(Last updated: 17.05.2022)
“Don’t worry if you made a mistake on your tax return or forgot to claim a tax credit or deduction. You can fix it by filing an amended return.” – The IRS
Last Updated: 28 April 2022
Every nonresident alien in the US is obliged to file a federal tax return before the tax deadline, which in 2022 was 18 April.
If you’re an international student or scholar in the US, by law you must file Form 8843 at least, but depending on your circumstances, you may also need to file a Federal tax return by filing a 1040NR, a State Tax return or two and maybe even a FICA return. Not filing a tax return could get you into a whole heap of trouble, leaving you with hefty tax fines and penalties, on top of possible problems getting US visas in the future.
Don’t panic! Nearly 30% of taxpayers are unable to organize their documents before the deadline and file late. But you can still fix this!
Here are a few important things you should consider if you expect to miss the deadline.
Continue reading “Missed the US tax return deadline? Here’s what to do” »
Resident or Nonresident – this is the question!
Determining your tax residency status is important, as it will decide how much tax you must pay while in the US.
The most common mistake nonresidents make is filing their taxes as a resident. If a nonresident files as a resident they can claim benefits and receive refunds that they’re not entitled to. Incorrect filing breaks the terms and conditions of a nonresident visa, this can lead to fines and penalties and you may also jeopardise your future visa or green card applications.
In this article, we will discuss everything you need to know about your residency and how you can determine your residency status.
Continue reading “Your US Tax Residency Status Explained” »
Each year, thousands of au pairs move to the US to live with host families.
We’ve put this handy guide together to fill you in on everything you need to know about foreign au pairs and tax in the US.
Continue reading “A Complete Tax Guide for Au Pairs in the U.S.” »
George Orwell once said: “Myths that are believed in tend to become true”.
Well, there might be a grain of truth in what he said but not when it comes to taxes and the U.S. taxation laws.
As an international student you are not supposed to know the US tax procedures concerning tax return filing by heart but at least you should be aware of the Top 8 tax myths that most international students tend to believe in.
So do not walk around believing in “old wives’ tax tales and check the most common tax myths DEBUNKED here!
Continue reading “Top 8 tax myths international students in US believe in – DEBUNKED!” »
The deadline for filing your 2021 US tax return is April 18, 2022, and it’s never too early to start preparing.
There’s no doubt that, whether you have filed a tax return before, or this is your first year with a filing requirement, the tax season can be a real headache.
In this blog, we’ll look at 5 things every nonresident alien in the US can do to ensure their tax season runs as smoothly as possible.
Continue reading “How to prepare for the 2021 US tax season” »
eSports are a form of competition where video gamers from around the world connect and compete for money.
Despite being around since the 1970s, eSports only began to truly take off in the late 2000s. In fact, it is estimated that nearly 500 million people tuned into Esports in 2020, whether as enthusiasts or occasional viewers.
From amateur level gamers to tournaments with millions of dollars in prize money on offer, eSports has blown up in a big way over the past decade.
But tournament play isn’t the only way to earn an income from eSports.
The outbreak of COVID-19 has empowered gamers to find opportunities to earn an income from live-streaming and even ‘influencer’ marketing!
Many US universities are jumping on the eSports bandwagon too!
In fact, more than 60 education institutions in the US have introduced an eSports program and the NCAA are reportedly considering a role in the sport.
However, the IRS does not consider tax evasion to be a game.
So if you are in the US as a nonresident and have eSports gaming earnings, it’s important to keep in mind that you are obliged to declare this income for tax.
Determining how to include your eSports income on your tax return can be tricky.
With that in mind, we’ve put together this guide on everything you need to know about your eSports tax requirements.
The answer to this question largely depends on your visa and immigration status.
While many nonresidents will be entitled to earn an income from eSports, it is important to be aware that you will need to obtain the proper immigration status before you earn an income.
As eSports becomes increasingly popular and a greater number of individuals earn income, it is easy to imagine that the IRS will put a larger emphasis on the taxation of this industry.
With this in mind, it is wise to correctly determine your tax liability early so that you can avoid a tax bill (and potential fines) from the IRS later on.
Exactly how much you will pay in tax will depend on the type of income you earned. There are two options to consider: if you are paid to participate and play a number of hours daily, then your income will be treated as personal services and it may be taxed at a graduated rate.
However, if you win a one-off prize, the amount is taxable at 30% nonresident rate, unless it is covered by a tax treaty between your home country and the US. More on that here.
However, things may get confusing if you earn income from a tournament held in one state but play it remotely from the state in which you live.
To examine this in more detail, let’s take a look at a case study.
Abdul is a 23-year old Esports gamer, originally from Pakistan, but living in California on an F-1 visa. Abdul does not meet the Substantial Presence Test and is therefore deemed a nonresident for tax purposes.
In March 2021, he took part in an online tournament from his bedroom in California. He ended up finishing the tournament in first place and pocketing the prize money.
However, the tournament was held in New York.
Abdul may have to pay taxes on his Californian tax return as well as a New York tax return.
Abdul will be entitled to pay what is known as ‘jock tax’.
This is used by a state tax authority in order to charge eSport players that aren’t residents for income earned there.
Firstly, it depends on how you received the money.
If you entered a competition and won the money by yourself, you will technically have won a prize or award, which still needs to be taxed.
In general, nonresidents who receive this are taxed at a rate of 30%. You should complete a W-8BEN in order to confirm your foreign status and treaty eligibility with the payer of the award from this tournament.
If you are a nonresident in the US, and you are employed by a gaming company and received the money as salary, you will be required to file a form 1040-NR in order to pay tax on esports winnings.
On top of this, if you are hired by a company to play games professionally, which many gamers are, income will need to be added to your W-2 form by your employer.
The W-2 form should be issued by the company that hires you. Dependent personal service income (wages, salaries) are taxed at a graduated rate to NRA, unless these are not covered by a tax treaty agreement.
Depending on where the tournament took place, you may also be required to file a state(s) tax return.
Where to include it on your tax return will also depend on how much money you made from it.
If you only earned a small amount of money, you can claim it as additional income on your tax return.
It’s hugely important that you comply with US tax regulations.
After all, with the growth of the eSports industry, the IRS is stepping up its approach to the taxation of Esports income.
The message from the IRS? File your taxes!
You will need to file before the US tax deadline (April 15).
By not filing or declaring all of your income, you may receive penalties and fines from the IRS.
In general, you will be hit with the late-filing penalty of 5% for each month left unfiled.
If, after 60 days have passed and you still haven’t filed, the minimum penalty is $435 or 100% of the unpaid tax, whichever is less.
There is also a chance that any future US visa and Green Card applications may be affected as a consequence.
The good news is that you can easily prepare your US tax documents online with Sprintax!
Sprintax Returns can help you take care of your tax responsibilities!
If you are a nonresident in the US, our software will ensure that your income is properly declared, meaning you won’t end up paying any more income than you need to.
In fact, we are the only online Federal and State self-prep tax software currently available for nonresidents in the US!
If you are confused about any aspect of your tax obligations, we also offer 24/7 Live Chat.
If you have any questions about your tax situation, feel free to reach out to our team at any time.
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.
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.
Firstly, all of the following cryptocurrency transactions are considered taxable:
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.
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.”
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.
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.
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.
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.
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.
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.
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.
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.
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.
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” »
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.
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:
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.
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.
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.
People do not file their taxes for a variety of reasons. Perhaps you forgot or were unaware that you had to file. Perhaps you had a hefty tax bill that you could not cover.
Whatever the reason, if you did not file your tax return by the deadline, you should do it as soon as possible. Otherwise, you risk being hit by fines, and you can jeopardize your future visa applications.
As a nonresident, you probably know that you have the obligation to file a tax return if you were in the US for just one day, and even if you did not earn any income in order to stay compliant with your visa tax commitment.
This guide will outline everything you need to know as a nonresident if you did not file your prior-year tax return(s). So, keep reading!
Continue reading “How to File Prior-Year Tax Returns as a Nonresident Alien” »
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?” »
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” »
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.
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” »
(Updated for 2022)
Important: Since 2020, the IRS no longer uses form 1040-NR-EZ. Form 1040NR has been simplified and will be used instead.
Coming to the US from a foreign country presents both thrills and challenges to every nonresident. One of the more common difficulties nonresidents face is filing their tax return.
In this blog post, we’ll be discussing Forms 1040, 1040NR, 1040NR-EZ, and how they apply to each person’s situation.
Form 1040 (NR & NR-EZ) figures out the total taxable income of the taxpayer and determines how much of a refund the person may be due.
So, without further ado, let’s examine how to find out which form applies to you! Continue reading “Which tax form should I use: Form 1040, 1040NR or 1040NR-EZ?” »