How to file bitcoin income to the IRS as a nonresident alien

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An alien is any individual who is not a U.S. citizen or U.S. national. A nonresident alien is an alien who has not passed the green card test or the substantial presence test.

If you are a nonresident alien at the end of the tax year, and your spouse is a resident alien, your spouse can choose to treat you as a U.S. resident alien for tax purposes and file Form 1040 using the filing status “Married Filing Jointly.”

Who Must File

You must file a return if you are a nonresident alien engaged or considered to be engaged in a trade or business in the United States during the year. However, if your only U.S. source income is wages in an amount less than the personal exemption amount (see Publication 501, Exemptions, Standard Deduction, and Filing Information), you are not required to file.

Even if you are not engaged in a trade or business in the United States, you must file a return if you have U.S. income on which...

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If you are required to file federal Form 1040NR (or 1040NR-EZ) to the IRS as a nonresident alien, how you file your Maryland income tax return depends on whether you are a legal resident of Maryland or a nonresident.

If you were domiciled in Maryland on the last day of the tax year, or you maintained a place to live in Maryland and were physically present in Maryland for more than six months (183 days) of the tax year, then you are a legal Maryland resident. In that case, you must file a Maryland resident tax return for the full tax year, using Form 502.

If you do not meet the above definition, you are not a resident of Maryland. You will need to file a nonresident income tax return to Maryland, using Form 505 and Form 505NR if you have income derived from:

tangible property, real or personal, permanently located in Maryland; a business, trade, profession or occupation carried on in Maryland; or, gambling winnings derived from Maryland sources.

Filing...

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Wikimedia Commons

The IRS has yet to rule on how to report income from Bitcoin.

That has left Bitcoin enthusiasts — assuming they are interested in passing an IRS audit — in a legal no man's land.

So we spoke with Tyson Cross, an attorney in San Diego specializing in IRS compliance who has extensively researched Bitcoin's tax implications since the currency blew up. His company is BitcoinTaxSolutions.com .

The Q&A has been lightly edited for brevity and clarity.

BI: Do you even need to report Bitcoin income in the first place?

TC: Most people who take a sensible approach say it is taxable and reportable, so they need to make sure they're being compliant in their filing.

The question of whether bitcoins are taxable is really not much question at all if you look at the way income defined, and the way courts have applied that definition, it reaches everything. If the guy who caught Barry...

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IJ ZemelmanOct-01-2015

Dual-status aliens face some unique circumstances when it comes to filing tax returns or reporting foreign accounts.

What is a dual-status alien? A dual-status alien is an individual who is considered to have been both a resident and a nonresident of the United States in the same tax year. This is generally caused by an immigration occurrence such as acquiring or revoking a Green Card, dealing with expatriation issues, or arriving or leaving with a visa.

Residents and nonresidents have different requirements when it comes to reporting income. There are also different tax forms for residents and nonresidents.

US Residents are required to file an annual U.S. federal tax return using one of the 1040 Forms. Nonresidents file their income tax returns by using Form 1040NR. For the period where dual status aliens are considered U.S. residents they are required to report their global income – regardless of where it came from....

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The IRS has yet to rule on how to report income from Bitcoin.

That has left Bitcoin enthusiasts — assuming they are interested in passing an IRS audit — in a legal no man's land.

So we spoke with Tyson Cross, an attorney in San Diego specializing in IRS compliance who has extensively researched Bitcoin's tax implications since the currency blew up. His company is BitcoinTaxSolutions.com.

The Q&A has been lightly edited for brevity and clarity.

BI: Do you even need to report Bitcoin income in the first place?

TC: Most people who take a sensible approach say it is taxable and reportable, so they need to make sure they're being compliant in their filing.

The question of whether bitcoins are taxable is really not much question at all if you look at the way income defined, and the way courts have applied that definition, it reaches everything. If the guy who caught Barry Bonds' [record-breaking] home run ball had income from that, I'm sure will...

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Dear Tax Talk,
My wife and I are both U.S. citizens and file our annual returns jointly. I have a question about reporting gifts from a nonresident alien to the IRS.

I have an aunt overseas (non-citizen and never lived in the U.S.) who would like to send us monetary gifts. I understand the IRS allows cash gifts of up to $100,000 from a foreign non-corporation party without needing to report on Form 3520. However, is this limit per person or per tax return, since we typically file jointly? Also, is this an annual or lifetime limit? Thank you.
-- Dave

Dear Dave,
According to the IRS, you and your wife each constitute a "U.S. person" and would only be required to report the gift if either one or both of you received "more than $100,000 from a nonresident alien (your aunt) that you treated as gifts or bequests." The only guidance the IRS gives for joint filers is that the 2 U.S. beneficiaries may file a joint Form 3520, Annual Return to Report Transactions...

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Some Questions & Answers

Bitcoin and Taxes

First, tax regulations differ for each country around the world, so how Bitcoin is taxed in one country may not be the same elsewhere. Please look into the tax laws of your own country to find the specific details. What is pretty much global, is that buying Bitcoin or any other crypto-currency is not in itself taxable. However, you are likely to be taxed when you sell or even spend those coins and make a profit. How much depends on the amount of gains, how long you owned the coins and if and how your country taxes capital gains.

Receiving or buying Bitcoin is much like buying a gift card. Generally there are no income taxes or sales taxes (a notable except is Australia that does charge GST on the Bitcoin amount) but you might have to pay sales taxes or VAT on the fees portion charged by the exchange for the service of selling you the coins. Much like you might have to pay tax on the...

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Since resident and nonresident aliens are taxed differently, it is important for you to determine your status. You are considered a nonresident alien for any period that you are neither a United States citizen nor a United States resident alien. You are considered a resident alien if you met one of the following two tests for the calendar year:
The first test is the "green card test." If at any time during the calendar year you were a lawful permanent resident of the United States according to the immigration laws, and this status has not been rescinded or administratively or judicially determined to have been abandoned, you are considered to have met the green card test.
The second test is the "substantial presence test". For the purposes of this test, the United States includes the following areas:

All 50 states and the District of Columbia The territorial waters of the United States, and The seabed and subsoil of those submarine areas that are adjacent to U.S....
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Requirements

Generally, nonresident aliens who receive any type of payments, e.g., salary, stipend, honorarium, scholarship, etc. are required to file a Federal Tax Return. Most states, including Vermont, California, Massachusetts, and the District of Columbia, also require you to file a tax return. See more information on State tax returns.

In addition to the Federal Tax Return (Form 1040NR or Form 1040NR-EZ), every nonresident alien on a F, J, M, or Q visa needs to file Form 8843. If you do not have to file a federal tax return, but are a nonresident alien on a F, J, M, or Q visa, you and your dependents on a F, J, M, or Q visa each need to send Form 8843 to the IRS. You do not need a social security or individual taxpayer identification number to do so. The federal tax return preparation software the college provides to you, FNTR, prepares Form 8843 for you or you can wait for the Tax Office's email in late spring which will give you access to Form 8843 for...

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On Jan. 1, German citizen Hans Schlabaugh arrived in the United States for business meetings. He returned to Germany 10 days later. Then, on May 15, Schlabaugh traveled to the U.S. again, this time on a visa to work for the American division of his employer for the remainder of the year.

For tax purposes, the Internal Revenue Service considers Schlabaugh a U.S. nonresident alien until May 15. After May 15, he is considered a U.S. resident alien. Will this affect the tax forms Schlabaugh will file for that tax year?

In a word: Yes. He'll need to file federal income taxes as a dual-status alien, which recognizes a person as a U.S. resident alien and a U.S. nonresident alien in the same tax year. Typically, this occurs the year a non-U.S. citizen arrives in or departs from the U.S., as long as certain residency requirements are met.

Being a dual-status alien shouldn't be confused with citizenship, though. It only applies to federal taxes. It signifies that a...

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You qualify as a Non-Resident Alien with Income if you meet the following criteria:

Have been in the U.S. as an F-1, or J-1 Student for less than 5 calendar years Have been in the U.S. as a J-1 non-student (Research Scholar/Professor) for less than 2 calendar years Have been in H-1B status for less than 183 days during the past year. Did not obtain Permanent Residency status (Green Card) at any time in the past year. Did not obtain U.S. Citizenship at any time in the past year.

If you meet any of the above criteria and you earned money from a U.S. source in the past year, you can use Glacier Tax Prep to file your taxes. UC International Services has purchased the use of Glacier Tax Prep to help you file your taxes online. Information on using this service is below.

Can I use a different tax service or software?

If you have a Non-Resident Alien tax status, it is not recommended that you use services like H&R Block, Jackson Hewitt or computer software...

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U.S. traders move abroad, others make international investments and non-resident aliens invest in the U.S. How are their taxes handled?

U.S. resident traders living abroad U.S. resident traders with international brokerage accounts Report of foreign bank and financial accounts IRS Offshore Voluntary Disclosure Program Foreign retirement plan elections and reporting Foreign assets reported on Form 8938 U.S. traders move to Puerto Rico to escape capital gains taxes Renouncing U.S. citizenship or surrendering a green card Non-resident aliens are opening U.S. brokerage accounts, and Foreign partners in a U.S. trading partnership can be tax-free

U.S. resident traders living abroad

U.S. tax residents are liable for federal tax on worldwide income whether they live in the U.S. or a foreign country. If you qualify for “bonafide” or “physical residence” abroad, which is living abroad for an entire tax year, try to arrange Section 911 “foreign earned income” benefits on Form...

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NON-RESIDENT ALIEN TAX FILING. 1042-s, w-2 & cintax. Nonresident or resident alien?. There are four definitions that are important to the international tax process:

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If you count as a resident alien for matters of taxation in the US, we have explained filing your US taxes at length in our guide to federal income tax in the United States. We strongly advise you to read the linked article first, as it outlines the basics of the US tax system and explains such essential concepts as fiscal residency.

For non-resident aliens, however, US taxes work a little differently than for citizens and foreign tax residents. Of course, you still need to send in your annual tax return to the IRS by the deadline on April 15. You’ll need a social security number, or taxpayer identification number, as well.

But as always, the devil’s in the details. If you don’t pass the fiscal residency test, you are subject to different regulations concerning US taxes.

Taxation According to the Territorial Principle

When you determine all your income sources in order to do your taxes, please note that for non-resident aliens, US taxes are only due on...

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By definition, an "alien" is an individual who is not a U.S. citizen. Aliens are classified as non-resident aliens and resident aliens by the Bureau of Citizenship and Immigration Services.

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Resident Alien

Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens.

To be classified as a resident alien, the individual must meet one of two tests:

Green Card Test
A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant. This status usually exists if the Bureau of Citizenship and Immigration Services has issued a green card.

Substantial Presence Test
A non-resident alien is classified as a resident alien for tax purposes if they were physically present in the U.S. for 31 days during the current year and 183 days during a three-year period that includes the current...

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Regardless of whether you are a permanent resident or an alien; while residing in the US, you need to have a serious approach towards paying taxes.

US federal laws require everyone living in the country to file an income tax return. For this purpose, the government issues a particular tax identification number that differs for different individuals. For instance, if you are a US citizen then you must have a social security number to file a federal income tax return.

But if you are an immigrant having resident alien status, then a different tax identity will be issued to you that is; an individual taxpayer identification number. You will not be able to file your income tax return without this unique identity.

Resident Alien Status

You become eligible to acquire a US resident alien status if you possess a green card within a calendar year. You also fall under this category if you meet IRS’s substantial presence test requirements. Your tax filing...

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Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ.

If you are any of the following, you must file a return.

You do not need to file Form 1040NR or Form 1040NR-EZ if you meet either of the following conditions.

Your only U.S. trade or business was the performance of personal services, and

Your wages were less than $3,700, and

You have no other need to file a return to claim a refund of overwithheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty.

You were a nonresident alien student, teacher, or trainee who was temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa and you have no income that is...

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What is a 'Nonresident Alien'

A nonresident alien is a classification assigned to a non-U.S. citizen, or foreign national, who doesn't pass the green card test or the substantial presence test. If a non-citizen currently has a green card or has had a green card in the past calendar year, he or she would pass the green card test and would be classified as a resident alien.

BREAKING DOWN 'Nonresident Alien'

If the individual has resided in the U.S. for more than 31 days in the current year and has resided in the U.S. for more than 183 days over a three-year period, including the current year, he or she would pass the substantial presence test and also be classified as a resident alien.

Resident aliens are taxed on all earned income as if they were U.S. citizens, but a nonresident alien is subject to taxation only under specific circumstances. For a nonresident alien, only income that is generated from U.S. sources, excluding certain investments, is...

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Dear Tax Talk,
I have owned a house in Florida for 16 years and haven't done a tax return for 12 years, when I left the country. Sometimes the house gets rented for a few months, but this is the first year the house had a full-time tenant and I will make a profit. My only bank account which is associated with the property has only ever shown transfers into the account from overseas to pay the mortgage, as it was empty. I'm concerned because someone told me I should do a tax return even though I have no income, job or profit. Is this right? I still live overseas and am not a U.S. citizen.
-- Matthew

Dear Matthew,
With the limited information you have provided, my answer is based on the assumption you will be classified for U.S. tax purposes as a nonresident alien and as such this requires you to report your rental property income on Form 1040NR, U.S. Nonresident Alien Income Tax Return.

The answer to your question is that both resident and nonresident...

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