The frequently asked questions about a US Visa
As US/UK ex-pat tax experts, we know that the subject of a US Visa can be confusing for some of our clients who are looking to invest in property in the United States. This also applies to people that are looking to move to the United States, moving away from the rainy United Kingdom.
Visitors entering the US from all countries need a passport on arrival regardless of their country of citizenship. A US visa may also be required for permanent residents and foreign nationals.
US visas must be applied for and obtained before the trip commences.
A US visa is an endorsement placed within a passport that gives the holder permission to enter, leave or stay in the US for a defined period of time. The most common US visas are business, work, tourist, student and transit visas.
The Department of State suspended routine US visa services in March 2020 because of the Covid-19 pandemic. A gradual resumption of US visa services is beginning as the global situation develops in 2021.
The frequently asked questions we answer about a US visa usually include one or more of the following:
“Why you might be paying too much tax in the United States.”
“Understanding the basics of US visas.”
“What are the benefits of having a US visa?”
“How long can I stay in the US without a visa?”
“How do I apply for a US visa?”
“What is the quickest way to get a US visa?”
“Which US visa is the right one for me?”
“When to US visa holders pay tax?”
“What are the tax implications for a relative when applying for a US visa?”
“If I pay income tax in the UK, do I need to submit a tax return in the US?”
“What is the taxation of non-immigrant US visa holders?
“As a British ex-pat, do I need to have an Individual Tax Identification Number (ITIN)?”
Why you may be paying too much tax in the United States
There are many reasons why British people living in the United States pay far more tax than they need to. This is because:
-They do not know what they do not know.
-They have not spoken to a tax specialist that knows all the UK and US tax laws.
-Their accountants in the UK are not knowledgeable about the US tax laws under the IRS.
-Their CPAs are not knowledgeable when it comes to the UK tax laws under HMRC.
Understanding the basics of US visas
There are 185 different types of US Visa that fall into two main categories. The non-immigrant US visa for temporary stays to include purposes such as business, study, work, tourism, family visits or transit.
The immigrant US visa covers permanent residency in the US. The Immigration & Nationality Act (INA) allows the United States to grant a maximum of 675,000 annually across all the various visa categories.
In 2020, the US State Department issued four million non-immigrant visas.
The US has complex non-immigrant visa procedures with tax obligations that vary considerably depending on each visa category.
If you are looking to invest in property in the US, it is critical to obtain the correct visa so that your tax liabilities are accurate about the residency rights allocated through your visa.
There are 20 non-immigrant visa categories with different requirements and restrictions relating to employment type, marital status, citizenship, occupation, residency and purpose of visiting the US.
There are also different types of taxation of aliens by visa type and immigration status in the US.
What are the benefits of having a US visa?
Having a US visa allows you to travel to a port of entry, airport or land border crossing, request permission of the Department of Homeland Security (DHS), and a Customs and Border Protection (CBP) inspector to enter the United States.
Another significant benefit of having a US visa is that it is a multiple entry visa, granting permission to enter and leave the country as needed. You will need to provide a passport and supporting documents.
How long can I stay in the US without a visa?
How do I apply for a US visa?
A US Embassy or Consulate issues a visa. It entitles the holder to travel to the United States and apply for admission. It does not guarantee entry. An immigration official at the port of entry determines the visa holder’s eligibility for admission into the US.
The purpose of your intended travel and other factors will determine the type of visa required under US immigration law.
When applying for a US visa, you need to meet all the requirements to receive the visa category for which you’re applying.
Anybody who is not eligible to enter the US free under the VWP, or is not a citizen of Canada or Bermuda, will need a visa to gain entry into the United States.
What is the quickest way to get a US visa?
The quickest way to get a US visa is by applying for an Expedited Appointment which can be processed in between 3-5 weeks.
This entails a few basic requirements. Pay the visa application fee. Complete the non-immigrant Visa Electronic Application (DS-160) form. Schedule an appointment online for the earliest available date.
It is important to note that you must schedule an appointment before you can request an expedited date.
Which US visa is the right one for me?
For most of our clients who are British ex-pat property investors in the US, the most appropriate are visitor visas.
These are non-immigrant visas for persons who want to enter the United States temporarily for business (visa category B-1), for tourism (visa category B-2), or a combination of both purposes (B-1/B-2).
These types of US visas are also the easiest ones to get, allowing temporary access.
When do US visa holders pay tax?
The Substantial Presence Test is the statutory tool used to determine the residency for tax purposes of a non-immigrant US visa holder.
Under the remit of the Substantial Presence Test, if you hold a non-immigrant visa, you become a tax resident if you’re present in the US on at least 31 days during the current year and 183 days during the three-year period that includes the current year and the two years immediately before.
Non-immigrant visa holders in the US temporarily must pay US income tax if they satisfy the Substantial Presence Test.
Non-resident aliens are required to pay US income tax only on income earned in the US or earned from a US source. They do not have to pay tax on foreign-earned income, such as UK property investments.
A determination of the residency of a foreign citizen is a starting point for the preparation of any tax return.
Like US citizens, US residents are required to report and are subject to tax on their worldwide income.
Individuals who do not pass the Substantial Presence Test in a given year remain non-residents for the entire year.
What are the tax implications for a relative when applying for a US visa?
A US visa application for a relative will require the submission of USCIS form I-864. This is an affidavit of financial support. It will also require you to submit proof of having filed US tax returns.
You must provide either an IRS transcript or a photocopy from your own records of your individual income tax return for the most recent tax year.
You are not required to have the IRS certify the transcript or photocopy unless instructed to do so.
If you provide a photocopy of your tax return(s), you must include a copy of each Form W-2 and Form 1099 related to your return(s).
You need to work with your international expat accountant to ensure you file the correct tax returns in both the host country (United Kingdom) and the United States.
If I pay income tax in the UK, do I need to submit a tax return in the US?
Even if you are not a United States citizen, you may be required to pay taxes in the US.
You usually need to file a tax return if you’re a UK resident with foreign income or capital gains. This is typically the position of our UK property investor clients operating in the US.
Whether or not you must file a US tax return depends on whether the government considers you a tax resident. All permanent residents (green card holders) are tax residents, but only some non-immigrant visas are tax residents.
Tax residents must report their entire worldwide income to the US Inland Revenue Service (IRS).
It doesn’t matter if a percentage or all of that income was earned from investments or business activities carried on outside the US. A US tax resident must report it all.
Becoming a US tax resident doesn’t mean that the US government will tax all of your worldwide income.
Frequently asked questions about international individual tax matters have been answered by the IRS.
These rules are complicated and subject to several exceptions. If you are unsure of your situation, consult a tax accountant.
What is the taxation of non-immigrant US visa holders?
US investment income is taxed at a flat 30% tax rate. Non-resident aliens are required to pay income tax on income earned in the US or from a US source.
Non-immigrant US visa holders do not pay US income tax on foreign-earned income.
Non-immigrant US visa holders in the United States temporarily must pay income taxes if they satisfy the Substantial Presence Test, as discussed earlier in this Article.
As a British ex-pat, do I need to have an Individual Tax Identification Number (ITIN)?
An ITIN is similar to the UK equivalent of a Unique Tax Reference (UTR) code from HMRC.
ITINs are unique to the individual in question. An ITIN is a nine-digit code and once obtained it must be kept safe to prevent any risks of fraud.
An ITIN is a tax processing number available for certain nonresident aliens and resident aliens, spouses, and dependents who cannot get a Social Security Number (SSN).
The IRS issues Individual Tax Identification Numbers to help individuals comply with US tax laws and provide an efficient means to process and account for tax returns and payments from those not eligible for Social Security numbers in the United States.
An ITIN is typically utilised by a nonresident alien who is required to file a US tax return.
An ITIN is used for British Ex-pats to submit a 1040 tax return to the IRS in the United States. You will need to submit a 1040 tax return to the IRS as a British citizen if:
– Your income is taxable in the US irrespective if you do/ do not live in the Unted States
– You are a resident alien (reside in the US for more than 183 calculated days)
– Married to an American citizen and it makes sense from a tax perspective for you to submit a 1040 return to the IRS
Please note that you need to use the ITIN to submit tax returns. The ITIN number may be revoked by the IRS after three years if not used. If your ITIN has expired you will need to reapply.
Everything you need to know about an Individual Tax Identification Number (ITIN) for British Ex-pats is essential in ensuring that you are fully aware of your tax obligations when investing in property in the US.
How does this affect our US readers?
To learn more, make sure you head over to our sister company, Optimise Accountants that helps Americans save tax in the UK. It is one thing to be tax-efficient in the UK or the US; it is another thing to be tax-efficient across the Atlantic.
This is why you need to get a tax advisor that truly understands international tax.