Ukrainians in the U.S.

Step One: Determine your income tax residency

1. An individual is a U.S. tax resident if:
   1. They are a U.S. citizen or a Green Card holder (with some exceptions under the U.S.-Ukraine Income Tax Treaty); or
   2. They’ve met a substantial presence test, which means they’ve spent a number of days in the reporting period based on the following formula: Days in the U.S. during the current year + 1/3 of U.S. days during the prior year + 1/6 of U.S. days during the year before prior year ≥ 183 days.
2. If the above tests are not met or if exceptions apply, an individual is not a U.S. tax resident. It is possible to elect to be treated as a resident under certain circumstances.

Step Two: Determine what income is subject to taxation

1. For U.S. tax residents, all worldwide income is subject to U.S. income tax rules.
2. For non-U.S. tax residents, only U.S.-sourced income is subject to U.S. taxation. In general, U.S.-sourced income includes, but is not limited to, the following:
   1. Income that is earned in the U.S. (i.e., employee salaries and non-employee receipts earned while physically working in the U.S., even if received from an employer or a client located abroad).
   2. Dividends from U.S. companies.
   3. Interest from U.S. banks.
   4. Rent from properties located in the U.S.
3. An individual is a dual resident during the first year in the U.S. if they are a U.S. tax resident on the last day of the year and arrived in the U.S. after the year has started. In this case, the non-U.S.-sourced income is not subject to taxation before the arrival date.

Step Three: Determine your filing status

1. Single: Unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by U.S. state law or a foreign country.
2. Married: Not divorced and not legally separated. You may file Jointly or Separately.
3. Head of Household: Single but having a qualified relative for whom you provide more than half of the individual’s support.
4. Non-U.S. tax residents file as Single, Married Filing Jointly or Married Filing Separately.

Step Four: Determine the amount of income that is subject to inclusion in the U.S. tax return and see if it is below the filing threshold

1. U.S. tax residents include all their worldwide income (some exceptions apply), and non-U.S. tax residents include U.S. sourced income;
2. If U.S. tax residents’ income is below the filing threshold, there is no need to file, unless claiming tax refunds or credits, or having other tax obligations (e.g., self-employment tax).
3. U.S. tax residents may need to file a tax return even if there is no taxable income or income was excluded under the U.S.-Ukraine Income Tax Treaty rules. There is also no threshold for income.

As many of the Ukrainian refugees will be non-U.S. tax residents in year 2023 and many started working and had income, most likely they have Form 1040NR filing requirement. Examples of reportable income are (but not limited to) the following:

• Salary from any U.S. employer (if you started the job in 2023 and received salary).
• Salary from a Ukrainian or any other non-U.S. employer, if you worked for them while physically located in the U.S.
• Payments received while performing services in the U.S., such as working as an Uber driver, providing cleaning, nanny, or elderly people care services, etc.
• Payments from clients located outside of the U.S. for self-employed individuals physically located in the U.S.
• Any income that you received from owners or creditors of U.S. business entities.
• Rental income from property owned in the U.S.

Step Five: Pay taxes owed

Individuals with tax filing requirements must file (or extend) their tax return and pay taxes due in full by April 15, 2024. Please read more details here.

Step Six: File tax return

Filing the tax returns in the U.S. is not an easy task and requires some knowledge and basic skills, especially if international transactions take place. However, help with the filings is available through the following:

1. Check out Volunteer Income Tax Assistance (VITA) here (enter your ZIP code): https://irs.treasury.gov/freetaxprep/
2. If you were not able to receive help or have a complex situation, please contact BPM LLP at [email protected] for further assistance.
3. Information from the IRS in Russian https://www.irs.gov/ru

If an individual is neither a U.S. citizen, nor a Green Card holder, then one of the following scenarios applies:

I. Does not meet substantial presence test for 2023, but had income that is subject to U.S. taxation. The individual most likely has a requirement to file Form 1040NR and report all income that is subject to U.S. taxation.

II. Does meet the substantial presence test for 2023. If the individual had any income in the year 2023, it is subject to U.S. taxation from the date of arrival in the U.S. in 2023 (with some minor exceptions).

If 2023 is the individual’s first year in the U.S., the tax return is dual status. This means an individual should file Form 1040NR, the U.S. Non-resident Alien Income Tax Return, from January 1, 2023, until the day before the arrival date; and Form 1040, U.S. Individual Tax Return, from the arrival date until December 31, 2023.

An individual should only include U.S.-sourced income in Form 1040NR and worldwide income in Form 1040. In addition, the individual has a requirement to file Form 114, the Report of Foreign Bank and Financial Accounts (FBAR).

Dual-status tax returns have several restrictions; a few of the most common ones are as follows:

• A dual-status taxpayer cannot use the standard deduction allowed on Form 1040. However, they can itemize certain allowable deductions.
• A dual-status taxpayer may be able to claim a dependent (a qualifying child or a qualifying relative). They may be entitled to claim additional deductions and credits for a qualifying dependent.
• A dual-status taxpayer cannot use the Head of Household filing status.
• A dual-status taxpayer cannot file a joint return. However, if the individual is married to a U.S. citizen or a Green Card holder, they may elect to file a joint return with their spouse. If the married individual does not elect to file Jointly, they must file as Married Filing Separately.

Individuals who are citizens of Ukraine or have closer connections to Ukraine (e.g., permanent residency, a house, a family, etc.) may treat themselves as a non-resident for the whole year 2023, file only Form 1040NR, and include only income that is subject to U.S. taxation. (Note: A thorough analysis is needed to determine if an individual has closer connections to Ukraine.)

Individuals who want to be treated as non-residents for the entire year should file Form 8833, Treaty-Based Return Position Disclosure, citing U.S.-Ukraine Income Tax Treaty Article 4(2) and describing why the tax residency is in Ukraine. This will work for all years an individual is in the U.S. as a refugee until they decide to stay in the U.S. and file for adjustment of status (Green Card).