All posts in Tax Tips

  • 5 Important US tax documents every international student should know

    US tax documents international students

    Let’s face it – tax is super boring!

    And when you move to the US as an international student or scholar, the local tax system will likely be the furthest thing from your mind.

    However, boring or not, compliance with the American tax authorities – the IRS – is crucial for any international student. In fact it’s one of the conditions of your visa! And how you handle your US tax affairs can play a big part in the outcome of your future visa or Green Card applications.

    But, by doing some research into US tax when you first arrive, you can save you a lot of hassle down the line.
    Continue reading “5 Important US tax documents every international student should know” »

  • How to add investment income in Sprintax when filing a tax return

    How to add investment income in Sprintax when filing a tax return

    Many nonresidents are unaware that income earned from investments in the US is subject to tax from the IRS.

    What’s more, if you have earned investment income, you may be required to file a tax return.

    With this in mind, if you are unfamiliar with the process of managing this tax responsibility, you may be feeling daunted by the task of filing correctly.

    In this guide we will discuss everything you need to know to include investment income on your US tax return.

     

    What is investment income in the US?

    In the US, investment income is considered to be passive income. This means that it is not effectively connected with trade or business inside the US.

    This is an important detail as it indicates that the income is taxed differently to regular US-sourced income.

    Essentially, investment income is made from interest payments, dividends, or capital gains realized on the sale of stock or other assets.

    For example, Cryptocurrency is one of the most popular areas where investment income is earned in the US.

    So, if you made a profit during the tax year on any cryptocurrency (which you traded from a US exchange or broker) while you were living within the US, you will have to declare it on a tax return.

     

    investment income tax

    Is there investment income tax in the US?

    Yes, if you earn investment income as a nonresident in the US, you will be taxed on it.

    However, many nonresidents are not aware of this tax on investment income in the US. Usually, any share of investment profit you make will be charged at the regular Capital Gains Tax (CGT) rate of 30%.

    Dividends received from your investments will also be taxed at 30%.

    However, if your home country has a tax treaty with the US, you may be able to claim a reduction in taxes paid.

     

    What forms do I need when filing my investment income tax return?

    If you earned income through Robinhood, eToro or a similar system, it’s likely you’ll receive a 1099-B form.

    You will receive your 1099-B form from your broker or banker. The information on your 1099-B form will need to be outlined on your 1040NR tax return.

    This form outlines gains and losses throughout the year for the trader.

    Information on the form such as the date the share was acquired and sold will be needed to complete it.

     

    How do I use Sprintax to file my investment income?

    Sprintax Returns can help you complete your 1040NR form so that your investment income is reported properly.

    Once you receive your 1099 form from your broker or banker, you will need to complete your tax return 1040NR with the information from the 1099-B, 1099-Int or 1099-Div forms you received.

    Remember, it’s vitally important you report your investment income tax on your tax return. Doing so will keep you compliant with the tax authorities.

    form 1099-B Copy A

    Below, you can see a step-by-step analysis of each part of the 1099-B form:

    1a – Description of Property

    Тhis will outline the number of transactions made toward one company.

    1b – Date acquired

    The very first date you bought the stocks

    1c – Date sold or disposed

    The last date you sold the stocks

    1e – Cost or Other basis

    The total amount on which you bought the transactions reported.

    1dProceeds

    The total amount on which you sold the transactions reported.

    1g – Wash sale loss disallowed

    Typically, to estimate your wash sale you have to subtract the wash sale amount from the cost basis amount from the broker’s report and enter the result in the cost basis field on Sprintax 1099-B to arrive at the correct gain.

    Note that this is not something that Sprintax will calculate for you, it is an amount that you will calculate by yourself and then be used by the software to prepare your return.

    Box 4, 16 – Federal/State taxes withheld

    You do not fill anything here as you do NOT have taxes withheld on the 1099 forms.

    Enter ‘0’ if you are not allowed to continue without filling the boxes.

    Box 14State name

    The state you lived in while buying and selling the stocks.

    Box 15State identification no.

    Enter ‘0’ as you do NOT have a state identification number.

    Payer’s details

    You should enter the details of the company you traded with. For example – Robinhood.

    If you do not have their tax identification number – you can put a ‘0’ in each box.

     

    When you are using Sprintax, you will be asked if your income is effectively connected to an US business or trade.

    If your only US business activity is trading in stocks, securities, or commodities (including hedging transactions) through a US resident broker or other agent, you are NOT engaged in a trade or business in the United States and you can select ‘No’ for this question.

    how to report investment income on tax return

    Where is the best place to file my US taxes?

    That’s easy – Sprintax Returns!

    Sprintax Returns was created specifically with nonresidents in the US in mind, aiming to ensure they complete the often tricky tax-filing process correctly and on time.

    Our specialist software was designed to help you e-file both federal and state taxes.

    We will guide you through the entire process – helping you to claim every tax relief you’re due to minimize your investment tax bill.

     

    With Sprintax Returns, you can:

    • Avoid unnecessary stress
    • Ensure you are compliant with tax authorities
    • Claim any tax refund due and avail of tax treaty benefits
    • Chat anytime 24/7 with our team in the Live Chat facility

    Simply create your Sprintax Returns account here or login to get started!

  • How can nonresident aliens get an ITIN before tax season?

    How to get ITIN number for non resident

    It is important that nonresident aliens file their US tax documents to remain compliant with the IRS.

    And when you sit down to file your end of year tax return you will need to have your taxpayer identification number (TIN) details close by.

    In short, there are two types of Taxpayer Identification Numbers – the Social Security Number (SSN) and the Individual Taxpayer Identification Number (ITIN).

    If you are not eligible for a SSN and have triggered a tax filing obligation, then you will need to apply for an ITIN. And exactly how to get your hands on an ITIN during tax season will be the focus of this piece.

     

    Continue reading “How can nonresident aliens get an ITIN before tax season?” »

  • Why do I owe federal tax on my 1040NR tax return?

    Why do I owe tax this year on my 1040NR

    If you are a nonresident alien (NRA) who lived or worked in the US, you will have tax responsibilities, regardless of whether you earned income.

    In essence, every nonresident is required to file their taxes.

    When you sit down to file you may discover that you owe tax. But don’t worry, it is very common for nonresidents to owe money to the IRS.

    In this guide we discover some of the reasons you may owe tax and how to file your tax return

    Continue reading “Why do I owe federal tax on my 1040NR tax return?” »

  • How to File Your Nonresident Tax Return from Outside the US

    Need to file a US nonresident tax return from outside America?

    Don’t worry. You’re not alone! Countless nonresidents face this very predicament every year.

    Filing from outside the US can pose its own unique set of challenges. But, with some planning, organization and a little help from your friends at Sprintax, filing your documents can be easier than you think!

    In this handy guide, we’ve got 5 top tips to follow if you’re filing your nonresident tax documents from outside the US.
    Continue reading “How to File Your Nonresident Tax Return from Outside the US” »

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

    US tax treaties guide

    (Last updated: 27 Feb 2023)

    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?” »

  • Your US Tax Residency Status Explained

    US residency for tax purposes

    Last updated: 16 January 2023

    Resident or Nonresident – this is the question!

    Determining your tax residency status is important, as it will determine 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 jeopardize 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” »

  • How to file a nonresident state tax return

    how to file a nonresident state tax return

    Tax season can be difficult for a lot of nonresidents who move to the US.

    With so many different aspects of taxes in the US, it can be easy to feel a little overwhelmed.

    Filing both state taxes and federal taxes are vitally important to ensure your nonresident state income tax withholding is correct.

    Nonresident state tax returns are one of the lesser-known areas of tax for many people, so in this blog post we’ll outline everything you need to know about them as well as how to file them.

    So, without further ado, let’s dive right in! Continue reading “How to file a nonresident state tax return” »

  • E-Signature on Tax Forms – Can I Sign My Tax Forms Online?

    e-signature on tax forms

    The topic of e-signatures on tax forms is a relatively new subject.

    That is because the IRS has traditionally required paper signatures on all of their tax forms.

    However, for some tax forms, the rules have changed somewhat over recent years.

    This is due to a number of reasons, mainly due to the fact that the IRS is constantly looking to modernize the way in which they operate.

    In this blog, we’ll delve into what the current rules on whether or not you as a nonresident alien on an F, J, M or Q visa can sign your tax forms online, and if it is beneficial for you.

     

    What is an electronic signature?

    An e-signature, also known as an electronic signature, is an efficient way to sign documents electronically with a digital ID.

    Where does this apply to tax forms? Well, many tax forms can be completed electronically, but rules have stated that they need a paper signature.

    However, the IRS has recognized that completing, printing, and sending tax forms is a significant burden as opposed to e-filing them, so they are beginning to change their rules.

    The current law that allows e-signatures on tax documents is in place until 31 October 2023.

    From the end of October 2023 onwards, it is likely that it will be extended.

     

    What are the benefits of an electronic signature?

    The main benefit of using an e-signature is that it saves time on tax return preparation for workers.

    As well as this, when you apply an electronic signature to your document, it will lock it from further editing. This provides a safeguard against potential document manipulation after the taxpayer has completed the form.

    They can also save you money, as every time you use an e-signature, it prevents you from having to print the document and ultimately spend more money on paper (and ink!).

     

    How to add an electronic signature to a form

    To add an e-signature to a tax form, you will need to try a software that offers this service. For example, DocuSign e-signature is officially recognized by the IRS.

    The IRS states that it can accept two types of electronic signatures on tax documents:

    • Digital signatures: If you have software that allows you to sign documents digitally, you may do this – it is more secure than an image signature.
    • Imaged signatures: This is done by hand signing a form, scanning it, and saving it as an image.

     

    What is a digital signature?

    There are subtle differences between electronic signatures and digital signatures, despite how similar they sound.

    Although both are used to add authenticity to documents, they perform different operations.

    Digital signatures use technology to encrypt a signature – ensuring the person is not lying about their identity.

    The difference is that e-signatures outline that a signatory is to be legally bound by the terms within a specific document.

     

    Does the IRS accept electronic signatures?

    Recently, the IRS has begun to lax its rules on tax document signatures.

    For nonresidents, that applies to many of the common tax forms used in tax season.

     

    Can I add e-signatures with Sprintax?

    Sprintax can add e-signatures on W-4, W-9, W8-BEN, and Form 8233, but not W-7. You can do this with Sprintax Forms.

    To e-file your tax documents with Sprintax, you will need to electronically sign your forms using the information requested on the screen when you are finalizing your return.

    Before signing your return, you must verify your identity with us. This will require you to provide information from your previous federal tax return (If you did not file a tax return for tax year 2020, please enter ‘0’ as your prior year adjusted gross income).

    Next, you’ll be asked to agree to a disclaimer and consent statements before agreeing the information you entered is correct.

    Finally, simply click ‘E-File My Return’ to electronically send your tax return to the IRS.

    Check out the handy video below that outlines how to electronically file your return with Sprintax Returns!

     

     

    How Sprintax will help you

    As a nonresident, Sprintax will offer assistance with all you need come tax season.

    At Sprintax, we:

    • Help more than 215,000 nonresidents (including more than 200 nationalities) with their taxes every year
    • Automatically generate completed tax documents including federal, state and FICA tax returns, form 8843, tax return amendments and more
    • Get you your maximum US tax refund. guaranteed – our average federal refund is $1,126
    • 24/7 Live Chat tax support

     

    E-file nonresident tax return with Sprintax

     

     

  • IRS tax scams – what they are and how to avoid them

    How to avoid IRS tax scams

    Most international students dread the thought of taxes when they are in the United States.

    After all, there is so much focus on without getting confused about things like tax forms and treaties.

    Many international students need help with their taxes – this can leave them vulnerable to people looking to exploit them.

    Tax and Internal Revenue Service scams have been on the rise over the past few years. Here at Sprintax, we strive to educate and assist international students in the US so that they don’t make mistakes when it comes to tax. Continue reading “IRS tax scams – what they are and how to avoid them” »

  • Five top takeaways from the Nonresident Tax Clinic

    At the recent Nonresident Tax Clinic, our panel of industry thought leaders explored the world of tax compliance and outlined the latest developments in rules and regulations for taxation of nonresidents in the US.

    This fascinating event was ideal for anyone working within a HR, payroll department, or international office and who is interested in learning more about nonresident tax compliance.

    If you missed the Nonresident Tax Clinic and would like to check it out, you can watch it back here. Continue reading “Five top takeaways from the Nonresident Tax Clinic” »

  • Line-up announced for the Sprintax Nonresident Tax Clinic 2022

    The Sprintax Nonresident tax clinic 2022
    • The Nonresident Tax Clinic takes place on Wednesday 17 August
    • This free-to-attend session will be a complete tax guide to hiring and paying foreign nationals
    • Practical advice for payroll department & international office staff
    • Fantastic panel of speakers confirmed

    Register here to save your seat Continue reading “Line-up announced for the Sprintax Nonresident Tax Clinic 2022” »

  • What are my tax obligations as a nonresident self-employed worker in the US?

    self-employed and freelancers tax obligations

    (Last updated: 13 June 2022)

    It’s tricky being self-employed – after all, you need to keep a close eye on your income and all of your deductible expenses!

    It’s even more tricky being self-employed in a country where you are unfamiliar with the local tax rules.

    What’s more, when you are considered a nonresident for tax, special rules apply to you when compared with a resident.

    In this blog we will cover the key information that nonresident self-employed individuals in the US need to know about their tax filing obligations. Continue reading “What are my tax obligations as a nonresident self-employed worker in the US?” »

  • I filed an incorrect tax return. Should I file an amended return to fix it and how?

    how to amend my tax return

    (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

    Made an error on your nonresident alien income tax return? Don’t worry, fixing it is not as difficult as you might think!

    Continue reading “I filed an incorrect tax return. Should I file an amended return to fix it and how?” »