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Am I an Alien?
The US Tax Code defines an “Alien” as not a US Citizen. LOL, yes, you read that right. So chances are that if you were not born in the US, or not a naturalized US citizen, then you’re an Alien – at least accordingly to the IRS.
Further, the IRS classifies aliens as resident aliens and non-resident aliens. If you are an alien (not a U.S. citizen), you are considered a nonresident alien unless you meet one of two tests. You are a resident alien of the United States for tax purposes if you meet either the green card test1 or the substantial presence test2 for the calendar year (January 1-December 31).
Certain rules exist for determining the Residency Starting and Ending Dates for aliens.3
In some cases, aliens are allowed to make elections which override the green card test and the substantial presence test, as follows:
Note: You can be both a nonresident alien and a resident alien during the same tax year. This usually occurs in the year you arrive or depart from the United States. If so, you may elect to be treated as a Dual Status Alien7 for this taxable year and a Resident Alien for the next taxable year if you meet certain tests.
Why Does the IRS Care About What Type of Alien I Am?
Your alien status largely determines your taxable status. Because residents and nonresident aliens are taxed differently, it's important for you to determine your tax status.
Resident aliens must follow the same tax laws as U.S. citizens. If you're a resident alien, you must report your worldwide income from all sources, that is, income from both within and outside the United States.
Nonresident aliens are only required to pay income tax on any income that is earned or otherwise realized from a U.S. source. They do not have to pay tax on any foreign-earned income.
What Is the Green Card Test?
You are a resident, for U.S. federal tax purposes, if you are a Lawful Permanent Resident of the United States at any time during the calendar year. This is known as the "green card" test.1
You are a Lawful Permanent Resident of the United States, at any time, if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services (USCIS) issued you an alien registration card, Form I-551, also known as a "green card."
You continue to have U.S. resident status, under this test, unless:
- You voluntarily renounce and abandon this status in writing to the USCIS,
- Your immigrant status is administratively terminated by the USCIS, or
- Your immigrant status is judicially terminated by a U.S. federal court.
If you meet the green card test at anytime during the calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day on which you are present in the United States as a Lawful Permanent Resident. However, an alien who has been present in the United States at any time during a calendar year as a Lawful Permanent Resident may choose to be treated as a resident alien for the entire calendar year.
What is the Substantial Presence Test?
You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
Example: You were physically present in the U.S. on 120 days in each of the years 2015, 2016, and 2017. To determine if you meet the substantial presence test for 2017, count the full 120 days of presence in 2017, 40 days in 2016 (1/3 of 120), and 20 days in 2015 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2017.
Who Is Considered a Dual Status Alien?
You are a dual status alien when you have been both a U.S. resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident.
I’m a Foreign Student (On F1 Visa), but Meet the Substantial Presence Test. Am I a Resident or Nonresident?
Even though a foreign student may pass the substantial presence test, an exception exists in U.S. law which would allow the foreign student to continue to be treated as a nonresident alien.
The Internal Revenue Code contains two exceptions to the substantial presence test which can be used by aliens to maintain nonresident status.
- Internal Revenue Code section 7701(b)(3)(B) and (C) and Treas. Reg. § 301.7701(b)-2 (known as the closer connection exception). Most foreign students cannot use this exception, however, because of the requirement that the alien cannot have been physically present in the United States during the current year for more than 183 days, and the requirement that the alien’s tax home be located outside the United States. Most foreign students fail both of these tests.
- Internal Revenue Code section 7701(b)(5)(D) and (E) and in Treas. Reg. § 301.7701(b)-3(b)(7)(iii). The exception is available only to alien students (not teachers/researchers, etc.), and contains four requirements for its application. The student -
- does not intend to reside permanently in the United States;
- has substantially complied with the immigration laws and requirements relating to his student nonimmigrant status;
- has not taken any steps to change his nonimmigrant status in the United States toward becoming a permanent resident of the United States; and
- has a closer connection to a foreign country than to the United States as evidenced by the factors listed in Treasury Regulation 301.7701(b)-2(d)(1).
The burden of proof is on the student to prove these four factors. To claim the exception for students on an income tax return, a student should attach Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition8 to the student’s Form 1040NR.
The US Tax Code defines an “Alien” as not a US Citizen. If you are an alien, you are considered a nonresident alien unless you meet one of two tests: either the green card test1 or the substantial presence test2 for the calendar year. Note: You can be both a nonresident alien and a resident alien during the same tax year (i.e. a Dual Status Alien).
Because residents and nonresident aliens are taxed differently, it's important for you to determine your tax status. Resident aliens must follow the same tax laws as U.S. citizens - you must report your worldwide income from all sources, that is, income from both within and outside the United States. Nonresident aliens are only required to pay income tax on any income that is earned or otherwise realized from a U.S. source - they do not have to pay tax on any foreign-earned income.
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2 Substantial Presence Test: https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test
3 Residency Starting & Ending Dates: https://www.irs.gov/individuals/international-taxpayers/residency-starting-and-ending-dates
4 Non-Resident Alien Spouse: https://www.irs.gov/individuals/international-taxpayers/nonresident-alien-spouse
5 Conditions for a Closer Connection to a Foreign Country: https://www.irs.gov/individuals/international-taxpayers/conditions-for-a-closer-connection-to-a-foreign-country
7 Dual Status Alien: https://www.irs.gov/individuals/international-taxpayers/dual-status-aliens
8 Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition: https://www.irs.gov/forms-pubs/about-form-8843-statement-for-exempt-individuals-and-individuals-with-a-medical-condition-1