U.S. Tax Preparation Worldwide James Maertin CPA
Capital Gains, Interest and Dividends
Education Credits, Scholarships
Social Security, Medicare, Self Employment Tax
Tax Deadlines, Extensions, Late Payments, Estimated Tax
Tax Resident, Nonresident, Dual Status
Tax Residency - Resident, Nonresident, Dual Status
Federal tax residents file Form 1040 and are taxed on worldwide income (U.S. and foreign source)
Federal nonresidents file Form 1040NR and are taxed only on U.S. source income (with exceptions).
Dual status nonresidents file both Form 1040NR (return) and Form 1040 (statement).
Dual status residents file Form 1040 (return) and possibly also form 1040NR (statement).
State residency differs from federal residency.
Residence for income tax purposes generally has no bearing on an individual’s immigration status. Generally, foreign nationals may be considered resident aliens if they are lawful permanent residents (green card holders) or if their physical presence in the United States meets the substantial presence test.
Federal tax residents are U.S. citizens and resident aliens as defined below.
With few exceptions, you are a resident alien for tax purposes if any of the following apply:
1. You were a U.S. permanent resident (e.g., green card holder) at any time during the tax year.
2. You meet the
substantial presence test*.
To meet this test you must be physically present in the U.S. on at least 31 days during the current year, and 183 days during the 3-year period, counting (for tax year 2018):
All the days present in 2022
1/3 of the days present in 2021
1/6 of the days present in 2020.
*Exceptions: Do not count the days during which:
You were a student or trainee on an F, J, M or Q visa, if you had the visa for less than 5 calendar years, unless you can demonstrate to the IRS that you do not intend to reside permanently in the U.S. and have complied with the requirements of your visa.
You were a teacher or trainee on a J or Q visa, if you’ve had the visa for not more than 2 of the preceding 6 calendar years.
You were temporarily present in the U.S. as a foreign government-related individual (A or G diplomatic visa).
It is also possible for an individual to claim to be a nonresident of the United States by virtue of having a closer connection (such as a tax home) to a foreign country.
How is the income taxed? See below.
If you do not meet the substantial presence test, then you are a federal tax nonresident. Due to exceptions to the substantial presence test, students, teachers, trainees and diplomats are often nonresidents.
Note: If, during the tax year, you arrived in the U.S. or departed permanently, you may be a dual status resident.
How is the income taxed? See below.
Dual Status Taxpayers
A dual-status year is one in which you change status between nonresident and resident alien. Most dual-status years are the years of arrival and departure.
Year of Arrival:
If you were a U.S. nonresident (living outside the U.S.), and you entered the U.S. during the tax year and met the substantial presence test (you were present for 183 days or more on a work visa), then you would normally file a dual-status resident tax return, although there are a few possible exceptions. If you entered the U.S. during the tax year but did not meet the substantial presence test, then you will be considered a non-resident, rather than a dual-status resident.
Year of Departure:
If you were a U.S. resident for tax purposes, and you leave the U.S. (becoming a nonresident) for the remainder of the year, and during the next calendar year you are not a U.S. resident under either the green card test or the substantial presence test, then you may file a dual-status nonresident tax return. In this case, you will be considered a U.S. resident until the last day you are physically present in the U.S. during the tax year (excluding up to 10 days of presence in the tax year after permanently departing). For example, if you meet the substantial presence test and leave the U.S. permanently on June 1, but then return to the U.S. on vacation from Nov. 1–15, you will be considered a U.S. resident until Nov. 15. But if your vacation is less than 10 days (e.g., Nov. 1-9), you will be considered a U.S. resident until June 1.
How is My Income Taxed?
Taxable income includes wages, self-employment income, interest, dividends, rental income, etc., less certain deductions and the standard deduction or itemized deductions.
Your tax is a percentage of your taxable income (total income minus deductions). There are seven federal tax rates as of 2018: 10%, 12%, 22%, 24%, 32%, 35% and 37% (see IRS tax changes). Each state that has an income tax has its own tax rates, which are generally a lot lower than the federal rates. If you go to my Links page, you will find links to each state tax department website. However, nonresidents filing Form 1040NR are taxed at a flat 30% (or lower treaty) rate on income that is not effectively connected to a U.S. trade or business.
Residents (Form 1040):
Taxable on worldwide income (U.S. and foreign source).
Nonresidents (Form 1040NR):
Only taxable on U.S. source income. Any income reported on a Form W-2 for services performed outside the U.S. is not taxable.