BLOG (by Carmen Arce – 11/16/10)
When asked to blog on any subject of importance for our clients, I decided to blog on tax issues that keep popping up and creating problems for many foreign nationals.
According to Wiktionary.com, the English proverb “a stitch in time saves nine” means that a little effort expended sooner to fix a small problem, prevents it from becoming a larger problem requiring a lot of effort to fix later. This proverb comes to mind each time I review a client’s Federal Income Tax Return and realize that the taxes have to be amended because they were not done correctly the first time.
Here is one typical scenario: Mr. Smith is a U.S. Citizen. His wife (Mrs. Smith Lopez) is a Mexican National. The couple has been married for three years and Mr. Smith is in the process of petitioning for his wife. Prior to submitting the marriage-based adjustment of status, I realize that Mr. Smith has filed his tax return as single for the past three years although he was actually married.
When I ask Mr. Smith why he filed as single he responds that the person preparing his taxes told him that he could not claim his wife because she did not have a social security number therefore he had to file as single. THIS IS INCORRECT! Mr. Smith’s marital status does not change based on whether his wife has a social security number or not. Either way, Mr. Smith IS married and should have filed his taxes as married. We would recommend Mr. Smith amend his taxes immediately to correctly file as married.
Not only will the amendment cause a filing delay, it may cost Mr. Smith more fees in tax preparation and it could also lead to USCIS questioning why he filed as single in the first place which could lead to additional investigation into his case.
Another very common misunderstanding is that if you are not a U.S. Lawful Permanent Resident, then you are not a U.S. Resident for tax purposes either. This is incorrect. There is a big difference in being a Lawful Permanent Resident for immigration purposes and a U.S. Resident for tax purposes. Regardless of a person’s immigration status, if a person has spent substantial time within the U.S. during the past three years (over 183 days) then that person may be determined to qualify as a U.S. Resident for tax purposes. My best advice is if you fall within this category, then consult with a CPA or a Tax Attorney prior to filing your taxes.
These are two of the most common issues that I see on a regular basis and that end up causing delays and complications in my clients’ immigration cases. I cannot stress enough the importance of properly filing your federal income tax return (and your corporate income taxes as well). It is worth the peace of mind to spend a few more dollars on a licensed tax professional rather than making a mistake on such an important matter that will cost you more in the long run. Remember – A STITCH IN TIME SAVES NINE!!!