How to determine whether to file as a resident or non-resident alien taxpayer

The first question any non-US citizen is going to face is whether to file taxes as a “resident” or “non-resident alien” taxpayer. The IRS has its own set of rules for determining this, and non-residents face some different tax code rules than “resident” taxpayers.

This article will help you make that identification, so that you don’t file your taxes incorrectly.

Why does your tax residency matter?

When Americans refer to filing their tax return, they are talking about completing Form 1040. However, for non-resident alien taxpayers, they are actually required to use Form 1040NR.

This isn’t just a slight nomenclature difference. There are different rules applicable to residents and non-residents. You can read more about those here.

The key takeaway is, if you file Form 1040 when you should have filed Form 1040NR, you likely will calculate the wrong tax liability, which can get you in trouble with the IRS. That’s why it’s imperative for any non-US citizen to first determine their residency before even getting started on filing their tax return.

US citizens and green card holders file as ‘residents’

If you are a US citizen or green card holder, then no need to read any further. You will file as a resident taxpayer. Not much about taxes are simple, but this rule is! For the rest of you, keep reading.

IRS Substantial Presence Test

For those here on a work or student visa, determining whether you are a resident or non-resident alien taxpayer is a bit more complicated. We need to refer to the IRS’s Substantial Presence Test (SPT) to determine how you should file.

The test is based on the number of days you were physically present in the U.S. over a three year period. The three year period comprises the year for which we are filing a tax return (e.g. 2017) and the previous two years (e.g. 2015 & 2016). The substantial presence test is a funky two part calculation, whereby you have to have been in the U.S. a minimum amount of days this year and over the past three years combined.

To help you with this, we’ve provided a simple to use calculator below. Just enter the number of days you were physically present in the United States over the past three years (note that if you were on a F or J visa, read the next section before using the calculator):

Special Exemption for International Students

For international students here on a F1 or J1 visa, or their spouses on a F2 or J2 visa, there is a special exemption. Unfortunately it’s not an exemption from filing a tax return, but the days that you were present in the U.S. on one of those visa types do not count to the above substantial presence test.

For the first five years that you are on a F or J visa, those days are exempt. So when filling out the calculator, don’t include any of those days. However, you must file Form 8843 to have these days excluded. You can file this form on its own or with your tax return (if you earned enough income to be required to file a tax return). Read more here as to why we believe it is super important for international students and their spouses to always file Form 8843.

Next Steps

Still confused on whether to file as a resident or non-resident alien taxpayer? Get in touch with Visor! We’ll help you sort it out.

Visor is one of the leading tax providers for non-US citizens, particularly for international graduate students and other young professionals. Sign up and take comfort knowing all your tax needs are in expert hands.

 

Done filing taxes alone? New clients can prepay $99 to lock in your spot!

2 Comments

  1. If in July 2018 someone started work in the US on F1-OPT, then switched status to H1B exactly one year later (in July 2019), would that person still be allowed to file a non-resident return for the full year 2019?

    Or would the person be forced to file a resident return for the second half of the year?

    The first scenario (only a non-resident return) would likely be preferable, due to exclusion of income earned on international assignments from taxable income.

    1. Great question. The IRS Substantial Presence test would determine whether you file as a resident or non-resident in the year when you switch to an H-1B visa. You don’t file as a resident for one half of the year and a non-resident for the other half, the test determines your filing status for the full year.

      In your example, where you switch to H-1B in July of 2019, you would be right around the cutoff point of the test. That’s because if you are on H-1B for 183 days or more (half the year) then you will be classified as a resident. If you are on H-1B for less than 183 days, then you will file as a non-resident. So we can’t give you a definitive answer on your filing status for 2019 until we know exactly what date you transfer to the H-1B.

      If you haven’t yet read this article yet (https://blog.visor.com/non-us-citizens/international-students-f-j-visas-file-form-8843/), you should! Make sure to file Form 8843 for the years that you are on a F visa so that those days don’t impact the IRS Substantial Presence test. Feel free to reach out with any questions.

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