What is Publication 519?
IRS Publication 519 is the U.S. Alien Tax Guide, a document published by the Internal Revenue Service (IRS) detailing tax procedures for foreigners who are not U.S. citizens. All foreigners are subject to income tax in the United States. Foreign residents, those who have been in the country for some time, are subject to worldwide income tax, as are citizens. Non-resident aliens pay taxes only on income they earn in the United States and certain international income types.
Key points to note
IRS pub 519 provides tax information and advice to foreigners in the United States.
Non-residents may be subject to income tax from the U.S. and foreign authorities.
Taxes will depend on whether the person is a resident or non-resident alien or has dual status.
Who is a non-resident alien?
For income tax purposes in the United States, any non-US citizen is an "alien." The tax law distinguishes between "resident aliens," who are taxed on the same basis as citizens, and "non-resident aliens," who are taxed on a more limited basis.
All permanent residents of the United States ("green card holders") are considered foreign residents for tax purposes. In general, a non-immigrant who spends a certain number of days per year in the United States will be a tax resident for tax purposes if he passes the "substantial presence test"; special exemptions apply to people with a certain visa status (including those with F, J, M or Q visas).
Any non-resident alien is, by definition, a non-resident alien.
Understanding the IRS Pub 519
The most important aspect of IRS pub 519 is the definition of a taxpayer's status as a non-resident alien or a resident alien that uses the substantial presence test or the green card test because the tax rules applicable are based on this status. Taxpayers can also be considered dual-status aliens. They must also determine the tax status of any spouse.
The substantial presence test measures residence based on physical presence in the United States. To pass this test, a person must live in the United States at least:
One hundred eighty-three days in the three years, including the current year and the two immediately preceding years, including all the days you were present in the current year, one-third of the days you were present during the first year preceding the year in, and one-sixth of the days were present the second year before the current year.
Thirty-one days during the current year
A green card test indicates that an individual is a resident, for United States federal tax purposes, if he or she is a legal resident of the United States at any time during the calendar year. A person becomes a permanent legal resident if they have been granted the privilege, under immigration law, to reside permanently in the United States as an immigrant, usually by issuing an alien registration card, also known as the "green card." citizenship and immigration to the United States.
If a person qualifies as a resident and a non-resident in the same year, they have the so-called dual status. A married person may also have the option of treating the non-resident spouse as a resident alien.
Taxation of non-resident income
People who are considered non-resident aliens are generally subject to two different U.S. tax rates, one for the corresponding actual income and the other for the fixed or determinable annual or periodic income (FDAP). Actual income is earned by running a business in the United States or providing personal services and is taxed at the same rate as a U.S. citizen. FDAP is considered passive income and is taxed at a flat rate of 30%. Non-resident aliens must complete the income tax return using Form 1040NR.
For non-resident aliens, tax treaties with foreign countries can reduce or eliminate U.S. taxes on various types of personal services and other income, such as pensions, interest, dividends, royalties, and capital gains.
FOR MORE INFORMATION OR TO MAKE AN APPOINTMENT WITH Pacesetter Financial Services, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
