Handling taxes can be stressful, whether you are a U.S. citizen or a lawful permanent resident. If you or a loved one have recently obtained lawful permanent resident status in the U.S., understanding how this change can impact your tax obligations is important.
Upon becoming a lawful permanent resident, you are subject to U.S. tax laws, just like U.S. citizens. This status inspires both responsibilities and opportunities. The Internal Revenue Service (IRS) requires all residents to report their income, including earnings from U.S. and international sources. This approach helps to ensure the tax system remains fair and equitable but can also confuse newer residents.
What are your tax obligations as a U.S. resident?
After becoming a lawful permanent resident, your first step is to obtain:
- Social Security number (SSN)
- Individual Taxpayer Identification Number (ITIN)
These numbers are essential for filing your tax returns and accessing various financial services. If employed, your employer will use your SSN or ITIN to report your wages to the IRS and withhold appropriate taxes from your paycheck.
If you are a Colorado resident, you’ll file federal and state tax returns. Colorado’s tax system, while generally straightforward, has its nuances. For example, the state imposes a flat income tax rate of 4.40% individual income tax rate regardless of your income level.
One of the changes new residents must adapt to is reporting worldwide income. This requirement means you must include income from foreign sources on your U.S. tax return. While this might sound intimidating, several mechanisms, such as the Foreign Tax Credit, can help prevent double taxation. This allows you to claim tax credits paid to foreign governments.
Another essential aspect to consider is the tax treaty between the U.S. and your home country. These treaties can offer various benefits, including reduced tax rates on certain types of income or exemptions from specific taxes. Familiarizing yourself with these treaties can save tax and help ensure compliance with U.S. and international tax laws.
Understanding your tax obligations as a lawful permanent resident is important to help you avoid penalties and take full advantage of available benefits. As you start this new chapter, consider consulting with a reliable legal team to help ensure you meet all requirements and maximize your new status.