Determining a Foreign Individual's Tax Status
A person in nonimmigrant status (visa status) may be considered a 'resident alien or 'nonresident alien' by the IRS. The substantial presence test should be conducted to determine which category is appropriate for an individual. This test should be performed annually, as it is possible to switch between being a resident and a nonresident.
One of the primary purposes of Glacier is to perform the substantial presence test using the visa information entered by the individual for times of presence in various statuses through the years. Glacier will also calculate a projected start date of U.S. tax residency.
A non-resident alien for tax purposes, is defined by the IRS as:
- Someone who does not have a green card (permanent resident), or
- An individual who does not satisfy the substantial presence test
- The substantial presence test is a mathematical calculation used by the Internal Revenue Service (IRS) to determine the tax residency of a foreign individual present in the United States. An individual will satisfy the test if he or she is physically present in the U.S. for a minimum of 31 days in the current year and at least 183 days during the current and prior two years. In calculating the number of days present in the U.S., he or she must count all the days present in the current year, 1/3 of the days present in the prior year, and 1/6 of the days present in the second prior year. NOTE: Do not include days present in the U.S. as an exempt individual. An exempt individual means persons in categories who are not required to count days of presence toward the substantial presence test.
- The substantial presence test is a mathematical calculation used by the Internal Revenue Service (IRS) to determine the tax residency of a foreign individual present in the United States. An individual will satisfy the test if he or she is physically present in the U.S. for a minimum of 31 days in the current year and at least 183 days during the current and prior two years. In calculating the number of days present in the U.S., he or she must count all the days present in the current year, 1/3 of the days present in the prior year, and 1/6 of the days present in the second prior year. NOTE: Do not include days present in the U.S. as an exempt individual. An exempt individual means persons in categories who are not required to count days of presence toward the substantial presence test.
- For more information, see IRS Publication 519, U.S. Tax Guide for Aliens
- Unlike U.S. citizens, nonresident aliens are only taxed on U.S. Source income.
A resident alien for tax purposes, is defined by the IRS as:
- A person who possesses a green card, or
- An individual who has satisfied the substantial presence test
A resident alien is subject to the same tax withholding and reporting requirements as a U.S. citizen or Permanent
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