Alien and immigrant taxes are tricky! The forms and rules can be very confusing. Immigrants may find it extra confusing because this may be the first time they are preparing US taxes. Many immigrants opt to use a professional tax advisor like MYRA Wealth to help with their taxes or may turn to tax software options. These strategies can help prevent mistakes but it's still important that you be informed before heading into tax season. One omission could cost you a lot of money and if you are in the process of immigrating, can jeopardize your current or future status.
#1. Not Declaring All Of Your Income
If the IRS finds out that you haven’t declared all of your income, you may incur penalties and interest. If you are willfully evading taxes, you may even be subject to criminal prosecution and jail time. In addition, as an immigrant, this may negatively impact your application for citizenship. If USCIS discovers that you haven’t paid your taxes or owe back taxes, your citizenship application may be denied. If you find yourself in the situation of owing back taxes and can show that you are making efforts to pay them via a payment plan, USCIS can factor this into their decision.
#2. Not Disclosing Foreign Bank Accounts
If you become a resident alien at any point, you have to start paying taxes on your worldwide income. You also need to disclose foreign bank accounts to the IRS! You may need to file Form 114 or Form 8938. A professional tax advisor like MYRA Wealth can help you figure out if you need to file these forms. The penalties for failing to file are really hefty!
Related Article: When Do I Need To File Form 8938?
#3. Completing Form W4 Incorrectly On Your First Day At Your Job
On your first day at work (or sometimes before your first day), your employer will ask you to fill out a W4 form. This form tells your employer how much to withhold from your paycheck to give to the IRS over the course of the year.
If you’re a non-US citizen and considered a nonresident alien, you have to fill out the W4 in a special way.
If you fill out your W4 incorrectly, you might have too much withholding or not enough.
If you are a non-resident alien taxpayer, here are some tips for completing your W4 form:
Line 1 + 2: Input your name and SSN
Line 3: Select single regardless of what you actually are
Line 4: Ignore unless your name differs from the one on your social security card
Line 5: Put “1”
Line 6: On the dotted line after “each paycheck,” write “non-resident alien”
Line 7: DO NOT claim to be exempt
Sign! And give the form to HR
Also be sure to put your correct address on the form. For example, if you are working in a summer internship in another state, be sure to put the address of where you are actually residing during your internship. If you don’t, you might end up with withholding for the incorrect state and having to complete extra state tax returns.
Students on F, J, M, or Q visas in particular often make mistakes when completing their W4. If you complete your W4 incorrectly, your paycheck withholding may be incorrect. In particular, you may pay extra unnecessary payroll taxes (known as FICA taxes which are 6.2% Social Security Tax + 1.45% Medicare Tax). This is a lot whether you are earning a full time salary or just working in your summer internship. Non-resident taxpayers on F, J, M, and Q visas do not have to pay FICA taxes.
If you accidentally paid FICA taxes and shouldn’t have, you can get them back. An accountant can help you retrieve these erroneously paid FICA taxes for the past three tax years.
If you are a student on an F, J, M, or Q visa, follow the tips above on your W4 form.
#4. Not Filing Form 8843 If You Are On An F or J Visa
Form 8843 tells the US the # of days that you were physically present in the US on a student visa. It records the # of days that you spent in the US and were exempt from the Substantial Presence Test.
All students on F or J visas are considered nonresident aliens and the days spent in the US on that visa do not count toward the Substantial Presence Test.
In order to get this “exemption” on your days spend in the US under the F or J visa, you have to complete Form 8843. Even if you have no income, you should file this form! Your spouse on a F2 or J2 visa should also file the form.
If you didn’t file it, you can still file it for the previous 3 tax years. Filing this form can help extend your ability to file as a non-resident alien for a little longer while you are working in the US on an H1B, helping exclude your global income from taxation.
Related Article: Students On An F1 Visa Don’t Have To Pay FICA Taxes
#5. Filing As A Resident if You Are A Non-Resident Alien
Residents file Forms 1040 for their tax return. Non-residents file Form 1040NR. In order to determine if you are a nonresident alien you have to determine if you pass the “Green Card Test” or the “Substantial Presence Test.” The Substantial Presence test is not a question of whether you are literally sitting and residing in the US. It’s a calculation of how much you have been in the US over the last few years and this year in order to determine if you should be taxed like a resident and therefore taxed on not only your US but also your global income.
If you don’t meet the Substantial Presence Test, don’t file as a resident! Be sure to file Form 1040NR for non-residents. Failing to file correctly can result in incorrectly paid taxes. If you filed incorrectly, you can fix your taxes going back three years. A tax advisor like MYRA Wealth can help you.
#6. Filing As A Non-Resident Alien If You Are A Resident Alien
The formula for determining if you are a resident alien - also known as the Substantial Presence Test - is pretty tricky, so it’s no wonder that many people mess it up. But it’s important to know your proper filing status because you don’t want to get into delinquency with the IRS! Don’t file Form 1040NR for non-residents if you are considered a resident alien. There are several Substantial Presence Test calculators online that you can use to determine your correct filing status.
Related Article: Do I Have To Pay Taxes On Inheritance From a Foreign Relative?
#7. Incorrectly Claiming That You Are A Head of Household
Just because you cook, clean, and do errands and feel like the head of the household doesn’t mean that you are necessarily head of household for tax purposes! This can be confusing because you may see “Head of Household” on your tax return and think, ‘Yes, I am head of the household.’
The United States has something called “Head of Household” status. Filing as Head of Household can lead to lower taxable income and can increase your refund. Sometimes it is better to file as Head of Household than as single.
In order to claim you are “Head of Household” you must be:  Unmarried or ‘Considered Unmarried” (filing a separate return from your spouse, living apart for the last 6 months due to separation - things like military service, medical treatment, education, and business trips are not enough to be considered living apart),  Have paid over half the cost of keeping up your home for the year for yourself and your dependent(s),  Have a qualifying dependent that lived with you for over half the year
Head of Household status is mostly for single parents.
This is different from claiming a dependent. There are situations in which you might be able to claim a dependent but not claim Head of Household status (such as due to a divorce decree).
If you claim Head of Household status and don’t meet the requirements, you may be caught through an audit and ordered to pay back taxes plus a 75% penalty. Steep! The IRS can also disallow you from filing as Head of Household for up to 10 years into the future - and they can also jail and fine you!
#8. Not Declaring Foreign, Worldwide Income If You Are A Resident Alien
Your foreign banks may not issue tax forms and it can be easy to forget if you are generating passive income abroad, perhaps from investments. If you are considered a resident alien because you meet the Substantial Presence Test or the Green Card Test, be sure to report this foreign (global) income regardless of the amount. Even if you are paying taxes elsewhere, these amounts are still taxable in the US, although you may get a credit for the foreign taxes paid on your US taxes.
Related Article: 4 Ways To Reduce Taxes On Your Foreign Income
#9. Claiming The Dependent Child Tax Credit For Children That Don’t Live With You
In order to claim a child as a dependent, they must live with you. Don’t make the mistake of claiming your children as dependents if they don’t live with you even if they do depend on you!
You can claim a non-citizen child as a dependent if the child is considered a “qualifying child.” Note that only children who are US nationals, US resident aliens, or Mexico or Canadian nations can qualify. A qualifying child is defined as:
The child is your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, adopted child or a descendant of one of these, such as a grandchild
On the last day of the tax year, the child is half the year
You provided >half the child’s financial support during the tax year
The child must be a U.S. national, U.S. resident alien, or a resident of Canada or Mexico
The child will need an SSN or ITIN
If you made a mistake and claimed your child as a dependent and shouldn’t have, you can amend your tax return within 3 years. When you eliminate the dependent, your taxable income will likely go up so you may owe extra taxes and even penalties. Sometimes the IRS will waive the penalties if you can convince them that you made an honest mistake.
#10. Checking “Married Filing Jointly” If You Are A Non-Resident Taxpayer
In general, if either spouse is a nonresident alien, you can’t file married-filing-jointly. But nonresident aliens married to citizens or resident aliens can opt to file married-filing-jointly and be treated as a US resident for tax purposes. Speak to a tax advisor about the best choice for your situation.
Have you lived outside India for more than 182 days in the financial year (Apr-March)? If yes, then for tax purposes, you are an NRI (Non-Resident Indian). As per FEMA (Foreign Exchange Management Act) guidelines, it is illegal for NRIs to hold savings accounts in their name in India.
Instead, you will have to convert those accounts into NRO (Non-Resident Ordinary Rupee) accounts. Additionally, it is a good idea to open an NRE (Non-Resident Rupee) account as well. These accounts are needed only when an NRI wants to have a bank account in his/her own name in India to hold savings, earn/invest in India and wants to freely transfer funds between US and India. (If you don’t have any Indian bank accounts, you can still send money to someone in India via money transfer services, wire transfers or Telegraphs, or buy something in India with International Credit Cards).
What is the NRO account?
The NRO account is a savings or current account held in India for NRIs to manage their income earned in India. All income which is receivable in India such as rentals from property, investments, pension etc have to be deposited in this account. Any payment towards insurance premiums or EMIs on loans which you availed while in India also has to be mandated from NRO account.
You can apply for an NRO account jointly with a resident Indian in which the bank will give you both an NRO debit card each. Alternately, you can add a mandate holder for the account who can carry out certain operations of the account on behalf of the NRI like drawing cheques to make local payments, make and renew fixed deposits, and invest in avenues open for NRIs. Any foreign currency deposited into the NRO account will convert to Indian rupees.
Even though funds from NRO account are now repatriable up to $1million (with a certificate from a Chartered Accountant for payment of taxes and other repatriation fees), it is advised to keep these India based earnings in India, in the NRO account. Note that interest earned in the NRO Account is subject to TDS (Tax Deductible At Source) at 30.9%.
And what about an NRE account?
The NRE account comes to the rescue, for NRIs wanting to transfer funds between US and India. One can deposit only foreign currency earned abroad in this account, which gets converted into INR at the time of deposit. Therefore, you may repatriate the money in this account (plus interest earned) any time without incurring income/wealth/gift tax. The benefit of repatriation and taxation is the main benefit of the NRE account. Some Indians move their US savings to the NRO accounts, invest in India in high yield instruments, and re-transfer and use that money in the US. Transferring funds between and NRE and NRO account is straightforward and simple. Additionally, with the NRE account, you will receive an international debit card that enables you to transact and withdraw money at any time (withdrawal in INR).
However, a joint NRE account can be opened only with another NRI. You cannot use your NRE account for receiving funds/income/interest in India. To make local bill payments, purchase property, etc. in India you will have to move funds from your NRE to NRO account first. This is how the government regulates the inflow of foreign money to India.
Please contact your Indian Bank now for details on opening and managing your NRE and NRO accounts.
To read more about related topics, check these out:
Immigration and Customs Enforcement (ICE) — the federal law enforcement agency in charge of arresting, detaining, and deporting undocumented immigrants or documented immigrants with criminal convictions — is reportedly begiun nationwide raids, potentially impacting thousands of immigrant families.
Dealing with law enforcement can be stressful, so it’s important to know your rights before you’re face-to-face with ICE agents. While there’s never any guarantee that law enforcement officers will follow the law, here’s what they can and can’t legally do to you and what you can legally demand.
Don’t Open the Door:
Like police, ICE can’t enter your home without a warrant signed by a judge. You can ask ICE to slide their document under the door, if they have one, to determine whether or not it's a judicial warrant.
Ask to Speak to a Lawyer:
A good immigration lawyer can help guide clients through the complicated and often confusing system of immigration law, so find one in your area and discuss your status with them, not with law enforcement. If you're at risk, try to speak with an attorney as soon as possible.
The American Immigration Lawyers Association’s Immigration Lawyer Search lets you specify what kind of immigration law you need help with, i.e., “Deportation - Removal,” and search your local area if you enter a city name or zip code; you can even search by last name if you’re familiar with a lawyer in your area by name but not sure how to find them.
Remain Silent or Tell ICE You Wish to Do So:
You have the right to remain silent in any interaction with an ICE agent, and you can tell them so. What you say can be used against you in immigration court or deportation proceedings, so always be cautious of what you say to ICE or law enforcement and ask to speak to a lawyer before any communication takes place.
Don’t Sign Anything:
Unless you’ve already spoken to a lawyer who advises it you shouldn’t sign any documents ICE asks you to. According to the Miami Herald, signing a document provided by ICE may mean you’re signing your own deportation order.
Don’t Lie or Provide False Documents:
Lying to ICE agents can be dangerous. Providing false documents can be used against you in court proceedings.
Don’t Flee or Resist Arrest:
If you run from ICE, the results can be deadly not just legally dangerous. People who help an immigrant escape ICE can be charged with things like obstruction of justice by the Department of Justice, as was the case with a judge who let an immigrant escape after a court hearing. People who attempt to physically stop an arrest can also be charged with resisting a public officer.
You Don’t Have to Tell Them Where Someone Else Is:
You’re under no obligation to tell ICE where someone they’re looking for is, but you shouldn’t lie. Instead, ask the agents to leave contact information.
You’re Allowed to Ask for an Interpreter:
If an immigrant placed under arrest is not an English-speaker, they can ask for an interpreter during their detention process with ICE.
You Should Make a Plan With Family or Loved Ones:
In the event you are detained, it’s wise to have an action plan in place to handle any immediate concerns like child and pet care, and long-term issues like home maintenance and collecting mail. Attorneys also advise that loved ones have on hand the name and contact information for an attorney so they can make contact in the event of an arrest.
If you have elderly parents visiting you from India, it is highly recommended to get them medical insurance. This is especially true if they are coming for a long duration, already have pre-existing medical conditions or are susceptible to health issues due to weather/food change, stress and fatigue.
Even if they are healthy and have planned many outdoor/strenuous activities during their stay, its best to err on the side of precaution. Usually you will see the option to purchase insurance when you book your ticket to the US. Remember that travel insurance is not the same as visitor medical insurance. Travel insurance protects you in case of damage to baggage, flight cancellations, delays due to weather and other travel related emergencies.
Medical insurance will cover new and unforeseen medical problems, accidents and injuries. To find the right medical insurance policy, there are some important criteria you should consider:
Cost of buying the medical insurance:
How much do you have to pay per month to the insurance provider? Coverage limit, policy maximum, deductible, co-pay.
What is the maxim amount the insurance will pay in various situations?: Is there an amount that you will have to pay every time you visit the doctor/avail a medical service?
At what point will you stop paying out of pocket?
Comprehensive or Fixed coverage: Comprehensive policies cover many more instances of medical assistance and hence cost more. Fixed coverage is for very specific instances and have higher deductibles and co-pays, but lower costs per month. What works best for you?
Are you suffering from health issues that exist prior to buying the policy?
Are they covered by the policy?
Cancellable or renewable policies: In case your trip is cut short, is there a cancellation fee? Can you get a refund for the remaining duration of the policy? Similarly, if your trip is extended, can you renew the policy for the additional period? Multi trip coverage and joint coverage for both parents If you are travelling to and fro, multiple times within your visa duration, can the policy cover all trips?
Will it be cost effective to purchase the same policy if both parents have different health issues?
PPO (Preferred Provider Organization) or Out of Network coverage If you have a specific doctor in mind, or is most conveniently located, who does not accept this insurance, what will be the repercussion?
How do I find doctors within the PPO network?
Customer care support:
What is the customer care number if you have/don’t have a local US number?
Is it toll free/24*7?
How do they handle disputes/grievances?
Process of claims, refunds, billing, paperwork: What is the step by step process that I should follow from when I need to go to a doctor to when the medical treatment is completed?
What forms do I need to fill? It is better to buy medical insurance from a US provider because of customer care availability at US hours and direct billing by the doctor to the insurance company.
However, if you still feel that Indian companies are easier to communicate with and lighter on the wallet, you have options like Bajaj Allianz, SBI, TATA AIG, HDFC Ergo, Bharti AXA, Future Generali and Apollo.
Some of the top plans for parents visiting the U.S. include Patriot America Plus, CoverAmerica - Gold, Atlas America, Liaison Travel Choice and Patriot America, as they all feature excellent PPO networks, reliable comprehensive coverage, and coverage for acute onset of pre-existing conditions.
Insubuy.com (US) and Policybazaar.com (India) are reliable portal to get quotes and compare policies. If the terms used are confusing, ensure you get it clarified and also explain the same to your parents. You do not have to do any medical tests prior to coming to the US, but if you have recent medical reports that may help the doctor assess your case better, carry that along as well. Ensure that your parents have all the documents and payment options handy in case they have to deal with a medical emergency, and prepare them mentally. The groundwork is worth the peace of mind so both you and your parents can enjoy their time in the US. Health is priceless after all!
The United States is a country where people from different backgrounds, cultures, and religions can be found. The government and laws are organized so that you and other citizens from different backgrounds and different beliefs can have the same rights. This means that no one can be punished or harmed for having an opinion or belief that is different from that of other people , one can vote in free elections to choose important government officials, such as the president, vice president, senators, and representatives. The government of the United States is based on several important values: freedom, opportunity, equality, and justice which help to protect your rights. When you share these values, it gives you a common civic identity. Thus, as a citizen in US, you can help to shape the government and its policies when you learn about the important public issues as well as get involved in your communities. Each layer of US government – federal, state and local – provides a portion of the fabric of the services and safety nets for the public and each of these layers forms part of the system of government “federalism” which is a system of shared, distributed power between federal, state and local government. Every layer of US government has its own separation of powers and checks and balances and their different roles helps to minimize corruption, waste, fraud and abuse.
State and local governments exercise important responsibilities to make living in US peaceful and fruitful. They plan and pay for most roads, run public schools, provide water, organize police and fire services in cases of emergency and help arrange elections. These and many more roles directly affect different parts of your life every day. While states are part of the larger entity of a federal system, local governments are creatures of the state and as such the states can abolish a local government, merge it with other entities or give it an additional authority. In addition, each state has its own constitution and government. Every state government has three branches: legislative, executive, and judicial and the leader of the state executive branch is called the governor. As citizen of your state, you can vote in elections to choose your governor and your representatives to the state legislature so as to make laws that apply in your state. These laws cannot go against the U.S. Constitution, hence the need to vote the right person who will stand in and protect your rights in your constituency and state. Your state’s judicial branch upholds the laws of your state. You can have either city or county governments, or sometimes both
Local government is the form of government that is closest to the people and with which people come into contact most frequently. Each state also has local governments to help provide and oversee many services in your local community, such as public schools, libraries, police and fire departments, and water, gas, and electric services. In your local community, you vote your local government officials; however some local officials are appointed and need not be voted in. Local governments have different forms. Some have mayors as their leaders; others have city or county councils. Local communities, at the educational level, also has school boards, and these are a group of citizens who are elected or appointed to oversee the public schools.
The big moment is almost here. Are you ready? It’s two weeks to tax day, and the countdown has started.
Here's a checklist with the documents most of you would probabely need to send. Use it to make sure you’re covered:
SSN and Date of Birth (yours and your spouse)
Copies of last year’s tax returns for both spouses (optional, but helpful)
Bank account number and routing number for depositing returns
1099-C - Debt cancellation form
1099-G - Form for unemployment benefits or tax refunds already received
1099-MISC - for income from freelance work
1099-R or 8606 - for payments/distributions from IRAs or retirement plans
1099-S - forms for income from sale of a property
1099-INT or -DIV or -B or K-1 for income from investments or shares
SSA-1099 for Social Security benefits
Business or farming income - profit/loss statement, capital equipment information
Income/expenses from rental of property
Any additional income: prizes, grants, scholarships, etc.
Forms that can help you trickle down the tax breaks:
1098-E for student loans interest paid
1098-T for payment of tuition fees
Receipts for home improvements in energy (installation of solar system, for example)
Records of Medical Savings Account (MSA) contributions
Health insurance records for self-employed workers
Receipts for moving expenses (carriers, new telephone lines, etc.)
Child support payments
Deductions and credits:
The US government offers tax benefits in many cases, which will usually significantly lower your tax account or even get some money to your pocket. You will need any of these documents to get your benefits:
Education Costs: Form 1098-T
Adoption costs: the child's SSN number and documentation of medical, legal and even transportation costs
Form 1098: interest on mortgage, private mortgage insurance (PMI), and points paid
Receipts for donations and charity
Medical expenses and dental expenses
Casualty and theft losses: amount of damage, insurance reimbursements
Home renovation expenses
Rental property income/expenses: profit/loss statement, rental property suspended loss information
The W-2 form, (or the Wage and Tax Statement, if you want to be formal), is the main form you need to fill in this coming tax form if you are an employee, and not self-employed. These are the things you need to know to fill it out this tax season:
Let’s Start from the Basics:
-Don’t confuse the W-2 with the W-4. What’s the difference? A W-2 is a form you get from your employer, which you need to file. The employer reports your salary on the W-2. The W-4 is a form you need to file for your employer, in which you report your personal and financial status. You employer uses the W-4 to determine your withholding tax rate.
-The W-2 is really important. For most employees, this is the form that would determine your tax bill the most, and your refunds.
You HAVE to File a W-2
The W-2 states how much you’ve earned, and how much you’ve already paid in withholding tax during the tax year. If you have additional forms to file, the W-2 will help you out, with lots of information.
If you didn’t get your W-2 yet, something’s wrong. Your employers has to send it out by January 31st. By the way, you need a seperate W-2 for each employer you worked for in the past year, and had paid you more than $600.
It’s Not Just About Your Salary
So, your W-2 talks a lot about what you’ve earned in the past year. But it also talks about your insurance expenses, the benefits you’ve got from your partner, and any other information that affects your tax picture. Some things would be deductible for you, or even give you credit. However, as employees, the responsibility to report your personal status is on you.
Don’t Keep Any Secrets
Employers are obligated to send copies of your W-2 to Social Security and the IRS. So no, as employees, it’s basically impossible to avoid paying your taxes. In fact, if you don’t fill out the W-2 form until April 15th, you’re going to get a long letter from the IRS pretty quickly.
Your Employer Can Make Mistakes
Imagine your company’s accountant working very very late on December and January, trying to fill out all the W-2’s for all employees. It’s almost midnight, after many cups of coffee, and they spell your name wrong. Or much worse - put a decimal dot in the wrong place. Sounds crazy? Well, it happens.
If you haven’t read your W-2 yet - it’s time to do it now. Read it carefully to track any mistake and don’t hesitate to ask for it to be fixed. You’re not bothering anyone - you’re actually doing them a favor. If the IRS catches a mistake, your employer would be penalized.
Read the Instructions!
Don’t be lazy. The forms come with thorough and straightforward instructions. Read them through if you’re not a veteran!