Income reporting for Ukrainians arrived with U4U program and having UHP status

[ikseek]

I arrived to US via Unite for Ukraine program and received Ukrainian Humanitarian Parole in August 2022.

I applied and received SSN and Employment Authorization Document in September.

I have an income as self-employed in Ukraine (and pay taxes in Ukraine).

How should I report my income and any suggestion on who can help me to learn the process?

Thank you!

[Anonymous_]

Check back. I will page Champ @pk for this.

[pk · Accepted solution]

@ikseek , welcome to the USA.

(a) are you here with your family or just by yourself?

(b)  since you have not passed the Substantial Presence Test (183 days total counting all the  days in 2022, 1/3 of days present in 2021 and 1/6 the days present in 2020 ), you can file as  1. Non-Resident Alien on form 1040-NR  ( not supported by TubroTax )  but this essentially allows you to file as a single and very limited deductions -- so generally higher tax.;       OR     2. as a resident for tax purposes --- this requires each member of your family / filing with you to have SSN, allows standard deduction,  you file on form 1040 ( supported by TurboTax), needs paper-filing ( file by mail ) because you need to add a request  note   stating:  (A). you were not a resident for tax purposes  in 2021,   (B). for the test period Aug 2022 ( when you entered the USA ) till the end of the year ( 12/31/2022 ) you have been in the  USA at least 75% of the days and that you have been here at least 31 days;  (C). that  you will pass the Substantial Presence Test ( SPT ) in 2023  and that you wish to be treated as a resident for the tax year 2022.  Note that this treatment as resident means that USA will tax your world income ( no matter the source)  starting from the first full day of presence in this country.

 This is only the answer to your specific questions here.  You can always come back and  one of us will help you through.

You may want to contact your local library for help on tax preparation  / education - there are lot of  groups  that help seniors and others  on filling out their returns  and often the local library is the contact point  ( TaxAid/ VITA / AARP etc. are all active in this).   Just be aware  US tax code  is quite complicated  but an individual normally needs very little of it.

Is there more I can do for you ?

pk

[ikseek]

@pk you're incredibly helpful, thank you very much!

I'm not married and my relatives are back in Ukraine, so I arrived alone, but I rent a house together with my friend's family of 6. That complicates form filling as I'm not always sure how to answer questions about "household income" (in benefits forms for example, my friends applied for benefits on their own and I applied on my own), so I usually state that I'm is my whole family.

I will try to get virtual assistance from TaxAid/ VITA / AARP you mentioned, looks like I should qualify for free help. Thank you!

[ikseek]

@pk do I understand correctly, that if I do file as a non-resident alien, I will still have to pay tax on my income in Ukraine during Aug-December?

[pk]

@ikseek , if you file as a Non-Resident, then you include ONLY your US sourced income for US taxes and on form 1040-NR ( not supported by TurboTax and usually not by the groups I mentioned earlier ). 

If you file as a resident ( exercising the first year choice as mentioned earlier  ), using form 1040  ( fully supported by TurboTax ) hen your world  income  from the day you were admitted to the USA becomes  taxable to USA.  To reduce the effects of the double taxation, you can use  foreign tax credit / deduction ( form 1666 ).

As always , if you need help , just add to this thread and one of us would be happy to help.

[Elena_B]

Hello! I have a similar situation. I arrived to the US on August 23, 2022 using the U4U status. I would like to make a first-year election to be treated as a resident alien for my 2022 tax return. To the best of my knowledge, I will meet the substantial presence test only in May 2023 since I have to divide by 3 my days of presence in 2022. Do I need to file the extension, Form 4868, and pay my non-resident tax estimate for 2022 by April 18, 2023? If yes, do I also need to file an extension of my Indiana tax return (IT-40PNR)? Thank you.

[DaveF1006]

Please read the following requirements to make the first year election.  There is a lot of material discussed here but the most notable provision is in step 2 of the requirements. Please read this over completely.

Individuals making the First-Year Election to be treated as dual-status aliens do not actually qualify for this election until the SPT (Substantial Presence Test)  is met in the following year. Therefore, an individual who wishes to make this election may request an extension to file his or her tax return in order to allow time to satisfy the SPT.  Once the individual has met the SPT, the individual may file a Form 1040 and include a statement indicating they are making the election under IRC § 7701(b)(4).

Yes, file the 1040 NR return and request extensions (pay the tax due) for both your Federal and Indiana state returns.  Turbo Tax does not handle filling non-resident returns but our affiliate at Sprint tax does.  Please select the link for further assistance. 

@Elena_B 

[pk]

@Elena_B , having through your post and @DaveF1006  response, I would like to add the items below:

(a) The first year choice to be treated as a resident for the year requires that : 1. you have lived in the USA for at least 31 days  in the current year; 2. you have lived at least 75% of the  days from the earliest 31 day test period till the end of the year ; 3.  You  file your return and apply to be treated as a resident for the year  only after you meet the SPT.             Thus in your particular  case  -- admitted to USA  on 08/23/2022, your earliest test period is 08/23/2022 .

(b) To meet the SPT, you count all days present in 2022 + 1/3 days  present in 2021 + 1/6 th days present in  2020.   So for you , because of continuous presence since 08/23/2022, you will generally meet your SPT in  Feb 2023  -- considering tax year 2022.  Once you meet SPT, you  generally count each year as the current year in question.

(c) coming back to request  to be treated as a resident for 2022, you need an attachment to your return prepared on form 1040 ( not form 1040-NR ), stating that (a) you have been in the USA for  31 days  in the year 2022,  (b) that starting from your first 31 day test period ( 08/23/2022)  you have been here at least 75% of the days till the end of the year; (c) that you were not a resident for tax purposes in 2021; (d) that you will/ have met the SPT in 2023.

(d) a point to note is that even though you will treated as a resident  ( taxed on world income from the day of start of the residency -- 08/23/2022), you still have to use itemized deduction because there is no way to allocate  the standard deduction ( this is disadvantage imho,but thems the rules).  Hence , I am not sure this helps you at all, other than  the lowered tax rate on passive income and not having to file form 1040-NR.

Is there more I can do for you ?

[Elena_B]

Thank you so much for your help. My only income is from my W-2. So, I agree there is no advantage requesting US tax residency (dual status) for my 2022 tax return since the standard deduction is not allowed in my case. Now I am going to file a nonresident tax return.

I am going to file the following forms to IRS: (1) 1040-V, (2) a personal check for the amount I owe, (3) W-2, (4) 1040-NR, (5) Schedule A for Form 1040-NR, (6) Schedule OI for Form1040-NR; and the following forms to Indiana (I am expecting a refund): (1) W-2, (2) IT-40PNR, (3) Schedule A , (4) Schedule C (since I share the apartment rent with my host family), (5) Schedule D, (6) Schedule F, (7) Schedule H, (8) Schedule CT40-PNR. Does this list look good?

[SergiiB]

Hi @pk I have a question of a similar nature. I am a Ukrainian national considering applying for a U4U scheme visa to the US. I am trying to understand the taxation rules for self-employment under such circumstance
If I come to the US under the U4U program and get paid on a 1099 basis I should file returns as self-employed, right? Can you please verify or correct my findings? As far as I understand until I meet the substantial presence criteria I will be considered a nonresident alien and as such I will not have to pay the FICA self-employment 15,3% tax. Say, I arrive in the US in November 2023 and have an average monthly income of $5000 on a 1099 basis. Until roughly somewhere in June 2024 I will be a nonresident alien. I will have to pay the standard federal and state (NJ) tax on my 1099 income as any  US citizen but will be exempt from the self-employment taxes. And after June 2024 I will become a tax resident and will have to pay self-employment tax on my income earned after June 2024. Is this correct?
Also, I won't be able to claim the standard deduction until the next year after I become a tax resident, which in this example will be 2025? 
Thank you for your help!

[pk]

@SergiiB ,  just to restate your situation :

(a) Non-Resident Alien  ( Ukraine citizenship ) arrives in the USA  on Nov 15th. 2023 with work visa

(b)  Spouse and children all enter the USA on the same day with work permit and SSN ---- Social Security Number .

This implies the following :

1.  For the year 2023, the taxpayer is a Non-Resident Alien and therefore is taxed  ONLY on  US sourced income, must use itemized deduction.

2.    The tax payer ( non-student / non-trainee )  and on receiving 1099-NEC compensation  must pay Social Security and Medicare  taxes to the tune of  15.3%  ( called SECA -- Self-Employment   version of FICA )

3.       The  tax payer , generally  may meet the requirements of asserting request for  First Year  Resident --- but the residency start date is still the first full day after arrival and cannot file return till after meeting Substantial Presence Test ( 183 days present counting  all the days present in 2023, 1/3 rd the days in 2022 and 1/6th the days present in 2020 ).  In your particular case and assuming that this 2023 entry to USA is a first within the last  three years, you would NOT meet SPT in 2023.

4.  In 2024, some where  in  May / June   ( for the example articulated ), you would be a Resident for Tax purposes  and therefore  for the year you  would generally be  dual status  -- Non-Residence  till SPT and Resident thereafter.  Depending on how you proceed , you could be a resident for the full year and therefore be able to use the Standard Deduction ( it requires a full year of residency / presence ), be taxed on   world income..

5. I n all cases though as a self-employed tax payer you are under the SECA rules i.e. 15.3% of net income taxed as contribution to Social Security and Medicare.  A W-2 employee on the other hand shares the 15.3%  ( on a 50-50 basis ) with the employer.

Does this answer your questions regarding this subject ?   Is there more I can do for you ?

Welcome to the USA , whenever you choose to come   and contribute to this country .

pk 

[SergiiB]

@pk Thank you for a very elaborate answer. This helps a lot. I really appreciate your help. 

[selldon]

The IRS has revised its guidance for people fleeing conflict and other “adverse conditions” in certain foreign countries, including Ukraine.

https://www.irs.gov/pub/irs-drop/rp-23-19.pdf

according to this document IRS provides a waiver, under Section 911(d)(4) of the Tax Code, of the time requirements for individuals who exclude their foreign-earned income when they must leave a foreign country because of war, civil unrest or similar adverse conditions in that country.

I arrived from Ukraine under the U4U program in February 2023(more than 183 days in 2023). Does this mean that I can use this exclusion and file taxes as a non-resident?

[pk]

@selldon , I think I have answered  this question  through your 2nd post on the subject.

Is there more I can do for you ?

pk