Frequently Asked Questions
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We provide US and UK personal tax services and Certified Acceptance Agents (CAA) in 4 countries helping people all over the world get their ITIN number(Form W7), EIN number, Form 8233, W-8BEN, W-BEN-E, 1040NR, 1040, SA100.
We understand from our clients query that there are significant confusion around the ITIN or EIN and US Tax filing requirements and tax reclaim process for excess taxes withheld. We have complied the FAQS based on our client query, we hope you find your answers and if you have any further queries, please do not hesitate to contact us. ( Add a link to landing page)
We aim to have your ITIN/EIN application process less stressful, faster by quick response to your emails, arrange for the meetings to certify the passports and complete all the relevant paperwork with flexibility with the time, meeting venue and to locations that suitable to both the representatives and our clients.
SSN/EIN/ITIN/FORM W7/ W-8 BEN [FAQ]
What Is a Social Security Number (SSN)?
An SSN is a Social Security Number. SSNs are nine digits (xxx-xx-xxxx) and belong to US citizens and authorized residents/U.S Green Card Holders.
Individuals who are employed and receive wages must have an SSN or apply for one. Every employer who sets up payroll and pays an individual wages must request the employee’s SSN and report the wages using that number [Except for foreign nationals who are domiciled in foreign country and are in USA for short visit as performers and who are eligible for treaty exemption claim under US/Foreign Country Treaty can apply for ITIN]. Parents must also obtain an SSN for any child that the parent(s) claim on an income tax return.
SSNs are issued by the Social Security Administration (SSA), and anyone who is eligible to have an SSN may apply for one by completing an application known as the Form SS-5. Any taxpayer with an SSN must use the SSN as an identifying number on their tax returns and not the ITIN details.
Processing time for SSN: varies from few weeks (if resident in USA) and up to 6 month for U.S Citizens applying via USA Embassy in foreign country.
Below link is link to apply for SSN.
What Is an Individual Taxpayer Identification Number (ITIN)?
An ITIN is a tax processing number that is issued by the IRS for individuals who are not eligible for an SSN, such as a foreign national or non-resident alien, but are required to file certain federal tax/claim treaty exemption/Refund claim or information return
Like an SSN, an ITIN number is nine digits in the format xxx-xx-xxx. But the first digit will always be a 9, and the second section of the number will be in the range of 70-88 (e.g., 9xx-88-xxxx).
To obtain an ITIN, an alien with foreign status should complete Form W7, Application for IRS Individual Taxpayer Identification Number. No one should have both an ITIN and an SSN. For example, if an SSN/ITIN application is pending, an ITIN will not be issued even if the individual completes and submits a Form W-7
How long does it take to receive an ITIN?
During peak processing times (between January and June), it should take up to 8 t0 10 weeks for an applicant to receive their ITIN.
Outside peak processing times (between July and Dec), it should take up to 6 to 8 weeks for an applicant to receive their ITIN.
Applicants who did not use the CAA (Certified Acceptance Agents Service) and if they sent original documents (i.e Passport/Marriage Certificate) submitted to IRS directly in support of an ITIN application will be returned within 60 days (estimated). People who do not receive their original and certified documents within 60 days (estimated) of mailing them to the IRS may call 1-800-908-9982 to check on their documents’ whereabouts.
Please note if you use the CAA (Certified Acceptance Agents Service) then applicants do not have to send your original passports to IRS. The CAA representative will certify copy of the documents and have complete documents checks and also call IRS on your behalf via special dedicated lines allocated to CAA.
What Is an Employer Identification Number (EIN)?
An EIN is an Employer Identification Number. EINs are also nine digits, but formatted differently (xx-xxxxxxx).
Every business (i.e LLC, LLP, SCORP, C CORP) is required to file any business tax returns is required to obtain an EIN.
EINs can be obtained from the Internal Revenue Service.
Processing time : For US Residents (with 5 days) and Foreign Nationals ( 5 weeks if via postal), EIN for foreign companies registered outside of U.S.A [ eligible to received the EIN number over telephone]
When do I need to complete these Forms?
Form W-7 – For ITIN Application Process
Form W8 BEN/Form W8 ECI – On receipt of ITIN number you need to complete this Form. Foreign ID number on W8BEN should be ITIN number with number starting with digit 9.
Form W9 – This form is to complete your SSN number if you are your US Citizen, Resident Alien with Valid SSN number.
Employer Identification Number EIN [FAQ]
Can I get an EIN even if I don't have an SSN (Social Security Number)?
Do I need to be a U.S. citizen to get an EIN?
No, you do not need to be a U.S. citizen to get an EIN.
How do you apply for my EIN without an SSN?
We properly fill out your EIN paper application as as foreigner, have you review and sign it, and file it with the IRS to receive your EIN.
Do I need to be a U.S. resident to get an EIN?
No, you do not need to be a U.S. resident or live in the U.S. to get an EIN. You can even use your non-U.S. address to get your EIN.
Do I need a U.S. address to get an EIN?
No, you do NOT need a U.S. address to get an EIN. You can use your non-U.S. address to apply for your EIN.
Can I get an EIN even if I don't have an ITIN?
Yes, you can get an EIN even if you do NOT have an Individual Tax Identification Number (ITIN).
Can I get an EIN on my own?
Yes, you can do this on your own if you love to:
– Deal with the IRS on your own
– Fill complicated and confusing IRS forms
– Spend 6 weeks of your time navigating the IRS information maze
– Risk being rejected just to start all over again
What’s your time worth to you? Let an expert work on your EIN and receive it in less than 2 weeks. You focus on your business. We focus on the paperwork.
Do I need an EIN to open a business bank account in the U.S.?
Yes, ALL banks in United States require an EIN to open up a business bank account.
How long will it take to receive my EIN?
It takes the IRS 1 to 2 weeks to assign your EIN.
What is the process like?
Simple 3-step process: 1. You fill out an easy online application, 2. Our team will prepare and complete your EIN application, 3. You receive your EIN in the mail from the IRS.
How will I receive my EIN?
2 weeks after applying for your EIN, you will receive your EIN confirmation letter sent to your U.S. or non-U.S. mailing address from the IRS.
Do I need to provide any documents when applying for an EIN?
No documents are required unless you are applying for an EIN for an LLC or Corporation. In such cases, you will need to provide us a copy of your Articles of Organization (for LLC) or Articles of Incorporation (for Corporation).
What are the other names for an EIN?
Employer Identification Number, Tax ID, Tax Identification Number, FEIN, Federal Employer Identification Number, Employer ID Number, Business TIN, Business Tax ID Number, Federal Tax ID Number, among many other names.
What's the difference between EIN & ITIN?
Employer Identification Number (EIN) is a BUSINESS Tax ID number issued by the IRS. EIN is necessary to lawfully conduct business in the U.S.. On the other hand, Individual Tax Identification Number (ITIN) is a PERSONAL Tax ID issued by the IRS for people who don’t have an SSN who need to file taxes or open a U.S. bank account. Find out if you qualify if you an ITIN here.
What can I use my EIN for?
You can use your EIN to lawfully do business in the U.S., open a U.S. bank account, hire employees, and comply with the Internal Revenue Service (IRS).
Can I use my EIN for Amazon FBA, Stripe, or eBay account?
Yes, you can use your EIN to open up an account with any Amazon FBA, Stripe, or eBay, or any other online account, if they require a Tax ID.
Is it safe to send my information via the online form?
Yes, it is completely secure to send your information using the online form. All the information sent through our website is secured with 256-bit encryption SSL certificates and we will never share your personal information with anyone else.
Do you guarantee that I can get my EIN?
Yes! We are confident!
We offer a Money Back Guarantee to make sure you get your EIN. If you don’t get your EIN in 4 weeks, we will issue you a full refund immediately. This is how confident we are about the EIN service that we offer to our foreign national clients.
How to apply for EIN outside of the USA?
Our team will fill out!
Certified Acceptance Agent Certification (CAA) Process [FAQ]
A Certified Acceptance Agent (CAA) can certify identity documents for all applicants (Primary, Secondary and Dependents). We initially gather the information to prepare the Form W7 via email or post to have the paperwork ready prior to the meeting time. The Certified Acceptance Agent Certification Process comprises of various elements that must be followed before an application can be submitted.
As part of the Certified Acceptance Agent Certification Process the following steps are performed:
- The CAA conducts a face to face meeting or a video conferencing meeting (e.g , Zoom meetings Skype, Google Hangouts or Facetime).
- Irrespective of the meeting formats (i.e. face to face or video call meetings) the CAA needs to have sight of the original or certified identity documents (from the Issuing Agency who issue this documents) being verified (i.e. in their possession during the interview process). This allows the CAA to verify the security features and authenticate the documents as legitimate.
- Once the verification is complete the CAA completes a Form W-7 (COA) Certificate of Accuracy for IRS Individual Identification Taxpayer Number. This must be attached to each application submitted to verify that the CAA reviewed the original documentation or a certified copy from the issuing agency of those documents.
- The Form W-7 (COA) along with the W-7 application, the copies of all documentation reviewed at the meeting and as applicable, supporting documentation is also sent with the application to the ITIN Office.
Why does the CAA need to see my original or certified identity documents?
The CAA facilitates the ITIN application process by reviewing the necessary documents to ensure they are legitimate. The IRS placed a higher scrutiny on the verification process due to a high level of fraudulent documents being used to apply for ITINs.
I have a notarised copy of my passport – can I use this?
No you will need to provide either a certified document or the original copy. A certified copy is one that the original issuing agency provides and certifies as an exact copy of the original document and contains an official stamped seal from the Agency.
A notarised copy is one that a public notary bears witness to sighting and then provides an official seal to confirm it as legitimate. These types of documents are no longer accepted for ITIN documents since 2011. If you send notarised documents you are application will be delayed and rejected eventually.
Can a CAA help to obtain an ITIN for me if I already have an Social Security Number – why?
As part of the ITIN process the CAA must determine whether you are in anyway eligible for a Social Security Number (SSN). If you are, then you cannot apply for an ITIN. The CAAs job is to ensure that the correct application is made and that if an ITIN application is completed, that there is no reason for it to be rejected on the basis that you may in fact require an SSN. If the applicant conceal the truth of he processing the SSN information from CAA then if IRS rejects the ITIN application. He will not be held responsible for the rejection.
ITIN for Spouse of US Citizen/Resident Alien [FAQ]
I’m an US Citizen/Resident Alien married to a foreign national (for ex: British national). Can I apply for ITIN for my spouse (Foreign national with no US Visa or prior USA visit anytime) by filing 1040 tax return with the filing status Married Filing Jointly/Separate (MFJ/MFS) ?
Yes, if you are legally married (this rule applies even to same sex partners) as of 31st Dec for the tax year of filing, then you are eligible to file MFJ/MFS even if your spouse does not have US Visa, never visited the USA. Please note, It’s only for the dependent child/other dependents ITIN application process requires ( US Visa, date of entry to the USA, 183 days stay(I-94 records), and with proof of residences like US Medical records or school records is required).
For spouse ITIN the main supporting document in addition to passport copy is the 1040 tax return copy with original signatures and dates.
In order to file ITIN application for my spouse. On my 1040 tax return filing status, Do you need to mandatorily file married filing jointly(MFJ) or do I have an option to file Married Filing Separate (MFS)
It’s not necessary who have to file Married Filing Jointly(MFJ) ONLY. You can also file as Married Filing Separately (MFS).
Reasons many of our clients choose to file Married Filing Jointly (MFJ) from 2018 tax year onwards is listed below:
- a) From 2018 the tax rules changed with no personal exemption of $4,050available for the taxpayer or the spouse (The personal exemption was available until 2017 tax year), so by filing Married Filing Separately(MFS) or Single your final tax due on the 1040 return would be same.
- b) From 2018 with new tax rules the standard deductions for the Married filing jointly (MFJ) increased from $12,700 to $24,000 giving a massive deduction of $11,300 from your gross income, resulting in a reduction in taxes due or increase in refund on computation.
- c) Married Filing Jointly (MFJ) status is also beneficial to foreign nationals spouse who has no income in the USA or in a foreign country. Even if the foreign national spouse is working in a foreign country then he/she is eligible to claim foreign earned income exclusion $103,900 (for 2018)and eligible to claim Foreign tax credits (FTC) for taxes paid in a foreign country.
Married Filing Jointly (MFJ) requires a joint election filing of IRC section 6013(g) to be made treating a nonresident alien spouse as US resident alien and subject to worldwide income reporting and Foreign Bank Account Reporting. The 6013(g) can be revoked if the foreign national does not wish to file jointly in future tax years.
Your CPA with US expatriate tax and international tax experience should be in a position to determine the best filing status option based on the source of income and having the numbers run on tax software.
I cannot file my US tax return via turbo tax, my CPA says I need to get my ITIN first for my spouse to file my US tax return electronically
Kindly note, For the first year of US tax filing with MFS or MFJ filing status along with spouse ITIN application you cannot file electronically via turbo tax or any US tax software, the 1040 tax return filing will be via paper format postal filing ONLY (As far as you have postal proof of mailing on or before the due date or extended due date) its considered the tax return was filed on time. If the tax return is on Zero taxes due or refund position then you need not worry about the tax filing deadline date.
The below process involves when tax return and ITIN application is mailed via post to IRS:
The 1040 tax return (with MFJ or MFS filing status) and with your spouse name (on SSN column write Form W7 Enclosed) listed on 1040 tax return will be sent to ITIN operation department, wherein the ITIN (Tax ID) is allocated to your foreign national spouse first in order to claim the joint filing exemption calculation and the tax return is processed at the same time.
I’m legally married but I filed my US taxes electronically via turbo tax as single just to meet my tax return filing deadline of 15th April because I do not have tax ID for my spouse to file MFS or MFJ?. How do I get a tax ID for my spouse now?
Please note, if you are legally married as of 31st Dec then you cannot file the tax return filing status as Single. Your filing status on 1040 should be MFS or MFJ. If you already filed the tax return as single (electronically just to meet the tax filing deadline date), then we need to amend a tax return (prepare 1040X) with MFS or MFS status and paper file the 1040X tax return with Form W7 ITIN application.
My spouse had a ITIN previously with which I filed my 1040 tax return with MFS/MFJ status. However IRS sent me notice that her ITIN is expired and it has to be renewed to futher process my 1040 tax return and the refund. What do I do now?
If the tax return was processed as filed previously via postal paper filing or with old ITIN and rejected/notice received from IRS(for ITIN not valid/renewed on time). Then a new ITIN application with 1040 tax return ” WRITE COPY ONLY FOR FORM W7 DO NOT PROCESS AGAIN” on top of the 1040 tax return so IRS knows the 1040 tax return is sent only for the ITIN supporting document.
My CPA asked me get ITIN so he can file my tax return electronically, he has filed an extension for me until 15th October, Can you ONLY certify the passport and get a ITIN for my spouse? Is having the 1040 tax ready before making the ITIN application mandatory?.
Kindly note in addition to ITIN application (Form W7) for your spouse (i.e Foreign National) with passport verification done by IRS Certified Acceptance Agent (CAA) and other paper work like (Letter from CAA, Form COA), the 1040 US tax return needs to be filed with Married Filing Jointly(MFJ) or Married Filing Separately(MFS) with both signatures (of US citizen/Resident Alien and foreign national spouse) on 1040 Page 1, this is mandatory for the ITIN application to go through successfully without any rejections.
Your CPA or yourself ( if you prepared the tax return via turbo tax or other self-prepared software) cannot electronically file US 1040/1040X tax return for the first year when ITIN is required for your spouse, so only for the first year when the ITIN application is in process, the tax return needs to be paper-filed along with ITIN application.
You have 2 options:
Option 1 – ONLY ITIN SERVICE FROM OUR TEAM
Your CPA can prepare the 1040 tax return, if self prepared via Turbo tax you can (generate a 1040 PDF with a random 9 digits number of software for example 123-45-6789 or 999-99-9999 for the ITIN applicant) and send them to you (Push your CPA team to prioritize the tax return), taxpayer and the spouse needs to sign on the 1040/1040X tax return original ink (electronic signature not acceptable by IRS), Our team can assist with ITIN application completion and help to mail 1040 tax return to the IRS along with ITIN application.
Option 2 – ITIN AND TAX RETURN SERVICE FROM OUR TEAM
If your CPA has not prepared the 1040/1040X tax return we can assist with the preparation ( additional fee for the US Federal and State tax return applies based on the complexity of work involved). The taxpayer and the spouse needs to sign on the 1040 tax return original ink (electronic signature not acceptable by IRS), Our team can assist with ITIN application completion and help to mail 1040/1040X tax return to the IRS along with ITIN application.
Let us know the best options that work good for you and we can assist you accordingly.
New Requirement For Dependents( Does not apply to spouse) Whose Passports Do Not Have A Date Of Entry Into The U.S.
The IRS will no longer accept passports that do not have a date of entry into the US as a stand-alone identification document for dependents, other than dependents of military members overseas. Affected applicants will now be required to submit either US medical records for dependents under age six, or US school records for dependents under age 18, along with the passport. Dependents aged 18 and over can submit a rental or bank statement or a utility bill listing the applicant’s name and US address, along with their passport.
US Bank Account opening process information [FAQ]
Non – US Resident Opening a U.S. Business Bank Account for an LLC
Make sure you have formed an LLC, your LLC is approved, and you have obtain an EIN before trying to open a U.S. bank account.
Foreigners (non-U.S. residents) can open a U.S. business bank account for their LLC.
You don’t have to be an American or a U.S. resident alien to open a business bank account in the U.S.
How to open a U.S. LLC business bank account?
We have 3 options for foreigners who want to open a U.S. bank account for their LLC.
- Visit the local branch of an international bank
You can open a U.S. business bank account for your LLC by international bank in your location. Some banks like HSBC, Wells Fargo, Citibank, Federal Credit Union banks provides this service.
- Appear in person in the U.S.
You can open a U.S. business bank account for your LLC by getting on a plane and flying to the U.S. You will need to open an LLC bank account in the same state where you formed your LLC. Its highly recommend to have the LLC formation done first via US based agents, every banks have a different documents requirement process so you need to check with appointments and document required details prior to booking ticket to USA.
- Open a TransferWise bank account
If you don’t want to fly to the US to open a bank account, you can open a TransferWise business account (called a “Borderless” account). You’ll get a US bank account number and US bank routing number.
You can receive US Dollars (USD) to your LLC bank account, exchange to your currency, and then withdrawal to your local bank account.
Many of our clients shared their experience opening a TransferWise account and get paid in US Dollars (USD) to your LLC has been a easier option. Then exchange to your currency and withdrawal to your local bank account.
Do I need an SSN or ITIN to open U.S LLC bank account?
No, you don’t need a Social Security Number (SSN)/ Taxpayer Identification Number (ITIN) to open a U.S. LLC bank account.
Documents needed to open U.S. LLC bank account
YOU MUST CALL THE BANK AHEAD OF TIME AND TAKE DETAILED NOTES.
As mentioned earlier, all banks work differently. You will need to call ahead of time and ask to speak with the branch manager and tell them you are interested in opening a business account for your LLC and let them know that you are a foreigner (non-US resident).
The following are common requirements for banks:
- LLC approval from state (stamped/approved Articles of Organization, Certificate of Organization, or Certificate of Formation)
- EIN Confirmation Letter
- Operating Agreement
- 2 forms of identification (like a foreign passport and foreign driver’s license)
- Proof of address (LLC approval, EIN Confirmation Letter, lease, phone bill, etc.)
Proof of address:
Make sure you call ahead of time about this. Some banks require 1 document to verify your U.S. address (located in the same state where you’re opening the bank account) and some banks require 2 documents to verify your U.S. address. Some banks accept certain documents (like a lease or phone bill) and some don’t. Make sure you get on a phone and fully understand what’s needed before you show up at the bank. It’s always a good idea to call and talk to a second person to verify the information you received from the first call, too, before you make the trip.
How about these banks which are often talked about on google search?
Silicon Valley Bank
Silicon Valley Bank (“SVB”) usually only works with technology startup companies that are located in California and have that have raised money through venture capital. Most businesses need to prepare a presentation and a business plan in order to open a bank account with SVB.
Stripe Atlas is an all-in-one solution for startup technology companies that plan to go public or raise venture capital. Stripe Atlas forms your company, gets your EIN, and opens a bank account.
However, the application fee is expensive (most other banks don’t have application fees) and this is only for startup companies who want to form a Corporation or LLC in Delaware.
US Citizen Green Card holder living outside of the USA [FAQ]
U.S.A Form 1040 Expatriate Tax Filing Deadlines for US Citizens, Greencard holders and Resident Alien
- April 15 – Tax payment deadline. After this date, interest will be assessed on any tax due.
- June 15 – Tax filing deadline (for the tax year 2018, the deadline is June 15, 2019). If you cannot file by then, an extension can be filed to extend the filing deadline to October 15. Penalties can be assessed after this date on any tax due.
U.S. Citizens & Green Card Holders must file a U.S. tax return and report worldwide income even if living outside the U.S. (unless you don’t meet the minimum filing requirements).
The gross earned income (i.e., Foreign Wages/Business Income) can be reduced or eliminated by claiming:
- Foreign earned income exclusion (for 2018, up to $104,100 per qualifying person (i.e., if you are married and both work abroad, you may be able to each exclude up to $104,100 of your earned income),
- Foreign housing exclusion (i.e., if renting)
- Foreign tax credit (i.e., Taxes paid to foreign country claimed as a credit on US 1040 tax return subject to maximum allowable limits)
The foreign earned income exclusion may be available if you meet either the:
- The foreign earned income exclusion may be available if you meet either the:
- Bona fide resident test-BFR (you’ve lived in a foreign country for over a year, made it your home, and (generally) pay taxes there. There are no specific time restrictions; for instance, it is possible to be away from your foreign residence for months and still meet the test), or
- Physical presence test-PPT (you were physically outside the U.S. for 330 days out of any 365 day period, and your tax home was abroad). See below.
- Note: You cannot claim a foreign tax credit or foreign earned income exclusion on the portion of your wages generated during business trips to the U.S. Any income earned while working in the U.S. is subject to U.S. tax. For some people, it is significantly more beneficial to claim the foreign tax credit and not claim the exclusion.
Foreign Bank and Financial Asset Reporting Requirements
- If you had, in all foreign accounts combined, over $10,000 at any time during 2018, you are required to file Form TDF 90.22-1. We can complete this form for you based on information you provide and have them electronically e-filed. Please note the filing deadline for the Foreign Bank and Financial Asset Reporting Form is 15th April 2019. If a valid extension is filed by 15th April 2019, you can get an extension until 15th October 2019.
- New starting tax year 2011: If the total value of your foreign financial assets exceeds the figures below, you are required to file Form 8938 with your tax return. There is some overlap between the foreign bank report (i.e. FBAR or Form TD F 90-22.1) and Form 8938 as they may cover the same foreign financial accounts. That includes reporting of the depository, custodial, or other financial accounts maintained by a foreign financial institution (such as a bank or brokerage company). On Form 8938, you must also include any assets not held in an account maintained by a foreign financial institution including (1) Shares of a foreign company held directly and not through a broker, (2) interests in foreign entities, (3) loans to foreign persons or entities, (4) any financial instrument or contract held for investment that has a foreign issuer or counterparty. For any income generated from your foreign financial assets, Form 8938 also requires a summary of income reported on the tax return along with Form and line numbers. See also the instructions for Form 8938.
Living in the United States:
- Single or married filing separately
- Married filing jointly
- $50,000 + on 12/31/2018
- $100,000 + on 12/31/2018
- $75,000 + at any time during the year
- $150,000 + at any time during the year
Total Value of Foreign Financial Assets:
- Thresholds for Filing Form 8938
Living outside the United States:
- Single or married filing separately
- Married filing jointly
- $200,000 + on 12/31/2018
- $400,000 + on 12/31/2018
- $300,000 + at any time during the year
- $600,000 + at any time during the year
US Tax Guide for Foreign Nationals [FAQ] [FAQ]
This guide is dedicated to helping you comply with US tax laws if you are a foreign national receiving income from USA (LLC member, Foreign partner, Amazon Income, Beneficiary of 401K pension, US Gambling winnings, Foreign National providing independent personal service on a short term in USA, Artist receiving Royalty income/Rental income or investing in the US (Interest, dividend, capital gain, Sale of US rental property).
US Tax reporting are complex and seeking professional assistance would help you to have the peace of mind in ensuring that you have take the right measure to ensure the IRS reporting obligations are done correctly and all the compliance filing requirements are done.
Who Needs to File a US Tax Return?
If you are a non-resident alien doing business or working in the United States or receiving income from US based connection, then you are required to file a tax return. To “file a tax return” means to send your completed and signed tax return to the Internal Revenue Service (IRS), either through the mail or electronically. If you work or invest in a state that has an income tax, a state tax return will also be required.
In prior years, if you were a non-resident alien whose only US trade or business was the performance of personal services, and you received wages less than the exemption amount ($4,050 in 2017), you were exempt from the filing requirement. However, for years after 2017, the personal exemption has been repealed. Therefore, there is no longer a minimum income exception for wage earners.
Form 8843 is required if you are an “exempt individual.” This does not mean you are exempt from paying US taxes, but that you are exempt from the “substantial presence test” for determining residency status.
What are you missing by not filing your US tax return?
Most foreigners who are required to file, either do not file a return or file incorrectly. However, and it has also been shown that there is a massive over-payment of US taxes by foreign nationals who do not file, rather than underpayment.
Just because your employer has withheld tax from your wages (Form W2)/your US corporate has withheld 30% flat tax on the Form 1042/1099R/8805/8288A it does not mean that you have paid the proper amount. You could have a sizable refund due!
If you do not have any tax liability, you might be wondering what will happen if you do not file a return. Well, the IRS will not impose penalties if no tax is due. However, the terms of your visa require you to comply with all laws of the United States, including the requirement to file an income tax return. You might be required to show proof that you filed if you wish to change your visa status, or become a permanent resident, or regain entry into the United States once you have left. Don’t risk your visa status by failing to comply with this requirement.
When and Where to File
If you receive wages subject to US tax withholding, the due date for filing your tax return is generally April 15 of the following year. If April 15 falls on a weekend, the due date is the next work day that is not a holiday. If you did not receive taxable wages during the year, the due date for filing your tax return is June 15 of the following year, with the same deferral for weekends. Your Form 1040NR or Form 1040NR-EZ (including Form 8843) must be sent to the Department of the Treasury, Internal Revenue Service, Austin TX 73301,U.S.A.Please ensure you have postal proof of mailing for your file records to prove the tax return was sent to IRS on time.
List of all the forms and publication that’s helpful for the foreign national tax return preparation
- Form 1040NR and Instructions or Form 1040NR-EZ and Instructions.
- Form 8843
- Form 843 (for improperly withheld social security tax)
- Publication 519
- Publication 901
- Publication 597 (if you are from Canada)
Why Residency Status Is Important
The first thing you must know in order to file your tax return is whether you are a resident or non-resident for US tax purposes. If you find that you are both a resident and non-resident in the same year, you are a dual status alien for which special rules apply. The designation of resident for tax purposes is completely separate from your immigration status. You might qualify as a resident for tax purposes while remaining a non-immigrant alien for immigration purposes.
If you are a non-resident, you must file a special tax form (Form 1040NR), pay tax only on US source income, are subject to special rates, and might qualify for treaty exemptions. Conversely, if you are a resident for US tax purposes, you are generally under the same rules and file the same forms as a US citizen. That means you report your worldwide income rather than just US source income.
Determining Your Residency Status
The Green Card Test
The Substantial Presence Test and Definition of Exempt Individual
To meet the substantial presence test, you must be physically present in the United States during a period (in which you are not an A, F, G, J, M or Q visa holder) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the previous two years, counting:
- all of the days you were present in the current year,
- 1/3 of the days you were present in the first preceding year, and
- 1/6 of the days you were present in the second preceding year.
Closer Connection Exception
Even if you meet the substantial presence test, if you are present in the United States for less than 183 days during the calendar year and can establish a closer connection to your home country, you are treated as not meeting the substantial presence test. See IRC Section 7701(b)(3)(B). However, if you have applied for a green card, this exception won’t work. See IRC Section 7701(b)(3)(C). To claim the closer connection exception, you should include Form 8840 with Form 1040nr.
An exempt individual is someone whose days in the United States are not counted toward the substantial presence test, not someone who is exempt from tax. If you are an exempt individual, you are a nonresident alien until you no longer meet the definition of exempt individual, you change your visa status or you receive permanent residency status. You are generally in this category if you are:
- An individual temporarily present in the United States as a foreign government related individual (A or G visa holder).
- A teacher or trainee temporarily present in the United States under a J or Q visa, who substantially complies with the requirements of the visa.
- A student temporarily present in the United States under an F, J, M or Q visa, who substantially complies with the requirements of the visa.
- A professional athlete temporarily in the United States to compete in a charitable sports event.
Teacher or trainee.If you are a teacher or trainee temporarily in the United States in J or Q status, and you have been present in the United States during no more than two calendar years out of the last six calendar years, you are an exempt individual. Any day spent in the US during a calendar year counts as a full calendar year. For example, let’s say you entered the US on December 28, 2016 as a trainee on a J visa, and stayed in the US continuously through 2018. Your days in this country are exempt from the substantial presence test for 2016 and 2017, but they all count in 2018. That means you were a nonresident alien in 2016 and 2017. But if you were in the US for at least 183 days in 2018, you will pass the substantial presence test in 2018. If you remain in the US as a J visa holder, you will again be an exempt individual in 2023.
Exception: If all of your compensation during the six year period is from a foreign employer, the two year exemption period is extended to four years.
Student.If you are a student temporarily in the United States on an F, J, M or Q visa, and you have been present in the United States during no more than five calendar years, you are an exempt individual. For example, let’s say you entered the U. S. on June 4, 2010 as an F-1 student visa holder, and have remained here until 2015. You are a nonresident alien for 2010, 2011, 2012, 2013 and 2014. If you are in the US for at least 183 days in 2015, you will pass the substantial presence test in 2015.
Members of the family.If you are an exempt individual, members of your immediate family who are with you in the United States on visas derived from your visa (J-2, F-2, etc.) are also exempt individuals.
If you are employed, make sure your employer withholds taxes from your wages based on your nonresident alien status. That usually means taxes should be withheld allowing for no standard deduction. If the employer does not adequately withhold, you will end up owing the balance when your tax return is filed.
A dual-status alien is both a nonresident alien and a resident alien in the same year. That means your tax return becomes more complicated. Pub 519 explains how to figure the tax in Chapter Six. Here are the most common circumstances of dual status:
- When you enter the US and receive permanent residency status (receive a Green Card) during the year of arrival
- When you enter the US and pass the substantial presence test in the year of arrival
- When you enter the US and do not pass the substantial presence test, but qualify for and make the First Year Choice election (see below)
- When you hold a J, F, M, or Q visa the first part of the year and receive permanent residency status during the year
- When you hold a J, F, M or Q visa during part of the year, but later change to an H visa or other status eligible to use the substantial presence test, and pass the test
- When you leave the United States permanently during a year in which you qualify as a tax resident, but only if certain conditions apply. (See Last Year of Residency in Chapter One of publication 519)
Residency Status Examples
Angelina, from United Kingdom, arrived in the US as an H1b visa holder on April 15, 2018. Angelina remained in the US, working for a US employer, for the entire remaining calendar year. Angelina was not present in the US in 2016 or 2017. Angelina passed the substantial presence test in 2018, since she was present in the US for 260 days in 2018. Angelina’s residency starting date is April 15, the date of her arrival. She is therefore a dual status resident for 2018 and must file a dual status return. Angelina should report only US source income (if any) for the portion of the year prior to April 15, and her worldwide income for the portion of the year after April 14.
Assume that Angelina in Example I arrived September 15, rather than April 15. Also assume that Angelina was present in the US in 2016 for 120 days and in 2017 for 150 days. Angelina did not pass the substantial presence test in 2018, because her total days computed for 2018 are 177 [(120 x 1/6) + (150 x 1/3) + 107]. Angelina should therefore file a nonresident tax return.
Assume the same facts as in Example II, except Angelina spent 180 days in the US in 2017 rather than 150 days. Mary passes the substantial presence test in 2018, because her total days computed for the test are 187 [(120 x 1/6) + (180 x 1/3) + 107]. Mary must file a dual status tax return, unless she maintains a closer connection to UNITED KINGDOM and qualifies under the closer connection exception provided for in IRC Section 7701(b)(3)(C). In that case she is deemed to be a nonresident and should file a nonresident return showing the closer connection exception on Form 8840.
The First Year Choice
If you arrive in the US too late during the year to pass the substantial presence test, or if you were an exempt individual during the first part of the year, then changed visas later in the year, you are classified as a nonresident alien for the entire calendar year unless you make a special election. This generally means that you cannot claim the spousal and dependency exemptions for your spouse or children. However, there is a special election [IRC Sec. 7701(b)(4)] to be treated as a resident alien from your date of arrival if you satisfy the following tests:
- You are not otherwise a resident alien for the year,
- You were not a resident alien at any time in the immediately preceding year,
- You are a resident alien under the substantial presence test for the immediately following year,
- You are present in the United States during the election year for a period of 31 consecutive days,
- Your days of US presence are 75% or more of the total days between the beginning of the earliest 31 consecutive day period and December 31.
If you make this election, you will be a dual-status alien and you can claim an exemption for your spouse for years prior to 2018. (Beginning in 2018, personal and dependency exemptions are no longer allowed.) Furthermore, the regulations include an extremely liberal rule that permits an alien who makes this election to make the election as well on behalf of dependent children who themselves satisfy the test [Reg. Sec. 301.7701(b)-4(c)(3)(v)]. You must, however, have ITINs for your spouse and children to claim them. Also, to make the election you must pass the substantial presence test in the year following the election year, which means you will need to file an automatic extension for your current year return so you can file after you pass the test for the following year.
Effectively Connected Income
Income that is effectively connected with a US trade or business is reported on the first page of Form 1040NR or Form 1040NR-EZ. It is subject to tax at the same graduated rates that apply to residents, and can be offset by allowable deductions and exemptions. It can also be partially or fully excluded from your income by treaty provisions between the United States and your home country. Refer Tax Treaties from IRS guide If you are in the United States as an F, J, M, or Q visa holder, you are considered engaged in business in the United States. That means any US source income that is taxable to you in connection with your scholarly activities, such as wages or scholarship and fellowship grants, is included in this category. Also, any other income from personal services performed in the United States is generally considered effectively connected income.
Not Effectively Connected Income
If your US source income is not effectively connected with a US trade or business, it is reported on Schedule NEC on page four of Form 1040NR, (you cannot use Form 1040NR-EZ if you have this type of income). It is generally taxed at a flat 30% rate and cannot be reduced by deductions and exemptions. Treaty provisions between your home country and the United States might provide for a lower rate of tax. Income that is typical of this category includes corporate interest, dividends, capital gains in excess of capital losses, prizes, awards and certain gambling winnings. If you are a nonresident alien, capital gains on stocks, securities and other personal property are taxable to you only if you are present in the United States for at least 183 days during the tax year. A nonresident alien can be present in the US more than 183 days if they are an “exempt individual.” Bank interest received by nonresident aliens is statutorily excluded from taxation.
Reporting interest, dividend and capital gain income is a little confusing. There are spaces provided to show it on page 1 of Form 1040NR, and in Schedule NEC on page 4 as income not effectively connected with a US trade or business. Reporting it on page 1 means it is effectively connected to a US trade or business. To be effectively connected, the investment income must have a direct economic relationship to your United States trade or business. For example, investment income reported on a K-1 of a partnership you have an interest in could be classified as effectively connected income. If you are a student or scholar with investment income, your trade or business in the United States is studying, teaching, or doing research. Therefore, it is very unlikely you have effectively connected investment income.
The tax rate on income that is not effectively connected with a US trade or business is a flat 30 percent, unless a treaty provision between the United States and your home country reduces the rate. Show the income on page 4 and any US tax withheld on the income, and compute the tax. The computed tax and related withholding is shown on page 2 of Form 1040NR.
Exempt Interest. Interest paid on deposits with banks, on accounts or deposits with certain financial institutions, or on certain amounts held by insurance companies, are exempt from US tax even though they are US source income. If you file Form 1040NR, do not report this interest anywhere on the return.
Capital Gains. You do not pay tax on capital gains from the sale of stock or securities if you are a nonresident who has not been present in the United States for 183 days or more during the tax year, unless it is effectively connected income. In that case, tax applies at the lower capital gains rates for effectively connected income. However, if you are an “exempt individual” who resides in the United States longer than 183 days, you do pay tax on capital gains at the 30 percent rate, unless a lower tax treaty rate applies to you.
Income from Rental Real Estate
You are given a choice regarding income from real property in the US. This income is generally considered income that is not effectively connected with a US trade or business, and is taxed at a flat rate of 30 percent of gross income. A nonresident individual is not required to file a US return if tax of 30 percent is withheld by the payor (usually the property manager). Alternatively, you can file a tax return and include an election (under IRC Section 871(d)) to have the net income (after expenses) taxed as income effectively connected with a trade or business in the US. This is generally a much better way to go for nonresident aliens. Any net income is taxed at graduated rates beginning at 10 percent. Under Section 897 of the Code, gain on the disposition of real property by a nonresident alien is always treated as income effectively connected with a US trade or business, and is therefore taxable, but at the generous capital gains rates.
UK Residency Test Rule for Tax Filing [FAQ]
The Automatic Overseas Test
You would normally be considered a non-UK resident if you meet any one of the following elements of the Automatic Overseas Test:
- You were considered as a UK resident in one or more of the previous three tax years, but you spend fewer than 16 days in the UK in the current tax year
- You spend fewer than 46 days in the UK in the tax year AND you were non-UK resident in the preceding three tax years
- You work full time outside the UK and spend fewer than 91 days in the UK and you work fewer than 31 days in the UK for three hours or less in any given day.
In terms of calculating the amount of time working in/out of the UK, you should always seek advice. There are a number of intricate calculations and considerations which will be taken into consideration which will affect the amount of time you have officially spent in the UK.
The Automatic Residence Test
If the Automatic Overseas Test is inconclusive, or you fail each of the components, the next step is to consider the Automatic Residence Test. If you meet any of these requirements you will be considered a UK Resident. Once again, there are intricate calculations involved, so you should always seek advice before making any decisions about your residence status.
Firstly, if you spend more than 183 days in the UK in the tax year.
Secondly, if you have a home in the UK and you spend a period of 91 consecutive days there, including 30 inside the tax year. You will also be considered a UK resident if you have no home overseas or you spend no more than the permitted amount of time there.
Finally, if you work in the UK for 365 with no significant break. However, there are a number of calculations and requirements to fulfil, so please seek advice if you are concerned
The Sufficient Ties Test
If, after reviewing the previous tests, you are still unsure about your residence status, you need to consider the sufficient ties test.
The Sufficient Ties Test essentially looks at whether you have ties which would deem you to be a resident in the UK. Ties would include:
- Family members in the UK (for example a spouse or children)
- Accommodation, that is a place to stay which is available to you for a continuous period of 91 days (thus excluding hotels)
- 40 working days of 3+ hours per day or more in the UK
- More than 90 days spent in the UK in at least one of the previous two tax years
- You have spent more days in the UK than in any other country during the tax year
Understanding how many ties which are required to determine your residence status will depend on the number of days you spent in the UK during the tax year.
The following table simplifies this, however you should seek advice for an accurate assessment.
Days spent in the UK in the tax year under consideration
UK ties needed to be considered a UK resident
At least four
At least three
At least two
At least one
DCNI DPNI Scheme for Foreign Embassy Staff [FAQ]
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