In the USA, an immigrant is considered as an individual who wants to become a Lawful Permanent Resident in the United States. Permanent Residents have the right to legally and permanently reside and work in the United States. If an immigrant lives more than 4–6 months per year then he/she is considered resident aliens for tax purposes and is taxed in practically the same way as US citizens.
There is a saying that immigrants don’t have to pay any taxes for the first 7 years in the USA. This is not true; in fact, it might have come from someone’s misunderstanding of the concept of “exempt individual.” It might also come from the misunderstanding of how tax treaties or social security treaties work.
Jump To A Section
- 1 Residency Under U.S. Tax Law
- 2 What Is The Taxpayer Bill Of Rights
- 2.1 The Right To Be Informed
- 2.2 The Right To Quality Service
- 2.3 The Right To Pay No More Than The Correct Amount Of Tax
- 2.4 The Right To Challenge The IRS’s Position And Be Heard
- 2.5 The Right To Appeal An IRS Decision In An Independent Forum
- 2.6 The Right To Finality
- 2.7 The Right To Privacy
- 2.8 The Right To Confidentiality
- 2.9 The Right To Retain Representation
- 2.10 The Right To A Fair And Just Tax System
Residency Under U.S. Tax Law
Taxation in the USA is significantly affected by residency status. The residency rules for tax purposes are found in I.R.C. § 7701(b). Although the tax residency rules are based on the immigration laws concerning immigrants and nonimmigrants, the rules define residency for tax purposes in a way that is very different from the immigration laws. If you are an alien (not a U.S. citizen), you are considered a nonresident alien, unless you meet one of two tests for the calendar year (January 1 – December 31).
You are admitted to the United States as, or change your status to, a Lawful Permanent Resident under the immigration laws (the Green Card Test), or
You meet the Substantial Presence Test (which is a numerical formula that measures days of presence in the United States).
In some cases, aliens may choose to override the result of the Green Card Test and/or the Substantial Presence Test by:
1. Making the “First-Year Choice” to be treated as a resident alien for at least part of the year of arrival;
2. Choosing with their resident alien or U.S. citizen spouse to be treated as a resident;
3. Claiming a closer connection to a foreign country; or
4. Qualifying as a resident of a foreign country under its laws and being eligible to be treated, and claiming treatment, as a resident of the foreign country under the residency tie-breaker rules of an income tax treaty between that country and the United States.
What Is The Taxpayer Bill Of Rights
Every taxpayer in the USA has a set of fundamental rights that they can enjoy when paying taxes. So if you are paying tax then you should know them when dealing with the U.S. Internal Revenue Service. These rights are known as the “Taxpayer Bill of Rights.” The rights are:
1. The Right to Be Informed
2. The Right to Quality Service
3. The Right to Pay No More than the Correct Amount of Tax
4. The Right to Challenge the IRS’s Position and Be Heard
5. The Right to Appeal an IRS Decision in an Independent Forum
6. The Right to Finality
7. The Right to Privacy
8. The Right to Confidentiality
9. The Right to Retain Representation
10. The Right to a Fair and Just Tax System
The Right To Be Informed
As a taxpayer, you have the right to know what exactly you need to do to comply with the tax laws. So you have the right to have clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. You must be informed of IRS decisions about the tax accounts and to receive clear explanations of the outcomes.
The Right To Quality Service
You have the right to receive prompt, courteous, and professional assistance while dealing with the IRS. The authority must speak in a way that you can easily understand. So with this right, you can expect clear and easily understandable communications from the IRS. Moreover, you will be able to speak to a supervisor about inadequate service.
The Right To Pay No More Than The Correct Amount Of Tax
If you are paying tax then you have the right to pay only the amount of tax legally due, including interest and penalties. This Taxpayer Bill of Rights ensures that the IRS applies for all tax payments properly.
The Right To Challenge The IRS’s Position And Be Heard
While paying taxes you have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
The Right To Appeal An IRS Decision In An Independent Forum
The taxpayers have the right to have a fair and impartial administrative appeal of most IRS decisions, including many penalties. Moreover, they have the right to receive a written response regarding the Office of Appeals’ decision. This right also gives the taxpayers the power to take their cases to court.
The Right To Finality
If you are paying taxes then this law gives you the right to know the maximum amount of time you will get to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Moreover, you will get to know when the IRS has finished an audit.
The Right To Privacy
Privacy is very important for a taxpayer. So as a taxpayer you have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections, and will provide, where applicable, a collection due process hearing. Click here for more information.
The Right To Confidentiality
It’s a taxpayer’s right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. It’s the duty of the authority to take appropriate action against the employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
The Right To Retain Representation
This law gives the taxpayer right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Moreover, they have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
The Right To A Fair And Just Tax System
It’s the taxpayer’s right that the tax system will consider facts and circumstances that might affect the underlying liabilities, ability to pay, or ability to provide information timely for the taxpayer. Moreover, taxpayers can receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.