Banking, Money and Taxes in the USA

The banking system in the USA is sophisticated and safe. Expats will easily be able to connect with their bank accounts overseas. Using credit and debit cards to pay for goods both locally and internationally is standard practice in the USA.

Money in the USA

The official currency is the USA Dollar (USD), which is subdivided into 100 cents.

• Notes: 1 USD, 2 USD, 5 USD, 10 USD, 20 USD, 50 USD and 100 USD
• Coins: 1, 5, 10, 25 and 50 cents, and 1 USD

While 2 USD bills and 50-cent coins are legal tender, they’re rarely seen in everyday circulation.

The USA is both a cash and a card society. Both methods of payment are accepted almost everywhere, although some of the smallest outlets may not take cards. Bank branches can be found in all major US towns and cities. ATMs are well dispersed.

Useful links

• US Treasury: Exchange Rates
• Federal Reserve: Foreign Exchange Rates
• USA.gov: American Money

Banking in the USA

Banking in the USA is extremely competitive. An array of services and rates can make choosing where to open an account confusing. It is often easier to maintain an overseas account, open a US-based account at the same bank, and transfer money back and forth. It’s possible to relocate successfully without opening an American account. Expats on short stays usually choose to use their overseas accounts.

To open a checking account (current account), expats moving to the USA should confirm with their bank what forms of identification are required. Generally speaking, a passport, immigration information, social security number and proof of address are expected. If you don’t have a Social Security Number, you’ll likely be able to substitute this with another number, such as a passport number, a tax number, or an Individual Taxpayer Identification Number (ITIN).

Almost all international banks are represented in the USA. Those with large operations include HSBC, Citigroup, Barclays, Deutsche Bank, and UBS. Expats who have an account with one of these banks will find that they can assist in opening an account in the USA as well.

Major banks in the USA include the Bank of America, Citibank, JPMorgan Chase and Wells Fargo. All of these banks offer various account types, extensive ATM networks, online banking services and branches in most major cities.

Useful links

• FDIC: Find FDIC Insured Banks
• Federal Reserve: Foreign Banking Organizations
• CFPB: Bank Account Resources
• OCC: Consumer Banking Resources

How to apply for a Social Security Number and card

You’ll need a Social Security Number (SSN) before formally starting a job if you’re moving to the USA. This is used to report your earnings to the government, and in this way, it is similar to the National Insurance (NI) number in the UK.

If you’re residing but not working in the USA, you’re generally not eligible to apply for a SSN.

Some businesses, such as credit companies and banks, will ask for an SSN, but in most cases, alternative identification methods are accepted. It isn’t necessary to have an SSN in order to get a driver’s licence, register children for schools, or get private health insurance.

All social security cards should be kept in a safe place, but it is possible to get a replacement if it is lost.

There are two ways to get an SSN, depending on whether you’re an immigrant or a non-immigrant. Immigrants, or permanent residents, can apply in their home country before departing for the USA as part of the process of filing for an immigrant visa. Alternatively, you can visit a Social Security office in person upon arrival in the USA. Non-immigrants only have the latter option and can only apply once in the country.

There are offices in all towns and cities. Wait 10 days after arriving in the USA before applying at a Social Security office to allow time for the necessary documents to be available online. There is no charge for an SSN. The process takes about two weeks. When completed, applicants will receive a card bearing their SSN.

Useful links

• SSA: Social Security Numbers for Immigrants

Taxes in the USA

Tax laws in the USA are hugely complex and made more so by expatriation. Individuals are subject to federal tax at graduated tax rates ranging from 10 to 37 percent of the individual’s income. Immigrants and most non-immigrants are also subject to Federal Insurance Contributions Act (FICA) taxes, which are made up of Social Security and Medicare taxes. The FICA tax rate is fixed at a certain percentage and is divided equally between the employer and the employee.

Most states and some local jurisdictions impose an additional state income tax. State and local jurisdictions may also levy property and sales taxes that differ widely by state, county and city. State and local taxes differ considerably both in amount and regulation.

Paying taxes as a resident

The determination of tax residency is important as residents are subject to tax on their worldwide income in the same manner as US citizens. A ‘resident alien’ is defined as a foreign national who meets the provisions of either the Green Card Test or the Substantial Presence Test.

• Green Card Test: A foreign national who is lawfully admitted to the USA for permanent residence (i.e. receives a Green Card) will be considered a resident alien for federal tax purposes.
• Substantial Presence Test: A foreign national will be considered a resident alien for a given calendar year if the individual has been physically present in the USA for at least 31 days during the year and in total 183 days or more in the current and the two preceding calendar years.

US residents are required to file an annual individual tax return, disclosing their worldwide income received for that given tax year. US residents who paid foreign income taxes on income from another country qualify for a foreign tax credit or deduction.

Paying taxes as a non-resident

Individuals who are not considered residents for tax purposes are classified as ‘non-resident aliens’. Non-resident aliens are subject to tax only on income derived from sources within the USA. US-source income includes remuneration from employment, self-employment and trade or business activities conducted in the USA.

Non-resident expats may also be exempt from some forms of taxation, such as Social Security and Medicare taxes.

Tax advisors

The USA has an extensive network of tax treaties that further complicate the taxation of both resident and non-resident expats. Professional tax advisors are widely used by US citizens, even with less complicated tax returns. It is thus highly recommended that expats moving to the USA hire a tax planner specialising in expat taxes.

Useful links

• IRS: International Taxpayers
• IRS: Substantial Presence Test