Ukrainians in the U.S.
Tax information and responsibilities for Ukrainians in the United States
We extend a warm welcome to all Ukrainian people who have arrived in the United States (U.S.). The following information is intended to provide you with general information on U.S. tax rules. Our goal is to help you understand your tax filing obligations in the U.S. and provide relevant resources.
Once you have had a chance to review the general rules, you can also ask questions by filling out the form below. Our team of experienced Russian-speaking tax professionals will be happy to respond to your specific questions and provide general information that will help you determine your U.S. tax filing obligations.
This communication is designed to address federal income tax rules only; tax filings in one or more states may be required as well and are not addressed in the following. Please also note that the information contained herein, and the questions outlined below, are intended to be general in nature and may not encompass all situations that could have U.S. tax consequences.
- Does an individual need to file a U.S. individual income tax return?
Step 1: Determine your income tax residency
- An individual is a U.S. tax resident if:
- He or she is a U.S. citizen or a green card holder (with some exceptions under the U.S.-Ukraine Income Tax Treaty); or
- The individual met a substantial presence test, which means he or she spent a number of days in the U.S. based on the following formula: Days in the U.S. during the current year + 1/3 of U.S. days during the prior year + 1/6 of U.S. days during the year before the prior year are equal to or greater than 183 days.
- If the above tests are not met or if exceptions apply, an individual is not a U.S. tax resident. It is possible to elect to be treated as a resident under certain circumstances.
Step 2: Determine what income is subject to taxation
- For U.S. tax residents, all worldwide income is subject to U.S. income tax rules.
- For non-U.S. tax residents, only U.S. source income is subject to U.S. taxation. In general, U.S. source income includes, but is not limited to, the following:
- income that is earned in the U.S.; this includes employee salaries and non-employee receipts earned while physically working in the U.S., even if received from an employer or a client located abroad.
- dividends from U.S. companies.
- interest from U.S. banks.
- rent from properties located in the U.S.
- An individual is a dual resident during the first year in the U.S. if he or she is a U.S. tax resident on the last day of the year and arrived in the U.S. after the year has started. In this case, the non-U.S. source income is not subject to taxation before the arrival date.
Step 3: Determine your filing status
- Single: Unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by U.S. state law or a foreign country.
- Married: Not divorced and not legally separated. You may file jointly or separately.
- Head of Household: Single but having a qualified relative for whom you provide more than half of his or her support.
- Non-U.S. tax residents file as Single, Joint or Married Filing Separately.
Step 4: Determine the amount of income that is subject to inclusion in the U.S. tax return and see if it is below the filing threshold
- U.S. tax residents include all their worldwide income (some exceptions apply), and non-U.S. tax residents include U.S. source income.
- If U.S. tax residents’ income is below the filing threshold, there is no need to file, unless claiming tax refunds or credits, or having other tax obligations (e.g., self-employment tax).
- U.S. tax residents may need to file a tax return even if there is no taxable income or income was excluded under the U.S.-Ukraine Income Tax Treaty rules. There is also no threshold for income.
As many of the Ukrainian refugees will be non-U.S. tax residents in the year 2022 and many started working and had income, most likely they have a Form 1040NR filing requirement. Examples of reportable income include (but are not limited to) the following:
- Salary from any U.S. employer if you started the job in 2022 and received a salary.
- Salary from a Ukrainian or any other non-U.S. employer if you worked for them while physically located in the U.S.
- Payments received while performing services in the U.S., such as working as an Uber driver, providing cleaning, nanny or elderly people care services, etc.
- Payments from clients located outside of the U.S. for self-employed individuals physically located in the U.S.
- Any income that you received from owners or creditors of U.S. business entities.
- Rental income from property owned in the U.S.
Step 5: Pay taxes owed
Individuals with tax filing requirements should have filed (or extended) their tax returns and paid taxes in full by April 17, 2023 (or by October 16, 2023, if they or their accountant are in California counties that were subject to the disaster reliefs earlier this year). Please read more details here.
Step 6: File tax return
Filing tax returns in the U.S. is not an easy task and requires some knowledge and basic skills, especially if international transactions take place. However, help with the filings is available through the following:
- Check out Volunteer Income Tax Assistance (VITA) here (enter your ZIP code): https://irs.treasury.gov/freetaxprep/
- If you were not able to receive help or have a complex situation, please contact BPM LLP at [email protected] for further assistance.
- Information from the IRS in Russian https://www.irs.gov/ru
- An individual is a U.S. tax resident if:
- Determine what form to file
If an individual is neither a U.S. citizen, nor a green card holder, then one of the following scenarios applies:
I. Does not meet the substantial presence test for 2022; but had income that is subject to U.S. taxation. The individual most likely has a requirement to file a Form 1040NR and report all income that is subject to U.S. taxation.
II. Does meet the substantial presence test for 2022; if he or she had any income in year 2022, it is subject to U.S. taxation from the date of arrival in the U.S. in 2022 (with some exceptions).
If 2022 is the individual’s first year in the U.S., the tax return is dual status. This means an individual should file a Form 1040NR, the U.S. Non-resident Alien Income Tax Return, from January 1, 2022, until the day before arrival day, and Form 1040, U.S. Individual Tax Return, from arrival day until December 31, 2022.
An individual should include only U.S. source income in Form 1040NR and worldwide income in Form 1040. In addition, he or she is required to file Form 114, the Report of Foreign Bank and Financial Accounts (FBAR).
Dual-status tax returns have several restrictions; a few of the most common ones are as follows:
- A dual-status taxpayer cannot use the standard deduction allowed on Form 1040. However, he or she can itemize certain allowable deductions.
- A dual-status taxpayer may be able to claim a dependent (a qualifying child or a qualifying relative). He or she may be entitled to claim additional deductions and credits for a qualifying dependent.
- A dual-status taxpayer cannot use the Head of Household filing status.
- A dual-status taxpayer cannot file a joint return. However, if the dual-status taxpayer is married to a U.S. citizen or a green card holder, he or she may elect to file a joint return with his or her spouse. If the married individual does not elect to file jointly, he or she must file as Married Filing Separately.
Individuals who are citizens of Ukraine or have closer connections to Ukraine, such as permanent residency, a house, a family, etc., may treat themselves as a non-resident for the whole year 2022, file only Form 1040NR, and include only income that is subject to U.S. taxation. (Note: a thorough analysis is needed to determine if someone has closer connections to Ukraine.)
Individuals who want to be treated as non-residents for the entire year should file Form 8833, Treaty-Based Return Position Disclosure, citing U.S.-Ukraine Income Tax Treaty Article 4(2) and describing why the tax residency is in Ukraine. This will work for all years an individual is in the U.S. as a refugee until he or she decides to stay in the U.S. and file for adjustment of status (green card).
Please fill out the form below to contact one of our specialists.