Tax consequences on one’s income are bound to arise regardless of the way a person has immigrated to the US- – through investment, employment, or family relationships. This article will explore some of the common tax issues faced by noncitizens , whether here temporarily or permanently
Taxes from Employment
As a threshold matter, only those with employment authorization from the Department of Homeland Security can work legally in the United States. Legal permanent residents (green card holders) are free to work for any employer, or even for multiple employers, either full time or part time. However, foreign nationals on nonimmigrant visas (J-1, H1-B, etc.) have to f first obtaining employment authorization and must ensure that they work within the limits of their nonimmigrant visas.
IRS vs. DHS
The IRS has its own classification system for tax purposes. Although the immigration system makes the distinction between immigrants and nonimmigrant, the IRS makes the distinction between resident and nonresident aliens. The IRS has its own way of calculating who is considered a resident versus a nonresident alien, and it has the most implications for those who are on nonimmigrant visas for extended periods of time or for those who derive income from both foreign and domestic sources.
Furthermore, a resident alien (i.e. most if not all green card holders) is taxed at a graduated or scaled rate on all income from both domestic and international sources just like a United States citizen. A nonresident alien, however, is taxed on certain types of income that has United States sources. Furthermore, nonresident aliens may be taxed at a flat rate on “passive” income with United States sources or at a scaled rate if the income is effectively connected with a U.S. trade or business.
And always, special rules may apply for certain types of occupations, such as teachers, medical professionals, athletes, and employees of foreign governments and international agencies.
If you have questions about your income, employment authorization, or other tax issues and how they may be affected by your immigration status, contact our office so that we may help with your issues.