July 27, 2003 - admin

U.S. tax filing amnesty for nonresidents

Nonresidents of the United States frequently don’t file the U.S. tax returns that they should. Just as frequently, there are no tax liabilities involved — indeed, sometimes filing a tax return secures a tax benefit that would otherwise be lost. And if there is a U.S. tax liability, the problem is huge.

Here’s the default rule. It just goes to prove that we pick on foreigners. 🙂 If you are not a U.S. resident, and you are “too late” in filing a tax return in the U.S., you are taxed on your gross income. You do not get to deduct your business expenses from your income.

Perfect example? (I have seen this many times). A nonresident owns U.S. real estate and rents it. Doesn’t file a tax return in the U.S. Result? The U.S. tax liability is 30% of the rent collected. No deductions can be taken for mortgage interest, property tax, depreciation, management fees.

The solution is to file those tax returns. The “too late” problem is temporarily not a problem. But the amnesty expires 15 September 2003. Here is a link to page at the IRS website which describes the amnesty. Here is a link to Notice 2003-38 (a PDF file) and the IRS’s FAQ on the amnesty (another PDF, sorry).

Foreign Business Activities in the USA US Real Estate Investments