ALIENS

An alien is any individual who is not a U.S. citizen or U.S. national

Determining Alien Tax Status

Because residents and nonresident aliens are taxed differently, it is important for you to determine your tax status.

Nonresident Aliens

You are considered a nonresident alien for any period that you are neither a U.S. citizen nor a resident alien for tax purposes.

Resident Aliens

You are considered a resident alien if you met one of the following two tests for the calendar year:

The green card test - You are considered to have met the green card test if at any time during the calendar year you were a lawful permanent resident of the United States according to the immigration laws, and this status has not been revoked or administratively or judicially determined to have been abandoned.

The substantial presence test - For the purposes of this test, the term United States does not include U.S. possessions and territories or U.S. airspace. The United States includes the following areas:

All 50 states and the District of Columbia,

The territorial waters of the United States, and

The seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources.

To meet the substantial presence test, you must have been physically present in the United States 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. To satisfy the 183 days requirement, count:

All of the days you were present in the current year, and

One-third of the days you were present in the first year before the current year, and

One-sixth of the days you were present in the second year before the current year.

Days of Presence in the United States - Do not count the following days of presence in the United States for the substantial presence test:

Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico. You commute regularly if you commute to work in the United States on more than 75% of the workdays during your working period in the current year.

Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States.

Days you are in the United States as a crew member of a foreign vessel engaged in transportation between the United States and a foreign country or a U.S. possession. However, this exception does not apply if you otherwise engage in any trade or business in the United States on those days.

Days you intended to leave, but could not leave the United States because of a medical condition or medical problem that arose while you were in the United States. Whether you intended to leave the United States on a particular day is determined based on all the facts and circumstances.

Days you are an exempt individual.

Exempt Individuals - You are an exempt individual if you fall into any of the following categories:

An individual temporarily present in the United States as a foreign government-related individual under an A or G visa. However, this category does not include household staff of a foreign government-related individual present in the United States under an A-3 or G-5 visa.

A teacher or trainee temporarily present in the United States under a J or Q visa, who substantially complies with the requirements of the visa. You will not be an exempt individual as a teacher or trainee if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. However, you will be an exempt individual if all of the following conditions are met:

You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years,

A foreign employer paid all of your compensation during the current year, and

A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee.

A student temporarily present in the United States under an F, J, M, or Q visa, who substantially complies with the requirements of the visa. You will not be an exempt individual as a student in the current year if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you meet both of the following requirements:

You establish that you do not intend to reside permanently in the United States.

You have substantially complied with the requirements of your visa.

A professional athlete temporarily present in the United States to compete in a charitable sports event.

Even if you meet the substantial presence test, you may still be treated as a nonresident alien if you are present in the United States for fewer than 183 days during the current calendar year, you maintain a tax home in a foreign country during the year, and you have a closer connection to that country than to the United States. You cannot claim a closer connection if you have applied for status as a lawful permanent resident of the United States, or you have an application pending for adjustment of status. Sometimes, a tax treaty between the United States and another country will provide special rules for determining residency for purposes of the treaty.

Dual-Status Tax Year - If your status changes during the year from resident alien to nonresident alien or vice versa, you generally have a dual-status tax year. Your tax on the income for the two periods may differ under the provisions of the laws that apply to each period. 

How Income of Aliens Is Taxed

Resident and nonresident aliens are taxed in different ways.

Resident Aliens

Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.S. tax and must be reported on their U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens. Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U.S. citizens.

Nonresident Aliens

A nonresident alien's income that is subject to U.S. income tax must be divided into two categories:

Income that is effectively connected with a trade or business in the United States, and

Income that is not effectively connected with a trade or business in the United States 

The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and resident aliens. 

Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate.

Effectively Connected Income: If you are engaged in a U.S. trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income.

Trade or Business in the United States

Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. Whether you are engaged in a trade or business in the United States depends on the nature of your activities.

The following will help you determine whether you are engaged in a trade or business in the United States.

Personal Services

If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States.

Personal service income you receive in a tax year in which you are engaged in a U.S. trade or business is effectively connected with a U.S. trade or business.

Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. The income may be paid to you in the form of cash, services, or property.

If you are engaged in a U.S. trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected.

Other Trade or Business Activities

Other examples of being engaged in a trade or business in the United States follow.

Students and trainees.   If you are temporarily present in the United States as a non-immigrant under an “F,” “J,” “M,” or “Q” visa, and not otherwise engaged in a trade or business, you are considered to be engaged in a trade or business in the United States if you have taxable income from participation in a scholarship or fellowship described in section 1441(b). The taxable part of any scholarship or fellowship grant that is U.S. source income is treated as effectively connected with a trade or business in the United States.

Forms to File

If you are a nonresident alien, you must file a Form 1040NR (PDF) or Form 1040NR-EZ (PDF) if you are engaged in a trade or business in the United States, have any other U.S. source income on which the amount withheld did not fully pay the tax due, or to claim a refund.

If you had wages subject to income tax withholding and file on a calendar-year basis, your return is due by April 15.

If you did not have wages subject to withholding and file on a calendar-year basis, your return is due by June 15.

Resident aliens must follow the same tax laws as U.S. citizens. If you are a resident alien, you must report your worldwide income from all sources, that is, income from both within and outside the United States. You will file a Form 1040EZ (PDF), Form 1040A (PDF), or Form 1040(PDF) depending on your tax situation

If you are a resident alien filing on a calendar-year basis, your return is due by April 15, and you should file it with the service center for your area.

For any due date that falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

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