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5 US Tax Regulations Immigrants need to be aware of

Date of Posting : June 28, 2020

One of the toughest tasks you may face as an immigrant in the U.S. is filing your taxes. Many immigrants want to make the most of the refund season. But that’s only possible when you know what you need to do right while filing your taxes. To help you with the process, here are five U.S. tax regulations that you must know if you are an immigrant in the country:

Individual Tax Identification Number (ITIN)

In case you do not have a Social Security Number, then the IRS can issue an Individual Taxpayer Identification Number (ITIN) which you can use on your tax returns instead of a Social Security Number. Created by the IRS in July 1996, the ITIN program helps foreign nationals and other individuals who otherwise don’t have an SSN or are not eligible for the same.

Such individuals can still pay their taxes without defaulting. All that’s needed is to file form W-7 to apply for an ITIN. This processing number can be issued to unauthorized immigrants as well so that they can pay their taxes with ease, irrespective of their immigration status.

Know the W-4

As a new resident of the country, you must learn about the importance of the Form W-4 and the impact it has on your taxes. At the beginning of your new job, it is mandatory for your employer to provide you a Form W-4 which you need to fill out. This form will help your employer to figure out the amount of the federal income tax withheld from your paychecks.

The information that you need to provide includes details about your marital status, allowances, and exemptions. It is important to note that if too much tax is withheld, then you will have to forego that money on your paychecks and will have to wait until tax time to get a refund.

Reporting all income and assets

Apart from the U.S., you may also have investments, properties and financial accounts in other countries. If so, then you must file for taxes on your worldwide income. This will include all the interest, returns on investments, rents, and government pensions, that you have received in a given financial year. Thus, it is necessary to report all the income that has been generated outside the U.S.

Apart from the income received from other countries you also need to report the details of the financial assets that you hold in those countries including bank accounts, brokerage accounts, insurance policies, etc. You can avoid getting penalized by the IRS by filling out these details accurately and without hiding any information.

Marriage and U.S. Taxes

If you have immigrated to the U.S. on a K-1 or K-3 visa by marrying a U.S. citizen or permanent resident, then you must file your taxes jointly in the next tax filing season. Don’t forget to prove that the marriage is bona fide while filling the Form I-485 to register for permanent resident status on the basis of your marriage.

Learn about Non-Resident Tax Treaties

The U.S. has income tax treaties with several foreign countries. If you are a non-resident alien, then obtaining information about these treaties is a must before you file your tax. This is because these treaties can reduce or remove U.S. tax on a number of personal services and other income like interest, dividends, capital gains, royalties, etc. Thus, make sure you review every single treaty to know which all incomes can be exempted from your U.S. tax or are taxed at a lower rate.