New to the United States? Your First Tax Return, Foreign Income and Starting a Business

Moving to the United States can mean starting a new job, finding a home, opening bank accounts, or building a business. It also means learning a tax system that can involve federal, state, and sometimes local rules.

One of the most important first steps is to determine your U.S. tax residency. Immigration status and tax residency are not the same thing, and the answer can affect which income you must report, which tax return you file, and whether foreign-account reporting rules apply.

1. Do I need to file a U.S. tax return?

It depends on your tax residency, income, filing status, and other circumstances. U.S. citizens may need to file a U.S. return reporting worldwide income even when they live abroad, depending on their income and filing circumstances. Non-U.S. citizens need to determine whether they are resident aliens or nonresident aliens for U.S. tax purposes.

A resident alien is generally taxed in a similar way to a U.S. citizen and usually reports worldwide income. A nonresident alien is generally taxed on U.S.-source income and certain income effectively connected with a U.S. trade or business. A nonresident alien engaged in a U.S. trade or business will often need to file Form 1040-NR; other filing requirements may also apply.

You may also need to file to claim a refund, report self-employment income, or satisfy another filing requirement. Do not assume that you can skip filing simply because you are new to the country or believe no tax is owed.

2. Immigration status is not the same as tax residency

For U.S. income-tax purposes, many noncitizens become resident aliens by meeting the green card test or the substantial presence test. The substantial presence test generally counts days in the current year and weighted days in the two preceding years; exceptions apply to certain categories of people and situations.

A visa, student status, work authorization, or the date you physically arrived does not always tell the whole story. Special rules may apply to students, teachers, government-related individuals, treaty cases, and people who are residents for only part of the year. Some newcomers may have a dual-status tax year.

If your status is not straightforward, document your travel days, visa or green-card dates, prior U.S. visits, and relevant immigration records before preparing your return.

3. Which tax return should I file?

The correct form depends on your citizenship, residency status, income, and circumstances. Common federal individual returns include:

Form 1040

Generally used by U.S. citizens and resident aliens.

Form 1040-NR

Generally used by nonresident aliens who have a U.S. filing obligation.

Dual-status filing

Special reporting rules may apply if you were a nonresident for part of the year and a resident for another part.

Choosing the wrong return can affect income reporting, deductions, credits, and treaty claims. Confirm your status and the applicable instructions for the tax year before filing.

4. Do I have to report income from my previous country?

This is one of the most important questions for newcomers. U.S. tax residents generally report worldwide income, including wages, self-employment income, interest, dividends, pensions, rental income, and gains from investments or property, subject to applicable rules.

Nonresident aliens are generally taxed on U.S.-source income and certain income effectively connected with a U.S. trade or business. If you became a resident during the year, the residency start date and the type, source, and timing of income all matter. Dual-status rules can be technical, so do not assume that all income earned before arrival is automatically excluded or that all foreign income is automatically taxable.

A tax treaty or foreign tax credit may help reduce double taxation in some circumstances, but relief is not automatic and eligibility depends on the income and the specific rules.

5. What about savings and property I owned before moving?

Transferring money that you already owned from a foreign bank account to a U.S. account does not, by itself, automatically make the transfer taxable income. However, the source of the funds matters. Interest earned, investment gains, rental income, business income, and the sale of property may have separate tax consequences.

Keep records showing the source of significant transfers and, where relevant, the purchase cost, acquisition date, ownership, sale proceeds, and value of property or investments. Foreign gifts, inheritances, trusts, and business interests can have separate reporting rules, so large or unusual transactions should be reviewed before filing.

6. Do I need to report foreign bank accounts or investments?

Possibly. U.S. residents with overseas accounts or investments should check at least two separate reporting systems. These are not the same as reporting income on a tax return.

FBAR (FinCEN Form 114)

A U.S. person with a financial interest in, or signature authority over, foreign financial accounts generally must file an FBAR if the aggregate maximum value of those accounts exceeded $10,000 at any time during the calendar year. The FBAR is filed separately from the income tax return.

Form 8938

Some taxpayers must also report specified foreign financial assets with their tax return when applicable thresholds are met. For taxpayers living in the United States, thresholds depend on filing status; for example, an unmarried taxpayer generally meets the threshold if specified foreign financial assets exceed $50,000 at year-end or $75,000 at any time during the year. For married taxpayers filing jointly, the corresponding thresholds are generally $100,000 at year-end or $150,000 at any time during the year. Form 8938 does not replace an FBAR, and one filing requirement can apply without the other.

Do not judge the requirement only by the balance on December 31. Account ownership, signature authority, asset type, joint ownership, residency, and exceptions can all matter. Directly owned foreign real estate is generally not itself a specified foreign financial asset for Form 8938, but related accounts or interests in entities may need review.

7. Do I need an SSN or an ITIN?

A Social Security number (SSN) is used for Social Security and many tax purposes. People who are eligible for an SSN generally apply through the Social Security Administration.

If you need a U.S. taxpayer identification number for federal tax purposes but are not eligible for an SSN, you may need an Individual Taxpayer Identification Number (ITIN). The IRS application generally uses Form W-7 and supporting documents, and in many cases it is submitted with a federal tax return unless an exception applies.

An ITIN is for federal tax purposes only. It does not grant immigration status or authorize someone to work in the United States. An ITIN also does not make a person eligible for every tax credit or benefit.

8. What about filing deadlines, state taxes, and tax payments?

Many calendar-year individual federal income tax returns are generally due by April 15 of the following year, subject to weekends, holidays, and special rules. Nonresident returns can have different deadlines. An extension generally extends the time to file, not the time to pay tax that is due.

The federal return is only one part of the picture. Depending on where you live, work, own property, or operate a business, you may also have state or local income taxes, sales and use tax, property taxes, franchise taxes, or business-license fees. State rules and deadlines differ.

If you are self-employed or have income without enough tax withheld, you may need to make estimated tax payments during the year. Waiting until the annual filing deadline can lead to an unexpected balance or an underpayment penalty.

Eligibility for deductions, credits, and family-related tax benefits depends on the facts and the rules in effect for that tax year. Keep your filing status, spouse or dependent information, income records, and identification documents organized.

9. Thinking about opening a business in the United States?

Before registering a company, decide what kind of business you will operate, who will own it, where it will do business, and how it should be taxed. The legal structure can affect personal liability, annual filings, tax returns, and how money can be taken out of the business.

Common structures include a sole proprietorship, partnership, limited liability company (LLC), and corporation. An LLC is formed under state law, but it does not automatically have one specific federal tax treatment:

• A single-member LLC is generally treated as a disregarded entity for federal income-tax purposes unless it elects corporate treatment.
• A multi-member LLC is generally treated as a partnership unless it elects corporate treatment.
• A corporation generally files its own federal corporate income tax return. Certain eligible corporations may elect S corporation treatment, but strict eligibility rules apply; a nonresident alien generally cannot be an S corporation shareholder.

The best choice depends on more than the registration fee. Review tax treatment, state costs, compliance obligations, ownership, liability, and your longer-term plans before filing formation documents.

10. What should I do after forming a business?

The exact steps depend on the state and activity, but many businesses need to complete several practical tasks before operating:

• Register the business with the appropriate state agency and check whether a registered agent is required.
• Confirm federal, state, and local licenses or permits, including any industry-specific requirements.
• Apply for an Employer Identification Number (EIN) when required or useful for tax, banking, or employment purposes.
• Open a business bank account and, where appropriate, a separate business credit card. Keep business and personal funds separate.
• Set up bookkeeping from day one, decide how invoices will be issued, and create a process for collecting and storing receipts.
• Check whether you must register for sales tax, payroll accounts, state income or franchise taxes, annual reports, or other recurring filings.

Important for international founders: forming a U.S. LLC or corporation does not automatically give an owner permission to work in the United States. Immigration and work-authorization rules are separate from business registration. Foreign-owned entities can also face additional U.S. tax reporting, including Form 5472 and a pro forma Form 1120 in certain situations. Get advice before choosing a structure if any owner is not a U.S. tax resident or the business has cross-border transactions.

11. U.S. bookkeeping: what records should a new business keep?

Good bookkeeping is not just something to do before tax season. It helps you understand cash flow, measure profit, support deductions, prepare financial statements, and respond to questions from tax authorities or lenders.

A practical monthly routine is to record income and expenses, categorize transactions, reconcile every bank and credit-card account, review unpaid invoices and bills, track payroll and sales tax, and save source documents in an organized system. Keep:

• Sales invoices, customer receipts, payment-processor reports, and deposit records.
• Vendor bills, expense receipts, bank and credit-card statements, and proof of payment.
• Payroll records, contractor payments, Forms W-2 and 1099 where applicable, and payroll tax filings.
• Mileage and business-use records for vehicles, equipment purchases, inventory, and depreciation information.
• Records of owner contributions, draws or distributions, loans, reimbursements, and transfers between accounts.
• Business registration documents, EIN confirmation, prior tax returns, and state or local tax filings.

Recordkeeping requirements and retention periods can differ by document type. Keep enough supporting evidence to substantiate income, deductions, payroll, and tax filings, and follow the applicable IRS and state retention rules.

12. Which tax returns might a small business need?

The return depends on the business structure and tax classification, not just the name “LLC.” Common federal examples include:

• A sole proprietor or a single-member LLC treated as a disregarded entity generally reports business activity on the owner’s individual return, often using Schedule C.
• A partnership or an LLC taxed as a partnership generally files Form 1065 and provides Schedules K-1 to its partners.
• A C corporation generally files Form 1120.
• An eligible S corporation generally files Form 1120-S and passes applicable items through to shareholders.

Employers may have payroll withholding and employment-tax filings. Businesses selling taxable goods or services may also need sales-tax returns and state or local registrations.

Self-employed owners may owe income tax and self-employment tax, and may need estimated payments. Partnerships and corporations can have their own filing schedules, even if the business has little activity or no profit. Check each applicable filing obligation rather than waiting until year-end.

13. What documents should newcomers prepare for a first tax return?

The right document list depends on your status and income, but it is useful to collect the following before your appointment or tax-preparation meeting:

• SSN or ITIN, legal name, current address, date of birth, and relevant immigration records.
• Arrival and travel dates, green-card or visa information, and details of earlier U.S. visits.
• Forms W-2, 1099, and other U.S. income statements; records of self-employment, rental, investment, pension, or other income.
• Foreign income records, foreign tax paid, overseas bank and brokerage account details, and information about foreign financial assets.
• Documents about property, investments, business interests, gifts, inheritances, or large transfers involving another country.
• Spouse and dependent information, prior-year returns, estimated tax payments, and receipts for potentially deductible expenses or credits.
• For a business: formation documents, EIN notice, bookkeeping reports, bank statements, invoices, receipts, payroll records, contractor information, and state tax registrations.

14. Common newcomer mistakes to avoid

• Assuming that your immigration category automatically determines your tax residency.
• Using the wrong individual tax form without checking resident, nonresident, or dual-status rules.
• Ignoring foreign income, foreign taxes paid, or foreign financial-account reporting requirements.
• Assuming a money transfer is automatically taxable, or automatically irrelevant, without checking where the money came from.
• Mixing personal and business spending or leaving bookkeeping until tax season.
• Assuming an LLC has one universal tax treatment or that forming a company resolves visa and work-authorization questions.
• Forgetting state and local filings, estimated payments, sales tax, payroll obligations, or annual business registrations.
• Assuming an extension to file also extends the deadline to pay tax.

15. A simple example

Imagine a newcomer arrives in the United States during the year, begins working for a U.S. employer, keeps a bank account overseas, and earns interest from that account. The correct reporting depends on the person’s tax residency and residency starting date, the source and timing of each income item, and whether foreign-account reporting thresholds are met.

The person should not simply report only the U.S. paycheck or assume that all overseas activity is outside the U.S. tax system. They should collect the relevant documents and determine whether Form 1040, Form 1040-NR, dual-status reporting, FBAR, Form 8938, or state filings may apply.

When should you get professional tax and bookkeeping help?

A first U.S. tax return may be relatively straightforward if you have one employer and no other complications. It can become more involved when you have income from more than one country, foreign accounts or assets, rental property, self-employment, a new LLC or corporation, several state filing obligations, or uncertainty about your tax residency.

Professional support can help you organize your records, identify likely federal and state filing requirements, keep business books current, and spot cross-border questions that should be reviewed before a return is filed.