Filing your taxes as a non-citizen can be confusing and present many questions or ambiguities regarding U.S. tax law. As the deadline for filing your 2021 tax returns is fast approaching, we’ve highlighted some important considerations in this blog for resident aliens who haven’t submitted their taxes yet. Keep in mind that the official deadline for filing your taxes this year is April 18th, 2022.
1. Claiming the Dependent Child Tax Credit
In the United States, you can receive a bigger tax refund per your annual income if you have children/dependents that you support. However, immigrants need to be careful when filing their taxes when choosing the “Dependent Child Tax Credit”. In order to eligible for this tax credit, the IRS notes that the child must be living with the principal tax filing applicant, and the child must have a Social Security Number (SSN).
In addition, the child or children that you plan on claiming must have lived with you for at least half of the past fiscal year and you must have provided the child with significant financial support over the past year. You can claim the dependent child tax credit if the child is your legal son, daughter, stepson, stepdaughter, or legally adopted child.
2. Declaring Foreign Income
It might be the case that some resident aliens (those who meet the Substantial Presence Test) also make passive income in their country of origin. For example, landowners or those who own apartment buildings but live in the United States need to declare their foreign passive income when filing their annual taxes. Foreign account holding institutions (FFIs) might report you to the IRS if you fail to declare your income. This could result in penalties that immigrants who are looking to make the U.S. their permanent home will absolutely want to avoid.
3. Understanding the Head of Household Option
Immigrants living in the United States might be unfamiliar with an important option for residents and U.S. citizens filing their taxes. No matter if you are going through a CPA or doing your taxes online by yourself, you will be prompted with the question of whether you are a Head of Household for tax filing and refund purposes. Therefore, knowing the eligibility standards for HoH is important. Generally, a HoH is someone who satisfies the following three conditions:
a) You must be unmarried. According to the IRS you cannot be married and be eligible for the Head of Household option.
b) You must pay more than half of household expenses per the year in question.
c) You must live with a qualified dependent for at least half the year (children, stepchildren, grandchildren under 19 years of age). You can also qualify as a head of household if you pay more than half of your parents living expenses even if you don’t live with them.[1]
The IRS is fairly strict on the payment of household expenses for a dependent or parent for more than half of the years expenses. If you think that you contributed to the expenses of a parent in the past year, but know it was only a few times throughout the year, you will generally not qualify for Head of Household status.
