The U.S. tax system is complex, and many Chinese people, even after living in the U.S. for many years, have little understanding of the detailed tax system, let alone foreign students or new immigrants who have just arrived. Recently, there are several Chinese who have been in the U.S. for a short period of time and are worried about filing their tax returns. They have consulted with different accountants and received different or even opposite responses on whether to declare their overseas assets.
Chinese with F1 visas: one person for each statement, don’t know who to listen to
According to the report, Chinese Xiao Zhang took the F1 visa and has been living in the United States for three years. Last year, he sold his home in China and asked his relatives and friends to help remit hundreds of thousands of dollars to his account in the United States one after another.
A friend of Zhang’s who is a real estate agent told him to remember to declare these overseas incomes. A female tax preparer said he did have to file an overseas gift return (Form 3520) and said she could help with the filing for a fee of $200.
Zhang found a male tax preparer, but the male tax preparer said Zhang had not yet received his green card and was not a tax resident, so he did not have to file Form 3520.
Zhang was confused and did not know what to do when he met a financial planner who said to him seriously, “You are a new immigrant and do not understand the U.S. taxation, the IRS is more stringent in investigating overseas assets in order to close the tax loopholes and collect them more severely. I have a client who used to be a non-tax resident, so he didn’t file a return. As a result, the IRS sent him a letter a few years later, asking why he didn’t fill out the asset declaration. Anyway, declare these forms only to the IRS to disclose information about overseas assets, and do not pay taxes, then you declare it does not have any loss, lest in case of future green card applications are interrogated how your account has so much money, is income, borrowing or money laundering? You can’t cope with it, it’s better to do it without any leakage.”
Xiao Zhang said, “These professionals a person a statement, let me very nervous, but also very torn, whether to declare or not?”
Chinese with B1 visa: asked 5 4 said not to report
Chinese Xiao Li that is to take the B1 visa, currently in the United States for a year, but also last year sold the house, remitted 200,000 over.
Xiao Li said he checked the U.S. tax information, because he has not yet got a green card, only work cards, but in the United States has been more than 183 days, belong to the tax resident. He heard that tax residents must report if they receive remittances or transfers from China or gifts from parents, relatives and friends to buy a home or property in the U.S. each year, more than $100,000. If you report late or do not report, when you are caught, you will be penalized at 5% of the remittance amount every month, and the maximum penalty will be 25% of the remittance amount, plus interest, which is terrible.
“But I asked five accountants in a row, and all but one said I had to declare it, and the other four said I didn’t have to. Do I have to declare my home sale information, and overseas account information or not? With so many accountants, who should I listen to?”
Accountants: specific analysis of specific issues
In this regard, Mr. Tang of the New City Accounting Firm said that specific issues should be analyzed specifically. The United States imposes global income taxation on tax residents and requires them to disclose information on overseas financial assets, bank accounts, shares of holding companies, etc., while non-tax residents are only taxed on their income within the United States.
How do you determine the difference between a tax resident and a non-tax resident? It is the Green Card Test and the Substantial Presence Test, but there are some special cases of personal exemptions (exempt individuals) that do not apply to the actual number of days of residency test, the more common ones include F/J/M/Q visas, student visas are relatively simple to judge, and visiting scholars are relatively more complicated. For visiting scholars, the determination is more complicated.
For example, although Xiao Zhang has lived in the U.S. for three years, he is still a student and the residency test does not apply (183 days or more), so he is a non-tax resident and has no reporting obligations, so he does not need to report his home sale and foreign transfer information for 2020.
Although Xiao Li has only lived in the U.S. for one year, he meets the residency test (183 days or more) and is a tax resident with filing obligations, so he needs to report his home sale and foreign transfer information for 2020.
Mr. Tang finally said that although many new immigrants are tax residents and theoretically need to declare the above information, in practice, they may not understand the complex tax laws of the United States, may be too much trouble or have various worries, and did not bother to do the information declaration, as to whether the immigration bureau will check it is not easy to say, it is recommended to try to find more senior professionals to consult.
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