Everything you need to know about US tax as an immigrant

20 Feb 2023 - Category: Blog /
tax us

Are you thinking about moving to the United States? Maybe, you’ve already arrived but now you’re searching for a job. If this is the case, then you may make your life a little easier by learning how US taxes work for immigrants today.

Taxes are often quite complicated but it is essential that you understand the basics if you want to live and work in the United States.

In this blog we’ll be exploring a number of topics to help immigrants learn all they need to know about the UX tax system, including:

Who has to pay tax in the US?

U.S. citizens are not the only people that have to pay taxes in the U.S. Immigrants that are authorised to work in the United States will also need to pay the same state and federal income taxes as citizens. This may be news to some immigrants so it is important that you learn as much as possible about taxes and the taxes that apply to you.

The Internal Revenue Service (IRS) is the government organisation in charge of the taxation process. The IRS defines residency differently to how it is defined in U.S. immigration law which means that, for tax purposes, workers can be categorised as resident or nonresident aliens.

Let’s take a look at the difference between the two categories of residency when it comes to taxes:

  • Resident Aliens

If you are an immigrant to the U.S. the IRS will consider you a resident alien, for tax purposes, if you pass one of these tests:

  • Substantial presence test: You will pass this test if you have been physically present in the US for at least 31 days during this current year and 183 days during the three-year period that includes the current and the last two years.
  • Green card test: You will pass this test if you have received a green card or alien registration card, from the US Citizenship and Immigration Service, that allows you to permanently reside in the U.S. as an immigrant

If you qualify as a resident alien then you will have the same filing requirements as a United States citizen.

  • Non-Resident Aliens

For non-resident aliens the process is slightly different. If you are not a U.S. citizen and you also do not qualify for these resident alien tests you are only required to file a tax return if you own a business in the US or if you have a US income that wasn’t taxed enough by your employer.

Most working adult immigrants will qualify as a resident alien, so you won’t have to worry too much about non-resident alien requirements.

W-4 forms

Your employer may have asked you to complete a W-4 form. A W-4 form is used to work out the amount of money that will be withheld in taxes from your income. This form will include worksheets that help you understand how many “allowances” to claim.

To learn more about how you can file your taxes visit the official page of the U.S. government.

As you can see, the requirements around taxes are quite specific and can seem a little complicated. Now you have an idea of whether you need to file taxes, let’s take a look at the next stage and see how you can pay your taxes.

Do undocumented immigrants pay taxes?

Undocumented immigrants, who are not authorised to work in the United States, can still pay taxes on income earned through various means, such as self-employment income or income earned from a side job.

To pay taxes, undocumented immigrants can obtain an Individual Taxpayer Identification Number (ITIN) from the Internal Revenue Service (IRS). The ITIN is a tax processing number that can be used instead of a Social Security number on federal tax forms.

It's important to note that paying taxes does not provide a path to citizenship or legal status, and the IRS does not share taxpayer information with immigration authorities. However, failure to pay taxes or file tax returns can result in penalties and interest charges, and may also have negative consequences in any future immigration proceedings.

When are Taxes Due this year? 

The deadline for filing your federal income tax return for the 2022 tax year is April 18, 2023. However, if April 15 falls on a weekend or holiday, the tax deadline may be extended to the next business day. So, it’s essential to check the calendar to confirm the exact due date.

If you need more time to file your federal income tax return, you can request an extension by filing Form 4868. This form will give you an additional six months to file your tax return, but keep in mind that it only extends the time to file, not the time to pay any taxes owed. Therefore, if you expect to owe taxes, you should estimate the amount and pay it by the original tax deadline to avoid interest and penalties.

How do you file and pay your taxes in the United States?

You will only be able to file and pay taxes in the U.S. if you have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). If you are allowed to work in the US then you will be eligible to apply for a SSN before you even arrive in the US.

You can also visit your local Social Security office and fill out Form SS-5. This is the ‘Application for Social Security Card’. When you complete this form you will need to provide identification documents and evidence that you are authorised to work in the US.

If you are not eligible for a SSN then you can get an ITIN instead. To receive an ITIN you will need to submit Form W-7. You can submit this to the IRS along with documents that show your identity and that you are an immigrant.

The forms you need to file:

  • If you are a Green card holder…you can use the Form 1040to file your taxes. This is the same form that U.S. citizens use. Usually this form is due on April 15 each year.
  • If you are on a temporary visa…you can use the Form 1040-NR. Usually this form is due on April 15 each year.

Upon filing your taxes you will receive guidance on how much tax you need to pay and when you need to pay that amount.

How do you get help to file your taxes?

Hopefully, you now have a better idea of how the tax system works for immigrants in the US. Nevertheless, it can still be a tricky process when the day comes to actually file your taxes. But don’t worry, because there are places to get extra help.

For example, the IRA has aVolunteer Income Tax Assistance (VITA) program that is designed to help taxpayers who cannot afford tax preparation. They can also help people in need of a translator or those who have any further questions about applying for an ITN.

The best way to access a VITA site is by going to the IRS Free Tax Prep site and entering your ZIP code. Through these free online resources anyone can learn how to file and pay their taxes. Alternatively, you can reach out to a qualified tax professional and receive some in-depth expert advice. They’ll be able to help you through the process and ensure that they are receiving the right deductions.

Best tax preparation software and websites:

  1. TurboTax: One of the most popular tax software programs, TurboTax offers step-by-step guidance and various options for filing federal and state taxes.
  2. H&R Block: Offers tax preparation services through their software or in-person at one of their many locations. Their software is user-friendly and offers guidance and support throughout the filing process.
  3. TaxAct: It’s another tax preparation software that offers a user-friendly interface and various filing options.
  4. FreeTaxUSA: As the name suggests, FreeTaxUSA offers free federal tax filing and a low cost for state tax filing. Their software is easy to use and includes a variety of tax forms.
  5. IRS Free File: The Internal Revenue Service (IRS) offers a Free File program, which allows eligible taxpayers to use free tax preparation software from various companies.
  6. Credit Karma Tax: It is a free tax preparation software that offers federal and state tax filing services.
  7. TaxSlayer:  Offers a variety of tax preparation software options, including a free version and a deluxe version for more complicated tax situations.

It's important to note that the ease of doing your taxes may depend on the complexity of your individual tax situation, so it's always a good idea to do your research and choose a tax preparation software or service that best suits your needs.

How to send money home

When you've figured out how to do your taxes in the U.S. you may want to send money home to your family or friends. This is where Small World can help.

Small World is an international money transfer service helping millions transfer funds to their loved ones around the world everyday. We offer a number of safe, quick and easy transfer services including bank deposit, mobile wallet, home delivery, cash card reload, cash pickup and mobile top-up.

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