U.S. Taxes for EB-5 investors: Filing your taxes

United States (U.S.) tax requirements for EB-5 investors are complex, given investors in the program are required to make a large investment in the U.S. economy, change residence status, and eventually have their investment repaid to them. All U.S. residents must file annual tax returns in accordance with the standards set by the IRS, who strictly monitors compliance. For EB-5 investors who may already be living in the U.S. on a nonimmigrant visa, tax liability may apply to estate and income even before being granted conditional permanent residency in the U.S.

It is important that immigrants complete their tax planning and preparation before entering the U.S. Educating yourself on the American tax laws, as well as the impact on your different income streams and existing investments on your tax liability is most effective when assisted by a tax professional. Investors can adequately prepare themselves to consult with a professional by understanding the basics of the U.S. tax code prior to their first consultation.

Tax Identification Numbers

In the United States, every person must obtain a specific number in order to file their taxes. Most commonly, this is a “Social Security number” (SSN). Your SSN is a nine-digit number that is key to your life in the United States; it’s necessary not only to file taxes, but also to work, obtain a bank account, fill out government forms, and much more. An SSN is analogous to a “Hukou” number in China, an “Aadhaar” number in India, a “SIN” number in Canada, and a “National Insurance” number in the United Kingdom.

If you are arriving in the United States for the first time as new Lawful Permanent Resident (LPR), obtaining an SSN is among the first orders of business to start your new life in the United States. As an immigrant to the United States, you must obtain an SSN.

Obtaining an SSN

Obtaining an SSN is a relatively simple process, though it requires gathering some documentation ahead of time. SSNs are issued by the Social Security Administration (SSA), a federal government agency. You will have to physically visit an SSA office in your locality to apply, in-person, for an SSN. You can find the nearest SSA office and make an appointment at the following link: Field Office Locator | SSA

If the immigrant investor is already physically present in the U.S., you will likely have an SSN already. There is no need to re-apply for an SSN if one has already been issued. People are only issued one SSN for their lifetime, regardless of how their immigration status changes, and they are permanently valid.

As a foreign national applying for an SSN in-person at an SSA office, you will need to bring the following original documents with you to your appointment:

1. Current foreign passport, valid and unexpired, with U.S. Immigrant Visa foil sticker evincing LPR status and admission stamp (if any) issued upon arrival in the U.S.
2. LPR card (i.e., “green card), if you have received it in the mail
3. I-94 Arrival/Departure Record, available here: I94 – Official Website (dhs.gov)
4. Foreign birth certificate (not required, but preferable if in English to prove age)
5. Completed Social Security Card application form SS-5. Application for Social Security Card (ssa.gov)

There is no cost to apply and SSNs are issued for free.

Once you apply in person, your Social Security card with SSN will be mailed to your address listed on the application. You must keep that card safe with you for the rest of your life in the United States and, if lost, apply to the SSA for a replacement promptly.

After receiving your SSN, you will be able to take several official steps to integrate into the United States. As aforementioned, banks, employers, and government agencies will all require you to state your SSN in order to engage with them. If you are an LPR, you are authorized to work for most employers in the United States without restriction, though you will need to present your SSN to them before you can be employed.

ITINs: A Limited Circumstance

While an SSN is most commonly issued to all LPRs, it may not be available to everybody. If you have made an EB-5 investment in the U.S. while still abroad and are waiting to become eligible for consular processing (to become an LPR), you will need to pay taxes on your capital gains — even as you are not yet eligible for an SSN.

In this case, you must obtain an Individual Taxpayer Identification Number (ITIN). An ITIN is normally issued to people who need to pay U.S. taxes despite not being authorized to work in the United States. Like an SSN, it is a nine digit number, but it is issued by the Internal Revenue Service (IRS, America’s tax collecting agency) rather than the SSA.

ITINs are normally obtained outside the United States after submitting an application to the IRS. One can either apply by mail or by consulting with local private accountants designated by the IRS as “Certified Acceptance Agents” (i.e., who verify a person’s identity documents abroad). For more information, please visit the following website: https://www.irs.gov/individuals/how-do-i-apply-for-an-itin

It is generally recommended that foreign nationals apply for an ITIN through a Certified Acceptance Agent, which avoids the need to mail original documents proving identity, age, and citizenship overseas to the United States for processing.

Once you are issued an ITIN, it is valid for a limited time period. Obtaining an ITIN does not obviate the need to obtain an SSN once you arrive in the United States. You must obtain an SSN as soon as possible, after which the ITIN will be voided.

Filing your Taxes

Once you obtain an SSN or ITIN, you will eventually need to file tax returns for any income or monetary gains earned in the United States. A tax return covers one tax year — i.e., from January 1 to December 31, concurrent with a calendar year — and must be filed every year. The deadline to file your tax returns is usually four months after the end of the tax year (often in April of the subsequent year).

Filing your tax returns is a complicated and intricate process, given the complexity of the U.S. Internal Revenue Code and the many credits, deductions, and exemptions that exist. Hence, most U.S. taxpayers do not complete their tax returns on their own and, instead, use several services to aid them. 

Often, taxpayers with simple tax situations (i.e., salaried employment with small investments) use online services to prepare their tax returns and electronically file them with the IRS. There are many such services available: e.g., TurboTax, H&R Block, TaxSlayer, et cetera.

Many online services charge a fee to prepare one’s tax returns. However, the U.S. Government plans to release a free service known as “Direct File” to electronically file tax returns with the IRS. The IRS also has agreements with several service providers to provide free filing for low-income taxpayers. For more information, please visit the following link: IRS Free File | Internal Revenue Service

However, for EB-5 investors, the large size of their investment and their foreign financial ties add another layer of complexity to tax returns, which online services are usually unequipped to handle. Hence, it is recommended that EB-5 investors solicit a U.S.-based Chartered Professional Accountant (CPA) to handle all their U.S. tax-related matters.