Hi doxeyman,
Yes, you must pay Income Tax on your earnings, and probably on the
investment income. I'm not a tax expert, and the rules are complex, so
I have pointed you to resources where you can read to determine if you
are liable to pay tax on the investment income.
Here's the tax forms you will need and the instruction booklets:
U.S. Nonresident Alien Income Tax Return
http://www.irs.gov/pub/irs-pdf/f1040nr.pdf
Instructions for Form 1040NR
U.S. Nonresident Alien Income Tax Return
http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
U.S. Income Tax Return for Certain
Nonresident Aliens With No Dependents
http://www.irs.gov/pub/irs-pdf/f1040nre.pdf
Instructions for Form 1040NR-EZ
U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
http://www.irs.gov/pub/irs-pdf/i1040nre.pdf
Publication 519 (2004), U.S. Tax Guide for Aliens
http://www.irs.gov/publications/p519/index.html
The 2005 Guide is not posted yet, but there's a section for what's new
in 2005 here:
http://www.irs.gov/publications/p519/ar01.html#d0e315
As far as the investment income is concerned, there are too many
variables for me to determine here, it's a minefield of rules and
exceptions. I can say "probably", and I have included a couple web
pages where you can read about "possible" taxation of non-resident
aliens for investment income.
Subject: Tax Code - Non-Resident Aliens and US Holdings
http://invest-faq.com/cbc/tax-non-us-nat.html
..."In the years when you are considered a non-resident for tax
purposes (basically, the years when you spend in the US less than 183
days; the actual rule is a little more complex, and takes prior years
into account; see IRS publication 519 for details), you file your US
tax return on form 1040NR, instead of regular 1040 (EZ, A), and pay
tax on your investment income according to special rules:
? No tax on capital gains. This means that a brokerage or a mutual
fund should withhold nothing when you sell shares. With respect to
mutual funds, long-term capital gain distributions are exempt as well.
? No tax on bank interest.
? No tax on portfolio interest. It's not always easy to figure out
interest on what bonds qualify as "portfolio interest", though. Some
brokerage firms are confused on this issue, unfortunately.
? 30% flat rate tax on dividends. Generally this includes dividend and
short-term cap gain distributions by mutual funds. A tax treaty with
your country of residence may reduce this rate.
? 30% flat rate tax on interest that neither is paid by a bank nor
qualifies as "portfolio interest." A tax treaty with your country of
residence may reduce this rate.
? No personal exemption or deductions can be applied against
investment income (which is, technically, "income not effectively
connected with your US trade or business").
If you are a non-resident for the tax purposes in a given year, but
spend 183 days or more in the country, your capital gains are also
subject to the 30% flat tax. This is a fairly rare but possible
situation.
IRS Publication 515 (for 2005)
http://www.irs.gov/pub/irs-pdf/p515.pdf
This is given to companies that might have to withhold from non-resident aliens.
An Introduction to the U.S. Taxation of Non-Resident Aliens
http://offshorepress.com/offshoretax/alientax.htm
These might also come in handy:
IRS Publication 901, "Tax Treaties"
http://www.irs.gov/pub/irs-pdf/p901.pdf
IRS Tax Topic 851, "Resident and Nonresident Aliens"
http://www.irs.gov/taxtopics/tc851.html
The IRS web site "Digital Daily" has a collection of information for
the International Taxpayer.
http://www.irs.gov/businesses/small/international/
The Digital Daily's area includes this article which focuses on the
taxation of capital gains Of nonresident aliens (the link is
unfortunately buried in another article).
http://www.irs.gov/businesses/small/international/article/0,,id=96400,00.html
If I can be of more assistance in regards to this topic, please ask.
Good luck to you!
~~Cynthia
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