An alien is any individual who is not a U.S. citizen or U.S. national. The taxation of aliens by the United States is significantly affected by the residency status of such aliens. Although the immigration laws of the United States refer to aliens as immigrants, nonimmigrants, and undocumented (illegal) aliens, the tax laws of the United States refer only to Nonresident Alien (NRA) and Resident Alien (RA).
A Resident Alien for tax purposes is treated in the same manner as a U.S. citizen when filing a tax return and paying taxes. A Nonresident Alien for tax purposes has a completely different method of having tax withheld, completing tax forms and tax documents, and is eligible for very few and limited deductions when paying taxes. A Resident Alien for tax purposes must report worldwide income, whereas, a Nonresident Alien for tax purposes must only report and pay tax on money that he or she receives from U.S. sources.
The time period for which you are a Nonresident Alien for tax purposes depends on the results of what is called the “Substantial Presence Test.” In general, individuals present in the U.S. under an F, J, M, or Q STUDENT immigration status will be a Nonresident Alien for the first FIVE calendar years they are present in the U.S.; individuals present in the U.S. under a J or Q NON-STUDENT immigration status will be a Nonresident Alien for the first TWO calendar years they are present in the U.S. There are many exceptions to the general rule so further questions must consider the facts and circumstances of the particular individual’s current and past visits to the U.S.
Tax Residency Status
If you are an alien (not a U.S. citizen), you are considered a nonresident alien, unless you meet one of two tests for the calendar year (January 1 – December 31).
- You are admitted to the United States as, or change your status to, a Lawful Permanent Resident under the immigration laws (the Green Card Test);
- You pass the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States);
In some cases aliens are allowed to make elections which override the Green Card Test and the Substantial Presence Test.
Are you an "immigrant" (Lawful Permanent Resident) of the United States under the immigration laws of the United States? Aliens who are Immigrants are Resident Aliens of the United States for tax purposes, under the condition that they spend at least one day in the United States.
If you answered yes to the above question, you do not need to proceed to the questions below.
You must pass both the 31-day and 183-day tests.
- 31 day test: Were you present in United States 31 days during current year?
- 183 day test:
A. Current year days in United States x 1 =_____days
B. First preceding year days in United States x 1/3 =_____days
C. Second preceding year days in United States x 1/6 =_____days
D. Total Days in United States =_____days (add lines A, B, and C)
If line D equals or exceeds 183 days, you have passed the183-day test.
Do not count days of presence in the U.S. during which:
- you are a commuter from a residence in Canada or Mexico;
- you are in the U.S. less than 24 hours in transit;
- you are unable to leave the U.S. due to a medical condition that developed in the U.S.;
- you are an exempt individual;
- you are a regular member of the crew of a foreign vessel traveling between the U.S. and a foreign country or a possession of the U.S. (unless you are otherwise engaged in conducting a trade or business in the U.S.)
The term "exempt individual" does not refer to someone exempt from U.S. tax, but to anyone may exclude days of presence in the U.S. for purposes of the Substantial Presence Test.
- Employee of Foreign Government;
- Employee of International Organization;
- Usually on A or G visa;
- Does NOT include students on J or Q visas;
- Does include any alien on a J or Q visa who is not a student (physicians, au pairs, summer camp workers, etc.);
- must wait 2 years before counting 183 days; however if the J or Q alien has been present in the U.S. during any part of 2 of the prior 6 calendar years in F, J, M, or Q status, then he or she is not an exempt individual for the current year, and he or she must count days in the current year toward the substantial presence test;
- Quality of being an Exempt Individual applies also to spouse and child on J-2 or Q-3 visa;
- must wait 5 calendar years before counting 183 days;
- the 5 calendar years need not be consecutive; and once a cumulative total of 5 calendar years is reached during the student’s lifetime after 1984 he or she may never be an exempt individual as a student ever again during his or her lifetime;
- Quality of being an Exempt Individual applies also to spouse and child on F-2, J-2, M-2, or Q-3 visa;
- will not be an exempt individual as a student if he/she has been exempt as a teacher, trainee, student, Exchange Visitor, or Cultural Exchange Visitor on an "F, " "J, " "M, " or "Q " visa for any part of more than 5 calendar years.