Getting an H1B is one challenge, but navigating taxes in the first year can be even trickier. Many new visa holders find themselves asking — should they file as a resident or a non-resident?
The confusion arises from two different sets of rules. The Substantial Presence Test states thata a person must be in the US for at least 183 days in a year to qualify as a resident for tax purposes. However, the First Year Choice allows some individuals to file as resiidents sooner if they meet specific criteria.
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Tax firms, online resources, and even experts often provide conflicting advice. Filing as a resident can offer better tax benefits, but eligibility hinges on how long someone has been in the U.S. and when their H1B visa began. Many opt for resident status to take advantage of higher deductions and save money.
In reality, the IRS rules create a bit of a gray area. Some individuals file as residents in their first year without any problems, while others are advised to maintain non-resident status. The best approach is to consult a tax professional who is knowledgeable about both options rather than relying on mixed information.
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For those planning to stay long-term, selecting the correct tax status from the selecting the correct tax status from the start is crucial. An incorrect filing could lead to penalties later on, while making the right choice can result in significant savings. Understanding both sets of rules and making an informed decision is the best way to prevent tax-related issues in the future.
