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  • Should nonresidents in the US report Cryptocurrency on their tax return?

    Reporting cryptocurrency on nonresident tax return

    Although Bitcoin was invented in January 2009, from a taxation point of view, cryptocurrency is still a relatively new phenomenon.

    Since its inception, investors in cryptocurrency have been unsure of their tax and reporting requirements. And many important questions on the topic have gone unanswered for years.

    Is cryptocurrency considered taxable in the US? If so, how much tax is deducted from gains? What type of tax should be deducted and how should this be reported to the IRS?

    The situation is even trickier for nonresidents in the US. While every nonresident is required to file tax documents to account for their time in the US, it can be hard to declare your cryptocurrency profits for taxation when you are unfamiliar with IRS tax law.

    The overall market value of digital currencies has increased roughly 75% in 2021. In fact, the value of the cryptocurrency market passed $2 trillion for the first time in April 2021. Bitcoin is the most popular digital currency – representing approximately 50% of this $2 trillion.

    With this in mind, it is easy to see why so many investors are attracted to these virtual, volatile currencies.

    In years past, it had been somewhat easy to avoid declaring your crypto-gains for tax. However, times are changing.

    If you are in the US as a nonresident – for example as an international student on an F-1 visa – and you are earning income from cryptocurrency, in this guide, you will find out everything you need to know about your tax reporting requirements.

    Do I need to report Cryptocurrency on my US tax return?

    Yes. If you have made a profit from cryptocurrency (which you traded from a US exchange or broker) while you were living in the US, you will have to declare this income.

    In short, cryptocurrency is treated as property by the IRS.

    That means any profit you make on it will be subject to Capital Gains Tax at 30% and must be included on your 1040-NR tax return.

    If you dispose of your investment for a loss, you will not need to pay tax. However, as a nonresident, you will not be able to use your losses against any tax liabilities in future years.

    While the lines may seem slightly blurred in regards to cryptocurrency and tax filing now, this will unlikely be the case in future years.

    Crispian Robinson, Strategic Partnerships at Koinly, says that cryptocurrency is high on the agenda of tax authorities globally:

    “It’s clear that Tax Authorities around the world are increasingly applying pressure on the Crypto Industry in order to drive tax compliance, ranging from partnering with exchanges to gain user trading data to developing new legislation bills.

    For example, President Biden’s latest $1 trillion infrastructure bill has specifically singled out tighter tax regulation over the Crypto industry as a key source of funding, expecting to raise $28 billion over 10 years as a direct result.”

    It appears inevitable that tighter regulation and tax compliance is coming and will be key in helping to further legitimize the cryptocurrency industry in the eyes of regulators.

    Crypto investor? We’ve teamed up with Koinly to calculate the tax you might owe on your cryptocurrency capital gains and income.

    How much tax will I pay?

    Firstly, all of the following cryptocurrency transactions are considered taxable:

    • Sale of cryptocurrency, mined personally, to a third party.
    • Sale of cryptocurrency, purchased from someone else to a third party.
    • Using mined cryptocurrency in order to buy goods or services.

    Nonresidents will pay tax at 30% on their income from cryptocurrency. And unlike residents, nonresidents are not entitled to use losses from previous years to offset their tax liability.

    As we mentioned above, the IRS considers cryptocurrency to be property. That means they are taxed in a similar fashion to gains made from stocks, shares and bricks and mortar property.

    In other words, if you sell some stock for a profit of $1,000, this is considered a “taxable event” and you must declare this money for Capital Gains Tax.

    But things aren’t always that straightforward when it comes to cryptocurrency. For example, if you use your Bitcoin to purchase Ethereum, does the IRS consider this to be a taxable event?

    What about if you pay for dinner or buy basketball tickets with Litecoin?

    The answer is yes!

    Every time you purchase something with cryptocurrency, the IRS will treat this as an instance where the asset was liquidated. And if you have made a profit, you must declare that for tax.

    However, if you have made a profit from cryptocurrency, it’s important to know that even if your home country has a tax treaty with the US, the gain is not covered by the treaty and will still be taxed accordingly.

     

    How do I determine the correct amount of cryptocurrency income to declare for tax?

    Many investors struggle to work out exactly how much they made or lost from their cryptocurrency investment.

    If you trade stocks or shares through a brokerage, the brokers should issue a Form 1042-S which documents your transactions, you may need to request this though.

    However, this form is often not generated to account for cryptocurrency transactions.

    Meanwhile, some exchanges have begun to issue a 1099-K form to account for cryptocurrency transactions. This is typically done where there are at least 200 transactions worth an aggregate of $20,000 or more. However, this form only reports the total value of transactions and does not detail how much the investor put in at the outset.

    As a result, many investors over-report their gains and pay more tax than they need to. With this in mind, it is advisable to properly document each cryptocurrency investment that you make and keep these records in a safe place.

    It’s important to remember that the purchase of digital currency is not a taxable event. Instead an investor must determine their tax liability when they sell their cryptocurrency for a profit.

    Some cryptocurrency exchanges will provide you with an excel summary of all your trades. This document will enable you to determine the amount you originally invested as well as the profit that you have made, so be sure to keep them safe.

    Alternatively, if the sale involves the disposal of assets from a variety of sources, the investor will need to know the fair market value of the asset on the day of sale.

    David Kremmer, bitcoin expert and CEO of CoinLedger, outlines that transactions may be difficult to report if assets are sent from wallet-to-wallet. He says:

    “Due to the transferable nature of cryptocurrencies, it’s easy for investors to send their assets from wallet-to-wallet or from one exchange platform to another.

    This creates difficulties when reconciling transactions for tax reporting.

    To help calculate your total profit, you should keep records of your cost basis (the original purchase price) for each cryptocurrency when you first acquired it. Having these records will dramatically help you when tax time comes around.”

     

    Sprintax Returns can help you file your tax return no matter where you are in the world!

    File your 1040NR online

     

    What happens if I don’t report my Cryptocurrency income?

    The IRS is taking the taxation of virtual currency seriously and has recently stepped up its efforts to crack-down on cryptocurrency tax-dodgers. The agency is liaising with crypto exchanges for information regarding non-compliant taxpayers.

    In fact, over the last two years, the IRS announced it was sending letters to more than 10,000 people who potentially failed to report cryptocurrency income. The letters state that individuals have 30 days to respond to the IRS. The result of non-compliance? Usually a tax audit for the investor.

    The message from the IRS is clear: file your taxes.

    This US tax deadline falls on 15 April each year (18 April in 2022), so you should know before then whether or not you need to file.

    If you do not file and declare all of your income, you leave yourself open to penalties and fines from the IRS. The late filing penalty is generally 5% of the unpaid taxes for each month or part month that it is late.

    However, if you still haven’t filed more than 60 days after the due date or extended due date, the minimum penalty is $435 or 100% of the unpaid tax, whichever is less.

    As a nonresident, failure to comply with your US tax obligations can also jeopardize your future US visa and Green Card applications.

    H1B taxes

    I earned a profit from bitcoin in previous years. Can I retrospectively declare this income to the IRS?

    2019 was the first year that the IRS included a reference to cryptocurrency on their tax documents.

    Citizens and resident aliens were asked on Form Schedule 1: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?

    Schedule 1 is used to report income that is otherwise not listed on Form 1040. This typically includes capital gains, alimony, or gambling winnings.

    However, Schedule 1 which nonresidents received did not reference cryptocurrency. Instead, nonresidents were expected to report their gains on Schedule NEC along with their Form 1040NR.

    In 2020, the IRS recognized that the process needed to be simplified as millions of dollars of cryptocurrency slipped through the net. With this in mind, the IRS moved the virtual currency question to the main 1040 tax return form.

    If you have earned income from cryptocurrency which has not previously been reported, it is advisable to declare this income to the IRS.

    Despite the IRS only beginning to update their tax documents in 2019 in relation to cryptocurrency, the US tax authority had issued notices as far back as 2014 and many of the rules outlined at that time are still in force today.

    In summary, if you were paid for personal services with cryptocurrency such as Bitcoin, it’s advisable to report it on your tax return, the same as ordinary income.

    Case Studies

    Case study 1 – Mike buys 3 Bitcoin

    Mike, who is on an F-1 visa in the US, purchases 3 Bitcoin for $9,000 and later sells it for $11,000, meaning he made a profit of $2,000.

    In this case, Mike’s profit of $2,000 will be taxed at 30%. This means that he will have a federal tax bill of $600 on his cryptocurrency income.

     

    Case study 2 – Sachin purchases multiple Bitcoin at different times

    Sachin is in the US on an F-1 visa. He purchased five Bitcoin in 2010 for $5,000 ($1,000 each), and three Bitcoin in 2018 for $12,000 ($4,000 each). He then sells six Bitcoin three years later for $20,000 in 2021.

    How should Sachin calculate his tax liability?

    The IRS says that if you can identify the Bitcoins that have been sold, their cost basis can be used. For example, Sachin sold three Bitcoin of $1,000 ($3,000 in total) from his wallet created in 2010 and three Bitcoin of $4,000 ($12,000 in total) from his wallet from 2018.

    In this case, the cost basis is $15,000 and the profit is $5,000 ($20,000 sales price minus the aforementioned $15,000 cost basis).

    So, the tax due in this case will be $1,500 ($5,000 at a tax rate of 30%).

    If it is difficult for Sachin to distinguish which Bitcoin are sold, the IRS advises that he should use a ‘first in, first out’ (FIFO) method to calculate his liability.

    Therefore, the first five Bitcoin would be based on the oldest cost basis of $1,000 ($5,000), followed by one Bitcoin of $4,000 – the newer purchase.

    As a result, the basis would be $9,000 and the profits under FIFO method would be $11,000 with tax bill of $3,300.

    How should nonresidents declare their cryptocurrency gains to the IRS?

    Simply put, it depends on how you use cryptocurrency.

    If you invest in cryptocurrency and you earn a profit from it, it will be taxed as Capital Gains Tax, and you will need to report it as a capital gain on the table at the bottom of the Schedule NEC page and transfer the same total as capital gains on the relevant line on your 1040NR form.

    If you were paid in bitcoin for work done as a self-employed person, this will count as personal services income – and you will need to report it on 1099-NEC.

    It is important to know that you may not need to pay tax on any profit until you purchase something or sell your investment. When you do this, you will need to pay Capital Gains Tax.

     

    Does the source of income matter?

    Yes.

    If you earned income from cryptocurrency from a US source you will need to pay tax on the amount of profit gained.

    If you earned your cryptocurrency profit from a different country, you will not have a US tax liability but may have tax requirements in the country where the digital currency was bought and sold.

     

    How can Sprintax help me?

    In short, Sprintax can help you organize your tax responsibilities ahead of the US tax deadline.

    If you are earning income from cryptocurrency, or from other types of investments, we will ensure that your income is properly declared to the IRS and that you don’t pay any more income than you need to.

    Sprintax is the only online Federal and State self-prep tax software that is available for nonresidents in the US.

    To get started, simply create your Sprintax account here.

     

    What’s more, we also offer 24/7 Live Chat tax support. So if you have any questions about your personal tax situation, you can contact our team at any time.

  • How to determine FICA tax exemption for your nonresident employees

    Withholding Fica tax on nonresident employees

    The tax withholding of nonresident employees has become a big issue for payroll offices in organizations across the US.

    One issue that has become particularly tricky for payroll staff is the proper determination of FICA tax exemption. Continue reading “How to determine FICA tax exemption for your nonresident employees” »

  • How the rule changes for NCAA compensation affect the taxation of nonresident student athletes in the US

    NCAA rules affecting taxation of nonresidents

    Thursday 1 July 2021 will forever be remembered for the dawn of a new era in US college sports.

    Students who participate in National Collegiate Athletic Association (NCAA) competitions are now – for the very first time – entitled to make money from a wide variety of business ventures, without losing their eligibility to compete.

    Perhaps the most interesting developments surround what is known as ‘NIL’ rights (name, image and likeness).

    A combination of state laws and NCAA NIL policy changes has now removed restrictions preventing athletes from selling their NIL rights.

    While these changes do not mean that college football players can suddenly begin to receive big salaries, they do open the door for athletes to claim a bigger piece of the billions of dollars generated by US college sports each year.

    However, making money from NIL will not necessarily be straightforward for every student athlete.

    There are thousands of nonresident athletes on scholarships at universities around the US.

    For many of these international students, it will be advisable to steer clear of NIL income – at least for now – lest they violate the terms of their visa.

    In this guide, we will take a closer look at the NCAA rule changes and examine how they affect nonresident athletes in the US.
    Continue reading “How the rule changes for NCAA compensation affect the taxation of nonresident student athletes in the US” »

  • The dangers of not filing a tax return

    Not filing a tax reurn

    If you have worked or studied in the USA, did you know that you are obliged to file taxes?

    Many nonresidents are unaware of this fact due to a combination of factors, such as busy lifestyle or they have left the country.

    However, whatever the case may be, not filing your taxes has very serious consequences.

    If you are a nonresident and still live in the US, continuing to avoid your responsibility can result in automatic wage seizure by the courts, asset seizures like your car and may even lead to arrest and jail time for tax evasion.

    What happens if I don’t file?

    If you do not pay the taxes you owe by the tax deadline (15 April every year, except 2020 and 2021 which were 17 May and 15 July respectively) you could be hit with a variety of punishments.

    Here are a few different dangers of not filing your tax return:

    You could miss out on your tax refund!

    If you are entitled to a tax refund, you won’t be punished for filing late by the IRS.

    If you wait longer than three years from the date your refund is published, however, you will lose out on your chance to claim the refund as it will automatically be handed over to the US government.

    You could be hit with fines and penalties

    If you have unpaid taxes, you will owe the IRS interest in addition to any penalties.

    You should do your best to file your tax return before the deadline to avoid facing penalties and fines!

    The penalty for filing late is normally 5% of the unpaid taxes for each month or part month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25% of your unpaid taxes.

    If you file your tax return more than 60 days after the due date or extended due date, the minimum penalty is strong – $135 or 100% of the unpaid tax, whichever is less.

    If you do not pay your taxes by the tax deadline, you will normally face a failure-to-pay penalty of 0.5% of your unpaid taxes.

    Residency status for tax purposes

    Can I file if I have left the US?

    Yes!

    You can file your US tax return with Sprintax from anywhere in the world!

    Sprintax is the only online Federal and State self-prep tax software for nonresidents in the US!

    Our system will assist you in preparing fully compliant Federal and State tax returns and secure your maximum legal tax refund.

    The average federal refund in the US is $1,126!

    With Sprintax you can:

    • Save time and stress!
    • Determine your residency status
    • Prepare a fully compliant US tax return
    • E-file your Federal tax return
    • Maximize your State tax refund
    • Avail of our 24/7 Vita Qualified Live Chat facility

    Complete your nonresident tax return today!

  • Do you use Workday to manage employee payroll? Sprintax Calculus can help with your nonresident tax withholding

    Workday employee payroll

    There is no doubt about it. Workday has been a game-changer in simplifying work processes for payroll office staff.

    Where once payroll/tax compliance staff relied on a plethora of different resources to manage their payroll requirements, Workday has worked wonders in centralizing the process into one tool. Continue reading “Do you use Workday to manage employee payroll? Sprintax Calculus can help with your nonresident tax withholding” »

  • Here’s the ultimate guide to nonresident taxes in the US

    NRA tax guide

    Whether you are dreaming of a trip to the US, or you are about to embark on one, the prospect of jetting off to The Land of Opportunity is bound to be exciting.

    While you get to grips with the culture in the US, one area that often confuses nonresidents is tax.

    That’s why Sprintax is here!

    We specialize in making tax as straightforward as possible to newcomers in the US.

    So, without further ado, here’s our ultimate guide to nonresident tax in the US. Continue reading “Here’s the ultimate guide to nonresident taxes in the US” »

  • 오류가 있는 세금 신고서를 제출했는데 정정한 세금 신고서를 제출해야 할까? 그 방법은?

    세금 신고서 정정 방법

    (Last updated: 10.01.2022)

    세금 신고서에 실수를 하거나 세액 공제나 소득 공제를 빠뜨렸더라도 걱정하지 마십시오. 정정한 신고서를 제출하면 오류를 바로잡을 수 있습니다. – IRS

    비거주자 외국인 세금 신고서에 오류가 있습니까? 걱정하지 마십시오. 오류를 정정하는 것이 생각만큼 어렵지 않습니다. Continue reading “오류가 있는 세금 신고서를 제출했는데 정정한 세금 신고서를 제출해야 할까? 그 방법은?” »

  • 미국 출입국 날짜 – 출입국 기록을 확인하는 방법

    KO-미국 출입국 날짜

    미국 세금 서류를 준비하려면 미국 출입국 날짜를 정확히 알아야 합니다.

    하지만 출입국 기록을 모르고 정확한 출입국 날짜를 재차 확인해야 하는 경우 좋은 소식은 온라인으로 쉽게 확인할 수 있다는 것입니다. Continue reading “미국 출입국 날짜 – 출입국 기록을 확인하는 방법” »

  • I am a nonresident in the US. Can I claim any tax treaty benefits?

    US tax treaties guide

    What are tax treaties and how can they help you save money at tax time?

    If you’re a nonresident alien in the US, you may be wondering if there are any tax reliefs available which can help you save money on your tax bill.

    While the answer to this question is likely “yes”, exactly what you will be entitled to will depend on your personal circumstances.

    The best place to start is by checking whether or not you are entitled to any tax treaty benefits.

    The US has signed tax treaty agreements with 67 countries around the world and if you are entitled to benefit from one of these agreements, you could potentially save a lot on your taxes.

    In this guide, we are going to take a closer look at tax treaty benefits – what they are and exactly how you can claim them.

    Continue reading “I am a nonresident in the US. Can I claim any tax treaty benefits?” »

  • Introducing your one stop shop for determining tax treaty entitlements!

    Sprintax Calculus (TDS) new tax treaty engine

    Sprintax Calculus (formerly Sprintax TDS) launch new Tax Treaty Engine

    Every year, the proper documentation and withholding of tax from nonresidents becomes a bigger issue for organizations around in the US.

    Exactly how a nonresident should be taxed depends on a number of unique circumstances including where they’re from, the type of income they are earning and the amount of time they have spent in the US. Continue reading “Introducing your one stop shop for determining tax treaty entitlements!” »

  • How to prepare your state tax only with Sprintax

    State only tax return Sprintax

    The prospect of tax filing and tax returns can be confusing and daunting for international students in the US.

    So, if this is how you feel, you are not alone!

    Even if you have filed your federal tax return – you may not be finished with your tax requirements.

    In this blog post, we’ll discuss how to prepare your state tax return the easiest way – with Sprintax!

    Continue reading “How to prepare your state tax only with Sprintax” »

  • H2B workers and taxes – all you need to know

    H2B visa temporary worker-tax guide

    What is the H-2B visa?

    The H2B program allows employers in the US, who meet regulatory requirements, to bring nonresidents to the US to fill temporary (non-agricultural) jobs – for example, hotel staff, janitors, amusement park workers, landscapers, etc.

    US Government announces increase in H2B visa cap for 2021

    The US government has announced that the H2B visa cap has been extended by 22,000 visas to a total of 88,000 per year. Continue reading “H2B workers and taxes – all you need to know” »

  • Иностранцы-нерезиденты: Ваше руководство по стимулирующим выплатам в соответствии с COVID-19 CARES Act

    Кто имеет право на получение выплаты CARES?

    Примечание: в марте 2021 года правительство США начало распространение третьего раунда стимулирующих выплат на сумму $1,400. Если вы получили этот чек и не имеете на него права, совет из этого блога будет вам полезен!

    Вы также можете узнать больше о втором платеже по стимулированию пандемии (в размере $600) здесь. Continue reading “Иностранцы-нерезиденты: Ваше руководство по стимулирующим выплатам в соответствии с COVID-19 CARES Act” »

  • Электронная подача федеральной налоговой декларации теперь доступна для нерезидентов на Sprintax!

    Sprintax Электронная подача федеральной налоговой декларации

    Никогда еще не было так просто подать федеральную налоговую декларацию США для нерезидентов.

    Мы рады сообщить, что Sprintax – единственное онлайн-решение для налоговых деклараций нерезидентов по федеральным налогам и налогам штата – теперь доступно для электронной подачи федеральной налоговой декларации.

    Это означает, что, заполнив простую анкету Sprintax, вы можете подать федеральную декларацию напрямую в IRS (Internal Revenue Service – Налоговое Управление США) онлайн. Continue reading “Электронная подача федеральной налоговой декларации теперь доступна для нерезидентов на Sprintax!” »

  • Hiring a J1 worker? Here’s everything you need to know about tax!

    Hiring a J1 visa employee

    The J1 visa program was stopped in its tracks in March 2020, following the outbreak of COVID-19.

    Thankfully, in large part due to vaccination rollout, demand for J1 visas is starting to climb again in 2021.

    If you intend to hire J1 employees at your organization, it is important to ensure that their tax compliance is managed correctly from the start.

    With that in mind, this article will cover everything you need to know to ensure J1 workers are taxed correctly, as soon as they start work.

    Continue reading “Hiring a J1 worker? Here’s everything you need to know about tax!” »