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For immigrants arriving to the United States, the American tax system can be a very new and confusing concept. In fact, the U.S. tax system is so complex that most natural-born Americans have difficulty filing each year. As a general rule, U.S. tax law applies to you if you live in the United States or spend a significant amount of time here.

In the United States everyone with income above certain levels is expected to file a tax return. That’s not true in all countries around the world. In many countries, the government withholds taxes from paychecks, and the individual never has to directly file an income tax return. The Internal Revenue Service (IRS) is the U.S. agency responsible for collecting taxes.

Whether you are a lawful permanent resident or an undocumented immigrant, it’s important that you get a basic understanding of your tax filing obligations.

Are You a Resident or Non-Resident Alien?

The IRS uses two tests — the green card test and the substantial presence test — to assess your alien status. If you satisfy the requirements of either one, the IRS considers you a resident alien for income tax purposes; otherwise, you’re treated as a non-resident alien. (Note: these terms are for tax purposes only and do not imply an immigration benefit.)

If you have a green card, you are a resident alien. If you don’t have a green card and spend at least 31 days in the U.S. during the current tax and a total of 183 days during the last three tax years (including the current tax year), you’ll generally satisfy the physical presence test and are also treated as a resident alien.

As a resident alien, you’re subject to the same tax rules as U.S. citizens. This means that you must report all income you earn on annual tax returns, regardless of which country in which you earn it. A non-resident alien must also pay income taxes to the IRS but only on the income that’s effectively connected to the U.S., which generally includes the money you earn while in the U.S. All of this can get a little tricky. If you are unsure, contact a tax professional to assist you.

Proper U.S. Income Tax Filing Is Essential for Permanent Residents

It’s possible to lose your status as a lawful permanent resident based on how you file (or do not file) taxes. It also affects your ability to naturalize as a U.S. citizen.

File Under The Correct Residency Status

There are a couple of common ways that taxes can affect your status as a permanent resident. First, there may be some tax advantages to file your income tax return as a non-resident, but this could adversely affect your immigration status. The IRS has its own way of calculating who is considered a resident versus a nonresident alien (as discussed in the previous section). Filing taxes with the IRS as a “non-resident” can lead the government to believe that you are a resident in another country and have abandoned your permanent residence in the United States. Before you file as a non-resident, speak to an immigration attorney.

Likewise, paying taxes in another country could create the presumption that you also reside in that country. One way this issue could be exposed is through a Customs and Border Protection (CBP) interview when re-entering the U.S. The CBP officer may ask if you’ve earned income or paid taxes in another country. If CBP determines that you have been residing in another country, you could find yourself in Immigration Court for removal proceedings.

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