A Few Words
Non-Resident Tax Return
NON-RESIDENT TAX RETURN
Resident aliens are defined as individuals who possess green cards and aren’t U.S. citizens. Resident aliens have passed the test for residence and are considered permanent legal residents. Non-resident aliens are those individuals who don’t have green cards, but are legally in the U.S. Non-resident aliens are usually in the country temporarily. If you’re a resident alien inside the United States, you’re responsible for filing a Non-Resident Tax Return.
The labyrinth of tax laws surrounding non-residents can be cumbersome and confusing; when in doubt, turn to a professional tax accountant. Our NY Certified Public Accountants, a best rated CPA firm in NYC Resident aliens are non-citizens who have passed one of the following tests:
- Green card test, which basically awards you status as a “lawful permanent resident” through the U.S. Citizenship and Immigration Services. As a resident alien, you must always carry your green card, which is your registration card from the government.
- Substantial presence test, which proves that you were in the country for the required number of days (31 this year, 183 over the past three years).
INCOME TAX BASICS
If you’re a resident alien inside the United States, you’re responsible for paying tax on all the income you receive, including income from foreign countries and pension payments from a foreign government. As a resident alien, you may be eligible to claim an exclusion on foreign-earned income to reduce your gross taxable income. If you work for a foreign government, you may receive an exemption on your income if your employing government has a reciprocal tax treaty with the U.S. and therefore do not need to file a Non-Resident Tax Return.
Unlike resident aliens, non-resident aliens only have to pay tax on income earned from an employer inside the United States. Your income earned from another country is totally exempt. For example, if you’re from India and you own a business in Mumbai and another one in NYC, you only have to pay taxes on what you your American company earns and have to file a Non-Resident Tax Return. For the sake of U.S. taxes, you can safely ignore the income your Indian company generates.
TAXING RESIDENT AND NON-RESIDENT ALIENS
If you have investment income that originates in the U.S., it’s typically taxed at a flat rate of 30 percent, unless an existing treaty has other terms. You can claim your spouse as a dependent, as opposed to filing a joint return, especially if your spouse doesn’t earn any income. If you’re a non-resident alien, you have to be diligent when maintaining your records to verify all sources of your income, in the event you are audited by the IRS.
If you’re in the country as a resident alien or non-resident alien, you actually may be exempt from tax liability, depending on your situation and income sources. While it’s always a good idea to file even if you don’t owe taxes, the rules are different for you. In general, as a non-resident alien, you have to file Non-Resident Tax Return if you earned any income in the U.S.:
- Through a trade or business that is “effectively connected” or
- That is defined as “fixed, determinable, annual or periodical” (also known as FDAP)
NON-RESIDENT ALIEN FILING REQUIREMENTS
- You’re working — or considered to be working — in a business inside the U.S. during the year. If your income is less than your personal exemption, you may not have to file, although it’s often a good idea to have your income on record.
- You’re not working for a trade or business inside the U.S, but you’ve earned income within the country for which not enough tax was withheld. In other words, you still owe taxes on income you earned passively.
- You represent another non-resident who falls into one of the two categories above.
- You’re a trustee or otherwise involved in the estate or trust of a non-resident alien — or you have authority over that estate or trust.
If you have to file a tax return, you should contact a licensed tax accountant. The CPAs, best accountants in New York can help you file Form 1040NR, along with any other forms required. While it’s possible to get an extension, it’s best to file in a timely manner. Your personal CPA in NYC can prepare your taxes with your interests in mind, to minimize your tax burden and maximize your wealth.
DUAL TAX STATUS
If you’re a resident alien who received a green card during the tax year, you’ll have to file a dual-status tax return. Because you received the green card during the year, you’re considered a non-resident alien before you received the card and a resident alien after obtaining it.
Your status changes on the day you receive your green card. Your New York CPA knows to include a statement with your income tax return when you file. It identifies the income you received as a non-resident and the income your received as a resident. These complexities are commonplace to an experienced tax accountant.
WHEN YOU LEAVE THE U.S.
Although there are some exceptions, you have to make some special arrangements when you decide to leave the country, even temporarily. Whether you’re a resident alien or a non-resident alien, before you leave, you have to acquire a document called a “certificate of compliance” — also known as a departure or sailing permit. To get this certificate, you must file a form (Form 1040-C) with the IRS. Your personal CPA in New York can help you complete this form, which basically states that you’ve paid all of your U.S. taxes.
Without this certificate, you’d have to file a tax return and take care of any unpaid taxes at the time of your departure. After you leave, even if you’re all paid up, you’re still required to submit your annual tax return by the following April 15th. The accountants at our firm understand all the tax requirements and forms for all non-residents of the U.S.
Do you have questions about services we offer including Non-Resident Tax Return in NYC and Long Island? Would you like to receive a personal Non-Resident Tax Return consultation customized to your specific needs? To schedule an appointment with a nationally recognized, best accountant in New York, Naresh Saripadya of our firm, please contact our Long Island or NYC tax accountants for a CPA consultation.