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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

Nonresident Alien Tax Status

Nonresident Alien Tax Status

Since nonresident and resident aliens are taxed differently, it is important to determine your status. You are considered a nonresident alien when you are not a U.S. citizen or a U.S. resident alien. You are seen as a resident alien if you pass one of the following two tests during the calendar year:

The first test to pass is the "green card test." Suppose you are a lawful permanent resident of the United States under immigration law, and such status has not been terminated or has not been administratively or judicially determined to be abandoned at any time during the calendar year. In that case, you are considered to have completed the green card test.

The second test that you must pass is the "substantial presence test." For this test, the United States includes the following areas:

  • The 50 States and the District of Columbia

  • U.S. territorial waters 

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

  • The term does not include U.S. possessions and territories or U.S. airspace.

To pass the presence test, you must be physically present in the U.S for at least 31 (thirty-one) days during the current year and 183 (one hundred and eighty-three) days during the three years, including the current year and the 2 immediately preceding years. To meet the 183-day requirement, count all the days you were present in the current year, 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 preceding the current year.

What is a nonresident alien?

A non-resident alien is not a U.S. citizen and fails the green card test or the substantial presence tests used to determine tax status. Nonresident aliens are mandated to pay taxes on their income in the United States.

The United States requires everyone who earns U.S. income to pay taxes on that income, including foreigners. As such, the Internal Revenue Service classifies foreigners as residents or nonresidents.

To classify a taxpayer as nonresident aliens, the IRS calculates the time they spend in the U.S. Those who are not or are not eligible for the Green Card or who have been in the United States for less than 31 days per year and 183 days in the last three years are to file a tax return as a nonresident alien.

An exception to this rule is a permanent resident who may file as a "married filing jointly" or a foreign national that is married to a U.S. citizen. 

Unlike resident aliens, who follow the same tax rules as American citizens, nonresident aliens only pay tax on their U.S. income, as long as it exceeds the annual individual exemption amount. 

Nonresident aliens use 1040NR or 1040NR-EZ to file their taxes. They can submit an individual tax identification number instead of a social security number if they are not entitled to a social security number.

Understanding Non-Resident Alien Taxes

The taxation of nonresident aliens is different from that of other statutes. As a nonresident alien, your professional income is taxed at the flat rate of 30% unless a tax treaty provides a lower rate. Your wages are taxed at progressive rates in the United States. Nonresident aliens must file and pay the tax owing using Form 1040NR: Income Tax Return for Non-U.S. Aliens or Form 1040NR-EZ: United States Income Tax Return for Certain Nonresident Aliens.

Example of nonresident alien

An example of a nonresident alien is a visiting professor from another country who teaches a course at a university for one semester. If the teacher arrives in the United States before the start of the semester in August and leaves at the end of the semester in December, that person will take the substantial presence test.

However, the tax status will change if the professor decides to return to teach in the classroom each year. After three years, the person has more than 183 days in the United States and meets the criteria for resident alien status.

Are you a non-resident alien and want to calculate taxes for the next year? Speak with a tax pro to help you determine how much you owe the IRS.

If you are a resident alien, you must comply with the same tax laws as U.S. citizens.

You pay income taxes from all sources, both inside and outside the United States. Depending on the tax situation, you will complete Form 1040EZ, 1040A, or 1040. The return is on April 15 and must be filed to the service center in your area. If the expiry date falls on a holiday or a weekend, the expiry date will be postponed to the next business day.



Jim McClaflin, EA, NTPI Fellow, CTRC
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