Even if you are not a U.S. citizen, you may be required to pay taxes in the United States. Whether or not you must file a U.S. tax return depends upon whether the U.S. government considers you a "tax resident." All permanent residents (green card holders) are tax residents, but only some holders of nonimmigrant visas are tax residents (see below). Still, filing a tax return can be a good thing if you've been working for an employer who's been withholding taxes from your paycheck -- you may get a refund!
Tax residents must report their entire worldwide income to the U.S. Internal Revenue Service (IRS). It doesn't matter if a portion or all of that income was earned from investments or business activities carried on outside the United States; a tax resident must report it all. But becoming a tax resident does not necessarily mean that the U.S. government will tax all of your worldwide income.
These rules are complicated and subject to a number of confusing exceptions. If you are unsure of your situation, consult a tax accountant or lawyer. Also see IRS Publication 519, U.S. Tax Guide for Aliens, available at www.irs.gov.
If You Have a Green Card
Once you get a green card, you automatically become a U.S. tax resident, starting with the year you got the green card, and you must declare your entire income to the U.S. government, unless you took steps to be treated as a resident of a foreign country under an income tax treaty.
You may have heard that the number of days you spend in the United States each year has some effect on whether or not you are a tax resident. But this is true only for people who have nonimmigrant visas, discussed below. It is not true for green card holders. Even if you remain outside the U.S. for an entire year, you'll still need to report your entire worldwide income.
As a green card holder, you must file a U.S. tax return Form 1040 each year.
If You Surrendered or Abandoned Your Green Card
Losing your permanent resident status doesn’t automatically mean you stop being a tax resident of the United States. You might need to notify the Department of Homeland Security that you lost permanent resident status or are surrendering your green card, and perhaps file IRS Form 8854, before you are relieved of the duty to file U.S. tax returns.
For some people, this duty to file U.S. tax returns can last for ten years after they stop being a U.S. permanent resident. For more information, see IRS Publication 519.
If You Have a Nonimmigrant Visa
Though holders of nonimmigrant visas are, by definition, not permanent residents of the United States, they may become tax residents simply by spending a certain amount of time in the country each year.
The Substantial Presence Test
If you hold a nonimmigrant visa, you will become a tax resident if you are present in the United States on at least:
- 31 days during the current year, and
- 183 days during the three-year period that includes the current year and the two years immediately before that.
Thus, you will automatically be a tax resident for any year you spend 183 days or more in the United States.
However, if you spend less than 183 days, but more than 31, you'll be a tax resident only if your total days in the United States during the current and previous two years add up to 183. But you don't count all the days you were present in the country during the previous two years. You count 1/3 of the days you were present in the first year before the current year, and 1/6 of the days you were present in the second year before the current year.
Example: You were physically present in the United States on 122 days in each of the years 2015, 2014, and 2013. To determine whether you meet the substantial presence test for 2015, count the full 122 days of presence in 2015, 41 days in 2014 (1/3 of 122), and 20 days in 2013 (1/6 of 122). The total for the three-year period is 183 days, so you are considered a tax resident for 2015.
If you spend fewer than 31 days of the current year in the United States, you will avoid being classified as a tax resident for that year.
You are treated as present in the United States on any day you are physically present in the country, at any time during the day. However, do not count the following:
- days you regularly commute to work in the Untied States from Canada or Mexico
- days you are in the United States for less than 24 hours while travelling
- days you are unable to leave the United States because of a medical condition that develops while you are in the country
- days you are an exempt individual--for example, you're a student temporarily present in the United States under an "F, " "J, " "M, " or "Q " visa; a teacher or trainee temporarily present under a "J " or "Q " visa; or a diplomat, foreign government employee, or someone otherwise related to a foreign government; or a professional athlete who is temporarily in the United States to compete in a charitable sports event.
If you exclude days of presence in the United States, you must file a fully completed IRS Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition.
The Less-Than-183-Plus-Closer-Contacts Exception
Even if you have a nonimmigrant visa and qualify as a tax resident under the above rules, you can avoid being treated as a tax resident if you:
- are present in the United States for less than 183 days during the current year
- have not applied for a green card
- have a closer connection with a foreign country than with the U.S., and
- maintain a tax home in this foreign country during the year.
You will be considered to have a closer connection to a foreign country than the United States if you or the IRS establishes that you have maintained more significant contacts with the foreign country than with the United States.
There are other exceptions to these tax rules based on tax treaties between the U.S. and your home country.
If you are a nonimmigrant tax resident of the United States who is required to file a federal income tax return, you use Form 1040NR or 1040NR-EZ.
Filing Your Taxes as a Foreign-Born Tax Resident
If you're a tax resident, all the tax rules applicable to United States citizens also apply to you. You can generally claim the same deductions and credits allowed to U.S. citizens. Tax residents also generally report tax payments, including withholding, using the same rules as U.S. citizens.
To avoid double taxation, tax residents may claim a foreign tax credit for income tax paid or owed to a foreign country on foreign source income. To claim the credit, you must file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040. For more information, get Publication 514, Foreign Tax Credit for Individuals.
The due date for filing your tax return and paying any tax due is April 15 of the year following the year for which you are filing a return.
You are allowed an automatic extension to June 15 to file your return and pay any tax owing if your main place of business and the home you live in are outside the United States and Puerto Rico on April 15. You can also get an automatic extension of time to file your return until October 15, by filing IRS Form 4868 on or before April 15 (or by June 15 if you qualify for the June 15 extension), but will need to pay any tax due by the required, unextended date.
Failure to follow the U.S. tax laws can lead to bad consequences for tax residents. If you have a green card, it will hurt your ability to qualify for U.S. citizenship. It may also be considered a crime -- and if you are found guilty, your green card can be revoked and you may be deported.
If you have a nonimmigrant visa, failure to follow U.S. tax laws can lead to criminal punishment, revocation of your visa, and deportation. Failure to comply with U.S. tax laws can also make it more difficult for you to obtain permanent residency (a "green card") should you ever want it.
To find out exactly how to comply with U.S. tax laws, consult a tax professional or visit the IRS website at www.irs.gov.
To learn more about the details of immigrating to the United States, see U.S. Immigration Made Easy, by Ilona Bray (Nolo).