IRS Publishes Updated 'Tax Guide For Aliens'

By ExpatBriefing.com Editorial 07 February, 2014

The Internal Revenue Service has released a revised United States Tax Guide for Aliens, providing guidance for resident and nonresident aliens for use in preparing their 2013 tax returns, and, in particular, how to determine their residence status and what information they need to file those returns.

For tax purposes, an alien is any individual who is not a US citizen, but resident aliens generally are taxed on their worldwide income, the same as US citizens, while nonresident aliens are taxed only on their income from sources within the US and on certain income connected with the conduct of a trade or business in the US.

It is pointed out that the information in the publication is not as comprehensive for resident aliens as it is for nonresident aliens, as, since resident aliens are generally treated the same as US citizens, they can find more information in other IRS publications.

New provisions described within the guide include an increase in the personal exemption for nonresident aliens for tax years beginning in 2013 to USD3,900, and an extension through 2013 of the treatment of a regulated investment company (RIC) as a qualified investment entity (QIE).

The special rules that apply to distributions from a QIE attributable to the gain from the sale or exchange of a US real property interest will therefore continue to apply to any distribution from a RIC in 2013. Beginning in 2014 (unless extended by legislation), a RIC will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a real estate investment trust.

The exemption from tax of interest-related dividends and short-term capital gain dividends received from mutual funds or other regulated investment company was scheduled to expire at the end of 2011, but has been extended through 2013. The exemption expires for amounts paid in tax years beginning after December 31, 2013 (unless extended by legislation).

For 2013, nonresident taxpayers may be required to report Additional Medicare Tax withheld by employers. Beginning in 2013, in addition to the Medicare tax, a 0.9 percent Additional Medicare Tax applies to Medicare wages and self-employment income that are more than USD250,000 if married filing jointly or USD125,000 if married filing separately. There are no special rules for nonresident aliens for purposes of Additional Medicare Tax.

Nonresident aliens, it is said, should also remember that refund requests for tax withheld and reported may require additional time for processing, and up to 6 months should be allowed for these refunds to be issued.

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