As an international tax payer, the U.S. tax code can be intimidating and confusing. Various visa types, occupations and movements throughout the U.S. can make completing one’s taxes both daunting and frustrating. At Isaana Tax, we work closely with individuals like you to assist in preparing and filing your tax returns so that you can rest assured that your taxes are compliant with the taxing authorities at both the state and federal levels.
Dual Status Aliens
Resident aliens are those individuals who are lawful permanent residents of the United States and they hold what are called ‘green cards.’ However, there are instances where an individual can be a resident for tax purposes only. They are referred to as tax residents. As such, they meet certain criteria which qualify them to claim this status, they:
- Have been in the United States for a substantial period of time
- Meet the substantial presence test (SPT)
- Qualify as tax residents.
For all other intents and purposes, they are considered non-resident aliens. For more information, please follow this link.
As a resident alien, the rules for qualifying to file US Income Tax returns are generally the same as US citizens. Your income is also taxed the same as if you were a US citizen. All interest, income, wages, dividends, rents or other sources of income must be reported to the taxing agencies whether from within the US or outside of the US.
Resident aliens file form 1040.
A non-resident alien is any individual who is does not meet the requirements outlined for Resident Aliens, are not U.S. citizens or U.S. Nationals.
You must file a tax return as a Non-Resident alien if you have U.S. source income above the personal exemption amount which is considered to be effectively connected to a trade or business in the United States or if you have income on which the tax liability was not satisfied by withholding at the source.
Non-Resident Aliens file form 1040NR or 1040NR-EZ.
Dual Status Aliens
If your residency status changed during the tax year then you are a Dual Status Alien and must file a Dual Status Return. This situation applies to you if:
- Changed from Resident to Non-Resident Alien or
- Changed from Non-Resident Alien to Resident
Your residency status affects your effective tax treatment and how any tax treaties are applied (see below) so it is vitally important that you classify your status correctly if it changes during the year.
Many international taxpayers can benefit from tax treaties between their home countries and the United States. These treaties were put in place to encourage business development, academic scholarship and apprenticeship between hundreds of countries. Although tax treaties offer these benefits to the governments of the patterning nations, the individuals benefit by properly applying these treaties to their federally taxed income. In many cases, this can result in substantial tax savings for the qualified individual.
Tax treaties can offer many benefits to the qualified person:
- Reduced tax rates
- Tax exemption or tax credit
- other treaty benefit or safeguard.
Qualifying for tax treaty benefits require specific understanding of the treaty language and the international tax payer regulations in place at the time. At Isaana Tax, we ensure we perform adequate due diligence ensuring you exercise your treaty benefits to the fullest extent possible.