Filing Taxes - What's Happening on Rota?

April 23, 2008

Last night I received an email from a guest worker from Rota wondering what's the deal with filing taxes there. Today the question was posed in an open letter to the Department of Finance. The question is simple. Why are nonresident workers who qualify to use Forms 1040EZ, 1040A, or 1040 to file their taxes being required to use Form 1040 NR? Does it have anything to do with stimulus package tax refunds? Read below:

An open letter to the Department of Finance – Revenue and Taxation

I am writing this letter to make an inquiry from the Department of Finance regarding the filing of Territorial Individual Income Tax Return for the year 2007. My husband and I have been working in the CNMI for fourteen (14) years now as contract workers. Since 1993, we have been using either Form 1040EZ, 1040A or 1040 and we didn’t encounter any problem. We received our tax refunds and the “additional child tax credit” for all the tax returns that we filed.

When we filed our tax return for the year 2007, however, the Revenue and Taxation of Rota told us that we can no longer use Form 1040A and that we should use Form 1040NR because we are nonresident aliens. I am not aware of any change on the taxation system this year that could alter our filing status. Anyway, if the requirement of the Revenue and Taxation for the nonresident aliens is to use the Form 1040 NR, then we will adhere to this.

However, when I was reading the instruction booklet that they gave us for Form 1040NR (for nonresident aliens) from the IRS, I came across an interesting topic on page 2, entitled RESIDENT ALIEN OR NONRESIDENT ALIEN. The instruction stated that:

“If you are not a citizen of the United States, specific rules apply to determine if you are a resident alien or a nonresident alien for tax purposes. Generally, you are considered a resident alien if you meet either the green card test or the substantial presence test for 2007.”

“ You are considered a U.S. resident if you meet the substantial presence test for 2007. You meet this test if you were physically present in the United States for at least:
1. 31 days during 2007, and
2. 183 days during the period 2007, 2006 and 2005, counting all the days of physical presence in 2007, but only 1/3 the number of days presence in 2006 and only 1/6 the number of days in 2005.

“ You can be treated as a nonresident alien if you were present in the United States for fewer than 183 days during 2007.”

With this information, I am now confused why the Revenue and Taxation is requiring us to use this form. We passed the substantial presence test so we can be classified as resident alien. Yes, we are nonresident aliens as per our immigration status but we are resident aliens for tax purposes. I asked for a legal opinion from a respectable lawyer specializing in taxation. According to her, she called the Revenue and Taxation in Saipan and she was told that we don’t have to use Form 1040NR if we were here in the CNMI for more than 183 days during 2007.

I called Revenue and Taxation – Rota again but their position is still the same, that is, to follow Revenue and Taxation-Saipan’s direction to use FORM 1040NR for nonresident workers.

I know that I am not as knowledgeable as the people working for the Revenue and Taxation so please correct me if my analysis and interpretation is wrong. I have been trying to call Revenue and Taxation – Saipan for the past week but I was not able to get any clarification on this matter. We really need to be enlightened on this. We want to know what is the regulation so that we would know what to do. I also learned from the IRS publication that if you file using Form 1040NR, you are not qualified to receive the economic stimulus payment. Is this the reason why we are being required to use this form? If we were not qualified to receive this economic stimulus payment, then don’t give it to us. We are not asking for anything that we don’t deserve, but please give us what is rightfully ours. We are TAXPAYERS too!

Thousands of nonresident workers desperately await your response and guidance.


Concerned Nonresident Worker
Songsong, Rota

Let's see if the Department of Finance will answer this. I asked an attorney in Saipan, and a congressional staff member in Washington, D.C. for an opinion. Both advised to follow the advise of the tax attorney. I will also contact the IRS for an answer, and will let you know if they respond.


Amy the Instructor said...

Please do. Also unfair is that if only one of your family members is a non-resident alien than you don't get the payment. I have a green card and my daughter is a citizen but because my husband is a student on an F-1 we don't get anything. I understand if they don't give us money for him, but why is my daughter out?