Client citizenship status

[ttbtaxes]

I have a new client coming in next week. He has a very clear foreign accent. How do you check the status of someone's citizenship? Obviously, I will ask him but do you ask to see any documents to prove citizenship? I'll also inquire about foreign accounts and assets. If they say they don't, I will have the person sign some letter of representation to that.

I hate to go overboard and make the client feel singled out but I also don't want to get hoodwinked. Any advice from personal experience would be appreciated.

[Gary2]

I have a new client coming in next week. He has a very clear foreign accent. How do you check the status of someone's citizenship? Obviously, I will ask him but do you ask to see any documents to prove citizenship? I'll also inquire about foreign accounts and assets. If they say they don't, I will have the person sign some letter of representation to that.

I hate to go overboard and make the client feel singled out but I also don't want to get hoodwinked. Any advice from personal experience would be appreciated.

Is there a specific reason you think citizenship is a significant issue? There are many non-citizens who have to file US tax returns.

[ttbtaxes]

No but I want to be sure I know what the facts are and what I'm dealing with. I've never prepared a return for someone who wasn't a US citizen.

I wouldn't even know what documents to check for to confirm a person's status.

[Gary2]

No but I want to be sure I know what the facts are and what I'm dealing with. I've never prepared a return for someone who wasn't a US citizen.

I wouldn't even know what documents to check for to confirm a person's status.

If you don't know what documents to check, then you don't actually know whether or not you've ever prepared a return for someone who's not a citizen.

If you've never done a 1040NR, that would be a good thing to add to your continuing ed plan. At a minimum, you need to understand the substantial presence test and the common exceptions to it, along with the first year election and the spousal election.

I'm going to guess that, like most tax professionals, if a client says they're married, you don't insist on seeing the marriage license. If you're willing to take their word about marriage, you should be willing to take their word about citizenship. On the other hand, if someone says "let me call my boyfriend/girlfriend to come in and sign the return, too", you can't ignore the slip up, and have to follow through, maybe even asking for the marriage license because you received specific information. But since you can't (or shouldn't) discriminate based on national origin, an accent alone isn't enough to justify different treatment.

One thing you can do that may be helpful (if you're not already doing it) is to ask all clients to see their social security cards, and those of their dependents. When you've done it once, you don't need to ask to see the same cards year after year. You can tell your existing clients that you just found out you needed to change your policy, and to be fair, you have to do it for everyone. The social security card is far more significant to tax prep than citizenship.

[ttbtaxes]

I am certain, within the same confidence parameters as DNA evidence, that I have never have a personal tax client that was not a US citizen. Can I prove that? No.

I've never had a client before that could barely speak the English language and I have one coming in for the first time next week. It's the language issue that has me wondering whether he is a citizen. He's a doctor so I can obviously confirm some information about him.

He's probably a citizen but, having never prepared a return for a non-citizen, I wouldn't know a green card from baseball card. A resident alien from a outer-space alien. It's not the type of work I do nor have ever done. If he has any foreign-related tax matters, I will refer him to someone who does that type of work. It's not a pool that I want to dip my toe into.

I'm just trying to get a head's up on what to look for from the kind doctor to confirm his status.

[WhiteOleander]

I would start by asking the questions I normally ask anyone that has come to me prepare their taxes. Then because of the concerns of their citizenship in the US, I would tell them I need to know what their status is. I would approach it from the standpoint that I want to be sure I prepare the proper forms etc. I would explain that there are circumstances that would require checking on tax treaties and so forth.

[Lion]

Don't forget to ask ALL your citizen clients if they have foreign income or foreign assets so you can file the correct forms and schedules for your citizens.

How do you know if the husband sitting in front of you with impeccable English doesn't have a foreign bride at home? And, whether or not she's electing to report her worldwide income on Form 1040 along with her citizen husband her first year in this country? That won't be obvious from his non-accent.

US income tax has more to do with the sources of income and how long someone lived here or not here than it does with citizenship. Those are your starting points. If and when someone identifies himself as a nonresident alien or even a resident alien with closer ties to his native country, that's when you need to get into tax treaties. That might be a niche you don't want and need to find a pro to refer to.

Find out what the doctor's situation is and come back with your questions. There are many here that can help. (I'm not one of them! I have a family, US citizens, living in Singapore for 2-3 years, and that's as complex as I've gotten.)

[Gary2]

I think the point others are raising is that all you need to do is ask. There's no reason to suspect that a doctor with a foreign accent would either not understand the question or would lie about it.

If you don't want to do 1040NR returns - that's fine. But if someone is here on an H1B visa, meets the substantial presence test, doesn't meet any of the exceptions, and is a full year resident alien, you can't simply refuse to prepare their 1040 (not a 1040NR) because they're not a citizen; there's no difference on their return.

That's why, even if you don't do non-resident returns, you should still know the rules. Pub. 519 is a good start, but since there are subtleties, I'd still encourage CE, even if you have no CE requirements.

[ttbtaxes]

Thanks for all the good thoughts and insights!

[kathyc2]

I think the point others are raising is that all you need to do is ask. There's no reason to suspect that a doctor with a foreign accent would either not understand the question or would lie about it.

If you don't want to do 1040NR returns - that's fine. But if someone is here on an H1B visa, meets the substantial presence test, doesn't meet any of the exceptions, and is a full year resident alien, you can't simply refuse to prepare their 1040 (not a 1040NR) because they're not a citizen; there's no difference on their return.

Why could a preparer not refuse to prepare a non-citizen 1040? There are certain non-discrimination factors such as race, age, etc., but citizen/non-citizen would fall under that?

[Gary2]

Why could a preparer not refuse to prepare a non-citizen 1040? There are certain non-discrimination factors such as race, age, etc., but citizen/non-citizen would fall under that?

Because "national origin" is one of those factors. Granted, "national origin" isn't identical to "citizenship", but it's so close that it would be extremely unwise to argue that. There's no basic difference between a full-year resident alien return and a citizen's return (unlike the 1040 vs 1040NR difference), so you can't argue any rational basis. You might refuse to do specific forms, such as the 8938, as long you did that for both citizens and resident aliens (but even there, I'd worry about circumstances lending themselves to a discrimination accusation).

[kathyc2]

Because "national origin" is one of those factors. Granted, "national origin" isn't identical to "citizenship", but it's so close that it would be extremely unwise to argue that. There's no basic difference between a full-year resident alien return and a citizen's return (unlike the 1040 vs 1040NR difference), so you can't argue any rational basis. You might refuse to do specific forms, such as the 8938, as long you did that for both citizens and resident aliens (but even there, I'd worry about circumstances lending themselves to a discrimination accusation).

Hmmm, I had never thought of that, although I've never had a situation where it has been applicable. I was thinking that some credit's aren't available to non-citizens, but I may be mistaken.

[Gary2]

Hmmm, I had never thought of that, although I've never had a situation where it has been applicable. I was thinking that some credit's aren't available to non-citizens, but I may be mistaken.

For the two credits of most concern, EITC and Child Tax Credit, both are available to resident aliens, though the EITC requires being a resident alien for the full year.

There is a very special case for adopted children and the child tax credit. The normal rule is that the child must be a citizen, national, or resident alien. However, if the child lived with the adoptive parents for the entire year and the parent is a citizen or national (but not a resident alien), the the child counts. That's a very unusual case that would only apply if the parents and child lived outside the US for more more than half the year, since otherwise the child would also meet the substantial presence test to be a US resident alien.

Another case where citizenship might introduce complexities is for the Foreign Earned Income Exclusion (form 2555). But off the top of my head, I can't think of any common situation where there's a difference between citizens and resident aliens - once the determination that the resident alien will be filing a full-year resident return has been made.