TAX RETURNS FOR NON US CITIZENS (FOREIGN STUDENTS AND IMMIGRANTS) Monica Ibarra and Mary Lepper Center for Great Neighborhoods VITA

TAX RETURNS FOR NON US CITIZENS (FOREIGN STUDENTS AND IMMIGRANTS) Monica Ibarra and Mary Lepper Center for Great Neighborhoods VITA

Topics Covered 2 1. Types of returns regular 1040 or 1040NR 2. Steps to determine return type to file 3. Resident Alien Taxpayer 4. Nonresident Alien Taxpayer 5. Dual-Status Taxpayer 6. Individual Tax Identification Number (ITIN) 7. Tax Credit Eligibility 8. Start of 1040NR return in Taxslayer

Types of Returns 3 1040 Return U.S. Citizen Undocumented Alien who does not have valid Visa Resident Alien 1040NR Return Nonresident Alien who is not a U.S Citizen Foreign Students and Teachers

First Step: Resident or Nonresident Alien 4 If you see NO on the intake form you must determine residency status A resident alien files a regular 1040 form (with ITIN) and generally follows same tax laws as US citizens A nonresident alien files a 1040NR out of scope unless Foreign Student certification is complete only sites that have certified volunteers Dual-Status Alien - A taxpayer who changed immigration status or received a green card during the year (may be out of scope for VITA)

Resident Alien Must meet one of two tests: 5 Green Card Test Taxpayer was lawful permanent resident at any time during the year (had a green card ) OR Substantial Presence Test Physically present in the US for at least 31 days during 2016 AND physically present in the US for at least 183 days during the past 3 years counting all days in 2017, 1/3 of the days present in 2016 and 1/6 of the days present in 2015. See Decision Tree in Pub 4012 for full details

Sample Permanent Resident cards 6 Current version Older, still valid version

Substantial Presence Test Example 7 Victor first arrived in the US on July 1 st, 2016. He returned to Syria to care for his sick mother on December 20, 2016. After his mother s death in May, 2017, Victor returned to Pittsburgh on August 31, 2017. He has a SSN but is not a citizen. Victor was present in the US for 123 days in 2017 and 173 days in 2016. 123 days in 2017 + 57 (1/3 of 173) days in 2016 = 180 days He does not meet the substantial presence test of 183 days and is a Nonresident alien for tax purposes.

Substantial Presence Test Example 8 Januka is a refugee and arrived in the US on March 1 st, 2017. This is her first time in the US and she hasn t left the country since her arrival. She received a Social Security number and card shortly after she arrived. Januka was in the US for 306 days in 2017. Januka meets the substantial presence test and is a resident alien for tax purposes. She files a regular 1040 return.

Substantial Presence Test: Students and Teachers 9 Foreign Students Do not count the days present during the first 5 calendar years will be considered nonresident for first 5 years of presence, can be resident if here longer than 5 years Teachers or Trainee Do not count the days present during the first 2 calendar years Will be considered nonresident for first 2 years of presence, can be resident if here longer than 2 years Question are any of your sites preparing 1040NR returns for nonresident students and teachers?

Screening Question to Help Determine Return Type Status 10 Are you a citizen or resident of the US? You are a resident of the US if you have a green card (for all or part of the year) OR meet the substantial presence test. If yes, continue with preparing the regular1040 return. If no, Check with local sites that are preparing 1040NR returns and direct taxpayer to site. Out of scope at most local sites.

Identification Needed for Return Preparation 11 Social Security Card Issued to U.S Citizens and Immigrants with valid immigration documentation Individual Tax Identification Number (ITIN) United States tax processing number issued by the Internal Revenue Service (IRS). The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security number (SSN) from the Social Security Administration (SSA).

Individual Tax Identification Number (ITIN) 12 Resident Aliens without a Social Security Number can apply for an ITIN in order to file a tax return A nine-digit number in the same format as the SSN (9XX-8X-XXXX), begins with a 9 and the 4th and 5th digits range from 70-88, 90-92 and 94-99. ITIN only good for filing taxes, not for work authorization. ITIN good until notice of renewal date sent.

Purpose of ITINs 13 IRS assigned numbers issued only for federal tax administration purposes Provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers. Assist the IRS with collection of taxes from foreign nationals, nonresident aliens and others who have filing or payment obligations under U.S. tax law

An ITIN does not: 14 Entitle the recipient to Social Security benefits or replace an SSN Qualify an applicant for Earned Income Tax Credit Change the individual's immigration status Give the individual the right to work in the U.S. Serve as identification outside the federal tax system

Who needs an ITIN? 15 A resident alien (taxpayer) filing a U.S. federal tax return who does not have social security number. A dependent or spouse of a U.S. citizen or taxpayer who does not have valid social security number. A nonresident alien required to file a return to obtain a refund of tax withheld under the provisions of an income tax treaty. Foreign nationals and others who have a federal income tax reporting or filing requirement. A nonresident alien student, professor, or researcher filing a U.S. federal tax return or claiming an exception. A dependent or spouse of a nonresident alien holding a U.S. visa

Who is not eligible for ITIN? 16 U.S. citizens Aliens with work visas that qualify them for a SSN Permanent legal resident of the U.S. (Green card holder, also known as Permanent Resident Card) Any individual with a valid SSN Applicant not meeting the criteria for residency and/or ID documentation (who failed to prove identity and foreign status)

Why should a resident alien file a tax return at all? 17 If you make over a certain amount of money or owe taxes, you have a legal obligation to file a tax return. Filing taxes is evidence of good moral character and continuous presence in the United States. You could get a cash refund if your employer withheld excess taxes during the year or if you have a dependent or dependents that qualify for the Child Tax Credit. Some immigration applications require you to present your tax returns.

Will the IRS share my information with immigration if I file return with ITIN? 18 No. The IRS does not share information with other departments of the US Federal government. The IRS cannot report you to immigration for having applied or received an ITIN. However, the courts can request information about you from the IRS if you have an open deportation order or if you are suspected of terrorist activities.

Tax Credit Eligibility 19 Eligible if dependent has ITIN (not SSN) Citizenship EITC NO Child and TP must be US citizen or a legal resident of the US with SSN valid for work TIP: Check to see if SSN is marked not valid for work if so not valid for EIC Dependent YES Dependent must be US citizen or a resident of the US, Canada or Mexico (no other country) Child Tax Credit YES Child must be US citizen or a resident of the US (lived in US) for more than six months of the year Head of Household YES Dependent must be US citizen or a resident of the US, Canada or Mexico Child Care Credit YES Child must be US citizen or a resident of the US, Canada or Mexico American Opportunity and Lifetime Learning Credits YES Child must be US citizen or a resident of the US, Canada or Mexico

Special Circumstances: US Citizen or Resident Alien married to Nonresident Alien 20 3 filing status options Married filing separately May still be able to claim exemption for spouse Married filing joint Wordwide income of both must be included Must include declaration signed by both agreeing to choose resident alien status Head of Household Possible even if they live together. If resident alien is unmarried or considered unmarried on the last day of the year and they pay more than half the cost of keeping up a home for you and a qualifying person, claim HOH. Must be a resident alien for the entire tax year. You are considered unmarried for this purpose. Spouse can be nonresident at any time during the year. See details in Publication 4491

Special Circumstances: Exemptions 21 Dependency Exemption for adopted foreign-born child Child must be resident of taxpayer s household for entire year Dependency Exemption for a child born overseas If at least one parent is a citizen, child is a US citizen for tax purposes. Must have SSN. See details in Pub 4491

Nonresident VISA Types 22 Student VISA F-1 Temporarily in US Does not count days in US toward Substantial Presence Test for five years File return as nonresident if worked in US Nonresident working in US H-1 Temporarily in US Days in US count toward Substantial Presence Test If more than 183, file regular 1040, if not 1040NR Teacher or Researcher J-1 For people who wish to take part in work-and-study-based exchange and visitor programs in the U.S. These programs are sponsored by Universities or Corporations

Dual-Status Taxpayer 23 Dual-Status Taxpayer Both a resident alien and a nonresident alien in the same year Does not refer to Citizenship only to resident status in US Most common dual-status tax years are the years of arrival and departure. For part of year a nonresident, taxes on income from US sources and on certain income effectively connected with a U.S. trade or business. Out of Scope for VITA sites

24 Taxslayer First Step to Start Nonresident Return

25 Taxslayer Filing Status

26 Required to Answer Health Care Questions

27 Questions to Answer on Non Resident Return

28 Questions to Answer on Non Resident Return

Additional Resources 29 ITIN tab in Pub 4012 Chapter 8 in Pub 4491 Publication 1915: Understanding your IRS ITIN Publication 519: US Tax Guide for Aliens Publication 4757: ITIN Power Point Presentation

Questions 30 Monica Ibarra monica@greatneighborhoods.org Mary Lepper mary@greatneighborhoods.org

Individual Taxpayer Identification Number 31 What is an ITIN? It was created for tax purposes. The ITIN program was created by the IRS in July 1996 so that foreign nationals and other individuals who are not eligible for a Social Security number (SSN) can pay the taxes they are legally required to pay. ITINs are not SSNs. The ITIN is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit, for example 9XX-7X-XXXX.

Individual Taxpayer Identification Number 32 Many immigrants have ITINs. People who do not have a lawful status in the United States may obtain an ITIN. In addition, the following people are lawfully in the country and must pay taxes but may not be eligible for a SSN and may obtain an ITIN: A non-resident foreign national who owns or invests in a U.S. business and receives taxable income from that U.S. business, but lives in another country. A foreign national student who qualifies as a resident of the United States (based on days present in the United States). A dependent or spouse of a U.S. citizen or lawful permanent resident. A dependent or spouse of a foreign national on a temporary visa.

Individual Taxpayer Identification Number 33 ITINs do NOT provide legal status or work authorization. An ITIN does not provide legal immigration status and cannot be used to prove legal presence in the United States. An ITIN does not provide work authorization and cannot be used to prove work authorization on an I-9 form. ITIN holders pay taxes. ITINs let more people pay into the system, which builds the tax base. ITIN holders are not eligible for all of the tax benefits and public benefits that U.S. citizens and other taxpayers can receive. For example, an ITIN holder is not eligible for Social Security benefits or the Earned Income Tax Credit (EITC). However, if that person becomes eligible for Social Security in the future (for example, by becoming a lawful permanent resident), the earnings reported with an ITIN may be counted toward the amount he or she is eligible to receive. ITIN holders are eligible for the Child Tax Credit (CTC). What other purposes can an ITIN serve? Opening an interest-bearing bank account. Individuals who do not have a SNN but do have an ITIN can open interest-bearing accounts. Providing proof of residency..

Applying for an ITIN 34 Each person who applies for an ITIN must file a separate Form W-7 and provide their own supporting identification documentation. One 1040 might include 2 or more W-7s for taxpayer, spouse and dependent(s) Form W-7 must be completed and attached to a U.S. federal income tax return.

ITIN application procedures 35 Appointments will be scheduled via 859.547.5542 at the Centro de Amistad or Center for Great Neighborhoods sites Taxpayers can complete Spanish intake form if helpful Preparer should ensure taxpayer has required documentation before starting return Bilingual preparer can complete return(s) and Form W-7 if necessary Bilingual preparer will translate for review when necessary Reviewer should review return and Form W-7

Documentation Required 36 Unexpired Passport (If you have a passport, this is the ONLY document required.) OR If you do not have a passport, you must present 2 of the following documents: National Identification Card (for example, Mexico s Matricula Consular) Foreign Voter ID Card Medical records (Only for dependents under 6 years old) School Report Card (Only for students under 18) Foreign Military ID Card Visa issued by the United States Photo ID from the U.S. Citizenship and Immigration Services (USCIS) U.S. Driver s License Foreign Driver s License U.S. State Photo ID U.S. Military ID Card If adult, one document must include photo If dependent, one document must be birth certificate All documents must be original and unexpired

Form W-7 37 Select reason C, D or E (resident alien or their spouse or dependent) If D or E is selected and the taxpayer is mailing in a W-7 also, write their name and applying for an ITIN on the dotted line

Form W-7 38 The applicantʼs name must be listed on the Form W-7 as it appears on the tax return. Form W-2 must have the same name that appears on the federal tax return submitted with Form W-7. If you no longer have a foreign address, list only your country of last residence on line 3

Form W-7 39 See form instructions for specific questions

Return with ITIN in TaxSlayer 42 Complete regular 1040 form for resident aliens Electronic filing of return with valid ITIN and different SSN shown on W-2. See instructions in Pub 4012 for Starting a return for someone applying for an ITIN Creating a temporary TIN for spouse or dependent applying for ITIN