Nonresident Aliens: Canadian and U.S. Tax Issues

1.1 Aliens and U.S. Citizens Living Abroad: Canadian & U.S. Tax Issues

I am a Canadian citizen living and working in the U.S. for a U.S. employer on a visa. Do I need to file both a U.S. tax return and a Canadian tax return?

You must comply with both U.S. and Canadian filing requirements, if any. In the United States, you generally are required to file a return if you have income from the performance of personal services within the United States. However, under certain circumstances, that income may be exempt from payment of U.S. tax pursuant to the U.S.-Canada income tax treaty. You need to determine what type of visa you have, and how that impacts your residency status in the United States. If, based on the tax code and your visa status you are treated as a U.S. resident, then your entitlement to treaty benefits will be impacted. You must contact the Canadian government to determine whether you must file a Canadian tax return and pay Canadian taxes.

References:

• Publication 519, U.S. Tax Guide for Aliens
• Publication 597, Information on the United States-Canada Income Tax Treaty
• Publication 901, U.S. Tax Treaties

1.2 Aliens and U.S. Citizens Living Abroad: Foreign Income & Foreign Income Exclusion

I am a nonresident alien. Can I take the foreign earned income exclusion if I meet the bona fide resident test or physical presence test? If yes, what is the tax form used for nonresident taxpayer?

No, nonresident aliens do not qualify for the foreign earned income exclusion. Only if you are a U.S. citizen or a resident alien of the United States and live abroad, may you qualify to exclude a specific amount of your foreign earned income. Refer to chapter 4 of Publication 54 Tax Guides for U.S. Citizens and Resident Aliens Abroad, for limitation that apply. If you are the nonresident alien spouse of a U.S. citizen or resident alien, you can elect to be treated as a U.S. resident in order to file a joint return. In this case, you can take the foreign earned income exclusion if otherwise qualified. Refer to Publication 519, U.S. Tax Guide for Aliens, for detailed instructions on how to make this election.

However, nonresident aliens would be able to exclude their foreign earned income under the dual-status rules. Refer to Tax Topic 852 for dual-status information. A nonresident alien is generally not subject to U.S. tax on compensation for services performed outside the U.S.

References:

• Publication 519, U.S. Tax Guide for Aliens
• Tax Topic 853, Foreign Earned Income Exclusion - General

1.3 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - General

I live in a foreign country. How do I get a social security number for my dependent who qualifies for a social security card??

Use Form SS-5-FS which may be obtained from the Social Security Administration.

References:

• Social Security Administration

Each foreign person who does not have and cannot obtain a social security number must use an IRS Individual Taxpayer Identification Number (ITIN) on any U.S. tax return or refund claim filed. For additional information on ITINs click on Individual Taxpayer Identification Number.

References:

• Publication 1915 (PDF), Understanding Your IRS Individual Taxpayer Identification Number
• Publication 519, U.S. Tax Guide for Aliens
• Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number
• Tax Topic 851, Resident and Non-Resident Aliens
• Tax Topic 852, Dual Status Aliens

1.4 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Tax Withholding

Under my visa as a temporary nonresident alien, I'm not subject to social security and Medicare withholding. My employer withheld the taxes from my pay. What should I do to get a refund of my social security and Medicare?

If social security tax and Medicare were withheld in error from pay received which was not subject to the taxes, you must first contact the employer who withheld the taxes for reimbursement. If you are unable to get a refund from the employer, file a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.

You must attach the following to your claim:

• a copy of your Form W-2 (PDF), Wage and Tax Statement, to prove the amount of tax withheld;
• Form I-797, INS Approval Notice, is needed if you have changed your status from F-1 or J-1 to another status prior to filing the claim;
• if your visa status changed during the tax year you should attach copies of the pay stubs that cover the period of exemption from social security taxes;
• a copy of INS Form I-94, Arrival/Departure Record, if you are still in the United States;
• a copy of your valid entry visa;
• Form 8316 (PDF) , Information Regarding Request for Refund of Social Security Tax , or a signed statement stating that you have requested a refund from the employer and have not been able to obtain one; and
• a copy of Form 1040NR (PDF) , US Nonresident Alien Income Tax Return (or Form 1040NR-EZ (PDF)), for tax the year in question. Processing of your claim may be delayed if you submit it less than six weeks after you filed Form 1040NR or 1040NR-EZ.

In addition to the documentation listed above foreign student visa holders should also attach the following:

• a copy of Form I-20, Certificate of Eligibility, endorsed by your student advisor and stamped by the Bureau of Citizenship and Immigration Services; and
• a copy of the Employment Authorization Document of your Optional Practical Training (e.g., Form I-766, I-538 or 688B).
• if you are an exchange visitor, attach a copy of Form IAP-66 or DS-2019 to your claim.

File the claim, with attachments, with the IRS where the employer's returns were filed. If you do not know where the employer's returns were filed, send your claim to the Internal Revenue Service Center, Philadelphia, PA 19255.

For more information, refer to Chapter 8 of Publication 519, U.S. Tax Guide for Aliens .

References:

• Form 843 (PDF),Claim for Refund and Request for Abatement
• Publication 519, U.S. Tax Guide for Aliens

1.5 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Students

Are nonresident alien students, with F-1 or J-1 visas and employed by a U.S. company during the summer, required to have federal income taxes withheld from their paychecks?

The following discussion generally applies only to nonresident aliens. Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, unless it is specifically excluded from the term "wages" by law, or is exempt from tax by treaty, is subject to graduated withholding. Nonresident aliens must follow modified instructions when completing Form W-4 (PDF). Please refer to chapter 8 of Publication 519, U.S. Tax Guide for Aliens, for directions on completing Form W-4 (PDF), Employee's Withholding Allowance Certificate.

References:

• Publication 519, U.S. Tax Guide for Aliens
• Publication 597, Information on the United States-Canada Income Tax Treaty
• Publication 515 (PDF) Withholding of Tax on Nonresident Aliens and Foreign Entities
• Form W-4 (PDF), Employees Withholding Allowance Certificate