The IRS (Internal Revenue Service) uses two tests, the green card test and the substantial presence test to evaluate your alien status. If you meet the requirements of either test, you are considered a resident alien for tax purposes; otherwise, you are considered a nonresident alien.

If you are an alien with a green card, i.e., when the U.S. Citizenship and Immigration Services allows you to legally reside in the United States, you are a resident alien. However, if you do not have a green card and you spend at least 31 days in the U.S. during the current tax year and a total of 183 days during the last three tax years (including the current tax year), you will most likely satisfy the physical presence requirement and also be treated as a resident alien for tax purposes.

Counting the 183 days

When counting the number of days you are present in the U.S. during the three-year period, you do not have to include every day. Rather, you count only a fraction of the days in two of the three years. Suppose, for example, you are trying to figure out your status for the 2020 tax year since you lived in the U.S. for 60 days. Count the 60 days for 2020, one-third of the days in 2019 and one-sixth of the days in 2018. So, if you were in the U.S. for 120 days in 2019 and 180 days in 2018, only include 40 days for 2019 and 30 days in 2018, with the total for the three-year period, being 130 days. In this scenario, you will pay tax on your income as a nonresident alien.

In addition, days you are physically present in the U.S. are disregarded under the following circumstances:

• Days you commute for work in the U.S. to from a residence in Canada or Mexico, if you regularly commute from Canada or Mexico.
• Days you are in the United States for less than 24 hours when you are in transit between two locations outside the United States.
• Days you are in the United States as a crew member of a foreign vessel.
• Days you cannot leave the U.S. because of a medical condition that arose during your stay.
• Days you are an «exempt individual».
• An «exempt individual» for purposes of this test refers to the following persons:

 

An individual temporarily present in the United States as an individual of a foreign government under an «A» or «G» visa.

 

• A teacher or trainee temporarily in the United States under a «J» or «Q» visa, who substantially complies with the visa requirements.
• A student temporarily in the United States under an «F», «J», «M» or «Q» visa, who substantially complies with the visa requirements.
• A professional athlete temporarily in the United States to compete in a charitable sporting event.
• Still not sure if you are a resident or non-resident for tax purposes? You can check with our non-resident alien tax partner Sprintax, where you will find help in determining your residency status and filing your non-resident tax return if necessary.

Resident Alien Taxation
As a legal U.S. resident, you are subject to the tax rules for U.S. citizens. This means you must report all income you earn on annual tax returns, regardless of the country in which you earn it.

Taxation of nonresidents
A nonresident must also pay income taxes to the IRS, but only on income that is effectively tied to the U.S., which generally includes money you earn while in the U.S. However, the IRS has no authority to impose taxes on income that nonresidents earn in their home countries or in any foreign country.

When preparing your U.S. tax return, you should use Form 1040NR or the shorter Form 1040NR-EZ if you are eligible.

Regardless of which form you use, you will only report amounts that are considered U.S. source income.
Like resident aliens and U.S. citizens, there are deductions and credits you can claim to reduce your taxable income.
All nonresident alien tax return forms, such as 1040NR, 1040NR-EZ or 8843, are available with instructions on the IRS website. You can also use software such as Sprintax to guide you through the process of preparing a nonresident alien tax return.

Dual Resident Aliens
In the year of transition between being a nonresident and a resident for tax purposes, a dual resident alien is generally considered a resident alien. A dual resident alien files two tax returns for the year, one return for the portion of the year he/she was considered a nonresident and another for the portion of the year considered a resident. In some situations, the taxpayer may elect to be treated as a resident for the entire year in the transition year to avoid having to file two separate returns.