Banking, Money and Taxes in the USA
By John Harvey of ExpatCPA.com
Almost all international banks are represented in the USA, and for the most part each will have at least a reciprocal bank or branch present in the USA for transactions.
Banking in the USA is extremely competitive and an array of services and rates can make choosing where to open an account confusing. It is often easier to maintain your overseas account, open a US based account at the same bank and transfer money back and forth overseas. It is possible to relocate successfully without opening an American account, and expats on short stays usually choose to use their overseas account.
To open a checking account, expats moving to the USA should confirm with their bank what forms of identification are required, but generally speaking passport, immigration information, social security number and proof of address are often expected.
Credit histories can be transferred to the USA, although this is a hassle many expats choose to forgo in favour of making major purchases through their overseas account. Property can be bought without a US bank account.
USA’s tax laws are hugely complex and made more so by expatriation. There are both state and federal taxes on income, and property and sales taxes differ by state. State taxes differ considerably both in amount and regulation.
A resident alien (foreign national; living in the United States) is generally taxed in the same manner as a U.S. citizen. Resident aliens can be classified in two ways, either according to the lawful permanent residence test ("green card") or the substantial presence test.
For the first and last year in the US as a resident, you simultaneously may be considered a resident and non-resident; and consequently may still be required to disclose your worldwide income for the portion of the year that you are considered a US resident.
Non-residents who are doing business in the USA are taxed on the income they received in the USA if it is significant. Expats in the USA may be exempt from some forms of taxation such as social security. All of this is further complicated by tax treaties with other countries. Professional tax advisers are widely used by USA citizens even with less complicated tax returns, thus it is highly recommended that expats to the USA hire a tax planner specializing in expat taxes. We have provided some useful links for these service providers.
Almost all international banks are represented in the USA, and for the most part each will have at least a reciprocal bank or branch present in the USA for transactions.
Banking in the USA
Banking in the USA is extremely competitive and an array of services and rates can make choosing where to open an account confusing. It is often easier to maintain your overseas account, open a US based account at the same bank and transfer money back and forth overseas. It is possible to relocate successfully without opening an American account, and expats on short stays usually choose to use their overseas account.
To open a checking account, expats moving to the USA should confirm with their bank what forms of identification are required, but generally speaking passport, immigration information, social security number and proof of address are often expected.
Credit histories can be transferred to the USA, although this is a hassle many expats choose to forgo in favour of making major purchases through their overseas account. Property can be bought without a US bank account.
Taxes in the USA
USA’s tax laws are hugely complex and made more so by expatriation. There are both state and federal taxes on income, and property and sales taxes differ by state. State taxes differ considerably both in amount and regulation.
Paying taxes as a resident in the US
A resident alien (foreign national; living in the United States) is generally taxed in the same manner as a U.S. citizen. Resident aliens can be classified in two ways, either according to the lawful permanent residence test ("green card") or the substantial presence test.
- Green Card Test: An alien who is a lawful permanent resident of the United States under U.S. immigration laws (receives a “green card”) will be considered a resident alien for federal tax purposes. Resident status begins in the first calendar year in which the alien is a lawful resident and is physically present in the United States for at least one day. Resident status continues until permanent resident status is terminated or abandoned.
- Substantial Presence Test: An alien will be considered a U.S. resident if the individual is physically present in the United States for at least 31 days during the calendar year and 183 days for the current and two preceding calendar years. For purposes of the 183-day requirement, each day present in the United States during the current calendar year counts as a full day, each day in the first preceding year as 1/3 of a day, and each day in the second preceding year as 1/6 of a day. Exceptions as to what days an alien is considered to be physically present in the United States include: regular commuters from Canada or Mexico; days in transit; medical conditions preventing departure; certain teachers, trainees, and students; professional athletes; crew members of foreign vessels; and foreign government workers. Generally, Form 8843 must be completed to exclude days of physical presence in the United States. Presence in U.S. territories or possessions does not count as presence in the United States for this purpose.
For the first and last year in the US as a resident, you simultaneously may be considered a resident and non-resident; and consequently may still be required to disclose your worldwide income for the portion of the year that you are considered a US resident.
Paying taxes as a non-resident in the US
Non-residents who are doing business in the USA are taxed on the income they received in the USA if it is significant. Expats in the USA may be exempt from some forms of taxation such as social security. All of this is further complicated by tax treaties with other countries. Professional tax advisers are widely used by USA citizens even with less complicated tax returns, thus it is highly recommended that expats to the USA hire a tax planner specializing in expat taxes. We have provided some useful links for these service providers.
