How to Determine whether You are Resident Alien or Not for Taxes

The United States is known as an inclusive country. People from all over the world study, work and live in this country. As an international student or foreign worker, you may ask the question, what is my US tax status when I have income. Below I will give you a starting point when you ask this question or struggle with this issue.

Resident alien or a Non-resident alien

The first step in resolving this tax problem is to understand if you are a resident alien or a non-resident alien. As for tax purposes, an alien refers to an individual who is not a U.S. citizen. Alien has two subcategories, resident alien and non-resident alien. In most cases, resident aliens are taxed on all their income, regardless where the income comes from. An example of this is an employee of Google working in the US, without any other income sources, would be taxed on his or her U.S. income. Nonresident aliens are taxed only on income sources from within the United States, and on most income which is from a trade or business in the United States. Often, foreign people may also subject to certain tax treaties as well that can override the regular tax rules.

Normally, you are nonresident alien unless you pass either green card test or substantial presence test for the calendar year. The green card test means you meet the test as a lawful permanent resident of the United States. You are regarded as a lawful resident if you are given privilege to reside in the United States permanently as an immigrant. Often, governmental agency (i.e. USCIS) will issue you a registration card when you have this status. This status continues unless the resident status is taken away from you (administratively or judicially).  A green card holder pays taxes, and is subject to the same tax rules, as a US citizen.

If you are not a green card holder, you may be regarded as resident alien if you pass the substantial presence test for the calendar year. The starting point for this test is that you must be physically present in the United States, including all 50 states and the District of Columbia. IRS has certain time/day requirement for this test. Take 2016 as an example, you should be present in the United States at least 31 days in 2016 and 183 days during past 3-year period includes 2016, 2015, and 2014. The basic rule to count the days is to count all the days that you were present in 2016, 1/3 of the days that you were present in 2015 and 1/6 of the days that you were present in 2014.  Assume a foreign worker who were present in the country for 90 days in 2016, 180 days in 2015, and 300 days in 2014. Let’s do the counting quickly, for this person, his/her days of presence are 90+ 1/3*180+1/6*300=90+60+50=200>183. In general, this person passed the substantial presence test and is required to file a form 1040 (or one of its variations). A non-resident alien conversely, would file a Form 1040NR.

Exceptions

Exceptions apply when you count the days that you are present in the United States. For example, you don’t count the days that you commute to work in the United States from Canada or Mexico, you are unable to leave the country, or you are exempt individuals. When you are unable to leave the country due to medical condition or you are exempt individuals. You must file Form 8843. In this case, you may be exempt individuals if you are holding “F”, “J” or “Q” Visa. Certain restrictions may apply. Details about form 8843 will be discussed later.

As we discussed above, it is important to determine whether you are non-resident alien or resident alien. One major tax issue we discussed is about the substantial presence test. This test is used to determine whether you are resident or non-resident alien. Along with the basics, today we discuss situations that some individuals can exempt the days they are actually present in the United States.

In general, there are several categories of individuals who can exempt the days of presence in the United States. For example, some students, trainees, foreign government related individuals, and professional athletes, are exempt within certain parameters.

Form 8843

The Form 8843 is designed to serve this purpose of determining if a person is exempt. If you are an alien individual (other than a foreign government-related individual), you need to file Form 8843 to explain the rationale of your claim that you can exclude days of US presence in the United States as exempt individuals. In addition, this form can be used for people who are unable to leave the United States because of a medical condition or medical problem. This form is required to be attached to your Form 1040NR or Form 1040NR-EZ (note these are the non-resident income tax forms).

The first group of alien individuals this form covers is teachers and trainees. This group of people is present in the United States under “J” or “Q” visa. The second group is students. An international student normally holds an “F”, “J”, “M” or “Q” visa. Similarly, this group will be considered as complied if they have not done anything prohibited. However, you cannot exclude the days of presence if you are a student for any part of more than five calendar years unless you can establish that you don’t have the intention to reside in the United States permanently. Therefore, if a student takes 6 years to gain their US degree, it will have to be proven that it was reasonable that the school work had to take more than five years to complete. If you can not do this, then after five years you will be potentially a US subject taxpayer even with the student visa. Some possible facts can establish this statement if you maintain a close connection with your home country or you did not take any step to change your immigration status. Often, a personal statement will be attached. The last group of exempt individuals is professional athletes. You can exempt the days if you are here to compete in a charitable sports event. Therefore, most athletes end up paying US taxes on their income.

For people who have medical condition or medical problems, individuals can exempt from the days when they are trying to leave the United States, but they couldn’t due to their condition. Different categories are required to fill in different sections of the form and attach to your return.