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Nonresident Alien Tax Compliance: Challenges and Planning Techniques for Tax Professionals

IRS Compliance and Enforcement, ECI vs. FDAP Income, Reporting Requirements, Exemptions, Deductions, Tax Credits

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, August 3, 2022

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will provide tax counsel and compliance professionals guidance on the rules, reporting requirements, and available tax planning mechanisms for U.S. nonresident alien taxpayers. The panel will offer approaches for determining taxpayer classification, identifying and reporting income subject to U.S. income tax, available exemptions, deductions, and credits in light of recent IRS compliance campaigns, and tax planning tips for U.S. nonresident alien taxpayers.

Description

Many nonresident aliens are either employed, own rental property, or earn dividends from U.S. investments in the United States. Nonresident aliens are subject to U.S. income tax only on their U.S.-source income. Tax advisers must conduct a careful analysis to determine their taxpayer status, connection to the U.S., approaches to reduce their tax liability, and U.S. reporting obligations.

Taxpayers without green cards or who do not maintain a substantial presence in the U.S. during the calendar year are considered U.S. nonresident aliens. These nonresident aliens can be subject to two different tax rates, one for effectively connected income (ECI) and one for fixed, determinable, annual, or periodic (FDAP) income.

Taxpayers earn ECI in the U.S. from operating a business in the U.S., wages, or self-employment income in the U.S. ECI is taxed for a nonresident at the same graduated rates as for a U.S. person.

If eligible income is classified as FDAP income, such as interest, dividends, rents, or royalties, then the income is taxed at a 30 percent rate. The differences in tax rates, reporting mechanics, and withholding requirements for ECI and FDAP require tax professionals to be familiar with the ECI rules to avoid paying unnecessary taxes and penalties.

Tax treaties, deductions, credits, and other options are available to reduce or eliminate the applicable tax rates or liability. Recently, however, the IRS has implemented campaigns specifically focused on proper deduction of expenses for U.S. tax purposes and claiming of U.S. tax credits by nonresident alien taxpayers.

Listen as our panel guides advisers in determining taxpayer status for non-U.S. citizens, ECI vs. FDAP income classification, reporting requirements, and available mechanisms to reduce the tax liability of nonresident aliens. The panel will also offer tax planning techniques and best practices in light of the recent IRS compliance campaigns regarding nonresident alien taxpayers.

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Outline

  1. Overview of the rules and regulations regarding nonresident aliens and U.S. income tax system
  2. Determining taxpayer status, filing, and reporting requirements
  3. Classifying eligible income: ECI vs. FDAP
  4. Tax treaties and reducing or eliminating U.S. tax on nonresident alien income
  5. IRS recent compliance campaign and handling issue-based examinations and audits
  6. Best practices for compliance and tax planning techniques for U.S. nonresident aliens

Benefits

The panel will review these and other high priority issues:

  • Tax rules and regulations applicable to U.S. nonresident aliens
  • Criteria for determining a nonresident alien taxpayer
  • Differences in tax reporting, rates, and withholdings between ECI and FDAP
  • The effect of tax treaties the U.S. has with other countries
  • Recent IRS compliance campaigns focused on nonresident alien taxpayers
  • Best practices for compliance and tax planning techniques

Faculty

Callicutt, Debra
Debra Callicutt, CPA, MBA
Partner
Henry+Horne

Ms. Callicutt brings together her extensive industry knowledge and decades of experience to consult with clients...  |  Read More

Giordano-Lascari, Thomas
Thomas M. Giordano-Lascari
Partner
Karlin & Peebles

Mr. Giordano-Lascari is an accomplished income tax and transactional attorney specializing in international matters for...  |  Read More

Raby, Burgess
Burgess Raby
Principal
Raby Law Office

Mr. Raby's practice focuses on international tax matters, including planning for foreign investment into the United...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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