With all of the news regarding immigration laws these days, you may have numerous questions about your status here in the U.S. One of those questions may be whether the IRS expects you to pay income taxes.
If you have a substantial presence in this country, the IRS will expect you to pay income taxes on any monies you earn here in the U.S. as well as anywhere else in the world. If you are a new permanent resident, gaining a basic understanding of how the taxation system works in this country might prove useful.
First, do you pass the “substantial presence” test?
Before you start filling out income tax returns, you need to make sure the law requires you to pay taxes here. In order to pass this test, you must be physically present in this country as follows:
- For a minimum of 31 days a year
- For a minimum of 183 days within the last three years
- For a minimum of 183 days for the two years prior to that
If you meet these requirements, then you are responsible for paying income taxes here in the U.S.
Second, you may need to pay taxes on worldwide income
If you qualify as a permanent resident with a substantial presence in this country, you pay taxes on all income regardless of what country you earned it in. For example, if you have an investment account, rental property or some other income generating venture in your country of origin, you must report it to the IRS. If you are not considered a permanent resident, you only pay taxes on the money you earn in this country.
Third, you must figure out what tax you may owe
The tax system in this country allows for certain deductions, exemptions and credits in order to lower your taxable income. You are responsible for determining whether you qualify for any of these, along with how much you may owe in taxes when you report all your income. Even many U.S. citizens have trouble doing this correctly without assistance, especially in complicated tax circumstances such as yours if you have income from more than one country.
The formulas can be quite complex. Even if you do have income from another country, it may not be subject to taxation by the IRS. Your country of origin may be one that has an agreement with the U.S. when it comes to taxes. Other tax laws could apply to your situation depending on whether you wish to remain in this country or surrender your green card.
Fourth, help is available to you
If you fail to get your taxes right, you could end up facing an audit or other inquiries from the IRS that could result in the payment of additional taxes, interest and penalties. In some cases, the IRS may accuse you of tax fraud, tax evasion or some other crime.
It would probably be worthwhile for you to sit down with an experienced tax law attorney who can help you determine whether you file as a permanent resident or non-resident, whether you will owe taxes on income from outside the U.S., and other factors that will affect your taxes.