Immigration and the Related Tax Issues

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On behalf of Silver Tax Group posted in Tax Audit on Thursday, April 5, 2018.

As we approach the tax filing deadline of April 17 in 2018, it is crucial to determine whether you must file as an immigrant. Permanent residents/green card holders must file a U.S. tax return.

For those who have filed for refugee status and are awaiting a decision or have been granted asylum or withholding/cancellation of removal, it is usually necessary to file a tax return. If you are due a refund and miss the filing deadline there is no penalty for a late filing. When a balance is due, however, the penalty is 5 percent of the balance for each month late.

The Green Card test

If you received a green card at any point in 2017 (even late December), you are a resident for IRS tax purposes. This means you must file a 2017 U.S. tax return. And the U.S. is rather unique in that it taxes income regardless of where earned.

This means you might have to file a FBAR (FinCEN Form 114) disclosing foreign accounts that contain more than $10,000 or equivalent assets. In some cases, you may also need to file Form 8938 based on the value of foreign financial accounts and your filing status.

Failing to file or pay taxes could also put your chances at naturalizing in jeopardy. Don’t let unfiled returns limit your future options.

What is substantial presence and why does it matter?

The other test for those in the country on non-immigrant visas is time based. If you were in the country:

  • 183 days in 2017, you will need to file a U.S. tax return or
  • 31 days in 2017 and a total of 183 weighed days (1/3 of days in 2016 and 1/6 of days in 2015) over a three-year period

An example illustrates the second category. Assume you are in the U.S. for three months each summer. In 2017, you were in the U.S. for more than 30 days, but the roughly 120 days in 2016 would add an additional 40 days and the 120 in 2015 adds 20 days. At 180 days, you would not be considered a resident for tax purposes.

Those who do not need to file a tax return

Some non-immigrant visa holders may not have to file including:

  • Teachers or trainees in the U.S. on a J or Q visa
  • Students temporarily in the country on F, J, M or Q visas
  • Professional athletes competing in charitable sports events

Days in the country on these visas would not could toward the “substantial presence” test.

Immigration status can make tax time more complicated. When you have questions, get answers from a seasoned tax professional to avoid later issues.

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