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A Comprehensive Guide on Tax Filing for H1B Visa Holders
April 25, 2022
9 mins
Tax forms 1040 with a pen and the US hundred-dollar bills on the American flag background

In the following article, you will read about three topics:

  • An overview of H1B visa tax filing and obligations
  • How H1B tax filing works - forms and procedures
  • Important dates to remember

Tax Filing H1B

H1B status holders in the US are tax residents who have to pay the same taxes as any other US citizen. This includes taxes paid to the federal system and state and local taxes, depending on which state you are based. Furthermore, taxing will be applied to all the income you earn in the US and any other form of income from anywhere else. Read to the end of this article for a simple and comprehensive understanding of when and how to pay taxes as an H1B visa holder.

Tax Payment as an H1B: Tax Obligations

The H-1B visa is a non-immigrant, employment-based visa. With the H1B, a foreign worker qualified for a specialty occupation lives and works in the US under a US employer's sponsorship for a limited duration - usually three years, which can be extended to six years.

As an H1B holder, you are viewed in the same position as any other US citizen for the duration you legally live and work in the US. You will be expected to pay federal, state, and local taxes, depending on where you live and work. This may fall within twenty to thirty-seven percent of your income, depending on the income level. This amount will automatically be deducted from your monthly income.

Taxes that an H1B has to pay will include:

  • Local taxes, depending on the region
  • Federal taxes, depending on the region
  • Sate taxes
  • Medicare and Federal Social Security taxes - FICA

Filing H1B Tax Return - How it Works

In US tax laws, one tax year is the period between January and December of any fiscal year. An H-1B visa holder will be classed, for tax purposes under one of two statuses based on an 'annual substantial presence test': an alien who is a resident or an alien who is a non-resident.

If you fall under the category of the non-resident alien taxpayer, you are only taxed on the income you make in the US. On the other hand, as a resident alien, you are obligated to pay taxes on all your income - both in the US and in other countries. As a resident alien, you are considered the same as a US citizen for tax deductions.

H1B Taxation - The Paperwork Involved

The Internal Revenue Service, or IRS, is the organization responsible for collecting taxes in the US taxation system.

Choose the right form

The first step to getting your H1B taxes filed is to figure out the filing status you fall under. With this information, you will be able to choose the right tax-return form to fill in:

  • The 1040 Form will be the tax form to fill in for H1B aliens who fall under the resident alien category. They are taxed similar to US citizens and permanent residents.
  • The 1040NR Form is the Tax Return form corresponding to H1B aliens who are non-residents.

Other paperwork involved in filing H1B tax returns

There is a lot of documentation involved in filing a tax return after the correct tax-return form has been identified and downloaded from the IRS website.

To start filing tax returns, you will need to keep handy Social Security numbers and dates of birth relating to you, your spouse, and any other dependents like children, if applicable. This information will help the IRS identify you and your income to make the right decisions on the taxes you need to return.

As a next step, you will need to gather a few other forms from your employer, banking partner, property tax collectors, mortgage companies, and any other organizations you may have paid taxes to. Some types of forms you may gather include:

  • The form W-2 that you need from your employer
  • Records of state income tax and local taxes paid
  • Records of taxes paid on real-estate
  • Records of personal property taxes paid
  • The 1098 Form, if received, for any amounts paid as interest on your mortgage
  • Any forms you may have received in the 1099 series (-INT, -NEC, -DIV, etc.)

You are now ready to start the tax-returns filing process with these documents.

Filling Tax Forms

Filling the tax return form is not a very complicated process. You will find that the form is in PDF and contains clear instructions for filling in the boxes.

1.The 1040 Form

1040 is a US Individual ITR form. Filling each box is a straightforward process. Some filers can choose from two methods of deduction - the standardized deductions, or the itemized deductions, based on their circumstances and which method will afford them larger deductions. Itemized deductions filing may become tedious with formulae and rules to be followed but may be worth it if it comes with larger deductions.

2. The 1040NR Form

This is the Tax Return form for US Non-resident aliens to file taxes. Choices are limited in this form. Another difference is that as a non-resident, you can only file as:

  • married, and filing separately
  • single, or
  • a qualifying widow(er)

Spouses are expected to file their taxes separately.

With the 1040 form, non-resident aliens, except some Indian residents, cannot claim standard deductions. They only have the option of itemized deductions on their tax returns.

The Process of Filing Your H1B Tax Returns

You have two options for completing your tax return filing:

1. Via mail: You can send the completed H1B tax file to the designated IRS office in the state you are residing in.
If you owe any money towards taxes and do not plan to enclose payment with your H1B return, your mail will have to be addressed to the office of the Department of Treasury.

2. Filing electronically: To complete tax returns online, you can use the tax return software of websites partnered with the IRS. Here are the most popular options:

  • Use the Paid Tax Software to file federal taxes, local taxes, and state taxes in one go.
  • Make use of Tax Filing Companies that can use the e-file process for completing your tax returns. This option may ring up a cost, but it is a good option when you want to ensure that you are filing taxes correctly. They also offer additional services like filing late tax returns.
  • The IRS' own Free File Service helps you complete your tax returns and use tax software websites for filing. This comes as a free service.

Also Read: F1 - h1 tax filing

Important Dates in 2022 to File Your H1B 2021 Taxes

The IRS defines April 18th, 2022, as the tax filing deadline for your 2021 income tax return. Below are a few other important dates to remember for planning your tax-return filing activities.

1. April 18th, 2022 - This is the last day for taxpayers to file tax returns or apply for extensions. It is commonly known as Tax Day.

  • It is also a due date for applying for extensions on 200 Federal Income Tax Returns.
  • It is a due date for State tax returns, though this may vary with state.
    If you have worked under different employers from multiple states in the US, you will be expected to file returns in all the states and the federal returns you file through the 1040NR/1040 forms, as your case may be.
  • It is the non-extendable final date for filing the Foreign Bank Account Report (FBAR) form. Taxpayers have to file this form for purely reporting purposes if they have more than USD 10,000 in foreign bank accounts over the previous year.

2. June 15th, 2022 - This is when US resident aliens or citizens living abroad must make tax payments, file their tax returns, or apply for a four-month extension.

3. October 17th, 2022 - By this date, you will have to e-file your 2020 Federal ITR and then proceed with an extension request.

In conclusion

H1B visa holders in the US are expected to adhere to rules and responsibilities so that their H1B visa and H1B tax status are always current. Being open and transparent about income and deductions will be in your best interests. Any evidence of dishonesty will result in the revoking of your visa. In the event that you lose your job with your H1B employer, you will be 'out of status' and will have to pursue other options or leave the US.

The H1B visa gives you an entry into living and working legally in the US for a period. While procuring the visa may look long and confusing, making a good start with the right kind of tools and resources will help you advance quickly through the steps. TechFetch H1B is one such resource you can use to find all the information regarding H1B visa to get you started right.

**Disclaimer: H1B rules and regulations keep changing from time to time. For updated information, always refer to the USCIS official website.

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Article by Techfetch H1B team

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