Taxpayer asks:
Just curious, are the foreign taxpayers who are not American citizens also going to get the stimulus rebate checks? I’ve heard people from all over the world have been filing tax forms for the stimulus payment. (And apparently, these are non-American citizens who have social security numbers).
Taxgirl says:
Permanent residents overseas who are American citizens (and otherwise qualify) will receive a rebate. You can see my prior answer to this question here.
Generally, overseas taxpayers who are not American citizens would not have a legally obtained Social Security number. Social Security numbers are assigned only to American citizens and others who qualify due to their immigration status (usually, green card holders). Non-American citizens who live abroad but are subject to US taxation file taxes using an ITIN; ITIN holders do not qualify for the rebates.
Additionally, nonresident aliens do not qualify for the rebate nor do taxpayers who file form 1040NR or Form 1040NR-EZ, Form 1040PR or Form 1040SS.
For more information about taxpayers who are ineligible for a rebate, see my prior post.
As for fraudulently obtaining a rebate, I don’t mean to sound patronizing but the rebate is, in most cases, not a lot of money for a single taxpayer under those circumstances. It seems like a lot of work to illegally obtain a Social Security Number overseas, file a tax return (and likely owe tax as an overseas taxpayer) simply to garner up to $600.
Even if you somehow legally obtained a Social Security number and file a regular 1040 while overseas – and not a US citizen – you would have to incur a tax liability to qualify for the rebate. And you’d be on the IRS’ radar moving forward, which would be a deterrent for first time filers simply to get the rebate. I just don’t see it.
So, I’m inclined to believe that it’s not happening as much as rumors would have folks believe.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl!
Hate her because she’s beautiful and rich.
Supermodel Gisele Bundchen of Brazil topped Forbes.com’s 2007 list of The Top Earning Models in the World with a whopping $33 million earnings last year. Even more surprising, Kate Moss came in second at a “paltry” $9 million – a pretty impressive differential.
Estimates as to Gisele’s US tax bill vary. Gisele was born in Brazil but currently boasts residences around the world, including a posh New York apartment. She pulls in money from several sources, including at least six major ad campaigns. Two of those ad campaigns are with US companies: Limited Brands, which owns Victoria’s Secret, for which Gisele earns approximately $5 million/year and Apple Computer, who signed a multi-million dollar contract with Gisele in 2006. She has also appeared in campaigns for American designers Michael Kors and Ralph Lauren.
Foreign citizens may still be taxed as US residents depending on a number of factors, such as length of residency and nature of employment. If a foreign citizen is taxed as a US resident, that taxpayer must report and pay tax all worldwide income (there are credits for taxes paid to other countries). In other words, if Gisele is taxed as a US resident, she must report all $33 million in income, whether earned in the US or not. On the other hand, if she is taxed as a nonresident, she must report all income earned from US sources.
All that said, Gisele’s tax bill will likely take a dip next year when Gisele’s income dips: her contract with Victoria’s Secret is ending.
Changes to the Tax Code, tax reporting and tax policy are generally reflective of the state of mind of the country at any given time. In other words, Congress uses taxes to modify your behavior (gasp). Think about it… We tax cigarettes and alcohol (sin taxes) to discourage those behaviors and we call those taxes "sin taxes." We impose luxury taxes on goods that we believe to be extravagant because, well, why shouldn’t the wealthy pay more, right? And of course, we offer incentives to purchase homes rather than rent because that’s the American dream.
So, what’s going on now that would merit a mention in tax policy? There’s a lot of talk lately on the federal level about immigrants, their effect on our economy and how our government should treat immigrants, both legal and illegal. It should come as no shock to anyone then that the IRS seems to be focusing on international taxpayers and immigrants with their latest round of revisions.
Take federal forms 8898 and 8840, for example. Those forms involve the residency requirements of taxpayers in American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the United States Virgin Islands. To qualify as a resident of those US possessions, you must pass the physical presence test, which means that you have been present in the US possession for at least 183 days during the taxable year, you must not have an established tax home outside of the U.S. possession during the taxable year, and you must not have a closer connection to the United States or a foreign country than to the U.S. possession. This is significant because a number of individuals want to be classified as a resident for tax purposes in order to tax advantage of certain tax attributes only allowable to US residents, such as the ability to itemize deductions.
In 2006, the IRS released federal form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, so that taxpayers who change their residency to or from a US possession post 2001 (to present) can formally notify the IRS of the change. If an exception applies, a resident alien would file federal form 8840, Closer Connection Exception Statement for Aliens.
However, this has proved to be a bit tricky. Apparently, the forms (I’ll admit that I haven’t prepared either one) are quite detailed. The IRS has received feedback that the reporting requirements on certain sections of the form are quite burdensome. As a result, the IRS is going to modify the forms to require less information. Yeah, you read that right. The IRS is going to require fewer details. Specifically, the information on lines 17 and 29 of federal form 8898 and lines 20 and 31 of federal form 8840 will be modified. Until then, taxpayers can simply disregard these line items by relying on Notice 2006-73. The catch (there had to be one) is that supporting documents for the information requested on those lines must be available for inspection, if necessary. C’mon you didn’t really think the IRS was going to give you that much of a break, did you?
