Guest Writer: Michael Longsdon of ElderFreedom.net*
Immigrants moving to the United States often have their hands full with immigration paperwork, assimilation into their new communities, and even tax considerations. Despite these challenges, many come with a vision of the American dream. Use this guide to help you make your American Dream a reality!
Down to Business
Many new transplants are eager to find a way to support loved ones back in their home country. Sometimes, the answer is starting an American business. The business world is a great place to start your immigrant journey. One of the most important things to understand about doing business is the relevant tax structure, and a resource like Briefly Taxing is a great place to learn more.
Getting Your Paperwork in Order
There are a number of different ways people officially immigrate to the United States. If you have questions about the type of Visa you need or are planning to apply for U.S. citizenship, you can learn the specifics from the U.S. State Department. Getting settled into your new home community should include some basic things including finding housing in the form of buying or renting an apartment, single-family home, condo, or townhouse; finding employment; identifying appropriate service providers like doctors, dentists, and optometrists; and enrolling any children you have in the appropriate school district.
Getting Acclimated to Make Your American Dream a Reality
When you move to a new geographic region, there’s always a period of adjustment and settling in. Get to know your neighbors, join a house of worship, if you’re so inclined, and utilize places like MeetUp groups to meet new people with common interests. Join a newcomers group, or even seek out organizations that specialize in bringing together countrymen, if that will make you feel a greater sense of kinship as you’re getting settled.
According to Relocation.com, you might also join a gym or start taking classes at a community center, or even volunteer as a way to meet more people in your community. If you have children in school, get to know the other parents and start hosting playdates as a way to get connected and help your kids make friends as well.
Immigrants relocating from another county have additional steps to take if they’re interested in starting a business. Your immigration status may impact the type of business license you’re eligible for, but you can check with the State Department or your state attorney general’s office for guidance.
In terms of start-up funding, look for banks that specialize in small business lending, or consult others in your community who may have advice for starting a business as a new citizen. Some cities also have chambers of commerce specific to different nationalities, and they could be a wealth of resources, as can small business development centers.
Tax Status of Immigrants
U.S. citizens and residents—both of whom are considered “U.S. persons”—are taxed on their worldwide income. This means that a U.S. person is subject to U.S. income tax whether it earns income from sources within the United States or abroad. On the other hand, a nonresident alien individual (“NRA”) is generally only subject to U.S. income tax on “U.S. source income.”
A U.S. person reports his worldwide income on an IRS Form 1040, Individual Income Tax Return, while an NRA reports only his U.S. source income on an IRS Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Thus, it is important to understand how and when an immigrant (referred to as “an alien individual” in the Internal Revenue Code) becomes a U.S. person.
There are three ways that an NRA may become a U.S. person. The most straightforward methods are for the NRA to obtain a green card or to make an election to be treated as a U.S. person. The final method is a bit more complicated, and it can be a trap for the unwary NRA, who does not want to become a U.S. person. If an NRA is present in the United States for 183 days during the year, he will be treated as a U.S. person under what is commonly referred to as the “substantial presence test.”
There are a number of nuances to each of these methods, and we could spend an entire article on them—which we will likely write in the future, so stay tuned. For a comprehensive overview of what it means to be a U.S. person and how it is accomplished, take a look at IRS Publication 519, U.S. Tax Guide for Aliens.
Foreign Reporting Requirements
Chances are good that even once an immigrant has moved to the United States, he may still have assets abroad, like a foreign bank account. Once again, the distinction between an NRA and a U.S. person is critical. U.S. persons have certain “foreign filing requirements,” which means simply that they must file information returns with the IRS and/or FinCEN reporting their foreign interests.
For example, if a U.S. person has a bank account with a balance of $10,000 or more at any time during the year, he must file a Report of Foreign Bank Accounts (more commonly referred to as an FBAR) with FinCEN. If the bank accounts have even higher balances, an IRS Form 8938 must be filed with the IRS.
If the U.S. person has interests in foreign companies or foreign trusts, additional forms are required. In fact, one of the only foreign “interests” that does not need to be reported is ownership of foreign real property.
Briefly Taxing has written a primer on the FBAR filing requirements, and the IRS offers a number of resources regarding the filing requirements of other forms, such as Form 8938, Form 5471 (interests in foreign corporations), and Form 3520 (interests in foreign trusts). Finally, if an individual—whether a U.S. person or an NRA—sends more than $10,000 in the aggregate during the year abroad, or receives the same from abroad, even more forms must be filed.
Supporting Those Back Home
Many people who immigrate to the United States do so with the goal of being able to have a better-earning level that they can then share with family outside the U.S. There are different ways you can send money, such as banker wire transfer, or even popular money exchange apps like Remitly. As we mentioned in the section above, if you send more than $10,000 per year, you will have to report the transfers to the IRS—though no tax will be due.
If you’re missing home, stay in touch with loved ones and friends back home via Zoom, video chats, regular phone calls, texts, and photo exchanges. If you’ve come from the Philippines, a great way to stay connected with home is to send your loved ones a balikbayan box.
If you have concerns about adjusting to American culture, consider staying current on local, state, and national news. There will be challenges as you journey to the American dream, but with hard work and dedication, you can make it your own.
*We hope you enjoy this article written by Michael Longsdon of ElderFreedom.net. Elder Freedom is an organization of advocates with a mission to help locate resources, events, and engagement opportunities to help enrich the lives of seniors.
Briefly Taxing thanks Mike for reaching out with this great article! If you’d like to contribute to Briefly Taxing, don’t hesitate to email us!
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