If your friend recently moved to the U.S. from Greece, they will encounter a few unique tax rules and responsibilities that differ from what they were accustomed to in Greece. Here’s a high-level overview of eight key tax considerations your friend needs to be aware of as they navigate their new life in the U.S.

1. Tax Residency: Resident or Non-Resident Alien?

The first thing your friend must understand is tax residency status. This classification determines how they will be taxed in the U.S.

• Resident aliens are taxed on worldwide income meaning both U.S.-source and foreign-source income.
  
• Non-resident aliens, on the other hand, are only taxed on their U.S.-source income.
  

This status is crucial in determining what income must be reported to the IRS and what deductions and credits apply.

2. Becoming a U.S. Resident Alien

There are three ways for your friend to become a U.S. resident alien for tax purposes:

• Green card holder: If they have obtained a lawful permanent resident status (a Green Card), they are considered a resident alien for tax purposes.
  
• Substantial Presence Test: This test determines residency based on the number of days spent in the U.S. over a three-year period. Your friend must meet specific day-count thresholds.
  
• First-Year Election: This option allows certain immigrants to elect to be treated as a resident alien for part of their first year in the U.S. under special rules.
  

Once your friend becomes a resident alien, they are generally subject to the same tax filing requirements as U.S. citizens.

3. Non-Resident Alien Taxation

If your friend does not meet the criteria for residency, they are considered a non-resident alien. Non-resident aliens are taxed only on U.S.-source income, and the rules differ from those for resident aliens. For example:

• Interest or dividends might be taxed at a lower rate for non-residents.
  
• Income from employment in the U.S. will still be subject to U.S. tax.
  

Understanding whether their income is U.S.-source versus foreign-source is critical for compliance.

4. Reporting and Filing Taxes

• Resident aliens use Form 1040, the same form used by U.S. citizens.
  
• Non-resident aliens must file Form 1040-NR. This form is specifically for individuals who are not U.S. residents for tax purposes.
  

Your friend will also need to be aware of state tax obligations, as the rules vary by state, and most states follow similar filing requirements.

5. Taxpayer Identification Number (TIN)

To file taxes in the U.S., your friend will need a Taxpayer Identification Number (TIN). This could be a Social Security Number (SSN) if they are eligible, or an Individual Taxpayer Identification Number (ITIN) if they do not qualify for an SSN.

It’s essential to obtain this number before filing any tax returns or reporting income.

6. Social Security and Medicare Taxes

The Totalization Agreement between the U.S. and Greece helps eliminate dual taxation for Social Security and Medicare contributions.

• If your friend has already contributed to Greece’s Social Security system, they might be able to combine credits from both Greece and the U.S. to meet the requirements for benefit eligibility.
  
• This agreement ensures that they are not required to pay Social Security and Medicare taxes in both countries on the same income.
  

It’s important to check whether this agreement applies to your friend’s situation.

7. Foreign Financial Accounts Reporting

Your friend may have to report their foreign financial accounts under U.S. laws if they meet specific thresholds. Two primary reporting requirements are:

• FBAR (Foreign Bank Account Report): Required for individuals with over $10,000 in foreign bank accounts.
  
• IRS Form 8938: This form is used to report certain foreign financial assets, including bank accounts, investments, and property, if their value exceeds specific thresholds.
  

Failure to file these reports can result in significant penalties.

8. Tax Treaties: Avoiding Double Taxation

The U.S.-Greece Tax Treaty is in place to avoid double taxation of income. The treaty provides a tax credit system, allowing your friend to claim a credit for taxes paid in Greece on income that is also taxable in the U.S.

This can help reduce the overall tax burden and ensure they are not taxed twice on the same income.

Navigating U.S. tax law as a new resident or non-resident can be complicated, especially for someone coming from a different country. It’s important for your friend to understand their tax residency status, reporting requirements, and eligibility for tax treaty benefits to ensure they comply with U.S. tax laws and avoid any surprises.

If your friend is unsure about their tax situation or needs help with tax filings, they should consider working with a tax professional who specializes in international taxation. This can help ensure they take advantage of available benefits and remain compliant with both U.S. and Greek tax laws.

Have questions about U.S. taxes for foreign nationals?
Reach out to BASC Expertise for expert guidance.
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