Income...15 Income Effectively Connected with a U.S. Trade or Business...15 Income Not Effectively Connected with a U.S. Trade or Business...16 Tax Credits...17 Income Tax Treaties...17 Chapter 3 Resident Aliens...19 Filing Status...19 Personal Exemptions...19 Income Subject to Taxation...20 Compensation...20

5 4 Rental of Residence...20 Deemed Income...21 Other Income...21 Gross Income Exclusions...21 Adjustments...22 Adjustments...22 Standard Deduction or Itemized Deductions...23 The Standard Deduction...23 Itemized Deductions...23 Computation of Tax...24 Tax Credits...24 Foreign Tax Credit...24 Income Tax Treaties...24 Dual Residents...25 Chapter 4 Dual-Status Aliens...26 Taxation: Resident Alien Part of the Year...26 Taxation: Nonresident Alien Part of the Year...26 Income From U.S. Sources...26 Not Effectively Connected Income...26 Effectively Connected Income...26 Restrictions for Filing Dual-Status Tax Returns...27 Resident Alien vs. Nonresident Alien Filing Procedures...27 Resident Alien at End of Year...27 Nonresident Alien at End of Year...28 Chapter 5 Taxation of U.S. Residential Real Estate...29 Property Owned by Nonresident Aliens...29 Income Not Effectively Connected with a U.S. Trade or Business...29 Election to Treat Real Property Income as Effectively Connected with a U.S. Trade or Business...30 Property Owned by Resident Aliens...30 Depreciation...30 Separating Cost of Land and Buildings...31 Passive Loss Rules...31 Personal Use of Rental Property...32 Allocation of Expenses...32

6 5 Expense Limitation for Excessive Personal Use...32 Sale of Residential Rental Property...33 Sale of Rental Property by Resident Aliens...33 Sale of Rental Property by Nonresident Aliens...33 Tax Treaties...33 Chapter 6 - Other Taxes...34 State & Local Income Taxes...34 Overview...34 State Residency General Rules...34 Tax Treaties...35 Social Security Tax...35 Self-Employment...36 Totalization Agreements...36 Net Investment Income Tax...37 Estate and Gift Taxes...37 Chapter 7 - Payment of Taxes...39 Tax Withholding at Source...39 Estimated Tax Payments...39 Annual Settlement of Taxes...39 Interest & Penalty Charges for Late Payment of Tax...40 Chapter 8 - Income Tax Return Reporting & Filing Procedures...41 Who Must File...41 Common Federal Income Tax Return Forms...41 Joint vs. Separate Tax Returns (Married Persons)...41 Tax Identification Numbers...42 Social Security Number (SSN)...42 Individual Taxpayer Identification Number (ITIN)...42 When to File U.S. Tax Returns...43 Resident Aliens...43 Nonresident Aliens...43 Dual-Status Aliens...44 Extension of Time to File Income Tax Return...44 Resident Aliens...44 Nonresident Aliens...45 Tax Clearance U.S. Certificate of Compliance...45

7 6 Chapter 9 - Other Tax Considerations & Filings...46 Form 8938, Statement of Specified Foreign Financial Assets...46 Background...46 Specified Individual...46 Reporting Thresholds...47 Penalties...47 Failure-to-File Penalty...47 Continuing Failure to File...47 Establishing Individual Retirement Accounts Possibly Electing the Foreign-Earned Income Exclusion Selecting a Fiscal Year Basing Estimated Tax Payments on the Prior-Year Liability Considering Visa Status Withholding on Interest Payments Made to a Foreign Lender Electing Out of Installment Sales Making Tax Treaty Disclosures...49 Foreign Currency Exchange Rules...49 Currency Restrictions & Reporting...49 Foreign Corporations and Other Foreign Entities Officers, Directors or Shareholders...49 Foreign Trusts & Large Gifts or Bequests from Certain Foreign Persons...50 Community Property States...50 Common Law...50 Community Property Law...50 Nonresident Alien Implications...51 U.S. Community Property States...52 Chapter 10 FinCEN Form 114, Report of Foreign Bank and Financial Accounts...53 Background...53 Who Must File...53 Filing Exception for Certain Accounts Jointly Owned by Spouses...53 Responsibility for Child s FBAR...53 Filing Due Date and Procedure...54 Penalties for Non-Compliance...54

8 7 Chapter 1 U.S. Tax Status: Nonresident Alien or Resident Alien Aliens Individuals that are neither a U.S. citizen nor U.S. national are commonly referred to as aliens within the U.S. tax scheme. And each tax year an alien must properly determine his or her U.S. tax status under federal tax law in order to understand which body of tax laws govern taxation. There are essentially 2 types of aliens : 1. Nonresident 2. Resident In general, nonresident aliens are subject to U.S. taxation only on their U.S. source income while resident aliens are subject to U.S. taxation on their worldwide income, similar to U.S. citizens and permanent residents (i.e., green card holders). Since the scope of taxation differs greatly between these two alien statuses, proper classification is financially critical. Alien Classifications: Nonresident, Resident and Dual-Status Nonresident Alien A nonresident of the U.S. for U.S. federal income tax purposes is a non-u.s. citizen or national who fails both the lawful permanent resident test (i.e., Green card test) and the substantial presence test. Resident Alien A resident of the U.S. for U.S. federal income tax purposes is a non-u.s. citizen or national who meets either the lawful permanent resident or substantial presence test. Dual-Status Alien If a person qualifies as a tax nonresident for one part of a tax year and as a tax resident for the other part of the same tax year, the person has what is known as a dual-status tax year. Dualstatus tax years are common in years where a person either relocates to or from the U.S. For the portion of the year a person qualifies as a nonresident, tax is computed by referencing laws applicable to nonresident aliens. For the portion of the year a person is considered a resident, tax is computed by referencing laws applicable to resident aliens. While a person having a dual-status tax year must compute their annual income tax obligation by reference of two different bodies of tax laws, only one income tax return is required to be filed for the year. See Resident Alien vs. Nonresident Alien Filing Procedures in Chapter 4 for information on which federal income tax form to file.

9 8 U.S. Tax Residency Tests Lawful Permanent Resident Test A person meets this test - and is considered a tax resident - if they have been legally admitted under U.S. immigration law to enter and remain in the United States. Such persons are commonly referred to as holding a green card. Lawful Permanent Residents are U.S. federal income tax residents regardless of where they reside (i.e., either within or outside the U.S.). They remain tax residents until lawful permanent resident status is either revoked or abandoned under U.S. immigration laws. It s important to note that lack of U.S. income tax compliance by a green card holder can result in abandonment of his or her green card. The U.S. residency start date for an individual meeting the lawful permanent resident test (but not the substantial presence test) is typically the first day during the tax year such person is present in the United States as a lawful permanent resident. Substantial Presence Test Meeting the substantial presence test is a function of how many days a person physically spends within the United States. The test requires an individual to accurately count the number of days physically present within the U.S. during a three-year qualifying period. An individual will be considered a U.S. tax resident under the substantial presence test if he or she meets both of the following requirements during the qualifying period: 1. Is a foreign citizen or national who is physically present in the United States for at least 31 days during the current tax year and, 2. Is physically present 183 days during a 3-year qualifying period (i.e., the current tax year and the 2 preceding tax years) using the following formula: ALL of the days present in the U.S. during the current tax year, PLUS 1/3rd of the days present in the U.S. during the first prior tax year, PLUS 1/6th of the days present in the U.S. during the second prior tax year. The U.S. residency start date for an individual meeting the substantial presence test (but not the lawful permanent resident test) is, in general, the first day the individual was physically present in the U.S. during the current tax year. There is an exception to this general start date rule commonly referred to as the de minimis presence exception. This exception allows an individual to delay - by up to 10 days the residency start date.

10 9 Example: William, a U.K. citizen, is employed by a U.S. company and travels to the U.S. frequently to conduct business. He maintains his home in the U.K. and does not hold a U.S. green card. (i.e., he fails the Lawful Permanent Resident Test). During the current tax year, William first enters the U.S. on February 1. He has numerous other short trips to/from the U.S. during the current tax year. Over the past 3 years, William s U.S. travel has resulted in the following number of days present within the U.S. Tax Days In U.S. Days In U.S. Total Days Year Worked Not Working Present in U.S Current = st Preceding = nd Preceding = 120 Using the Substantial Presence Test (SPT) formula, the number of days William has spent in the U.S. during the qualifying period is computed as follows: Tax Total Days Days SPT Equivalent Year Present in U.S. Counted Days of Presence Current 123 X 1.0 = st Preceding 120 X 1/3 = 40 2 nd Preceding 120 X 1/6 = Total 183 Since William was present in the U.S. for 31 days during the current tax year AND has at least 183 days of physical presence in the U.S. during the qualifying period, he meets the substantial presence test. Using the facts of this example, William would be considered a tax resident of the U.S. on February 1, his first day of presence in the U.S. during the current tax year. If an individual meets both the lawful permanent resident test and the substantial presence test in the same year, the residency starting date is the earlier of: The first day the individual is present in the United States during the year he or she passes the substantial presence test, or The first day the individual is present in the U.S. as a Lawful Permanent Resident (green card holder). Day of Presence Defined In general, a day of presence for purposes of the substantial presence test is defined as any day or partial day during which an individual is present in the U.S. at any time.

11 10 A day of presence does not include days an individual: Commutes to work in the U.S. from a residence in Canada or Mexico, Is in the U.S. for less than 24 hours when in transit between two places outside of the U.S., Is in the U.S. as a crew member of a foreign vessel, Is unable to leave the U.S. because of a medical condition that develops while you he or she was in the U.S. or, Is considered an exempt individual. Exempt Individual Defined For purposes of not counting days towards meeting the substantial presence test, an exempt individual includes: An individual temporarily present in the U.S. on a qualifying visa as a foreign governmentrelated individual, A student, teacher or trainee temporarily present in the U.S. under either a F, J, M or Q type visa, who is substantially compliant with the requirements of the visa and, A professional athlete temporarily in the U.S. to compete in a charitable sports event. Days excluded either due to medical condition or as an exempt individual must be reported a part of individual s annual person income tax return using Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition. Failure to file this form in a timely manner will, in general, result in otherwise exempt days being counted toward meeting the substantial presence test. Exception to the Substantial Presence Test - Closer Connection to a Foreign Country If an individual meets the requirements of having a closer connection to a foreign country, he or she will not be considered a resident of the United States for federal income tax purposes even if they otherwise meet the substantial presence test. To establish a closer connection to a foreign country, an individual must: 1. Be present in the U.S. for less than 183 days during the current tax year, 2. Maintain a tax home in a foreign country and, 3. Have a closer connection to the tax home country. Determining if an individual s tax home and closer connection are with a foreign country depends on a number of factual items which must be carefully evaluated. As such, any such determination is naturally subject to a degree of uncertainty. Form 8840, Closer Connection Exception Statement for Aliens, must be filed to claim the closer connection to foreign country exception to the substantial presence test. Note: The closer connection to a foreign country exception to the substantial presence test may not be utilized by an individual who has either initiated the process of applying for a U.S. green card or has such an application pending.

12 11 Special Elections Election to Be Treated as a Resident Alien for Part of Arrival Year (First Year Only) A special election is available to a foreign national who is unable to meet the substantial presence test in the year he/she arrives in the United States but wants to be taxed as a resident for a part of that initial year. To make this election, he or she must satisfy all of the following criteria: The foreign national was a nonresident for all of the preceding year. The foreign national meets the substantial presence test in the year following arrival. The foreign national is present in the United States for at least 31 consecutive days in the year of arrival. During the year of arrival, the foreign national meets the continuous presence test that is, he/she is present in the United States for at least 75% of the days between the first day of the thirty-one-day period and the last day of the year of arrival. For purposes of applying the 75% test, up to five days of presence outside the United States can count as days of presence in the United States. The U.S. tax return containing the first-year residency election may not be filed until the foreign national has satisfied the residency requirement under the substantial presence test for the following year. The foreign national may request an extension of time to file until the necessary period passes for satisfying the test in the following year, but tax must be paid with the extension application on the basis that the substantial presence test will be satisfied in the following year. By making this election, a nonresident alien effectively becomes a dual-status alien. Once made, the first-year election may not be revoked without the approval of the Internal Revenue Service. Election to Treat Nonresident Alien Spouse as a Resident (Married Taxpayers Only) If, at the end of the tax year, one spouse is a nonresident alien and the other spouse is either a U.S. citizen or resident alien, the couple may elect to treat the nonresident alien spouse as a resident for the entire tax year. If a couple makes this election, the follow rules apply: Both individuals are treated for income tax purposes as residents for the entire tax year. Both individuals are taxed on their worldwide income. The couple must file a joint federal income tax return for the tax year in which the election is made. Neither individual can claim under any tax treaty not to be a U.S. resident. If this election is made for any tax year, both individuals shall be ineligible to make this election for any subsequent tax year. The election to be treated as a resident alien is suspended (not ended) for any tax year (after the tax year for which the election was made) if neither spouse is a U.S. citizen or resident alien at any time during the tax year.

13 12 In general, the election may be terminated by: The timely, active revocation by either spouse, The death of either spouse, Legal separation under divorce decree or, Termination by Secretary (i.e., Internal Revenue Service). If the election is terminated, neither individual shall be eligible to make the same election for any future tax year. Election to Treat Dual-Status Alien as a Full-Year Resident (Married Taxpayers Only) If an individual is a nonresident alien at the beginning of the year but a resident alien of the U.S. at the close of the year and such individual is married to either a U.S. citizen or resident alien, the couple may elect to be treated as U.S. residents for the entire tax year. To make this election, each individual of the married couple must satisfy all the following criteria: The individual was a nonresident alien at the beginning of the tax year. The individual was either a resident alien or U.S. citizen at the end of the year. The individual s spouse joins the individual in making the election. This election is available to married taxpayers even if both were nonresident aliens at the beginning of the year and resident aliens at the end of the year. If a couple makes this election, the following rules apply: Both individuals are treated for income tax purposes as residents for the entire tax year. Both individuals are taxed on their worldwide income. The couple must file a joint federal income tax return for the tax year in which the election is made. Neither spouse can make this election for any later tax year, even if separated, divorced or remarried. Tax Treaty: Residency Tie-Breaker Notwithstanding the above residency tests, a foreign individual s U.S. resident alien status may be overridden if the individual is also considered a tax resident of a country that has an income tax treaty with the United States. A careful examination of an individual s facts and circumstances is required to invoke this provision of an income tax treaty. Individuals meeting the lawful permanent resident (i.e., green card) test should only invoke the income tax treaty residency tie-breaker provision with the understanding that doing so may result in revocation of their green card or an administrative decision that they have abandoned their green card; a potentially serious implication.

14 13 U.S. Residency Termination Tax Residents Meeting the Lawful Permanent Resident test (i.e., green card test) A resident alien who meets the green card test is considered resident until the day that his or her status as a lawful permanent resident officially ends that is, when he or she formally revokes the lawful permanent resident status or when an administrative decision is made that this status has been abandoned. Until that time, the green card holder is a U.S. tax resident even when outside of the country. Tax Residents Meeting Only the Substantial Presence Test The treatment of a departing resident alien who does not hold a green card varies depending on the particular circumstances. If the individual does not meet the substantial presence test for the year of departure, the individual is a nonresident alien for the entire year. If the individual meets the substantial presence test in the year of departure, the individual is considered a resident alien for the entire year, unless the individual establishes that, following the departure date, the individual has a closer connection with a foreign country. The individual documents and declares the closer connection by attaching a residency termination statement to his or her tax return. If a closer connection is so established, the last day of U.S. residence will be the day of departure and the individual will effectively be a dual-status resident for the year of departure. Note: Regulations governing departing non-green-cardholders stipulate that unless the residency termination statement is filed, an individual who meets the substantial presence test for the year of departure will be considered resident for the entire year. It therefore appears that a departing individual who meets the substantial presence test for the year might choose not to file the residency termination statement, in order to be considered a full-year resident of the United States. The choice should presumably be made in light of the same considerations that influence the first-year election to be treated as a full-year resident. Tax Residents Meeting Both the Green Card and Substantial Presence Tests The residency termination date for an alien meeting both the green card test and the substantial presence test is the date on which the alien no longer has lawful permanent residence or the date on which the alien is last present for the substantial presence test, whichever is later. Similar to the rules regarding an individual s U.S. residency start date, an individual may disregard up to ten days of U.S. presence following the termination of a U.S. assignment when determining his or her residency termination date.

15 14 Chapter 2 Nonresident Aliens Filing Status Individuals who are nonresident aliens at any time during the tax year normally are not eligible to claim head-of-household status and generally may not file a joint tax return with a spouse. Unmarried individuals must use one of the applicable single filing statuses and compute tax on their income effectively connected to a U.S. trade or business using the tax table or rate schedule applicable to single individuals. Married individuals must use one of the applicable married filing statuses and compute tax on their income effectively connected with a U.S. trade or business using the tax table or rate schedule applicable to married filing separate individuals. Personal Exemptions Nonresident aliens may, in general, only claim one personal exemption when computing tax on income effectively connected to a U.S. trade or business. Under certain circumstances, however, nonresident aliens from Mexico, Canada and South Korea may be eligible to claim additional exemptions for a spouse and/or a dependent child. For high-income taxpayers, the amount allowed to be claimed for personal exemptions is reduced by 2% for every $2,500, or part of $2,500, the taxpayer s income is above a statutory threshold. The applicable threshold is determined by one s filing status. Note: Personal exemptions for a spouse or qualifying dependent may only be claimed if such person is not being claimed as a personal exemption by someone else. Income Subject to U.S. Taxation Nonresident alien status individuals are typically subject to U.S. tax on income from U.S. sources. Sourcing of Income The source of income is, in general, determined by referencing the geographic location where the related services were performed or where the income-producing asset was located. The location from which the income is paid or when the income is paid is not a relevant factor in determining the sourcing of income. Example: Jan, a German citizen, is employed and paid by a German company and earns annual compensation equivalent to US$100,000. During the tax year, John works 40% of the time in Germany and the other 60% in the United States. Assuming John s wages are earned evenly throughout the tax year, John would have US$60,000 of U.S. sourced income (US$100,000 X 60% = US$60,000) and US$40,000 of German sourced income (i.e., non-u.s. sourced) during the tax year.

16 15 Taxation of U.S. Source Income Once the U.S. source income has been calculated, the manner in which it is taxed depends on the category of income it is. There are two categories for U.S. sourced income: 1. Income Effectively Connected with a U.S. Trade or Business (i.e., compensation and business income) And 2. Income Not Effectively Connected with a U.S. a U.S. Trade or Business (i.e., investment income). The term trade or business has never been unequivocally defined in U.S. tax law. In general, however, its meaning as it relates to nonresident aliens depends on the nature of the activities undertaken and economic interests within the United States. Income Effectively Connected with a U.S. Trade or Business Nonresident aliens are taxed separately on income arising from the activities of or assets used in a U.S. trade or business. This income, less allowable deductions, is taxed at the graduated rates that apply to U.S. citizens and resident aliens. Examples of income effectively connected with a U.S. trade or business typically include: Compensation received for personal services, Profits from the operation of a business within the United States, Income from a partnership engaged in a U.S. trade or business, Income from real property operated as a business, Income from real property held for investment (e.g., a residential rental property) IF a special election is made to treat the income from such property as business income, Income from the sale or disposition of U.S. real property interests and, Income from the sale of certain business-related capital assets. Note: If an individual is no longer engaged in a U.S. trade or business but continues to receive income effectively connected to that business, the income the individual receives may still be considered effectively connected and taxed accordingly. Adjustments and Deductions from Effectively Connected Income Unlike the flat tax on gross income not effectively connected with a U.S. trade or business, the tax on effectively connected income is applied to a nonresident individual s net taxable income. The adjustments and deductions available to a nonresident alien in computing his or her net taxable income are, however, limited compared to those available to a U.S. citizen or resident alien. Below is a listing of the potential adjustments and deductions a nonresident may claim if qualified to do so.

17 16 Adjustments Educator expenses Health savings account contributions Moving expenses Deductible part of self-employment tax Certain self-employed retirement plans Self-employed health insurance costs Penalty on early withdrawal of savings Scholarship and fellowship grants Individual Retirement Account (IRA) contributions Student loan interest Domestic production activities Itemized Deductions State and local income taxes paid Gifts to U.S. Charities Casualty and Theft Losses Job Expenses and Certain Miscellaneous (If exceeds of 2% of individual s adjusted gross income) Other Miscellaneous Deductions Most adjustments and deductions may only be claimed to the extent they are connected with the effectively connected income. Also, certain adjustments and itemized deductions may be disallowed if an individual is a high-income earner or fails to file his or her personal income tax return in a timely manner. Note: The Standard Deduction is not allowed to nonresident aliens. See Chapter 3 - Resident Aliens for definition of the Standard Deduction. Income Not Effectively Connected with a U.S. Trade or Business A nonresident alien s U.S.-source income that is not effectively connected with a U.S. trade or business is taxed at a flat rate of 30%. This tax rate is applied to gross income; no deductions are permitted in arriving at the taxable portion of this category of U.S. source income. The provisions of an income tax treaty, if available, may reduce the applicable tax rate, however. Examples of income not effectively connected with a U.S. trade or business typically include: Alimony received from a U.S. resident, Dividends, Gambling winnings (exceptions exist), Interest income, including certain original issue discounts, Rents and royalties from investment properties and, U.S. Social Security (85% of certain benefits).

18 17 Exceptions Interest income is excluded from U.S. taxation if it is from: Deposits (including certificates of deposit) with persons in the bank business. Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations and other savings institutions chartered and supervised as savings and loan or similar associations under U.S. federal or state law. Amounts held by an insurance company under an agreement to pay interest on them. Obligations of a state or political subdivision, the District of Columbia or a U.S. possession. Other obligations qualifying as portfolio interest. Capital Gains Except in the case of real property investments, a nonresident alien s U.S.-source net capital gains (i.e., capital gains in excess of capital losses from the sale of investment/personal property) are not subject to U.S. taxation. The general exemption for capital gains applies regardless of the number of transactions or amount of gain realized during the year. Exception Nonresident alien students and scholars as well as alien employees of foreign governments and international organizations who, at the time of their arrival in the United States, intend to reside in the United States for longer than 1 year are subject to the 30 percent taxation on their capital gains during any tax year (usually calendar year) in which they are present in the United States for 183 days or more, unless a tax treaty provides for a lesser rate of taxation. The 30% nonresident alien tax applies to such individuals even if they are nonresident alien status under the substantial presence test. Payment of Nonresident Alien 30% Tax The United States has extensive withholding provisions to ensure the collection of income taxes imposed on nonresident aliens. Ordinarily, the 30% (or lower treaty rate) will be deducted from payments made to the nonresident alien. If withholding is not deducted at source, the nonresident alien must file a tax return and pay the tax due. Otherwise, the withholding agent (the person paying the income) is liable for the tax. A tax return may be filed after year-end to request a refund of excess withholding. Tax Credits In general, nonresident aliens are eligible to claim the same credits against income tax as resident aliens. Income Tax Treaties Most tax treaties will either eliminate or reduce withholding requirements on U.S. income, such as dividends, interest, and royalties, received by nonresident aliens. Therefore, the applicable treaty, if any, should be reviewed to determine whether the flat 30% tax rate is reduced for the specific type of income. It is also necessary to establish that the recipient is a qualified resident of the treaty partner country.

19 18 Tax treaties may also exempt nonresident aliens from U.S. taxation on the following types of income: Compensation received from a foreign employer that is not engaged in a U.S. trade or business if the employee is in the United States for fewer than 183 days. Some treaties also contain a dollar threshold for tax exemption. Pensions from former foreign employers. Compensation and pensions received by teachers who are temporarily in the United States. Foreign income received by students and trainees who are in the United States for maintenance, training, and education.

20 19 Chapter 3 Resident Aliens Filing Status Similar to nonresident aliens, the amount of U.S. tax owed depends a great deal on one s filing status as it determines whether an individual may claim certain adjustments, deductions and credits. It also determines the tax schedule that must be applied to an individual s taxable income. Unlike nonresident aliens, all filing statuses available to a U.S. citizen are also available to resident aliens. The most common filing statuses are as follows: Single: Unmarried individual (who doesn t qualify for another filing status). Files one income tax return on which only his or her income, adjustments, deductions, exemptions, credits, etc. are reported. Married Filing Jointly: Married couple. Files one income tax return on which all their income, adjustments, deductions, exemptions, credits, etc. are reported. Married Filing Separately: Married couple files two income tax returns. Each individual reports only his or her respective income, adjustments, deductions, exemptions, credits, etc. are reported. Head of Household: Unmarried or considered unmarried individual who provides a certain amount of support to a qualifying person. Files one income tax return on which only his or her income, adjustments, deductions, exemptions, credits, etc. are reported. Note: An individual is considered unmarried for filing status purposes if his or her spouse was a nonresident alien at any time during the tax year and an election to treat the spouse as a full-year resident for the entire tax year is not made. Personal Exemptions Resident aliens may claim one personal exemption when computing tax on their worldwide income. A personal exemption may also be claimed for a spouse (if applicable) if filing a joint income tax return (i.e., Married Filing Jointly filing status) or the spouse had no income subject to U.S. taxation. An additional personal exemption is allowed to be claimed for each dependent (i.e., qualifying child or relative) provided such person is a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico. For 2017, each personal exemption is: $4,050. Planning Tip: Unless they are U.S. citizens or Nationals, a resident alien s dependent children typically must satisfy the requirements of either the green card or substantial presence test in order to be considered a U.S. tax resident. For children newly arriving in the United States with a resident alien taxpayer, the taxpayer may make a first-year election (See Special Elections in Chapter 1) for each of the children to be treated as residents when they would not otherwise

21 20 qualify as U.S. residents for the year. Doing so would enable the taxpayer to claim personal exemptions for each of the dependent children. For high-income taxpayers, the amount allowed to be claimed for personal exemptions is reduced by 2% for every $2,500, or part of $2,500, the taxpayer s income is above a statutory threshold. The applicable threshold is determined by one s filing status. Note: Personal exemptions for a spouse or qualifying dependent may only be claimed if such person is not being claimed as a personal exemption by someone else. Income Subject to Taxation A resident alien s U.S. gross income includes all worldwide income, derived from any source irrespective of where earned or paid unless specifically exempt or excluded. Common examples of income are: Compensation, Interest, Dividends, Certain state and/or local income tax refunds, Alimony received, Income or loss from any trade or business, Gains from selling investments or property, Retirement plan distributions, including pensions and annuities, Income or loss from partnerships, Income or loss from rental properties, Unemployment compensation, U.S. Social Security benefits, Deemed income and, Other income from any worldwide source (see common examples below). Compensation Compensation includes but is not limited to: Wages, salaries, tips, bonuses, commissions, taxable fringe benefits, equity-based compensation, pensions, foreign-service allowances, costof-living differentials, employer-paid housing, company-provided automobiles, non-qualified relocation expenses, reimbursement of an employee s taxes or other personal expenses, reimbursement of home leave expenses and tuition paid for an employee s spouse and/or children. The term Compensation also includes deferred compensation; income earned in one year but paid in a later year. Contributions by an employee to a U.S. qualified plan (e.g., 401(k) plan) is an example of a deferred compensation plan. Rental of Residence Many people who are on an international assignment do not sell their residence in their home countries. Some leave them vacant but the majority choose to rent them out while residing and

22 21 working in the U.S. Rental income is taxable. However, ordinary and necessary expenses associated with the property as well as depreciation are deductible in arriving at taxable income from the rental, if any. Some examples of rental-related expenses include: Mortgage interest (not principal), Real estate/property taxes, Realtor fee and commissions, Insurance, Utilities and, Cleaning and general maintenance costs. If a property is rented for fewer than 15 days during a tax year, no tax is owed on the rental income received. However, if a rental property is also used personally (including use by friends and relatives when fair market rent isn t received) during a tax year for more than the greater of 14 days or 10% of the days rented at fair market value, no rental loss may be deducted. Deemed Income U.S. tax law contains a number of provisions, less commonly found in the tax laws of other countries, deeming U.S. investors to have received income earned by foreign corporations that they control, by passive foreign investment companies (PFIC), and by trusts that they have established for the benefit of U.S. persons. These provisions apply fully to resident aliens, and, while these provisions tend to affect few resident aliens, their tax consequences can be surprising. These rules must therefore be considered carefully in evaluating U.S. income tax status. Other Income Examples of other income include: Family/child allowances paid by foreign governments, Employer contributions to non-qualified foreign pension and/or retirement schemes and, Earnings within non-qualified pension and/or retirement schemes. Note: If an individual earns compensation in one year but the receipt of such compensation is deferred in accordance with IRS rules until a later year, such income would not be taxed until the year of receipt. Compensation deferred by an individual while a resident alien but received when the individual is a nonresident alien generally retains its original character and is taxed at graduated rates in the year received. Gross Income Exclusions Items of income generally excluded from gross income include: Qualified relocation expenses, Interest on certain state and local debt obligations, Death benefits paid from life insurance contracts,

23 22 Gifts and inheritances (state and local rules may differ, however), Contributions by employers to qualified accident and health insurance plans, Certain employer-provided meals and lodging and, Qualified scholarships. Adjustments A resident alien s income tax liability is computed on his or her net taxable income. The first step in calculating net taxable income is to subtract allowable adjustments from the resident alien s gross income. Below is a listing of the potential adjustments a resident alien may claim if qualified to do so. Adjustments Educator expenses Certain business expenses for reservists, performing artist and fee-basis government officials Health savings account contributions Moving expenses Deductible part of self-employment tax Certain self-employed retirement plans Self-employed health insurance costs Penalty on early withdrawal of savings Alimony paid Individual Retirement Account (IRA) contributions Student loan interest Tuition and fees Domestic production activities Moving Expenses An individual may become eligible for a moving expense deduction if, following an employmentrelated move, the individual s new place of work is at least 50 miles farther from his or her old home than was the former place of work. After moving, the individual must generally continue to work as a full-time employee in the new location for at least 39 weeks during the 12 months after the move (or 78 weeks during the subsequent 24 months, if self-employed). A person who meets these tests may claim a full deduction for moving costs such as transportation of household goods and personal transportation. Qualified moving expenses may be deducted only if individuals incur the expenses themselves (i.e., not reimbursed by employer). Qualified moving expenses reimbursed by an employer are excludable from an employee s gross income as a qualified fringe benefit. When an alien relocates to a location outside the United States and, in doing so, terminates his or her U.S. residency status, no moving expense adjustment is typically allowed. In addition, the timing of when nonqualified relocation expenses are reimbursed could determine whether or not such reimbursements are taxable in the United States.

24 23 Standard Deduction or Itemized Deductions In additional to subtracting adjustments from their gross income, resident aliens may also subtract the higher of either the Standard Deduction amount or their actual itemized deductions. The Standard Deduction The amount resident aliens may claim as their Standard Deduction is determined by reference to their filing status. As mentioned in Chapter 2, the Standard Deduction is not allowed to be claimed by nonresident aliens. For 2017, the Standard Deduction amounts are as follows: Filing Status Standard Deduction Single $6,350 Married Filing Jointly $12,700 Married Filing Separately $6,350 Head of Household $9,350 Below is a listing of the potential adjustments and itemized deductions a resident may claim if qualified to do so. Itemized Deductions Medical and dental expenses in excess of 10% of adjusted gross income State and local income taxes paid or general sales taxes Real estate taxes not attributable to a business Personal property taxes (e.g., automobile licensing excise taxes) Other taxes (e.g., income taxes paid to foreign country not claimed as a tax credit) Mortgage Interest paid (i.e., mortgage interest and certain points) Mortgage insurance premiums Investment interest Gifts to U.S. Charities (i.e., includes both cash and non-cash gifts) Casualty and Theft Losses from non-income producing property) Job Expenses and Certain Miscellaneous (If exceeds of 2% of individual s adjusted gross income) Other Miscellaneous Deductions Limit on Home Mortgage Interest The amount of deductible interest expense related to any form of mortgage secured after October 13, 1987 is potentially limited. For U.S. tax purposes, mortgages are divided into two categories: Category A: Loan proceeds used to buy, build or improve the home and, Category B: Loan proceeds not used to buy, build or improve the home (e.g., home equity loan). In general, interest related to Category A mortgages is only deductible on loans totaling no more than US$1,000,000 in aggregate. Interest related to Category B mortgages is only deductible on

25 24 loans totaling no more than US$100,000 in aggregate. Both dollar limitations are reduced by 50% for individuals using the married filing separate status. If the total of all mortgages (Category A and B combined) exceeds the fair market value of the home, additional limits apply. Certain adjustments and deductions may be disallowed if an individual is a high-income earner or fails to file his or her personal income tax return in a timely manner. Other Miscellaneous Deductions The types of expenses that may be deducted are limited to the following: Gambling losses (only to the extent of gambling winnings) Casualty and theft losses of income-producing property Loss from other activities related to large partnerships A deduction for amortizable bond premium An ordinary loss attributable to a contingent payment or inflation-indexed debt instrument Deduction for repayment of amounts under a claim of right (if over US$3,000) Certain unrecovered investment in a pension Impairment-related work expenses of a disable person The sum of a resident alien s net itemized deductions (i.e., after the high-income earner reduction, if applicable) is compared to a statutory Standard Deduction. The larger of the two amounts may be deducted in computing taxable income. Computation of Tax A resident alien s taxable income is taxed using graduated rates. Each filing status has its own tax tables and rates schedules. The federal income tax rates range between 10% and 39.6%. Tax Credits Foreign Tax Credit Income taxes paid by a resident alien to a foreign country may be deducted as an itemized deduction or may be credited against the resident alien s U.S. tax liability. Since claiming foreign taxes as credits reduces the U.S. tax liability on a dollar-for-dollar basis, doing so will generally produce a lower net tax liability than would claiming the same foreign taxes as an itemized deduction. Income Tax Treaties The United States has negotiated tax treaties with other countries to reduce the burden of double taxation. A treaty may override the income tax laws of the United States for items covered by the treaty. Any item not specifically addressed by the treaty will be taxed in accordance with U.S. income tax laws.

26 25 Dual Residents Individuals who are considered U.S. resident aliens under either the green card or substantial presence test may be able to use an applicable income tax treaty to reduce U.S. taxation. In some situations, an individual may simultaneously be considered a tax resident of two countries under each countries domestic tax laws. If the two countries have entered into an income tax treaty with each other, then such treaty may contain a residency tiebreaker provision. The intent of such provisions is to determine a person s country of residence for treaty purposes and considers such factors as the location of the individual s permanent home, economic interest and personal relationships. Since the rules of the income tax treaty override the domestic tax laws of each country, U.S. resident aliens under either the green card or substantial presence test that are deemed to be a resident of the other treaty country under the tiebreaker rules, would be consider a nonresident of the U.S. Note: U.S. green card holders are cautioned that electing to be treated as a resident of another country using the tiebreaker provision of a treaty could adversely affect their continuing qualification for the green card. Dual-resident foreign nationals claiming treaty benefits must file Form 1040NR as nonresident aliens with respect to the portion of the tax year for which they were considered nonresident. The return must contain Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b). Penalties could apply for failure to file this form or a similar statement.

27 26 Chapter 4 Dual-Status Aliens Foreign nationals are dual-status aliens when they have been both a U.S. resident alien and a nonresident alien in the same tax year. Dual-status tax years are common whenever an individual relocates to or from the U.S. Since dual-status aliens have both a resident and nonresident period within the same tax year, they must apply different rules when computing their U.S. income tax liabilities. Taxation: Resident Alien Part of the Year For the part of the year an individual is a U.S. resident alien, he or she is taxed on income from all worldwide sources. Income from sources outside the United States is taxable if received while a resident alien. Taxation: Nonresident Alien Part of the Year For the part of the year an individual is a nonresident alien, he or she is taxed on income from U.S. sources only. Income From U.S. Sources Income from U.S. sources is taxable whether received while a nonresident alien or a resident alien unless specifically exempt under the Internal Revenue Code or a tax treaty provision. Not Effectively Connected Income U.S. source income that is not effectively connected with a U.S. trade or business during a dualstatus alien s period of nonresidence is subject to the flat 30% rate or lower treaty rate. In contrast, income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if received while a nonresident alien. Effectively Connected Income All worldwide income during a dual-status alien s period of residence and all U.S. source income that is effectively connected with a U.S. trade or business during his or her period of nonresidence, after allowable deductions, is combined and taxed using graduated rates that apply to U.S. citizens and residents. When determining what income is taxed in the United States, a taxpayer must consider exemptions allowable under U.S. tax law as well as the reduced tax rates and exemptions provided by tax treaties between the United States and certain foreign countries. Generally, tax treaty provisions apply only to the part of the year an individual is a nonresident.

28 27 Restrictions for Filing Dual-Status Tax Returns The following restrictions apply if filing a tax return for a dual-status tax year: 1. Cannot use the Standard Deduction. However, certain itemized deductions are allowable. 2. Subject to special rules for qualification, a dual-status taxpayer may claim personal exemptions for his or her spouse and dependents for the part of the tax year he or she was a nonresident alien if the taxpayer is a resident of Canada, Mexico, The Republic of Korea (South Korea), a U.S. national, or a student or business apprentice from India. 3. Subject to the general rules for qualification, a taxpayer is allowed to claim personal exemptions for his or her spouse and dependents when computing taxable income for the resident alien part of the year. 4. The total deduction for the personal exemptions for one s spouse and allowable dependents cannot be more than his or her taxable income (determined without deducting personal exemptions) for the resident alien part of the year. 5. The head of household Tax Table column or Tax Rate Schedule may not be used. 6. Cannot use the married filing jointly status (i.e. can t file a joint return). However, a dual status alien who is married to a U.S. citizen or a resident alien may elect to file a joint return with his or her spouse. Refer to Special Elections in Chapter 1 for more information). 7. If an individual is a nonresident alien and married to a U.S. citizen or resident alien for all or part of the tax year, and he or she does not choose to file jointly with his or her spouse, he or she must use the Tax Table column or Tax Rate Schedule for married filing separately to compute tax owed. The Tax Table column or Tax Rate Schedules for married filing jointly or single may not be used. 8. If an individual is a nonresident alien and married to a U.S. citizen or resident alien, he or she may not take the earned income credit, the credit for the elderly or disabled, or an education credit unless an election is made to be taxed as a resident alien jointly with his or her spouse. Resident Alien vs. Nonresident Alien Filing Procedures The U.S. income tax return an individual taxpayer must file as a dual-status alien depends on whether he or she is a resident alien or a nonresident alien at the end of the tax year. Resident Alien at End of Year An individual must file Form 1040, U.S. Individual Income Tax Return, if he or she is a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. In addition, the dual-status alien is required to attach a statement to his or her Form 1040 in which he or she provides details on income, adjustments, deduction and other information related to the nonresident part of the year. Form 1040NR, U.S. Nonresident Alien Income Tax Return is commonly used as a convenient, approved method for reporting the nonresident period tax information.

29 28 The Form 1040 is the income tax return and should be marked Dual-Status Return at the top of the form. The statement covering the nonresident period should be clearly marked Dual-Status Statement across the top, even if Form 1040NR is used as the statement. Nonresident Alien at End of Year An individual must file Form 1040NR, U.S. Nonresident Alien Income Tax Return, if he or she is a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. In addition, the dual-status alien is required to attach a statement to his or her Form 1040NR in which he or she provides details on income, adjustments, deduction and other information related to the resident part of the year. Form 1040, U.S. Individual Income Tax Return is commonly used as a convenient, approved method for reporting the resident period tax information. In this case, the Form 1040NR is the income tax return and should be marked Dual-Status Return at the top of the form. The statement covering the resident period should be clearly marked Dual-Status Statement across the top, even if Form 1040 is used as the statement.

30 29 Chapter 5 Taxation of U.S. Residential Real Estate Property Owned by Nonresident Aliens Income Not Effectively Connected with a U.S. Trade or Business As previously discussed, U.S.-source rent received by a nonresident alien that is not effectively connected with a U.S. trade or business is subject to tax at the statutory rate of 30% of gross income or, if applicable, a lower tax treaty rate. Such rent can result in an extremely disadvantageous tax position if the property has expenses associated with it, as illustrated in the following example. Example: Case A: Ms. Jones, a nonresident alien, holds U.S. residential real estate for rent. In this case, her rental activities do not constitute a trade or business. During the tax year, she receives rental income totaling US$15,000 and incurs real estate taxes, mortgage interest, and other expenses that total US$12,000. Because her income is not effectively connected with a U.S. trade or business, her U.S. federal income tax for the tax year would be calculated on a gross basis as follows: Gross rental income Expenses allowed US$15,000 None Net taxable income 15,000 Applicable tax rate 30% Federal income tax owed US$ 4,500 ===== Case B Assume the same facts as in Case A above except that the rental activities are effectively connected with a U.S. trade or business. In this case, the expenses associated with the property may be offset against the gross rental income and only the net rental income is subject to tax using the graduated tax rates instead of the flat 30% tax rate required in Case A. The U.S. federal income tax for the year would be calculated as follows: Gross rental income US$15,000 Expenses allowed 12, Net taxable income 3,000 Applicable tax rate 10% Federal income tax owed US$ 300 ===== Whether a nonresident alien s rental income is subject to the 30% gross tax or to the graduated rates on a net basis depends on whether the owner s rental activity is a U.S. trade or business.

31 30 To be considered a trade or business, rental activities and maintenance of the property must be regular and continuous, and the owner or the owner s agents must be involved in advertising for renters, repairing, and so forth. In other words, the business of renting property results from activities beyond the mere holding of the property and collection of rents. The rental of one small property may not be a trade or business. Furthermore, net lease arrangements, under which the tenant pays all expenses and merely pays net rent to the owner, are often considered not to be U.S. trades or businesses. Election to Treat Real Property Income as Effectively Connected with a U.S. Trade or Business The inability to claim deductions against rental income, as shown in the example, can be a severe disadvantage to nonresident alien property owners. U.S. income tax law provides an election to treat property income as effectively connected even though it would not be in the absence of the election. By making this election, the owner is able to calculate his or her tax liability on a net basis. The individual makes this election by filing a statement with his or her tax return. The election cannot be made until gross income from real property is reportable, and it applies to all real property located in the United States and held for the production of income. Furthermore, the election, once made, remains in effect for subsequent years and cannot be revoked without the consent of the Internal Revenue Service (IRS). For example, if an individual made the election in 2014, sold the real property concerned in 2016, and purchased a second property in 2017, the election would continue to be in effect for the second purchase. Because of its extensive effect, individuals should consult their tax advisers before making this election. While the statutory net tax election for real property is a continuing election (and is not easily revoked), a few tax treaties provide for a similar, more flexible election on an annual basis. Therefore, it is important to review relevant tax treaties carefully to determine whether an individual can take advantage of that election. Property Owned by Resident Aliens As previously discussed, no distinction is made in the tax treatment of resident aliens between income that is effectively connected with a U.S. trade or business and income that is not effectively connected with a U.S. trade or business. Thus, the net of rental income (i.e., gross rental income minus rental expenses) will be added to other taxable income received from worldwide sources and taxed at graduated tax rates. Depreciation The cost of purchasing rental property is not itself a rental expense. However, the portion of the purchase price attributable to buildings, improvements, and other depreciable parts of the property may be recovered through depreciation deductions taken over the statutory life of the property. Due to the number of potential variables that must be considered, determining the correct depreciable basis and then properly computing the allowable depreciation deduction can be a very complex exercise.

32 31 In general, however, a property owner must (i.e., claiming a deduction for depreciation is compulsory each year) begin to depreciate a rental property when it is placed in service for the production of income and stop depreciating it either when its cost (or other basis) has either been fully recovered or when it is retired from service, whichever happens first. A property owner may not postpone taking the deduction until some later time. If a property owner fails to claim all the depreciation allowable in a given year, he or she must still reduce the tax basis of the property by the full amount of depreciation that could have been claimed. The depreciation deduction is a function of the depreciable cost basis of the property. In general, the cost basis of property consists of the original purchase price, other capital costs incurred in purchasing the property (e.g., attorney fees, state taxes, broker commissions, travel and transportation costs, etc.), and the cost of improvements. Separating Cost of Land and Buildings Land itself is not a depreciable asset. Therefore, when both land and a building are purchased together, the total purchase price must be allocated between the cost of the building and that of the land. The part of the cost allocated to each asset is the ratio of the fair market value of the asset to the fair market value of the whole property on the purchase date. The cost allocated to the building is then classified and depreciated using statutory periods as follows: Asset Classifications of Residential Rental Properties Residential rental property located within the U.S. Residential rental property located outside the U.S. Removable equipment, furniture and other fixtures Depreciation Period 27.5 years 40.0 years 5-7 years Passive Loss Rules Under the Internal Revenue Code of 1986, income or loss from any source has been categorized as either active, passive, publicly traded partnership, or portfolio. Each of these classifications attracts specific tax consequences for individuals and certain closely held corporations. Generally, the income tax law provides that losses from passive activities, such as rental real estate, may be used to reduce income only from other passive activities, not active (salary) or portfolio (interest and dividend) income. Thus, it is not possible to reduce salary income by losses from passive activities. Passive losses not usable in a current year can be carried forward until sufficient passive income is received to use the losses or until the activity (i.e., rental property) is fully disposed of in a taxable transaction - at which time all accumulated suspended losses from that activity can be fully used against other types of income. Passive income comes from a trade or business in which the individual does not actively participate in any material way. A common source of passive income is an investment by an individual as a limited partner in a limited partnership that conducts active business. In addition, rental real estate activity is defined as a passive activity per se, regardless of the level of activity by the owner.

33 32 Although rental real estate is statutorily categorized as passive, a very important exception allows a maximum of $25,000 in real estate losses incurred by resident aliens to be used against any type of income, whether passive, active, or portfolio. The $25,000 exception is subject to a phaseout of one dollar for every two dollars of modified adjusted gross income in excess of $100,000 and is not available when modified adjusted gross income equals or exceeds $150,000. To qualify for this exception, an individual must meet an active participation test. In general, active participation means the investor (and spouse, if applicable) owns at least 10% of the rental property and must personally participate in the management of the property, which includes approving tenants, determining rental terms, or scheduling capital and repair expenditures. Participation need not always be regular, continuous, or substantial. For example, provided a qualified investor participates in management decisions regarding the property, he or she could hire a rental agent to handle the operations without forfeiting the $25,000 deduction. Note: In general, married couples living together but filing separate return and individuals filing dual-status returns are precluded from using the active participation exception. Personal Use of Rental Property Allocation of Expenses If a rental property is also used by the owner or the owner s family for personal purposes, expenses of that property must first be allocated between the rental period and the personal use period. Expenses allocable to personal use are not deductible unless specifically allowed. Real estate taxes and mortgage interest are examples of non-business expenses that can be deducted by a resident alien or citizen. A nonresident alien, however, cannot deduct any non-business expenses. Unless expenses are specifically attributable to a particular period, they are allocated to the rental period according to the following ratio: Number of days during year unit is rented at fair rental Total number of days during year unit is used for all purposes Exception for Di Minimis Rental Activity: The expense allocation between business and personal (i.e., non-business) use need not be made if the property was rented for fewer than fifteen (15) days during the year. In such cases, no rental income need be reported and no rental expenses can be claimed. Expense Limitation for Excessive Personal Use An overall annual limitation on deductions associated with a rental property is triggered if the owner (or the owner s family) personally uses the residence during a tax year for more than the greater of: days or, 2. 10% of the number of days during the year in which the property is rented at a fair rental value.

34 33 If the owner s personal use exceeds this limitation, he or she can deduct expenses only to the extent of the rental income from the property (i.e., net losses are not allowed). Property owners should therefore carefully monitor the number of days they personally use rental property. Sale of Residential Rental Property Sale of Rental Property by Resident Aliens The gain or loss on the sale of residential rental property is the difference between the net selling price (sales price less expenses of sale) and the adjusted basis of the property. A property s adjusted basis is its original cost plus capital improvements less the total amount of depreciation expense allowed or allowable during its life. A gain will normally be treated as a long term capital gain and will be taxed at graduated rates, limited to the maximum individual capital gain tax rate of 20% on long-term gains. Short-term capital gains are subject to tax at graduated rates. Losses on the sale of property used in a trade or business are capital losses and, with certain restrictions, may be deductible. However, losses on the sale of a personal residence or property not held for the production of income are not deductible. Sale of Rental Property by Nonresident Aliens In general, a gain or loss from a sale or other disposition of a U.S. real property interest by a nonresident alien is treated as if it were effectively connected with a trade or business within the United States, regardless of the property s actual use. All nonresident alien individuals regardless of whether they engaged in a trade or business or elected to treat real property income as effectively connected with a trade or business will be treated alike when taxed on gains from sales of real property. Real property for this purpose can consist of but is not exclusively limited to undeveloped land, buildings, residential dwellings, options on land, and real estate partnerships. Taxable U.S. real property interests, however, also include stock and other equity interests in certain U.S. corporations that own real property. Any gain from the disposition of a real property interest will be taxed at the graduated rates, limited to a maximum tax of 20% if the property is a capital asset and the gain is long-term. As with resident aliens, losses can be offset against gains only if the property was actually used in a business or income-producing property; personal-use property does not generate a deductible loss. Tax Treaties As previously indicated, tax treaties may provide more attractive treatment for certain kinds of real property income when compared to domestic laws. And although treaties typically won t completely eliminate taxation of gains on a U.S. real property interest, they should be referenced for potential tax-saving benefits.

35 34 Chapter 6 - Other Taxes State & Local Income Taxes Overview Almost all of the fifty states, the District of Columbia, and even some cities levy some form of personal income tax that is separate and distinct from the income tax imposed by the U.S. federal government. The tax base may be broader or narrower than that used in computing federal income tax owed. In addition, State income taxes are independent of each other. This can lead to double or even multiple state taxation of the same income. Double taxation at the U.S. state level is usually prevented by claiming a credit for taxes paid to another (i.e., nonresident) state. When applicable, the credit is claimed on the state income tax return where the taxpayer is a resident. State income taxes are generally levied on the worldwide taxable income of residents of the state. For nonresidents, taxes are levied on income from sources within the state. Example: Many individuals who work in New York City commute from their homes in New Jersey. Since they maintain their residences in New Jersey, they are liable for New Jersey tax on their worldwide income, including compensation earned in New York. However, since their compensation was earned in New York, it is subject to taxation by New York State as New York source income. As the state of residence, New Jersey will grant a credit against its tax for tax paid to New York, but only to the extent of the tax that otherwise would be due on that income. The states use various rules for apportioning income to the state, including a proration of worldwide income. This apportionment can affect the tax rate applied as well as the amount of income subject to tax. An individual who moves into a state and becomes a resident will usually be taxable as a nonresident for the period before the move (i.e., on income derived from sources within the state) and as a resident for the period after the move (i.e., on income from all sources). State Residency General Rules Residency for state tax purposes may not be defined in the same manner as residency for federal income tax purposes. To properly determine one s resident status for state income tax purposes, a state s specific residency rules must be reviewed. Most states use a combination of three tests to determine residency: 1. Domicile, 2. Whether a permanent place of abode is maintained within the state and/or, 3. The number of days physically spent with the state. The state-level residency rules apply equally to both U.S. citizens and foreign nationals. In addition, a person s residency status for federal income purposes does not determine his or her

36 35 residency status for state taxation purposes. Accordingly, a person may be treated as a nonresident for federal income tax purposes but a resident for state income tax purposes. Tax Treaties Treaties that the United States has with foreign countries generally have no direct control over state taxation. The method of taxation and the rates imposed by each state varies widely. States that impose a tax based on personal income generally follow federal law in computing taxable income. The extent of state conformity to federal law is wide-ranging and includes many deviations from the federal computation of taxable income. Some states directly piggyback on the federal income tax. For example, some states impose its income tax as a percentage of the federal income tax of residents and nonresidents, including estates and trusts. Other states adopt federal taxable income as the starting point for computing state taxable income. While adopting the federal definition of taxable income, most states provide for various adjustments in determining state taxable income. Some common variances from federal taxable income include the taxation of state pension income, Social Security income, and interest on state and local bond interest. In addition to providing variances from federal taxable income in the computation of state taxable income, states also provide different itemized and Standard Deductions than what is allowed for federal purposes. Social Security Tax Compensation for services performed within the United States as an employee is subject to U.S. Social Security tax. The Social Security tax rate is 7.65% and is withheld at source. Participation is mandatory even if the employee doesn t expect to qualify for benefits. The Internal Revenue Service (IRS) collects the Social Security tax, but only the Social Security Administration has the authority to disburse funds. The Social Security tax is commonly referred to as FICA tax, which is an acronym for Federal Insurance Contributions Act. The FICA tax is comprised of three parts: 1) Old-Age, Survivors & Disability Insurance (OASDI), 2) Medicare and, 3) Medicare Surtax. OASDI is the most significant part of the FICA tax. It is designed to ensure continuing income for those who are retired, surviving spouses and dependent children of workers who have died, and those who qualify for social security disability. Eligibility and benefit amounts are determined by a person s aggregate contributions to Social Security. Medicare and Medicare Surtax provides eligible persons certain hospital benefits and medically necessary services.

37 36 The applicable tax rates and wage bases are as follows: Tax Rate Applicable Tax Withholding Wage Base OASDI 6.2% First US$127,200 of wages Medicare 1.45% All Wages Medicare Surtax 0.90% Wages in excess of US$200,000 The employer also pays an equal amount of OASDI (6.2%) and Medicare (1.45%) tax. There is no employer match for the Medicare Surtax. FICA tax is assessed regardless of the citizenship or residency of either the employer or employee for services performed as an employee within the United States. See Totalization Agreements, however, for potential relief from the U.S. Social Security tax. Note: Medicaid is a state-level insurance program not to be confused with the Medicare portion of FICA. Self-Employment Self-employed individuals are subject to Social Security tax as well. Instead of FICA, it s called Self-Employment Tax. Since self-employed individuals are both the employer and an employee, they are required to pay both the employer s and employee s share of the self-employment tax. Self-employment tax is computed on net self-employment income. The wage caps, if any, are the same as with the FICA tax. Note: Unlike the FICA tax, U.S. nonresident alien status taxpayers are, in general, exempt from paying the self-employment tax even if the net income from self-employment was earned within the U.S. Totalization Agreements Income tax treaties do not cover social security taxes, so even if a nonresident alien is exempt from U.S. income tax under an applicable treaty, any U.S.-source earnings will still be subject to social security tax. As a practical matter, however, the IRS does not normally enforce the social security tax provisions in cases in which the foreign national is exempt from income tax. The United States has entered into social security totalization agreements with several countries that may eliminate duplicate coverage (taxes) and provide for totalized benefits for individuals who cannot qualify for full social security benefits in one country or the other. To qualify for the coverage provisions of such an agreement, an employee must be transferred by his or her employer from one country to the other. Direct hires in the host location do not qualify. The employer must apply for a certificate of coverage from the home country to avoid the tax in the host country. Self-employed individuals must move an existing business from one country to the other to qualify. Typically, totalization agreements will provide for an exemption

38 37 from the host country s social security taxes for employees for at least five years; the exemption for self-employed individuals may apply for only two years. Net Investment Income Tax In addition to regular income tax, the Net Investment Income Tax (NIIT) is assessed on certain net unearned income of resident alien taxpayers. Net unearned income includes investment income (e.g., interest, dividends, capital gains, and non-qualified annuities), plus other passive income such as rental income, reduced by directlyrelated expenses. The tax rate is 3.8% and applies to the lesser of net unearned income or the excess of modified adjusted gross income over the statutory threshold amount. The threshold amounts are determined by reference to the taxpayer s filing status and, for 2016, are: Filing Status Threshold Amount Single US$200,000 Married Filing Separately US$125,000 Married Filing Jointly US$250,000 Head of Household US$200,000 Qualifying Widow(er) with Dependent Child US$200,000 Nonresident aliens are not subject to the Net Investment Income Tax. If a nonresident alien is married to a U.S. citizen or resident and has made, or is planning to make, a special election to be treated as a resident alien for purposes of filing as Married Filing Jointly, tax regulations provide these couples special rules and a corresponding election for the NIIT. A dual-resident individual, in general, who determines that he or she is a resident of a foreign country for tax purposes pursuant to an income tax treaty between the United States and that foreign country and claims benefits of the treaty as a nonresident of the United States is considered a nonresident alien for purposes of the NIIT. A dual-status individual, is subject to the NIIT only with respect to the portion of the year during which the individual is a United States resident. The threshold amounts listed above are not reduced or prorated for a dual-status resident. Estate and Gift Taxes The system of taxation in the United States includes a separate tax for transfers of property by gift or via one s estate. As with the federal income tax, the laws applicable to such transfers are dependent on the donor s and recipient s respective tax statuses and domiciles as defined specifically for estate and gift purposes.

39 38 Individuals who are not U.S. citizens and are not considered domiciled in the U.S. are generally only subject to gift and estate tax on tangible property that is located within the United States. Intangible property, such as stocks, is generally not taxable when given by a non-domiciled foreign citizen. Non-domiciled foreign citizens may make annual gifts up to statutory limits without having to pay gift tax. Should the annual limits be exceeded, gift tax will apply at a maximum rate of 40%. Note: As a general rule, estate and gift taxes are levied on the donor - not the recipient of the assets. In addition to the federal-level estate and gift taxes, some states levy their own estate or inheritance taxes. The fair market value of the assets at the time of the transfer or date of death (or the alternate valuation date) is the basis for the tax for citizens, residents, and nonresidents alike. The U.S. estate and gift tax rules are complex. Accordingly, foreign nationals who are contemplating making or receiving gifts should seek competent tax counsel prior to executing such transfers in order to minimize taxation.

40 39 Chapter 7 - Payment of Taxes Tax Withholding at Source The U.S. tax system imposes substantial payroll tax obligations with respect to U.S. employment. These apply to all U.S. source employment income, regardless of whether the employer is U.S. or foreign (subject to applicable income tax treaties). These obligations take two basic forms. First, employers are required to withhold and deposit certain taxes owed by the employee. These include federal, state, and local income taxes and the employee portion of the social security tax. This system of withholding tax at source is similar to pay-as-you-go tax withholding schemes implemented by countries outside the U.S. Second, employers must pay their separate payroll tax obligations, including the employer portion of the social security tax as well as federal and state unemployment taxes. In addition to making the tax deposits, employers must meet separate quarterly and annual reporting requirements. These deposit and reporting rules apply to many allowances and noncash fringe benefits, including unsubstantiated business expenses. Failure to comply can result in the imposition of severe civil and criminal penalties. Estimated Tax Payments Individuals who receive income from sources other than employment may be required to make quarterly tax deposits for federal and state income taxes and self-employment taxes. The due dates for making quarterly payments are typically: Quarter Payment Due Date Covers Income Received In 1 st April 15 January, February, March 2 nd June 15 April, May 3 rd September 15 June, July, August 4 th January 15 (of subsequent tax year) September, October, November, December Annual Settlement of Taxes Individuals who meet the requirements for filing a personal income tax return must do so after the close of the tax year (See Chapter 8 for reporting and filing rules). The purpose of the annual tax return filing is to compute and settle an individual s final income tax obligation for a tax year as well as provide other compulsory information. If a person remits too much tax through withholding at source and/or estimated tax payments, such excess is refunded by the government. Refunds of tax are typically issued within 8 weeks of filing the income tax return with the tax authority. In contrast, if a person has not remitted enough tax through tax withholding at source and/or estimated tax payments, he or she must pay the additional tax by the original due date of the tax return to avoid various potential interest and penalty charges.

41 40 Interest & Penalty Charges for Late Payment of Tax If a taxpayer fails to pay 100 percent of the tax due by the original due date of his or her income tax return (generally April 15 for the previous tax year), federal and state (if applicable) tax authorities will charge interest at a rate set by the respective tax agency. Applying for and obtaining an extension to file one s personal income tax return does not prevent interest charges. In addition, tax authorities may assess a variety of penalty charges for failure to pay tax and/or file a tax return in a timely manner. These financial penalties can be significant.

42 41 Chapter 8 - Income Tax Return Reporting & Filing Procedures Who Must File An individual who has income subject to U.S. taxation and meets the filing requirements must file a personal income tax return in a timely manner. Depending on where a taxpayer resides, income tax returns, statements and/or other filings may be required in three tax jurisdictions: federal, state and local. Failure to comply with the applicable laws, including the proper completion and timely filing of returns, statements, informational disclosures and remittance of tax owed, subjects a person to potentially significant civil charges (i.e., interest and/or penalties) as well as criminal charges. Note: Even if a taxpayer relocated from the U.S. during the tax year and filed Form 1040-C, U.S. Departing Alien Income Tax Return, on departure, a separate annual U.S. income tax return is required to be filed. Common Federal Income Tax Return Forms Depending on a taxpayer s alien status, the following income tax return forms must be filed: Taxpayer Status Form(s) Filed Nonresident Alien 1040NR Resident Alien 1040 Dual-Status Alien 1040NR and 1040 Details for each of the amounts reported on the tax return are typically included on supporting schedules and forms. In addition, each state and local tax jurisdiction will have their own tax return forms. Joint vs. Separate Tax Returns (Married Persons) In order to file a joint (i.e., combined) income tax return, both the taxpayer and spouse must be resident aliens. If the taxpayer is a resident alien but the spouse is a nonresident alien, the couple can elect to file a joint return only if the nonresident spouse agrees to be subject to U.S. tax on his or her worldwide income for the entire tax year. If made, this election remains in effect for all future tax years until terminated by death, revocation, or separation. Making the election to be treated as a resident alien for federal tax purposes can have both positive and negative implications depending on the specific facts and circumstances of the taxpayer and spouse. Therefore, a thorough review of the consequences should be undertaken with a qualified tax advisor prior to making the election.

43 42 Tax Identification Numbers In general, anyone who either files or is included on a U.S. tax return, including spouses and dependents, is required to furnish his or her unique taxpayer identification number. For most taxpayers, their U.S. social security number serves as their taxpayer identification number. However, for those qualifying taxpayers, spouses, and dependents who are ineligible to receive a social security number, an Individual Taxpayer Identification Number (ITIN) may be obtained. Social Security Number (SSN) A Social Security Number (SSN) is a personal identification number issued by the U.S. Social Security Administration (SSA). Because this number is required for U.S. tax filings and routine management of one s personal and financial matters (e.g., employment-related documentation, opening bank accounts, obtaining credit cards, insurance, apply for loans, etc.) it is quite important. Social security numbers are typically reserved for U.S. citizens and noncitizens who are authorized to work in the United States by the Department of Homeland Security. To obtain a social security number, file Form SS-5, Application for a Social Security Card. Further details on eligibility to receive a social security number and the application process can be located at: Once approved, the SSA will issue a physical social security card to the recipient that contains the social security number. Critical: Due to the rise in identity theft, individuals obtaining a U.S. Social Security Number should take steps to protect their number from undesired disclosure. Best practice is to not carry one s social security card on your person and to keep it in a safe, secure place for reference when required. Also, be careful not to leave documents containing your SSN easily accessible to others. Individual Taxpayer Identification Number (ITIN) An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. By law, an alien individual cannot have both a SSN and an ITIN. Therefore individuals who either have or are eligible to receive a U.S. social security number should not obtain an ITIN. This includes individuals who have an application for a U.S. social security number pending. To apply for an ITIN, complete the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number. To the W-7 application, attach the following documents: 1. A valid federal income tax return (unless you qualify for an exception) and either 2. An original valid passport (or a certified copy from the issuing agency) of the applicant or, 3. Appropriate foreign status documents (e.g., visa issued by U.S. Department of State, civil birth certificate, national identification cards and foreign voter s registration card).

44 43 A certified document is one that the original issuing agency provides and certifies as an exact copy of the original document and contains an official stamped seal from the Agency. A person may be able to request a certified copy of documents at an embassy or consulate. If an original document is submitted to the IRS as evidence of one s foreign status, it will be returned to the applicant within 60 days using the mailing address shown on the Form W-7 application. If the original document(s) will be needed for any purpose within 60 days of submitting an ITIN application, a person should apply in person at an IRS Taxpayer Assistance Center. Note: While a separate Form W-7 is required for each individual, multiple ITIN applications may be filed together. Since a person s federal tax return is being filed as an attachment to the ITIN application(s), the ITIN application and federal income tax return must be filed together with the Internal Revenue Service s ITIN Operation center. Best practice is to file the ITIN application(s) for eligible persons with the taxpayer s first U.S. income tax return. Approved ITIN applications are typically processed by the Internal Revenue Service within 60 days. The IRS will send a letter to approved recipients notifying them of their assigned ITIN. Unlike a social security number, ITINs are technically for federal tax purposes only. Most state and local tax authorities accept ITINs, however. When to File U.S. Tax Returns The original due date for filing a personal income tax return can vary depending on an individual s tax status. In general, the original filing due dates are: Resident Aliens Fifteenth day of the fourth month following the close of the tax year (e.g., April 15 for calendaryear taxpayers). Nonresident Aliens Fifteenth day of the fourth month following the close of the tax year (e.g., April 15 for calendaryear taxpayers) for individuals who were employees and received wages subject to U.S. income tax withholding during the tax year. Fifteenth day of the sixth month following the close of the tax year (e.g., June 15 for calendaryear taxpayers) for individuals who were NOT employees that received wages subject to U.S. income tax withholding.

45 44 Dual-Status Aliens Taxpayers filing dual-status income tax returns follow the filing rules related to their tax status (i.e., resident or nonresident) as of the last day of the tax year. Extension of Time to File Income Tax Return The federal government, states and local taxing jurisdictions generally allow taxpayers to extend (i.e., postpone) the filing of their personal income tax returns if certain conditions are met. While most states and local jurisdictions follow the federal extension rules, this is not always the case. Therefore, a taxpayer must carefully examine each tax jurisdiction s rules regarding the extension of filing due dates to avoid penalties related to late filing of returns. For purposes of this publication, only the most common federal extension rules related to resident and nonresident alien status taxpayers are discussed. Critical: Extending the due date for filing one s tax return does NOT extend the due date for paying tax owed, if any. Interest and, potentially, a late payment penalty will be charged by tax authorities until tax owed is paid in full, regardless of when the income tax return is due or filed. Resident Aliens Not Out of the Country on Original Filing Due Date of Return A resident alien taxpayer may extend the due date for filing his or her personal income tax return by filing Form 4868, Application for Automatic Extension of Time to File U.S. Income Tax Return. Form 4868 must be filed no later than the original due date for the taxpayer s personal income tax return and, if filed properly, grants the taxpayer an additional six months of time to file the return (i.e., return must be filed no later than October 15). Out of the Country on Original Filing Due Date of Return A resident alien taxpayer who lives outside the U.S. and Puerto Rico and whose main place of work is outside the U.S. and Puerto Rico on the original due date will be considered out of the country. Such taxpayers are permitted an automatic extension of two months (i.e., to June 15 for calendar-year taxpayers) for filing his or her personal income tax return. While no formal request for the 2-month extension is required, the taxpayer s return, when filed, must include a statement that his/her tax home and abode were outside the United States and Puerto Rico on the original due date. If a joint return is filed, only one spouse must reside outside the United States in order to obtain the automatic two month extension. An additional automatic extension of four months, to October 15, is available by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return prior to automatically extended due date of June 15 (for calendar year taxpayers). If additional time is required beyond October 15, resident alien taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (i.e., to December 15 for calendar year taxpayers). To request this extension, the taxpayer must send the IRS a letter explaining the reason(s) why the additional 2-months of time is needed.

46 45 Nonresident Aliens Nonresident status taxpayers can postpone the filing of their tax returns to the 15 th day of the tenth month following the close of the tax year (i.e., October 15 for calendar year taxpayers) by properly filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return no later than the original due date. If a nonresident status taxpayer s original due was the 15 th day of the sixth month following the close of the tax year (i.e., June 15 for calendar year taxpayers) AND the taxpayer was out of the country on the original filing due date, the taxpayer can request a discretionary 2-month additional extension of time to file their returns (i.e., to December 15 for calendar year taxpayers). To request this extension, the taxpayer must send the IRS a letter explaining the reason(s) why the additional 2-months of time is needed. Tax Clearance U.S. Certificate of Compliance Before leaving the United States (or any of its possessions), most aliens in the U.S. on business are required to obtain a certificate of tax compliance. This document, popularly known as a sailing permit or departure permit, must be secured from the IRS before leaving the U.S. The certificate of tax compliance is obtained by filing Form 1040-C, U.S. Departing Alien Income Tax Return. In certain circumstances, Form 2063, U.S. Departing Alien Income Tax Statement and Annual Certificate of Compliance, may be filed instead of Form 1040-C. Note: The issuance of a certificate of compliance is not a final determination of an individual s federal tax liability. If it is later determined that more tax is owed beyond the amount estimated on Form 1040-C, the individual will be liable for the additional tax due.

47 46 Chapter 9 - Other Tax Considerations & Filings Form 8938, Statement of Specified Foreign Financial Assets Background In the Hiring Incentives to Restore Employment Act, enacted in 2010, Congress legislated that U.S. taxpayers meeting certain requirements would be required to report foreign financial assets to the IRS for tax years beginning after March 18, Form 8938, Statement of Foreign Financial Assets was created for taxpayers to use in reporting such assets when required. The underlying rules that govern the proper completion of Form 8938 are highly complex and lengthy. As a result, this publication only provides general guidance on this important disclosure form. Taxpayers should seek qualified, professional advice when determining if they are required to file this form and, if so, the specific information required to be disclosed. IRS Form 8938 must be filed by a taxpayer if he or she is considered a specified individual that has an interest in specified foreign financial assets and the total value of those assets is more than the applicable reporting threshold. Specified Individual A specified individual includes: 1. A U.S. citizen, 2. A resident alien of the United States for any part of the tax year, 3. A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return and, 4. A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico. Form 8938 is an attachment to a taxpayer s annual U.S. federal income tax return and is filed by the due date (including extensions) for that return. If an individual taxpayer is not required to file a U.S. income tax return (i.e., Form 1040 or Form 1040NR) he or she is not required to file Form 8938 even if the filing requirements for Form 8938 are otherwise satisfied.

48 47 Reporting Thresholds Form 8938 reporting thresholds are as follows: A. If Specified Individual Lives in the United States: Taxpayer s Filing Status on U.S. Federal Income Tax Return Total Value of Specified Unmarried Married Married Individual s Specified Foreign Taxpayer Taxpayer Taxpayer Financial Assets Exceed the (Single) (Filing Jointly) (Filing Separately) Noted Amounts On the last day of the tax year US$50,000 US$100,000 US$50,000 OR Any time during the tax year US$75,000 US$150,000 US$75,000 B. If specified individual lives outside the U.S., has a tax home in a foreign country, meets either the bona fide resident or physical presence test, and no exceptions apply: Taxpayer s Filing Status on U.S. Federal Income Tax Return Total Value of Specified Unmarried Married Married Individual s Specified Foreign Taxpayer Taxpayer Taxpayer Financial Assets Exceed the (Single) (Filing Jointly) (Filing Separately) Noted Amounts On the last day of the tax year US$200,000 US$400,000 US$200,000 OR Any time during the tax year US$300,000 US$600,000 US$300,000 Penalties Taxpayers may be subject to severe penalties if they fail to timely file a correct Form 8938 or if they have an understatement of tax relating to an undisclosed specified foreign financial asset. While there are other potential penalties (civil and criminal) associated with Form 8938 noncompliance, the most common penalties are for failing to file the form and continued failure to file. Failure-to-File Penalty If a taxpayer is required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), the taxpayer may be subject to a penalty of $10,000. Continuing Failure to File If a taxpayer does not file a correct and complete Form 8938 within 90 days after the IRS mails the taxpayer a notice of the failure to file, the taxpayer may be subject to an additional penalty of $10,000 for each 30-day period (or part of a period) during which the taxpayer continues to fail to

49 48 file Form 8938 after the 90-day period has expired. The maximum additional penalty for a continuing failure to file Form 8938 is $50,000. Note: Filing IRS Form 8938 does not relieve a taxpayer of the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). FinCEN Form 114 is discussed in Chapter 8 of this publication. Establishing Individual Retirement Accounts Foreign nationals may make contributions to individual retirement accounts (IRAs). Their contributions and withdrawals are subject to the same rules as are those of U.S. citizens, except in those instances in which a treaty has overriding beneficial provisions. Possibly Electing the Foreign-Earned Income Exclusion Foreign nationals who are lawful permanent residents of the United States (green card holders) but who are considered foreign residents under an income tax treaty may, in certain circumstances, be able to elect the foreign-earned income exclusion. Selecting a Fiscal Year In some cases, use of a fiscal-year accounting period may result in tax savings. In practice, it is rare. The primary advantage of selecting a fiscal-year period is that it enables the resident alien to shorten the period during which he or she is considered a nonresident or dual-status taxpayer. It also enables the nonresident alien to take better advantage of certain treaty and Internal Revenue Code provisions. Basing Estimated Tax Payments on the Prior-Year Liability In order to avoid an underpayment of tax penalty, foreign nationals in the United States for their first full year are allowed to base their estimated tax prepayments on 100% of their prior-year tax liability (110% for high-income taxpayers), regardless of whether the prior year was a nonresident or dual-status tax year, provided they filed U.S. tax returns in the prior year. The Internal Revenue Code requires only that there be a tax liability on a return covering twelve months in the prior year. The underpayment of tax penalty is not owed for the current tax year if a foreign national had no tax liability in the prior year and he or she was either a U.S. citizen or resident for the entire prior year. Considering Visa Status Foreign nationals present in the United States as teachers, trainees, or students (that is, on F or J visas) will generally be taxed as nonresidents.

50 49 Withholding on Interest Payments Made to a Foreign Lender Resident aliens who make interest payments to a foreign lender (e.g., mortgage interest on the resident alien s home in the foreign country) are required to withhold and deposit with the IRS 30% of the interest paid. The 30% may be reduced by an applicable income tax treaty. Electing Out of Installment Sales Foreign nationals who sell property on an installment basis are subject to U.S. tax on the gain relating to payments received after becoming a U.S. resident, even if the sale was made before U.S. residency was established. The foreign national can make an election on his or her first U.S. income tax return out of the installment sale method and thereby avoid U.S. tax on the gain. Making Tax Treaty Disclosures Resident aliens taking advantage of provisions of U.S. income tax treaties must disclose certain positions in their U.S. income tax returns, including the application of any nondiscrimination provisions. Provisions that do not generally need to be disclosed include reduced withholding tax rates, determination of residency, and modification of the tax on items such as pensions and annuities. Disclosure is usually made by completing Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b). Foreign Currency Exchange Rules Taxpayers are required to report income and deductions on their U.S. tax returns in U.S. dollars. Income and expenses paid in a foreign currency should generally be converted to U.S. dollars using the exchange rate on the date of receipt or the date of payment. In some circumstances, the most accurate exchange rate to use is an average exchange rate for the year. When calculating capital gains (e.g., from sale of home, stock, etc.), taxpayers are required to use historical exchange rates which may result in a foreign currency gain or loss in U.S. dollars. Currency Restrictions & Reporting The United States imposes no restrictions on bringing money into or out of the country. However, if a taxpayer transports or receives more than US$10,000 of cash or monetary instruments in or out of the United States at one time, it must be reported. FinCEN Form 105, Report of International Transportation of Currency or Monetary Instruments is used for reporting. The due date for filing FinCEN Form 105 varies depending on how the money is physically transported. Note: If money is transferred using normal banking procedures (i.e., not physically transported into or out of the U.S.), reporting is not required. Foreign Corporations and Other Foreign Entities Officers, Directors or Shareholders Resident alien taxpayers who are an owner, officer or director of a foreign corporation may be required to file a special information report with their annual U.S. federal income tax return: Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations. This

51 50 special filing is complex, time-consuming and requires taxpayers to provide a great deal of financial accounting information related to each foreign corporation in which an interest is held. The financial penalties assessed by the Internal Revenue Service for failing to file this report can be substantial so taxpayers should review their foreign investments with their tax advisor. Foreign Trusts & Large Gifts or Bequests from Certain Foreign Persons Resident alien taxpayers are required to file an information return with their annual U.S. federal income tax return - Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts if any of the following apply during the tax year: 1. Undertake certain transactions with foreign trusts, 2. Hold ownership interest in certain foreign trusts or, 3. Receive certain large gifts or bequests from certain foreign persons A separate Form 3520 must be filed for transactions with each foreign trust. This is yet another potentially complex and time-consuming filing that taxpayers should discuss with their tax advisor, if applicable, to help ensure compliance obligations are met and penalties avoided. Penalties for failure to file Form or if the information is incomplete or incorrect - apply and can be substantial. Community Property States In the United States, federal tax law determines how property is taxed, but state law determines whether, and to what extent, a person has property or rights to property subject to taxation. Accordingly, federal tax is assessed and collected based upon a person s state-created rights and interest in property. This interplay of federal and state law requires an understanding of relevant state property laws to properly analyze community property issues. There are two distinct property systems in the United States: common law and community property law. Each system creates different rights and interests in property. There is a difference in the way that federal tax is assessed and collected under each system. Further, the appropriate method of analysis to employ is also different under each system. Common Law This is the dominant property system in the United States. The theory underlying common law is that each spouse is a separate individual with separate legal and property rights. Thus, in general, each spouse owns and is taxed on his or her respective income. Community Property Law The theory underlying community property law is that each spouse is a member of a single marital community and shares equally in the profits, income and debts of the community. There is no his and hers under community property law theory. Thus, each spouse owns an automatic 50% interest in all community property, regardless of which spouse acquired the community

52 51 property. Spouses may also hold separate property, which they solely own and control, but the law in a specific community property state may not favor this. Nonresident Alien Implications As noted above, if a couple s place of domicile has adopted community property law, then all income and deductions are split equally between the spouses for tax purposes. This 50/50 splitting is of little concern when a married couple files a joint income tax return since all income and deductions are combined and reported on a single income tax return filing. However, if a couple domiciled in a community property state chooses to file or is statutorily required to file separate returns as is the case with U.S. nonresident aliens the income splitting required under community property law can have unwelcomed financial consequences. Note: The words "residence" and "domicile" do not mean the same thing. A person may have several places of residence, but only one domicile. A temporary place of abode may be a residence, but domicile is based on where the taxpayer intends his or her permanent home to be located. Domicile is the place where a person has his or her true, fixed, permanent home and principal establishment and to which, whenever he is absent, he has the intention of returning. Fortunately, certain aspects of community property law are disregarded if one or both of the spouses are nonresident aliens. In such cases, the spouses are automatically treated for federal taxation purposes as though they were living apart all year. Accordingly, community property income is generally taxed as follows: Earned Income (e.g., wages, salaries, professional fees, etc.) Treated as the income of the spouse whose services produced the income and all of it must be reported on that spouse s separate personal income tax return. Trade or Business Income & Deductions Treated as income and deductions of the spouse who operates the trade or business. In situations where both spouses operate the same trade or business, the income and deductions are allocated between the spouses according to the how the income is allocated. Partnership Income or Loss Treat income or loss from a trade or business carried on by a partnership as the income or loss of the spouse who is the partner. Separate Property Income Treat income from the separate property of one spouse (as determined under community property laws) as the income of that spouse. Social Security Benefits Treat social security benefits as the income of the spouse who receives the benefits. Other Income Treat all other community income, such as dividends, interest, rents, royalties, or gains, as provided under applicable state community property law.

53 52 U.S. Community Property States In the United States, there are presently nine states and one U.S. Territory that have adopted community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico (Territory), Texas, Washington and Wisconsin. In addition, the state of Alaska is an opt-in community property state that grants each spouse the option to make their property community property. Since application of community property law is elective, it likely would not be effective for federal income tax reporting purposes. The specific community property statutes vary by state and require a careful review to properly understand if such laws apply and how.

54 53 Chapter 10 FinCEN Form 114, Report of Foreign Bank and Financial Accounts Background The mandates of the Currency and Foreign Transactions Reporting Act of 1970 (a.k.a., "Bank Secrecy Act" or "BSA") are carried out by the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury. The BSA requires U.S. financial institutions to assist U.S. government agencies to detect and prevent money laundering. It also places complex reporting responsibilities on taxpayers related to foreign bank and financial accounts they have a financial interest in or have signature authority over. FinCEN Form 114 (more commonly known as FBAR), is used to report such accounts. Who Must File A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds US$10,000 at any time during the calendar year reported. The definition of a United States person includes U.S. citizens and residents. Filing Exception for Certain Accounts Jointly Owned by Spouses The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met: 1. All the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse, 2. The filing spouse reports the jointly owned accounts on a timely filed FBAR electronically signed and, 3. The filers have completed and signed Form 114a, Record of Authorization to Electronically File FBAR s (maintained with the filers records). If all three conditions are not met, both spouses are required to file separate FBARs, and each spouse must report the entire value of the jointly owned accounts. Responsibility for Child s FBAR Generally, a child is responsible for filing his or her own FBAR report. If a child cannot file his or her own FBAR for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. If the child cannot sign his or her FBAR, a parent or guardian must electronically sign the child's FBAR.

55 54 Filing Due Date and Procedure The FBAR is a separate, annual filing from a taxpayer s federal income tax return. If a taxpayer is required to file this form, it must be filed electronically through FinCEN s BSA E-Filing System and received by the Department of the Treasury on or before June 30 of the year immediately following the calendar year being reported. The June 30 filing date may not be extended. Extending the filing due date of a taxpayer s annual U.S. income tax return does not extend the due date for filing the FBAR. Note: Effective with 2016 FBAR filings (due in calendar year 2017), the original due date for filing the FBAR is April 15. An extension of time to file will also be allowed. Penalties for Non-Compliance A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed US$10,000 per violation (e.g., for each account a taxpayer fails to report regardless of the amount in the account). A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Criminal penalties may also be imposed.

56 Zander Sterling 704 S. State Road 135, Ste. D-321 Greenwood, Indiana, U.S.A.

U.S. taxation of foreign citizens

U.S. taxation of foreign citizens U.S. taxation of foreign citizens Global Mobility Services 2019 kpmg.com U.S. taxation of foreign citizens The following information is not intended to be written advice concerning one or more Federal

More information

U.S. Income Tax for Foreign Students, Scholars and Teachers. Arthur R. Kerr II Vacovec Mayotte & Singer LLP

U.S. Income Tax for Foreign Students, Scholars and Teachers. Arthur R. Kerr II Vacovec Mayotte & Singer LLP U.S. Income Tax for Foreign Students, Scholars and Teachers Arthur R. Kerr II Vacovec Mayotte & Singer LLP 617-964-0500 akerr@vacovec.com Are You Resident or Nonresident? Residence for tax purposes not

More information

Taxation of: U.S. Citizens & Residents Living Abroad

Taxation of: U.S. Citizens & Residents Living Abroad Taxation of: U.S. Citizens & Residents Living Abroad 2017 Edition ZanderSterling.com 1 The information contained in this publication is provided for general informational purposes only and is based on

More information

U.S. Nonresident Alien Income Tax Return

U.S. Nonresident Alien Income Tax Return Form 14NR Department of the Treasury Internal Revenue Service Please print or type U.S. Nonresident Alien Income Tax Return Information about Form 14NR and its separate instructions is at www.irs.gov/form14nr.

More information

U.S. Tax Guide for Aliens

U.S. Tax Guide for Aliens Department of the Treasury Internal Revenue Service Publication 519 Cat. No. 15023T U.S. Tax Guide for Aliens For use in preparing 2000 Returns Contents Introduction... 1 Important Changes... 2 Important

More information

U.S. Nonresident Alien Income Tax Return

U.S. Nonresident Alien Income Tax Return Form 1040NR U.S. Nonresident Alien Income Tax Return OMB No. 1545-0074 For the year January 1 December 31, 2011, or other tax year Department of the Treasury Internal Revenue Service beginning, 2011, and

More information

U.S. Nonresident Alien Income Tax Return

U.S. Nonresident Alien Income Tax Return Form 1040NR Department of the Treasury Internal Revenue Service U.S. Nonresident Alien Income Tax Return Information about Form 1040NR and its separate instructions is at www.irs.gov/form1040nr. For the

More information

U.S. Nonresident Alien Income Tax Return. Of what country were you a citizen or national during the tax year?

U.S. Nonresident Alien Income Tax Return. Of what country were you a citizen or national during the tax year? 1040NR U.S. nresident Alien Income Tax Return OMB. 1545-0089 2002 Form For the year January 1 December 31, 2002, or other tax year Department of the Treasury Internal Revenue Service beginning, 2002, and

More information

The United States Government defines an alien as any individual who is not

The United States Government defines an alien as any individual who is not The United States Government defines an alien as any individual who is not a U.S. citizen or U.S. national. A nonresident alien is an alien who has not passed the green card test or the substantial presence

More information

Form 1040NR Filing Challenges and Effective Approaches

Form 1040NR Filing Challenges and Effective Approaches Form 1040NR Filing Challenges and Effective Approaches Determining Taxpayer Classifications and Elections, Computing Income and Deductions, and Understanding Spouse/Dependent Treatment TUESDAY, SEPTEMBER

More information

DUAL-STATUS RETURN U.S. Nonresident Alien Income Tax Return LEE F DUT X. MN Foreign province/county

DUAL-STATUS RETURN U.S. Nonresident Alien Income Tax Return LEE F DUT X. MN Foreign province/county DUAL-STATUS RETURN U.S. Nonresident Alien Income Tax Return OMB No. 1545-0074 For the year January 1-December 31, 2011, or other tax year Department of the Treasury Internal Revenue Service beginning,

More information

Certain Cash Contributions for Typhoon Haiyan Relief Efforts in the Philippines Can Be Deducted on Your 2013 Tax Return

Certain Cash Contributions for Typhoon Haiyan Relief Efforts in the Philippines Can Be Deducted on Your 2013 Tax Return Certain Cash Contributions for Typhoon Haiyan Relief Efforts in the Philippines Can Be Deducted on Your 2013 Tax Return A new law allows you to choose to deduct certain charitable contributions of money

More information

U.S. Tax Guide for Aliens

U.S. Tax Guide for Aliens Department of the Treasury Internal Revenue Service Publication 519 Cat. No. 15023T U.S. Tax Guide for Aliens For use in preparing 2013 Returns Contents Introduction... 1 What's New... 2 Reminders... 3

More information

Table of Contents. Preliminary Work and General Filing Requirements... 1

Table of Contents. Preliminary Work and General Filing Requirements... 1 Table of Contents Preliminary Work and General Filing Requirements.... 1 General Requirement to File...3 Signatures....4 Marital Status...6 Married....6 Unmarried....7 Filing Status...7 Single....7 Married

More information

Foreign Student and Scholar Volunteer Tax Return Preparation. VITA Training 1

Foreign Student and Scholar Volunteer Tax Return Preparation. VITA Training 1 Foreign Student and Scholar Volunteer Tax Return Preparation VITA Training 1 e-learning Options & Understanding Taxes Website http://www.irs.gov/app/understandingtaxes/index.jsp VITA Training 2 Foreign

More information

U.S. TAX ISSUES FOR CANADIANS

U.S. TAX ISSUES FOR CANADIANS U.S. TAX ISSUES FOR CANADIANS If you own rental property in the United States or spend extended periods of time there, you could be subject to various U.S. filing requirements, even though you may have

More information

TAX GUIDE FOR FOREIGN VISITORS. Anne E. Davenport, CPA October 2012

TAX GUIDE FOR FOREIGN VISITORS. Anne E. Davenport, CPA October 2012 TAX GUIDE FOR FOREIGN VISITORS FOR USE BY: All Employees and Students Anne E. Davenport, CPA October 2012 Updated June 24, 2016 Table of Contents Introduction...1 Section 1: Definition of Terms...2 1.1

More information

TAX FILING FOR STUDENTS AND SCHOLARS 101. Columbus Community Legal Services

TAX FILING FOR STUDENTS AND SCHOLARS 101. Columbus Community Legal Services TAX FILING FOR STUDENTS AND SCHOLARS 101 Columbus Community Legal Services INTRODUCTION Who are we? Part of the Catholic University of America s Columbus School of Law Columbus Community Legal Services

More information

Table of Contents. Overview Filing Status... 35

Table of Contents. Overview Filing Status... 35 Table of Contents Overview.... 1 Preliminary Matters....1 Preparer Tax Identification Number....1 Electronic Filing Identification Number....2 State Matters...5 Filing Requirements....5 Individuals....6

More information

Non-Resident Alien Frequently Asked Questions

Non-Resident Alien Frequently Asked Questions Materials Management: Payroll Time and Attendance Unit Non-Resident Alien Frequently Asked Questions TAX FILING: DO I NEED TO FILE / WHEN DO I FILE? What happens if I fail to file my taxes? If you owe

More information

THE TAXATION OF INDIVIDUALS AND FAMILIES

THE TAXATION OF INDIVIDUALS AND FAMILIES THE TAXATION OF INDIVIDUALS AND FAMILIES Scheduled for a Public Hearing Before the TAX POLICY SUBCOMMITTEE of the HOUSE COMMITTEE ON WAYS AND MEANS on July 19, 2017 Prepared by the Staff of the JOINT COMMITTEE

More information

Frequently Asked Tax Questions 2018 Tax Returns

Frequently Asked Tax Questions 2018 Tax Returns Frequently Asked Tax Questions 2018 Tax Returns Q. When is my tax return due? A. 2018 Federal (U.S. government) tax returns are due by April 15, 2019. State of Iowa tax returns are due by May 1, 2019.

More information

DO NOT FILE THIS FORM IN 2019 WITH YOUR TAX RETURN

DO NOT FILE THIS FORM IN 2019 WITH YOUR TAX RETURN THIS FORM IN 2019 WITH YOUR TAX RETURN This IRS Tax Form is ONLY A DRAFT for 2019. This form will most likely be changed before its final version is ready to be used in 2019 with your 2018 Tax Return.

More information

Domestic Tax Issues for Non-resident Aliens

Domestic Tax Issues for Non-resident Aliens Domestic Tax Issues for Non-resident Aliens Presented by Monica Haven, EA, JD, LLM mhaven@pobox.com www.mhaven.net What we ll cover Are Non-resident Aliens from Mars? Where is home for Dual Status Aliens?

More information

Tax Information for Foreign National Students, Scholars and Staff

Tax Information for Foreign National Students, Scholars and Staff Information for Foreign National Students, Scholars and Staff I. Introduction For federal income tax purposes, foreign national students and scholars are categorized in one of two ways: Nonresident alien

More information

Overview of the Tax Cuts and Jobs Act

Overview of the Tax Cuts and Jobs Act Overview of the Tax Cuts and Jobs Act Changes to the tax laws affecting individuals for this filing season. Basics for Individuals and Families As part of our client and community outreach we have prepared

More information

DIVISION OF REVENUE AND TAXATION COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS CNMI Nonresident Alien Income Tax Return

DIVISION OF REVENUE AND TAXATION COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS CNMI Nonresident Alien Income Tax Return Form 040NR-CM DIVISION OF REVENUE AND TAXATION COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS CNMI Nonresident Alien Income Tax Return For the year January December 3, 03, or other tax year beginning, 03,

More information

US Tax Information for Diplomatic Families at the Canadian Embassy

US Tax Information for Diplomatic Families at the Canadian Embassy US Tax Information for Diplomatic Families at the Canadian Rick Ward LLC January 16, 2018 Disclosure This presentation has been prepared by LLC. The information in this presentation is current as of January

More information

US Tax Information for Diplomatic Families at the German Embassy

US Tax Information for Diplomatic Families at the German Embassy US Tax Information for Diplomatic Families at the German Rick Ward LLC February 26, 2018 Disclosure This presentation has been prepared for employees of the World Bank by LLC. The information in this presentation

More information

~E~ E-3 visa, 103 Earnings statement, 100, 131, 135, 136,

~E~ E-3 visa, 103 Earnings statement, 100, 131, 135, 136, Index ~A~ ACA Affordable Care Act 14, 173 A, G visa holders, 5, 6, 7, 37, 103 A-2 visa, PRI 6, 126, 132, 133 A-3 visa, 138, 141 Abuse, abusive employment situation, 141,142 Actual days, Z, 7, 8 Adjusted

More information

, ending. child tax credit (1) First name Last name

, ending. child tax credit (1) First name Last name Department of the Treasury Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2016 OMB No. 1545-0074 For the year Jan. 1-Dec. 31, 2016, or other tax year beginning, ending Form Your first

More information

U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 22, 2017 Presented by

U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 22, 2017 Presented by U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 22, 2017 Presented by Crystal C. Gates, Tax Principal Kelley C. Heng, Tax Supervisor

More information

OVERVIEW OF THE FEDERAL TAX SYSTEM AS IN EFFECT FOR 2013

OVERVIEW OF THE FEDERAL TAX SYSTEM AS IN EFFECT FOR 2013 OVERVIEW OF THE FEDERAL TAX SYSTEM AS IN EFFECT FOR 2013 Prepared by the Staff of the JOINT COMMITTEE ON TAXATION January 8, 2013 JCX-2-13R I. SUMMARY OF PRESENT-LAW FEDERAL TAX SYSTEM A. Individual Income

More information

Americans Living Abroad. 61 Tax Questions you should know.

Americans Living Abroad. 61 Tax Questions you should know. Americans Living Abroad 61 Tax Questions you should know 1 General FAQs 1. I m a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?

More information

Overview of the Tax Structure

Overview of the Tax Structure Overview of the Tax Structure 2007, CCH INCORPORATED 4025 West Peterson Ave. Chicago, IL 60646-6085 http://www.cch.com 1 of 35 3 of 35 Responsibilities of Taxpayers Prepare appropriate tax forms and schedules

More information

Expat Client Questionnaire

Expat Client Questionnaire Expat Client Questionnaire The tax professionals at Williams and Parsons, PC are dedicated to serving the American expatriate community. Filling out this organizer will help with gathering the information

More information

AARP FOUNDATION TAX-AIDE SCOPE MANUAL WHAT S IN WHAT S OUT

AARP FOUNDATION TAX-AIDE SCOPE MANUAL WHAT S IN WHAT S OUT AARP Foundation Tax-Aide helps low and moderate income taxpayers, with special attention to those 60 and older. Volunteers are trained to assist in filing Form 1040 and certain other schedules and forms.

More information

Individual Income Tax Organizer 2016

Individual Income Tax Organizer 2016 MICHAEL R. ANLIKER, CPA, P.C. 5348 Twin Hickory Rd. Glen Allen, VA 23059 TELEPHONE: (804) 237-6044 FAX: (804) 237-6064 www.anlikerfinancial.com Individual Income Tax Organizer 2016 This Tax Organizer is

More information

The VITA TaxSlayer Map

The VITA TaxSlayer Map The purpose of this tool is to help tax preparers and reviewers locate most tax return items in TaxSlayer Pro Online. The objective is to lay out the menu structures of each section of a return so that

More information

5 Qualifying widow(er) (see instructions) 6a Yourself. If someone can claim you as a dependent, do not check box 6a...

5 Qualifying widow(er) (see instructions) 6a Yourself. If someone can claim you as a dependent, do not check box 6a... Form 1040 Department of the Treasury Internal Revenue Service (99) US Individual Income Tax Return OMB No 1545-0074 IRS Use Only Do not write or staple in this space For the year Jan 1 Dec 31,, or other

More information

Payroll for U.S. Employees Abroad and Aliens in the U.S. Charlotte N. Hodges, CPP August 23, 2014

Payroll for U.S. Employees Abroad and Aliens in the U.S. Charlotte N. Hodges, CPP August 23, 2014 Payroll for U.S. Employees Abroad and Aliens in the U.S. Charlotte N. Hodges, CPP August 23, 2014 Federal Income Tax Withholding 14.1-1 U.S. citizens & resident aliens are subject to income tax withholding

More information

Tax Information for Foreign National Students, Scholars and Staff

Tax Information for Foreign National Students, Scholars and Staff Information for Foreign National Students, Scholars and Staff I. Introduction For federal tax purposes, foreign national students and scholars are categorized in one of two ways: Nonresident alien for

More information

UNDERWRITING THE SELF-EMPLOYED BORROWER

UNDERWRITING THE SELF-EMPLOYED BORROWER UNDERWRITING THE SELF-EMPLOYED BORROWER 2014 www.archmicu.com 2015 Arch Mortgage Insurance Company 114-11-14-CU Table of Contents Introduction Automated Underwriting & the Self-Employed Borrower...1 Basic

More information

Aliens & Citizens: Foreign and Domestic Tax Issues

Aliens & Citizens: Foreign and Domestic Tax Issues Aliens & Citizens: Foreign and Domestic Tax Issues What we ll cover Are Non-resident Aliens from Mars? Where is home for Dual Status Aliens? How do we tax extraterrestrial income? Do Space Treaties give

More information

American Citizens Abroad. Side-By-Side Analysis: Current Law; Residency-Based Taxation INTRODUCTION

American Citizens Abroad. Side-By-Side Analysis: Current Law; Residency-Based Taxation INTRODUCTION American Citizens Abroad Side-By-Side Analysis: Current Law; Residency-Based Taxation 5 December 2016; 1 November 2017; 1 December 2017; 18 January 2018; 19 April 2018 INTRODUCTION This side-by-side analysis

More information

See separate instructions. Your social security number RIGHT ANGLE XXX-XX-XXXX If a joint return, spouse's first name and initial

See separate instructions. Your social security number RIGHT ANGLE XXX-XX-XXXX If a joint return, spouse's first name and initial Form Department of the Treasury - Internal Revenue Service (99) 14 U.S. Individual Income Tax Return 216 OMB No. 1545-74 For the year Jan. 1-Dec. 31, 216, or other tax year beginning, 216, ending, 2 Your

More information

UNIVERSITY OF DAYTON NONRESIDENT ALIEN TAX GUIDE CONTENTS COMMON VISA TYPES AND THEIR TREATMENTS

UNIVERSITY OF DAYTON NONRESIDENT ALIEN TAX GUIDE CONTENTS COMMON VISA TYPES AND THEIR TREATMENTS UNIVERSITY OF DAYTON NONRESIDENT ALIEN TAX GUIDE CONTENTS I. RESPONSIBILITIES II. III. IV. SOCIAL SECURITY NUMBER REQUIREMENT DEFINITIONS TAX TREATIES V. PAYMENTS TO NONRESIDENT ALIENS VI. COMMON VISA

More information

US Tax Information for Diplomatic Families at the British Embassy

US Tax Information for Diplomatic Families at the British Embassy US Tax Information for Diplomatic Families at the British Rick Ward LLC February 22, 2018 Disclosure This presentation has been prepared by LLC. The information in this presentation is current as of February

More information

Provisions of Tax Cuts and Jobs Act

Provisions of Tax Cuts and Jobs Act Provisions of Tax Cuts and Jobs Act i Contents Introduction to the Course... 1 Course Learning Objectives... 1 Domain 1 Provisions of Tax Cuts and Jobs Act... 2 Introduction... 2 Domain 1 Learning Objectives...

More information

FOREIGN NATIONAL TAX PROCEDURES GUIDE FOR DEPARTMENTS. Document created and modified by Financial Services Revised February 8, 2018

FOREIGN NATIONAL TAX PROCEDURES GUIDE FOR DEPARTMENTS. Document created and modified by Financial Services Revised February 8, 2018 FOREIGN NATIONAL TAX PROCEDURES GUIDE FOR DEPARTMENTS Document created and modified by Financial Services Revised February 8, 2018 Table of Contents Pages Introduction 1 Definition of Terms 2-5 Frequently

More information

US Tax Information for Diplomatic Families at the Australian Embassy

US Tax Information for Diplomatic Families at the Australian Embassy US Tax Information for Diplomatic Families at the Australian Rick Ward LLC January 25, 2018 Disclosure This presentation has been prepared by LLC. The information in this presentation is current as of

More information

Foreign Tax Issues REBECCA DONEHEW

Foreign Tax Issues REBECCA DONEHEW Foreign Tax Issues REBECCA DONEHEW Form 5471 Information Returns of U.S. Persons with Respect to Certain Foreign Corporations Used to satisfy the reported requirements of transactions between foreign corporations

More information

EXPAT TAX HANDBOOK. Non-Citizens and U.S. Tax Residency. Tax Year Ephraim Moss, Esq Ext 101

EXPAT TAX HANDBOOK. Non-Citizens and U.S. Tax Residency. Tax Year Ephraim Moss, Esq Ext 101 EXPAT TAX HANDBOOK Non-Citizens and U.S. Tax Residency Tax Year 2018 Ephraim Moss, Esq. 718-887-9933 Ext 101 emoss@expattaxprofessionals.com Joshua Ashman, CPA 718-887-9933 Ext 102 jashman@expattaxprofessionals.com

More information

INSTRUCTIONS FOR 2017 PIT-RC NEW MEXICO REBATE AND CREDIT SCHEDULE

INSTRUCTIONS FOR 2017 PIT-RC NEW MEXICO REBATE AND CREDIT SCHEDULE INSTRUCTIONS FOR 2017 PIT-RC NEW MEXICO REBATE AND CREDIT SCHEDULE GENERAL INFORMATION You can find general information about Form PIT RC, New Mexico Rebate and Credit Schedule, on this page and the next

More information

OFFICIAL POLICY. Policy Statement

OFFICIAL POLICY. Policy Statement OFFICIAL POLICY 9.1.7 Resident Alien vs Nonresident Alien Status 2/8/16 Policy Statement. This handout is intended as a general guide on residence status for tax purposes. Please note that there are significant

More information

A & B Office. Education Benefits. A Self-Improvement Mini-Course. Student Loan Interest & Education Expenses. Income Tax Training School

A & B Office. Education Benefits. A Self-Improvement Mini-Course. Student Loan Interest & Education Expenses. Income Tax Training School A & B Office Income Tax Training School Education Benefits Student Loan Interest & Education Expenses Key Features: Learn how to properly calculate education expenses. Step-by-step description of the education

More information

Tax Organizer For 2017 Income Tax Return

Tax Organizer For 2017 Income Tax Return Tax Organizer For 2017 Income Tax Return Prepared For: and, Prepared By: Carol A Reithmiller, CPA, PLLC 11020 S Tryon St #406 Charlotte, NC 28273 This Tax Organizer can be used to help identify information

More information

Tax Workshop for Foreign Nationals Preparing 2018 Forms Douglas Kelley

Tax Workshop for Foreign Nationals Preparing 2018 Forms Douglas Kelley Tax Workshop for Foreign Nationals Preparing 2018 Forms Douglas Kelley Guest Lecturer Lamden School of Accountancy San Diego State University Before we begin Filing taxes means submitting tax forms (or

More information

U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 25, 2016 Presented by

U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 25, 2016 Presented by U.S. Income Tax Workshop for Foreign Students & Scholars Rice University Office of International Students & Scholars February 25, 2016 Presented by Crystal C. Gates, Tax Principal Kelley C. Heng, Tax Supervisor

More information

US Tax Information for Diplomatic Families at the Swiss Embassy

US Tax Information for Diplomatic Families at the Swiss Embassy US Tax Information for Diplomatic Families at the Swiss Rick Ward LLC October 18, 2018 Disclosure This presentation has been prepared by LLC. The information in this presentation is current as of October

More information

Appendix B Pali Rao, istockphoto

Appendix B Pali Rao, istockphoto Appendix B Pali Rao, istockphoto Tax Forms (Tax forms can be obtained from the IRS website: www.irs.gov) Form 1040 U.S. Individual Income Tax Return B-2 Schedule C Profit or Loss from Business B-4 Schedule

More information

Carol's Tax Return-2016 Tax Year. Part 2. Compute income tax

Carol's Tax Return-2016 Tax Year. Part 2. Compute income tax Turner School of Accountancy Chapter 1 and Chapter 2 Materials Page 1 Part 1. Complete Columns F,G,H. Part 2. Compute amount of tax due or refund Complete Form 1040, page 1 & 2, and Form 1040 Schedules

More information

Federal Individual Income Tax Terms: An Explanation Mark P. Keightley Specialist in Economics. May 31, 2017

Federal Individual Income Tax Terms: An Explanation Mark P. Keightley Specialist in Economics. May 31, 2017 Federal Individual Income Tax Terms: An Explanation Mark P. Keightley Specialist in Economics May 31, 2017 Congressional Research Service 7-5700 www.crs.gov RL30110 Summary Described in this report are

More information

Internal Revenue Service. Enrolled Agent Exam Part ONE. Exam Year May 1, 2017 February 28, Table of Contents

Internal Revenue Service. Enrolled Agent Exam Part ONE. Exam Year May 1, 2017 February 28, Table of Contents Internal Revenue Service Enrolled Agent Exam Part ONE Exam Year May 1, 2017 February 28, 2018 Table of Contents Lesson 1. Taxpayer Identification and Data Gathering Expansion of the Tax Code Internal Taxes

More information

Federal Income Tax Changes 2017

Federal Income Tax Changes 2017 Federal Income Tax Changes 2017 i ALL RIGHTS RESERVED. NO PART OF THIS COURSE MAY BE REPRODUCED IN ANY FORM OR BY ANY MEANS WITHOUT THE WRITTEN PERMISSION OF THE COPYRIGHT HOLDER. All materials relating

More information

Instructions for Form 1040NR-EZ

Instructions for Form 1040NR-EZ 2011 Instructions for Form 1040NR-EZ U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents Department of the Treasury Internal Revenue Service Section references are to the Internal

More information

PERSONAL INFORMATION ORGANIZER Please complete this Organizer before your appointment.

PERSONAL INFORMATION ORGANIZER Please complete this Organizer before your appointment. 1. PERSONAL INFORMATION PERSONAL INFORMATION ORGANIZER Name SSN or ITIN Date of Birth Date of Death Occupation Blind Disabled Taxpayer Spouse Street Address Apt. City or town State Zip Code County Foreign

More information

You Spouse 1 Single. name here.. G 5 Qualifying widow(er) with dependent child

You Spouse 1 Single. name here.. G 5 Qualifying widow(er) with dependent child ' Form 1040 U.S. Individual Income Tax Return 2014 IRS Use Only ' Do not write or staple in this space. For the year Jan 1 - Dec 31, 2014, or other tax year beginning, 2014, ending, 20 See separate instructions.

More information

Alien Tax Home Representation Form

Alien Tax Home Representation Form Alien Tax Home Representation Form I have reviewed the attached tax home information for aliens and/or have consulted with my tax advisor and make the following good faith representation (please check

More information

Preparing 2018 Individual Income Tax Returns

Preparing 2018 Individual Income Tax Returns Preparing 2018 Individual Income Tax Returns Published and Distributed by The CPE Store, Inc. www.cpestore.com Module 1 Chapters 1-4 Chapter 1 Filing Information... 1 Learning Objectives... 1 Introduction...

More information

SCHEDULE NR (Rev. 7/12/16)

SCHEDULE NR (Rev. 7/12/16) 1350 STATE OF SOUTH CAROLINA DEPARTMENT OF REVENUE 2016 NONRESIDENT SCHEDULE SCHEDULE NR (Rev. 7/12/16) For the year January 1 - December 31, 2016, or fiscal tax year beginning 2016 and ending 2017 Print

More information

Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage

Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage Updated September 20, 2017 Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage Health reform provides opportunities for millions of Americans to get affordable health

More information

Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage

Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage October 15, 2014 Key Facts You Need to Know About: Income Definitions for Marketplace and Medicaid Coverage Health reform provides new opportunities for millions of Americans to get affordable health coverage.

More information

Instructions for Form W-7

Instructions for Form W-7 Instructions for Form W-7 (January 2010) Application for IRS Individual Taxpayer Identification Number Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue

More information

2016 Federal Income Tax Planning

2016 Federal Income Tax Planning Weller Group LLC Timothy Weller, CFP CERTIFIED FINANCIAL PLANNER 6206 Slocum Road Ontario, NY 14519 315-524-8000 tim@wellergroupllc.com www.wellergroupllc.com 2016 Federal Income Tax Planning March 06,

More information

TAX ORGANIZER Page 3

TAX ORGANIZER Page 3 TAX ORGANIZER Page Basic Taxpayer Information Taxpayer Spouse Taxpayer Spouse First Name Initial Last Name Social Security No. Check if Date of Occupation Dependent Presidential Birth Disabled Blind of

More information

Preparing 2016 Individual Income Tax Returns

Preparing 2016 Individual Income Tax Returns Preparing 2016 Individual Income Tax Returns Published and Distributed by The CPE Store, Inc. www.cpestore.com Module 1 Chapters 1-4 Chapter 1 Filing Information... 1 Learning Objectives... 1 Introduction...

More information

Panex 1040 Individual - Spouse Home address (number and street). If you have a P.O. box, see instructions.

Panex 1040 Individual - Spouse Home address (number and street). If you have a P.O. box, see instructions. Form 4 Department of the Treasury ' Internal Revenue Service (99) U.S. Individual Income Tax Return For the year Jan. - Dec.,, or other tax year beginning,, ending Your first name and initial OMB No. 545-74

More information

2018 TAX ORGANIZER. This tax organizer has been prepared for your use in gathering the information needed for your 2018 tax return.

2018 TAX ORGANIZER. This tax organizer has been prepared for your use in gathering the information needed for your 2018 tax return. F R O M 2018 TAX ORGANIZER T O This tax organizer has been prepared for your use in gathering the information needed for your 2018 tax return. To save you time, selected information from your 2017 tax

More information

American Citizens Abroad. Side-By-Side Analysis: Current Law; Residency-Based Taxation INTRODUCTION

American Citizens Abroad. Side-By-Side Analysis: Current Law; Residency-Based Taxation INTRODUCTION 1 November 2017; 1 December 2017; 19 January 2018 American Citizens Abroad Side-By-Side Analysis: Current Law; Residency-Based Taxation INTRODUCTION This side-by-side analysis compares Current Law (i.e.,

More information

Chapter. Federal Income Tax. 7.1 Our Tax System 7.2 Filing Tax Returns South-Western, Cengage Learning

Chapter. Federal Income Tax. 7.1 Our Tax System 7.2 Filing Tax Returns South-Western, Cengage Learning Chapter 7 Federal Income Tax 7.1 Our Tax System 7.2 Filing Tax Returns 2010 South-Western, Cengage Learning Lesson 7.1 Our Tax System GOALS Why do we pay taxes? What are the different types of taxes? Describe

More information

Individual Tax Changes in the Tax Cuts and Jobs Act Ken Bagner, CPA, MST

Individual Tax Changes in the Tax Cuts and Jobs Act Ken Bagner, CPA, MST Individual Tax Changes in the Tax Cuts and Jobs Act Ken Bagner, CPA, MST Kenneth.Bagner@SobelCoLLC.com 973-994-9494 December 27, 2017 Agenda Today s presentation will provide a basic overview of some of

More information

Solutions Network Tax Services

Solutions Network Tax Services Solutions Network Tax Services Fax 877 469 4558 Phone 877 604 6636 ext 3 Information Needed to Prepare U.S. Tax Return Please send copies of W2s, and evidence of foreign income (if any) and any 1099s received.

More information

U.S. Issues for U.S. Citizens Living in Canada

U.S. Issues for U.S. Citizens Living in Canada U.S. Issues for U.S. Citizens Living in Canada March 26, 2009 Angela Zarn, CA, CPA, CAFA Presented to Scotia Bank Table of Contents! Filing Requirements & Due Dates! Difference in Taxation between countries!

More information

INVOICE. PN 501 E 38th Erie, PA Phone: (207) Date: 12/07/2017 Invoice Number: Service Description

INVOICE. PN 501 E 38th Erie, PA Phone: (207) Date: 12/07/2017 Invoice Number: Service Description INVOICE PN 501 E 38th Erie, PA 16546 Phone: (207)590-6223 Email: pasha@gmail.com Date: 12/07/2017 Invoice Number: 1004 Client: Pavel Nayda, Service Description Amount 12/07/17 08:41 PM December 7, 2017

More information

U.S. Individual Income Tax Update & Strategies for 2011/2012 and Beyond

U.S. Individual Income Tax Update & Strategies for 2011/2012 and Beyond U.S. Individual Income Tax Update & Strategies for 2011/2012 and Beyond Russell T. Fisher MBA, CPA, CCPS, AIF RT Fisher CPA PLLC RT Fisher U.S. Tax & College Planning Services Pte. Ltd. 1 Tannery Road,

More information

Your Federal Income Tax Responsibilities as an Au Pair

Your Federal Income Tax Responsibilities as an Au Pair S. Landau Services Steven Landau, E.A.* 2610 NW 56th Street #103 Seattle, WA 98107-4118 PHONE: (206) 784-1070 TOLL FREE: (877) 220-3241 TOLL FREE FAX: (877) 220-3889 E-MAIL: Steven@SLandauServices.com

More information

Integrity Accounting

Integrity Accounting Integrity Accounting Tax Reform Special Report Updated 8/15/2018 On Friday, December 22, 2017, the "Tax Cuts and Jobs Act" (H.R. 1) was signed into law by President Trump. Almost all of these provisions

More information

Prepare, print, and e-file your federal tax return for free!

Prepare, print, and e-file your federal tax return for free! Prepare, print, and e-file your federal tax return for free! www.freetaxusa.com Form 1040 Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2017 OMB No. 1545-0074

More information

Tax Guide For Foreign Investors In U.S. Residential Real Estate

Tax Guide For Foreign Investors In U.S. Residential Real Estate A T T O R N E Y S A T L A W Tax Guide For Foreign Investors In U.S. Residential Real Estate 2018 Edition In this guide I. Introduction 2 II. The U.S. Tax System 3 A. U.S. Persons 3 1. Basic Rules 3 2.

More information

Figuring your Taxes and Credits

Figuring your Taxes and Credits Figuring your Taxes and Credits This self-study explains how to figure your tax and how to figure the tax of certain children who have more than $2,100 of unearned income. Also discussed are various tax

More information

DeSain Financial Services 2018 Tax Questionnaire

DeSain Financial Services 2018 Tax Questionnaire Last Name: Last Name: Taxpayer First Name & Middle Initial: Taxpayer Social Security Number: Taxpayer First Name & Middle Initial: Social Security Number: Address: City, State, Zip: Home Phone: Work Phone:

More information

U.S. Taxation of Americans Abroad

U.S. Taxation of Americans Abroad GLOBAL MOBILITY SERVICES U.S. Taxation of Americans Abroad kpmg.com U.S. taxation of Americans abroad The following information is not intended to be written advice concerning one or more federal tax matters

More information

Benefits. and Expenses. Your Home

Benefits. and Expenses. Your Home Recommended IRS Publication Reading Listt for Part 1: Individuals Publication 17, Your Federal Income Tax Publication 501, Exemptions, Standard Deduction, and Filing Information Publication 971, Innocent

More information

Form 1040-V. Department of the Treasury. Internal Revenue Service $ 3, Dave Dave Sarah Sarah Terrace Glenview, IL 60001

Form 1040-V. Department of the Treasury. Internal Revenue Service $ 3, Dave Dave Sarah Sarah Terrace Glenview, IL 60001 2006 Form 040-V Department of the Treasury Internal Revenue Service For Privacy Act and Paperwork Reduction Act tice, see separate instructions. DETACH HERE Form 040 (2006) Department of the Treasury Internal

More information

TAX UPDATE TAX CUTS & JOBS ACT (2018) Add l Elderly & Blind Joint & Surviving Spouse: $1,300

TAX UPDATE TAX CUTS & JOBS ACT (2018) Add l Elderly & Blind Joint & Surviving Spouse: $1,300 TAX UPDATE 2019 This table compares the predominate changes made by the Tax Cuts and Jobs Act of 2019 to the tax law as it was during 2017 for individuals and small businesses. Exemptions 2017 TAX CUTS

More information

Tax Withholding and Estimated Tax

Tax Withholding and Estimated Tax This publication was cited in a footnote at the Bradford Tax Institute. ClLICK HERE to go to the home page. Department of the Treasury Internal Revenue Service Publication 505 Cat. No. 15008E Tax Withholding

More information

2012 Non-Resident Alien Tax Filings

2012 Non-Resident Alien Tax Filings 2012 Non-Resident Alien Tax Filings Spring 2013 The Colorado College Business Office OMIS Overview of the U.S. Income Tax System Your employer withholds from your earnings an estimate of what your federal

More information

Earned Income Table. Earned Income

Earned Income Table. Earned Income Earned Income Table Includes Taxable wages, salaries, and tips Union strike benefits Taxable long-term disability benefits received prior to minimum retirement age Net earnings from self-employment Gross

More information

Earned Income Table. Earned Income for EIC, Additional Child Tax Credit and Dependent Care Credit. Common EIC Filing Errors

Earned Income Table. Earned Income for EIC, Additional Child Tax Credit and Dependent Care Credit. Common EIC Filing Errors Earned Income Table Includes Taxable wages, salaries, and tips Union strike benefits Taxable long-term disability benefits received prior to minimum retirement age Net earnings from selfemployment Gross

More information