Two recurring themes have dominated the news cycle over the past few years: immigration and taxes. While these may seem like entirely separate issues at first glance, immigrants do pay federal income taxes — and face a variety of unique challenges in the process, including dealing with language barriers and learning to file for the first time.
To help make filing your taxes as an immigrant a little easier, here’s an overview of who needs to file, how to file for the first time and where you can turn for help.
Who files taxes?
Citizens aren’t the only ones who pay taxes in the U.S. Immigrants who are authorized to work in this country are required to pay the same federal and state income taxes that citizens do, and undocumented immigrants pay billions of dollars in taxes each year — often for public benefit programs that they are unable to use.
Filing requirements depend on whether you are considered a nonresident alien or a resident alien.
A resident alien must meet one of two tests:
- Green card test. The U.S. Citizenship and Immigration Services issued you an alien registration card, also known as a “green card,” which allows you to permanently live in the U.S. as an immigrant.
- Substantial presence test. You must be physically present in the U.S. for at least:
- 31 days during the current year, and
- 183 days during the three-year period that includes the current year and the two years immediately before that. (You can read more about how days of presence are determined here.)
Resident aliens follow the same filing requirements as U.S. citizens.
If you are not a U.S. citizen and don’t meet either of the tests to be considered a resident alien, you are considered a nonresident alien.
As a nonresident alien, you must file a tax return if you own a business in the U.S. or have U.S. income and did not have enough tax withheld by your employer. You may also want to file an income tax return to receive a refund of tax withheld.
What’s a W-4?
If you work in the U.S., your employer should ask you to complete Form W-4, which is used to determine the correct amount of tax to withhold from your pay.
Form W-4 includes worksheets to help you determine how many “allowances” you should claim. Each allowance reduces the amount held from your paycheck. You get one allowance for yourself, one for your spouse, and one for each dependent you claim on your tax return.
You can complete a new Form W-4 at any time, and it’s a good idea to submit a new one to your employer anytime your tax situation changes, such as if you get married or divorced or have a new baby. Adjusting your withholding can help prevent having too much or too little tax withheld.
Rather than relying on the worksheets included with Form W-4, you may want to use the IRS’s Withholding Calculator.
How to pay U.S. taxes
In some countries, the government withholds tax from your paycheck, and that’s the end of your tax filing requirements. In the U.S., it’s more complicated. Here’s an overview of what you’ll need to file a tax return.
SSN or ITIN
To pay taxes in the U.S., you will either need a Social Security number (SSN) or an individual taxpayer identification number (ITIN).
Noncitizens authorized to work in the U.S. by the Department of Homeland Security can apply for a Social Security number in their home country before coming to the U.S. or by visiting a Social Security office in person. You will need to complete Form SS-5, Application for a Social Security Card, and provide documentation to prove your identity, work-authorized immigration status and age. You can learn more about the acceptable documentation here.
If you are not eligible for an SSN, you can apply for an ITIN by filling out Form W-7, Application for IRS Individual Taxpayer Identification Number and submitting it to the IRS along with documentation proving your identity and foreign status. The Instructions for Form W-7 include a list of acceptable documents and instructions for submitting your application.
Which tax forms to file
The tax forms you’ll use to file your tax return depend on whether you are a resident alien or a nonresident alien.
Resident aliens use the same tax form as citizens: Form 1040, U.S. Individual Income Tax Return. Generally, Form 1040 is due on April 15 of the following year. However, if you are living and working outside of the U.S. on April 15, you are given an automatic extension to June 15. You can request a longer extension, until Oct. 15, by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
Nonresident aliens file using Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Form 1040-NR is also due on April 15 of the following year, but taxpayers who are not living and working in the U.S. on that date have until June 15 to file. You can request an extension to October 15 by submitting Form 4868 by the due date of your return.
Reporting income earned outside the US
Many resident aliens and nonresident aliens continue to receive income from outside of the U.S. even after they begin working in the country. Resident aliens are required to report income from all sources within and outside of the U.S. on their tax returns, whether they are living in the U.S. or abroad.
However, you may qualify to exclude a portion of your foreign earnings from your taxable income — the amount you can exclude changes each year. You can determine your eligibility and the exclusion amount using Form 2555, Foreign Earned Income. You can also use the IRS’s Interactive Tax Assistant Tool to help determine whether the income you earned in a foreign country can be excluded.
What to do if you’re undocumented?
According to the Pew Research Center, there were roughly 10.5 million undocumented immigrants in the U.S in 2017, and 7.6 million of them are a part of the U.S. workforce.
Whether undocumented immigrants work legally under Deferred Action for Childhood Arrivals (DACA) protections or work illegally with falsified or nonexistent documentation, they are required to pay taxes on any income earned in the U.S.
Many undocumented immigrants face barriers to complying with U.S. tax laws due to language barriers, difficulty understanding complex tax laws or fears that the IRS will pass their information along to immigration enforcement.
Later, this article will cover resources where immigrants can find help with tax filing. As for immigration enforcement fears, you generally do not have to fear that the IRS will share your application for an ITIN or tax information with immigration enforcement officials. The IRS is not allowed to release taxpayer information to other government agencies, except for providing information to the Treasury Department for tax compliance investigations or under a court order related to a non-tax criminal investigation.
Benefits of paying taxes
Filing a tax return and paying taxes to the U.S. does not entitle nonresident aliens or undocumented workers to claim Social Security benefits, but there are other benefits to filing tax returns. According to the National Immigration Law Center, paying taxes:
- Demonstrates compliance with federal tax laws
- Gives immigrants who want to legalize their immigration status and become a citizen an opportunity to prove they have “good moral character”
- Document work history and physical presence in the U.S.
- Claim certain tax benefits, such as the Child Tax Credit
- Claim insurance premium tax credits for children who are U.S. citizens
Where to find help
The IRS’s Volunteer Income Tax Assistance (VITA) program helps taxpayers who cannot afford traditional tax preparation service, need translation assistance or need help applying for an ITIN. The IRS trains and certifies volunteers to provide free basic tax return assistance to individuals.
You can locate a VITA site by visiting http://irs.treasury.gov/freetaxprep/ and entering your ZIP code. Before visiting a VITA site, you may want to review Publication 3676-B (available in English and Spanish) to verify the services provided by VITA and check out the IRS’s What to Bring page to ensure you have all of the required documents and information volunteers will need to help prepare your return and apply for an ITIN, if necessary.
If you prefer to handle tax filing on your own, check out our recommendations for tax filing software.