Assisting with Nonresident Alien Tax Preparation: Liabilities and Tips

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Assisting with Non-resident Alien Tax
Preparation Liabilities and Tips

• Melissa Hughes, M.S. Ed.
• Immigration Compliance Specialist, DSO, ARO
• Kent State University
• NAFSA Ohio State Drive-In Meeting
• March 26, 2007

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Overview

• Basics of tax categories
• Forms to file
• Liabilities Protection
• Tips to assist safely
• Kent State Examples
• Questions/Answers

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Resident vs. Nonresident Alien

• Resident and Nonresident do not mean the same
  thing as Immigrant and Non-immigrant.
• IRS vs USCIS
• Nonresident alien anyone in the US (not a U.S.
  citizen) unless you meet one of the two tests
  described under Resident Aliens.

http//www.irs.gov/publications/p519/ch01.htmld0e
438
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Resident vs. Nonresident Alien

• Resident Alien for tax purposes if you meet
  either the green card test or the substantial
  presence test for the calendar year (January
  1-December 31).
• Green card test not applicable - work with F-1
  and J-1 visa holders
• For more information on the green card test,
  visit www.irs.gov.

http//www.irs.gov/publications/p519/ch01.htmld0e
438
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Substantial Presence Test
http//www.irs.gov/publications/p519/15023t02.html

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Exceptions to Substantial Presence

• Days you commute to work in the United States
  from a residence in Canada or Mexico if you
  regularly commute from Canada or Mexico.
• Days you are in the United States for less than
  24 hours when you are in transit between two
  places outside the United States.
• Days you are in the United States as a crew
  member of a foreign vessel.
• Days you are unable to leave the United States
  because of a medical condition that arose while
  you are in the United States.
• Days you are an exempt individual.

http//www.irs.gov/publications/p519/ch01.htmld0e
438
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Exempt Individual

• An individual temporarily present in the United
  States as a foreign government-related
  individual.
• A teacher or trainee temporarily present in the
  United States under a J or Q visa, who
  substantially complies with the requirements of
  the visa.
• A student temporarily present in the United
  States under an F, J, M, or Q visa, who
  substantially complies with the requirements of
  the visa.
• A professional athlete temporarily in the United
  States to compete in a charitable sports event.

http//www.irs.gov/publications/p519/ch01.htmld0e
494
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Publication 678FS. Online at http//www.irs.gov/pu
b/irs-pdf/p678fs.pdf page 1-5.
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Exempt Individuals must file

• Form 8843 Statement for Exempt Individuals and
  Individuals With a Medical Condition
• Must be filed by all exempt individuals
• If income was earned
• 1040NR U .S. Nonresident Alien Income Tax Return
• Or 1040NR-EZ U.S. Income Tax Return for Certain
  Nonresident Aliens With No Dependents
• And Ohio State IT-1040 or IT-1040EZ
• And Municipal Income Tax Return

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Liabilities

• Tort is a legal term that means civil wrong, as
  opposed to a criminal wrong, that is recognized
  by law as grounds for a lawsuit.
• Negligence - targets an unreasonable breach of
  duty by one person to another.
• The elements of negligence are
• A duty of care
• Breach of that duty
• Breach causing harm in fact
• Breach being a proximate or not too remote a
  cause, in law

http//en.wikipedia.org/wiki/Tort
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Liabilities

• Vicarious liability - strict, secondary liability
  that arises under the common law doctrine of
  agency respondeat superior the responsibility
  of the superior for the acts of their
  subordinate, or, in a broader sense, the
  responsibility of any third party that had the
  "right, ability or duty to control" the
  activities of a violator.

http//en.wikipedia.org/wiki/Vicarious_liability
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Volunteer Protection Act of 1997

• Volunteer of non-profit organization or
  government entity will not be held liable for
  harm caused by an act or omission of the
  volunteer on behalf of the organization or entity
  if
• Work within scope of responsibilities
• Volunteer was trained/certified as applicable
• Harm was not willful or criminal misconduct, or a
  conscious flagrant indifference to the
  individual.
• Harm was not caused by volunteer operating a
  vehicle of some kind for which the State requires
  a license to operate and insurance.

http//frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi
?dbname105_cong_public_lawsdocidfpubl19.105.pd
f
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Assessing Risk Management

• Look critically to determine risks
• (What might happen?)
• Evaluate risk
• (What are the outcome of the risks?)
• Decide possible solutions
• (What steps can be taken?)
• Change practice
• (How do we get there?)

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Four Strategies for Risk Management

• acceptance - accept the risk and prepare for
  consequences
• avoidance - not offering the service because the
  risks are too high
• reduction - change the activity and/or develop
  procedures that decrease the opportunities for
  harm and decrease the impact of the potential
  damage and
• transfer - shift the activity or financial
  liability risks to a third party (insurance).

http//www.merrillassociates.net/topic/2002/10/ris
k-management-in-volunteer-and-service-programs/
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Discussion of Risk s

• Look critically to determine risks
• (What might happen if we assist with tax
  preparation?)
• Evaluate risk
• (What are the pros and cons?)
• Decide possible solutions
• (What steps can be taken?)
• Change practice
• (How do we get there?)

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Some Tools to Reduce Risk

• Publication 678 FS VITA/TCE Foreign Student and
  Scholar Text
• Tax Preparation Software like CINTAX, ISTaxes,
  University Tax Services, Global Tax Services, or
  NRTaxReturn
• Guide for Nonresident AliensPreparing 2006
  Federal Income Tax Returns, University of Texas
  at Austin
• Guidance of IRS officials

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Kent State University

• CINTAX Software
• Sell passwords to defray cost of software
• Workshops to assist using software
• All leaders take tests in Pub. 678FS and signs
  VITA Agreement
• Handout with guidance for tricky questions
• Website has information and links to IRS

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Thank you!

• Materials from todays presentation may be found
  on my website at
• http//www.personal.kent.edu/mhughes5/NAFSA/OhioD
  riveIn
• Melissa Hughes, Kent State University
• mhughes5_at_kent.edu
• 330.672.3243