Your First U.S. Tax Return After Moving to the United States
If you recently moved to the United States, your first U.S. tax return may involve more than the wages from your new job. Your arrival date, earlier visits, immigration status, and financial ties to another country can all affect what you must report.
Whether you came to work, study, join family, or establish a permanent home, start by determining your U.S. tax residency. That decision helps determine which return to file and which income belongs on it.
Start With Your Tax Residency
U.S. tax residency and immigration status follow different rules. You can become a U.S. tax resident before you become a citizen or receive a green card. The IRS uses the terms “resident alien” and “nonresident alien” to describe these tax categories.
A person who is not a U.S. citizen generally becomes a tax resident by meeting the green card test or the substantial presence test. The substantial presence test normally requires at least 31 days in the United States during the current year and 183 days under a three-year calculation. That calculation counts all qualifying days this year, one-third from last year, and one-sixth from two years ago.
Some days do not count. Certain students, teachers, and exchange visitors can qualify for exceptions, subject to specific conditions and time limits. Tax treaties or a closer connection exception may also affect the result. Keep a record of your U.S. arrival and departure dates, including visits before your move.
Your First Year May Have Two Tax Periods
You may be a nonresident for one part of the year and a resident for another. This is called a dual-status tax year. Your tax residency starting date determines how the two periods are divided.
For example, someone who moves to the United States during the year and becomes a tax resident may need different treatment for income received before and after residency begins. Do not assume that either the whole year or only the months after your move automatically belong on a standard return.
Residents generally file Form 1040, while nonresidents generally file Form 1040-NR. A dual-status return has special preparation requirements. Certain first-year and married-couple elections may change the treatment, so review the alternatives before filing.
Look Beyond Your US Paycheck
During your U.S. resident period, you generally must report worldwide income. That can include foreign bank interest, dividends, rental income, pensions, and business earnings. Leaving money in another country does not by itself remove it from U.S. taxation.
Nonresidents face U.S. tax on U.S. source income and income effectively connected with a U.S. trade or business, with limited exceptions. If you work remotely while physically in the United States, a foreign employer or foreign bank deposit does not automatically make the wages foreign source income.
Income and expenses reported on a U.S. return must be expressed in U.S. dollars. Give your preparer the original statements and currencies so the appropriate conversions can be made.
Foreign Taxes And Treaties May Help
If another country also taxes income reported on your U.S. return, a foreign tax credit may reduce double taxation. Eligibility and limits depend on the income and the foreign tax involved.
A tax treaty may provide additional relief or special treatment. Benefits depend on the particular treaty and your circumstances. Keep copies of foreign tax returns and payment records; paying tax abroad does not automatically eliminate a U.S. filing obligation.
Foreign Accounts Can Require Separate Reports
An income tax return and a foreign-account report serve different purposes. A U.S. person with a financial interest in, or signature authority over, foreign financial accounts generally must file an FBAR if their combined value exceeds $10,000 at any time during the calendar year. The threshold applies across the accounts together.
Form 8938 may also be required when specified foreign financial assets exceed the applicable threshold. Filing one report does not replace the other. Foreign investments, retirement arrangements, trusts, or business interests can require additional review and forms.
Remember to consider accounts and assets you kept abroad, even if you received no distributions or transferred no money to the United States.
Get The Right Tax Identification Number
Use your Social Security number if you have one. If you need a federal tax identification number and are not eligible for a Social Security number, you may qualify for an Individual Taxpayer Identification Number, or ITIN.
An ITIN application generally uses Form W-7 with a tax return and supporting identity documents, unless an exception applies. An ITIN is for tax purposes; it does not provide permission to work or change immigration status. Address identification requirements early, including those for a spouse or dependent.
Review Family Filing Choices Carefully
Marriage, a spouse living abroad, and children who moved with you can affect filing status and tax benefits. Eligibility depends on the particular rules for residency, relationships, support, and identification numbers.
Some couples can elect to treat a nonresident spouse as a U.S. resident and file jointly. That choice generally brings both spouses’ worldwide income into the U.S. income tax calculation for the entire year. Compare the consequences before making an election solely to obtain a deduction or credit.
Check Deadlines And State Requirements
For most calendar-year resident taxpayers, the federal return is due April 15 of the following year, adjusted for weekends and holidays. Nonresident filing deadlines can differ. An extension gives more time to file, but generally does not extend the time to pay.
Your state may also require a return and apply its own residency rules. Moving between states or working in a different state from where you live can create additional filing obligations.
Prepare Before Filing Season
Gather your travel dates, immigration documents, tax identification numbers, employer tax forms, foreign income statements, foreign tax returns, and financial-account records. Include information about your spouse, dependents, and any freelance or business activity.
GurelCPA can help you determine your filing status, review income and reporting requirements, and prepare your first U.S. tax return. Starting early gives you time to obtain missing records and consider elections before the deadline.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.