Human Resources

U.S. Tax Residency

(Resident Alien vs. Nonresident Alien)

For tax purposes, an individual is either a resident or a non-resident of the U.S. Unfortunately, the Internal Revenue Service (IRS) view of what constitutes a resident is different than that of the US Citizenship & Immigration Service (USCIS).

A U.S. citizen is by definition a resident of the United States. In the absence of tax treaties to the contrary, all income earned worldwide is subject to U.S. tax laws.

An alien (i.e., a non-citizen of the U.S.) becomes a U.S. resident for tax purposes by passing the Green Card test or the Substantial Presence test. In addition, an individual may be considered a resident alien if the relevant tax treaty between his/her home country and the U.S. contains that provision. As is the case with citizens, all income, regardless of the source, is subject to U.S. tax laws.

Nonresident aliens are those who don't fall under either of the above categories. Only U.S. source income is subject to U.S. tax laws for nonresident aliens.

Citizens and those who are residents for tax purposes must file a Form 1040, 1040A, or 1040EZ each tax year. Nonresidents must file a Form 1040NR of 1040NR-EZ each year.

The information provided above covers most situations but is not to be considered an exhaustive guide to U.S. tax law. You may find the following IRS publications helpful:

Green Card Test: If an individual has been awarded Resident Alien status by the INS, she or he is a U.S. resident for tax purposes.

Substantial Presence Test: If an individual has been present in the U.S. more than 31 days in the current year, and more than 183 days using the formula below, she or he is a resident for tax purposes:

 

Substantial Presence 183 Day Test
Current year days in U.S. times 1 = ________ days
Previous year days in U.S. times 1/3 = ________ days
Second previous year days in U.S. times 1/6 = ________ days
TOTAL DAYS in U.S. (if >183, "Resident" for tax purposes) ________ days

 

When counting days present in the U.S., count only the days you were physically present in the U.S. Do not count the following:

  • Days you commute from a residence in Canada or Mexico;
  • Days in which you were in the U.S. less than 24 hours while in transit;
  • Days in which you were unable to leave to leave U.S. due to a medical condition that developed in the U.S.; or,
  • Days in which you were an Exempt Individual.

An Exempt Individual can be an: 

  1. Employee of a foreign government or related individual; or
  2. Teacher, trainee, or researcher on a J or Q visa (exempt for two calendar years); or
  3. Student with F, J, M, or Q visa (exempt for five calendar years); or
  4. Professional athlete in U.S. to compete in charitable event.

Note that, for 2 and 3, calendar year is any portion of a year of which you were present. Thus, if you arrived on December 30 of 1999, and left a week later, you have been present for two calendar years (1999 and 2000).

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