Trying to figure out how to file your non-resident taxes in New York State? We can help you with that!
Uncle Sam is notorious for always getting his tax revenue, regardless of who you are.
You can’t even escape his taxes in death, after all!
This aggressive taxation certainly applies to nonresident aliens for federal return purposes, something that isn’t talked about very often but plays a huge role in the tax world.
Although obscure, we pride ourselves on having the knowledge it takes to file these types of returns, ensuring that your compliance needs are taken care of.
First, what are nonresident aliens?
A nonresident alien is someone who has not fulfilled one of two tests: the green card test (the person being lawful permanent resident of the United States) or the substantial presence test (being physically present for a certain number of days in the current calendar year or meeting a different threshold over the prior three years).
In this case, you would be considered a nonresident alien if you work in the United States for a certain number of days below the threshold, generating income in that time period.
Because you generated income in the United States, the United States imposes filing requirements upon you.
How do taxes for nonresident aliens work? Nonresident aliens are required to file a separate compliance form known as Form 1040NR or 1040NR-EZ.
Much like a standard 1040, these forms calculate the income generated in the United States and subject that amount to a tax rate. Basically, the Code stipulates that there are two forms of nonresident alien income: Effectively Connected Income and Fixed, Determinable, Annual, or Periodical (FDAP) Income.
Most often, if a nonresident alien is doing work in the United States with a US company, it is likely Effectively Connected Income unless otherwise carved out by the Code. This income is subject to deductions and is taxed on a graduated scale, much like a normal US citizen’s income.
FDAP Income, which most often relates to things like gain on the sale of real estate, are taxed at a flat 30% rate unless the United States is engaged with the filer’s home country in a tax treaty that stipulates a lower rate.
One other strange item associated with filing taxes for nonresident aliens is the lack of ability to electronically file.
This may not seem like much, but paper filing is generally slower, so if a nonresident alien is expecting a quick refund, that may not be the case.
Even stranger still is the individual states’ handling of the term “nonresident”.
While federally the term implies someone who is not a US citizen, the state term typically denotes an individual who lives in another state but may derive income from the state in which they’re required to file.
This may seem excessive, but states look to tax income from where it derived, so it makes sense (not to mention the fact that states strive for tax revenue in many ways, becoming increasingly aggressive as laws begin to change).
Filing a nonresident state tax return can be confusing, which is why we’re here to help. Before we help, though, we’re here to inform you of exactly what the nonresident income tax landscape looks like.
As mentioned, this is handled by the states, which implies that each state has their own set of rules and compliance regulations. This is most certainly the case. When filing a nonresident state tax return, it’s vital to understand what the state requirements are; we’ve got you covered when it comes to this area.
Because we’ve been doing this so long, Savvy & Suite has the expertise needed to navigate various states’ nonresident income tax forms, ensuring that your compliance needs are met.
Think this is as confusing as it gets? You should know with tax law that there is always more difficulty!
Let’s say you live in one state but work in the neighboring state. In some instances, your income is actually taxed on both your home state’s return and your nonresident tax return in the state that you work, but credits are added to your home state’s for the taxes paid on your nonresident tax return!
Even still, there is often a comparison of the tax rates paid in other states; some states will only allow a credit for the lesser of the actual tax paid on a nonresident return or the hypothetical tax that would have been paid had that income been earned in the home state (calculated by taking that income multiplied by the state rate).
If you live in a low tax rate state but work in a high tax rate state, it may seem like you’re out of luck, but let our team at Savvy & Suite get to work to determine your best course of action.
It’s clearly evident how so much can go wrong so quickly when it comes to filing nonresident income tax returns, but as we’ve said, we’ve got you covered.
What about New York City? Is there a New York City tax for nonresidents?
In most cases, the answer to this question is no, but there could be special circumstances that could cause you to pay City income taxes even though you don’t live in the City.
We’re the local experts on this matter, as we’re based here. We’ll answer any questions regarding this matter and can walk you through exactly when you would qualify for additional City taxes.
All these topics so far fly largely under the radar, but at Savvy & Suite, you can consider us up to snuff on these obscure tax concepts.
It may give laymen sick stomachs to read the above synopsis, but we live for these types of topics. We’ve been through the ringer when it comes to offering nonresident alien return prep services and are confident in our abilities, whatever your situation may be.
Have a unique state tax situation that requires analysis regarding nonresident and home state income tax filing? Let’s have a conversation about the best way to proceed forward.
Whatever your nonresident tax needs, we’re here for answers.