Tax Tips for Resident, Nonresident or Dual Status Aliens

Many resident aliens and nonresidents either do not file a return, or file incorrectly. Unfortunately, if your visa status falls into either of these categories, you may have overpaid your U.S. taxes. Even though your employer has withheld tax from your wages, you may still be eligible for a refund.

If you are a resident or nonresident alien earning income in the United States, you are required to file a tax return if your US income is greater than your personal exemption amount ($3,650 for 2010). If you are a student studying in the United States on an F, J, M or Q visa, and are classified as a nonresident for U.S. tax purposes, you are still required to file a tax return each year you are here if you have any income subject to U.S. income tax. It doesn't matter that your employer withheld adequate tax from your paychecks, or that you have a small amount of income and owe no tax; you are still required to file. 

Additionally, if you are an exempt individual (typically students and teachers), you are required to file Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition regardless of your income. Form 8843 is required if you are an "exempt individual." This does not mean you are exempt from paying U.S. taxes, but that you are exempt from the substantial presence test for determining residency status. You must file Form 8843 even if you are not required to file an income tax return.

Even if you do not have a tax liability, you still need to file a return. The IRS cannot charge you a penalty if you do not owe any taxes; however, your visa requires you to comply with all laws of the United States, including the requirement to file an income tax return. If you want to change your visa status, or obtain permanent residency, you may be required to show that you filed a tax return. By not filing, you could lose your visa.

The first thing you must do is to determine whether you are a resident, a nonresident, or a dual status alien for tax purposes. These titles do not relate to your immigration status. Even though you are a citizen of another country, you might still be considered a U.S. resident for U.S. tax purposes. This is an important first step because it determines whether you must file, what form to file, and whether you are eligible for treaty benefits.

For tax purposes, an alien is an individual who is not a U.S. Citizen. Aliens are classified as either nonresident aliens or resident aliens. Resident aliens generally are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States.

To be considered a resident alien, the taxpayer must meet either the green card test or the substantial presence test for the calendar year.

• Green card test. A taxpayer is a resident for tax purposes if he is a lawful permanent resident of the United States at any time during the calendar year. An alien will generally have this status if the U.S. Citizenship and Immigration Services (USCIS) or Immigration and Naturalization Service), INS has issued an Alien Registration Card, also known as a “green card.”
• Substantial presence test. To meet this test, the alien must be physically present in the United States for at least, 31 days during the current year and 183 days during the 3-year period that includes the current year and the two years immediately before that, counting:

            a. All the days present in the current year, and

            b. 1/3 of the days present in the first year before the current year, and

            c. 1/6 of the days present in the second year before the current year.

An alien is considered a nonresident alien for tax purposes unless one of the two resident alien tests is met.

An alien is considered a dual-status alien when they have been both a resident alien and a non-resident alien in the same year. Dual status does not refer to citizenship, only to their resident status in the U.S. The most common dual-status tax years are the years of arrival and departure. Different rules apply for each part of the year. Refer to IRS Pub 519, US Tax Guide for Aliens, for more information.

To make sure you properly file your taxes, consult a professional tax preparer at PRO-TAX. He can guide you through the process of determining your type of residency, and filing all of the forms required by the IRS.

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