Tax Preparation Considerations for Refugees
If you are offering support or advice to refugees during tax season it is probably important for volunteers to understand and communicate to the refugees that they are ultimately responsible for their own taxes, not you. A volunteer may help refugees with taxes in the following ways:
- Refer refugees to a VITA program
- Explain how taxes in the US generally work (income vs. sales tax; federal vs. state vs. local taxes)
- Help them gather the paperwork necessary for tax preparation
- Ensure that they have a translator or someone to offer support and accompany them to a VITA location if needed. Please feel free to defer to your own comfort level. If you do not feel comfortable helping in a specific way, feel free to connect refugees with others who do.
Tax help for refugees available through Volunteer Income Tax Assistance (VITA) programs: Volunteer Income Tax Assistance (VITA) is a federal program that offers an excellent resource for refugees preparing their taxes. "The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $53,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals." More information on VITA may be found at: http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers. To find a local VITA location visit: https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers It is useful to note that different VITA locations have varying hours and some offer drop-in services, while others require prior appointments. Additionally, some locations offer services for some languages other than English (eg. Spanish, French, Arabic, etc.)
Establish the residency/immigration status of refugees in the tax year: Source: IRS (irs.gov) It is important to verify the immigration/residency status of refugees so that you can determine what type of tax forms refugees should fill out. There are two tests for determining residency status (resident alien or non-resident alien or dual-status):
- Substantial Presence Test
- Green Card Test: Understanding the immigration status and visas (if applicable) may also be useful. These (and the nuances of residency status) are detailed in Chapter 1 (especially pp. 3-6) of the IRS Tax Guide for Aliens (http://www.irs.gov/pub/irs-pdf/p519.pdf). The Substantial Presence Test states (IRS Tax Guide for Aliens), "You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2013. To meet this test, you must be physically present in the United States on at least: 1. 31 days during 2013, and 2. 183 days during the 3-year period that includes 2013, 2012, and 2011, counting: a. All the days you were present in 2013, and b. 13 of the days you were present in 2012, and c. 16 of the days you were present in 2011." The appropriate tax form for the refugee depends on the refugee's status. For example, if the refugee's immigration status is non-resident alien refugee they would need to fill out the 1040NR (http://www.irs.gov/form1040nr) or 1040NR-EZ ( www.irs.gov/form1040nrez). Further information is given in the IRS Tax Guide for Aliens. It is important to note that not all VITA locations may have 1040NR forms available so it may be wise to bring a copy of the form if refugees are seeking assistance from VITA programs. State taxes (NC): NC Department of Revenue gives recommendations on non-residents completing state taxes here: http://dornc.com/taxes/individual/ncreturn.html
Understand the taxable status of different sources of income: Refugees may receive sources of income outside of what you may be familiar with. In addition to receiving straight-forward tax statements, like W-2s, for employment, they may have received any of the following sources of federal or state support within the first few months of arriving, so it is helpful to understand whether the support is tax-exempt or taxable.
The following may be helpful references to determine filing requirements, though this information should also be available through VITA.
- Table 1-1 (below) gives the filing requirements for most taxpayers (http://www.irs.gov/publications/p17/ch01.html#en_US_2013_publink1000170407).
- The IRS also offers helpful questions to determine whether one needs to file a return. (http://www.irs.gov/Individuals/Do-You-Need-to-File-a-Federal-Income-Tax-Return%3F-)
Table 1-1.2013 Filing Requirements for Most Taxpayers