1. Nonresident Alien or Resident Alien?

Introduction

You should first determine whether, for income tax purposes, you are a nonresident alien or a resident alien. Figure 1-A will help you make this determination.

If you are both a nonresident and resident in the same year, you have a dual status. Dual status is explained later. Also explained later are a choice to treat your nonresident spouse as a resident and some other special situations.

Topics This chapter discusses:

• How to determine if you are a nonresident, resident, or dual-status alien, and
• How to treat a nonresident spouse as a resident alien.

Useful ItemsYou may want to see:

Form (and Instructions)

• 1040   U.S. Individual Income Tax Return
• 1040A   U.S. Individual Income Tax Return
• 1040NR   U.S. Nonresident Alien Income Tax Return
• 8833   Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
• 8840   Closer Connection Exception Statement for Aliens
• 8843   Statement for Exempt Individuals and Individuals With a Medical Condition

See chapter 12 for information about getting these forms.

Nonresident Aliens

If you are an alien (not a U.S. citizen), you are considered a nonresident alien unless you meet one of the two tests described, next, under Resident Aliens.

Resident Aliens

You are a resident alien of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1-December 31). Even if you do not meet either of these tests, you may be able to choose to be treated as a U.S. resident for part of the year. See First-Year Choice under Dual-Status Aliens, later.

Green Card Test

You are a resident for tax purposes if you are a lawful permanent resident of the United States at any time during the calendar year. (However, see Dual-Status Aliens, later.) This is known as the green card test. You are a lawful permanent resident of the United States at any time if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the Immigration and Naturalization Service (INS) has issued you an alien registration card, also known as a green card. You continue to have resident status under this test unless the status is taken away from you or is administratively or judicially determined to have been abandoned.

Resident status taken away.   Resident status is considered to have been taken away from you if the U.S. government issues you a final administrative or judicial order of exclusion or deportation. A final judicial order is an order that you may no longer appeal to a higher court of competent jurisdiction.

Resident status abandoned.   An administrative or judicial determination of abandonment of resident status may be initiated by you, the INS, or a U.S. consular officer.

If you initiate the determination, your resident status is considered to be abandoned when you file either of the following with the INS or U.S. consular officer.

1. Your application for abandonment.
2. Your Alien Registration Receipt Card attached to a letter stating your intent to abandon your resident status.

You must file the letter by certified mail, return receipt requested. You must keep a copy of the letter and proof that it was mailed and received.

If the INS or U.S. consular officer initiates this determination, your resident status will be considered to be abandoned when the final administrative order of abandonment is issued. If you are granted an appeal to a federal court of competent jurisdiction, a final judicial order is required.

A long-term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions. See Expatriation Tax in chapter 4.

Substantial Presence Test

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
   1. All the days you were present in the current year, and
   2. 1/3 of the days you were present in the first year before the current year, and
   3. 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 120 days in each of the years 1999, 2000, and 2001. To determine if you meet the substantial presence test for 2001, count the full 120 days of presence in 2001, 40 days in 2000 (1/3 of 120), and 20 days in 1999 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2001.

The term United States includes the following areas.

1. All 50 states and the District of Columbia.
2. The territorial waters of the United States.
3. The seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources.

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

Figure 1-A Nonresident Alien or Resident Alien?

Days of Presence in the United States

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, there are exceptions to this rule. Do not count the following as days of presence in the United States for the substantial presence test.

• Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico.
• Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States.
• Days you are in the United States as a crew member of a foreign vessel.
• Days you are unable to leave the United States because of a medical condition that develops while you are in the United States.
• Days you are an exempt individual.

The specific rules that apply to each of these categories are discussed next.

Regular commuters from Canada or Mexico.   Do not count the days on which you commute to work in the United States from your residence in Canada or Mexico if you regularly commute from Canada or Mexico. You are considered to commute regularly if you commute to work in the United States on more than 75% of the workdays during your working period.

For this purpose, commute means to travel to work and return to your residence within a 24-hour period. Workdays are the days on which you work in the United States or Canada or Mexico. Working period means the period beginning with the first day in the current year on which you are physically present in the United States to work and ending on the last day in the current year on which you are physically present in the United States to work. If your work requires you to be present in the United States only on a seasonal or cyclical basis, your working period begins on the first day of the season or cycle on which you are present in the United States to work and ends on the last day of the season or cycle on which you are present in the United States to work. You can have more than one working period in a calendar year, and your working period can begin in one calendar year and end in the following calendar year.

Example.   Maria Perez lives in Mexico and works for Compania ABC in its office in Mexico. She was assigned to her firm's office in the United States from February 1 through June 1. On June 2, she resumed her employment in Mexico. On 69 days, Maria commuted each morning from her home in Mexico to work in Compania ABC's U.S. office. She returned to her home in Mexico on each of those evenings. On 7 days, she worked in her firm's Mexico office. For purposes of the substantial presence test, Maria does not count the days she commuted to work in the United States because those days equal more than 75% of the workdays during the working period (69 workdays in the United States divided by 76 workdays in the working period equals 90.8%).

Days in transit.   Do not count the days you are in the United States for less than 24 hours and you are in transit between two places outside the United States. You are considered to be in transit if you engage in activities that are substantially related to completing travel to your foreign destination. For example, if you travel between airports in the United States to change planes en route to your foreign destination, you are considered to be in transit. However, you are not considered to be in transit if you attend a business meeting while in the United States. This is true even if the meeting is held at the airport.

Crew members.   Do not count the days you are temporarily present in the United States as a regular crew member of a foreign vessel engaged in transportation between the United States and a foreign country or a U.S. possession. However, this exception does not apply if you otherwise engage in any trade or business in the United States on those days.

Medical condition.   Do not count the days you intended to leave, but could not leave the United States because of a medical condition or problem that developed while you were in the United States. Whether you intended to leave the United States on a particular day is determined based on all the facts and circumstances. For example, you may be able to establish that you intended to leave if your purpose for visiting the United States could be accomplished during a period that is not long enough to qualify you for the substantial presence test. However, if you need an extended period of time to accomplish the purpose of your visit and that period would qualify you for the substantial presence test, you would not be able to establish an intent to leave the United States before the end of that extended period.

In the case of an individual who is judged mentally incompetent, proof of intent to leave the United States can be determined by analyzing the individual's pattern of behavior before he or she was judged mentally incompetent.

If you qualify to exclude days of presence because of a medical condition, you must file a fully completed Form 8843 with the IRS. See Form 8843, later.

You cannot exclude any days of presence in the United States under the following circumstances.

1. You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave.
2. You returned to the United States for treatment of a medical condition that developed during a prior stay.
3. The condition existed before your arrival in the United States and you were aware of the condition. It does not matter whether you needed treatment for the condition when you entered the United States.

Exempt individual.   Do not count days for which you are an exempt individual. The term exempt individual does not refer to someone exempt from U.S. tax, but to anyone in the following categories.

1. An individual temporarily present in the United States as a foreign government-related individual.
2. A teacher or trainee temporarily present in the United States under a J or Q visa, who substantially complies with the requirements of the visa.
3. A student temporarily present in the United States under an F, J, M, or Q visa, who substantially complies with the requirements of the visa.
4. A professional athlete temporarily in the United States to compete in a charitable sports event.

The specific rules for each of these four categories are discussed next.

Foreign government-related individuals.    A foreign government-related individual is an individual (or a member of the individual's immediate family) who is temporarily present in the United States:

1. As a full-time employee of an international organization,
2. By reason of diplomatic status, or
3. By reason of a visa (other than a visa that grants lawful permanent residence) that the Secretary of the Treasury determines represents full-time diplomatic or consular status.

An international organization is any public international organization that the President of the United States has designated by Executive Order as being entitled to the privileges, exemptions, and immunities provided for in the International Organizations Act. An individual is a full-time employee if his or her work schedule meets the organization's standard full-time work schedule.

An individual is considered to have full-time diplomatic or consular status if he or she:

1. Has been accredited by a foreign government that is recognized by the United States,
2. Intends to engage primarily in official activities for that foreign government while in the United States, and
3. Has been recognized by the President, Secretary of State, or a consular officer as being entitled to that status.

Members of the immediate family include the individual's spouse and unmarried children (whether by blood or adoption) but only if the spouse's or unmarried children's visa statuses are derived from and dependent on the exempt individual's visa classification. Unmarried children are included only if they:

1. Are under 21 years of age,
2. Reside regularly in the exempt individual's household, and
3. Are not members of another household.

The immediate family of an exempt individual does not include attendants, servants, or personal employees.

Teachers and trainees.   A teacher or trainee is an individual, other than a student, who is temporarily in the United States under a J or Q visa and substantially complies with the requirements of that visa. You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U.S. immigration laws and could result in the loss of your visa status.

Also included are immediate family members of exempt teachers and trainees. See the definition of immediate family, earlier, under Foreign government-related individuals.

You will not be an exempt individual as a teacher or trainee if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. However, you will be an exempt individual if you were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years and:

1. A foreign employer paid all of your compensation during the current year, and
2. A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee.

A foreign employer includes an office or place of business of an American entity in a foreign country or a U.S. possession.

If you qualify to exclude days of presence as a teacher or trainee, you must file a fully completed Form 8843 with the IRS. See Form 8843, later.

Example.   Carla was temporarily in the United States during the year as a teacher on a J visa. Her compensation for the year was paid by a foreign employer. Carla was treated as an exempt teacher for the past 2 years but her compensation was not paid by a foreign employer. She will not be considered an exempt individual for the current year because she was exempt as a teacher for at least 2 of the past 6 years.

If her compensation for the past 2 years had been paid by a foreign employer, she would be an exempt individual for the current year.

Students.   A student is any individual who is temporarily in the United States on an F, J, M, or Q visa and who substantially complies with the requirements of that visa. You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U.S. immigration laws and could result in the loss of your visa status.

Also included are immediate family members of exempt students. See the definition of immediate family, earlier, under Foreign government-related individuals.

You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you establish to the satisfaction of the IRS Field Assistance Area Director that you do not intend to reside permanently in the United States and you have substantially complied with the requirements of your visa. The facts and circumstances to be considered in determining if you have demonstrated an intent to reside permanently in the United States include, but are not limited to the following.

1. Whether you have maintained a closer connection to a foreign country (discussed later).
2. Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident as discussed, later, under Closer Connection to a Foreign Country.

If you qualify to exclude days of presence as a student, you must file a fully completed Form 8843 with the IRS. See Form 8843, later.

Professional athletes.   A professional athlete who is temporarily in the United States to compete in a charitable sports event is an exempt individual. A charitable sports event is one that meets the following conditions.

1. The main purpose is to benefit a qualified charitable organization.
2. The entire net proceeds go to charity.
3. Volunteers perform substantially all the work.

In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in a sports event. You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events.

If you qualify to exclude days of presence as a professional athlete, you must file a fully completed Form 8843 with the IRS. See Form 8843, next.

Form 8843.   If you exclude days of presence in the United States because you fall into any of the following categories, you must file a fully completed Form 8843.

1. You were unable to leave the United States as planned because of a medical condition.
2. You were temporarily in the United States as a teacher or trainee on a J or Q visa.
3. You were temporarily in the United States as a student on an F, J, M, or Q visa.
4. You were a professional athlete competing in a charitable sports event.

Attach Form 8843 to your 2001 income tax return. If you do not have to file a return, send Form 8843 to the Internal Revenue Service Center, Philadelphia, PA 19255, by the due date for filing an income tax return. The due date for filing is discussed in chapter 7.

If you do not timely file Form 8843, you cannot exclude the days you were present in the United States as a professional athlete or because of a medical condition that arose while you were in the United States. This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements.

Closer Connection to a Foreign Country

Even if you meet the substantial presence test, you can be treated as a nonresident alien if you:

1. Are present in the United States for less than 183 days during the year,
2. Maintain a tax home in a foreign country during the year, and
3. Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

Closer connection to two foreign countries.   You can demonstrate that you have a closer connection to two foreign countries (but not more than two) if you meet all of the following conditions.

1. You maintained a tax home beginning on the first day of the year in one foreign country.
2. You changed your tax home during the year to a second foreign country.
3. You continued to maintain your tax home in the second foreign country for the rest of the year.
4. You had a closer connection to each foreign country than to the United States for the period during which you maintained a tax home in that foreign country.
5. You are subject to tax as a resident under the tax laws of either foreign country for the entire year or subject to tax as a resident in both foreign countries for the period during which you maintained a tax home in each foreign country.

Tax home.   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work.

For determining whether you have a closer connection to a foreign country, your tax home must also be in existence for the entire current year, and must be located in the same foreign country for which you are claiming to have a closer connection.

Foreign country.   In determining whether you have a closer connection to a foreign country, the term foreign country means:

1. Any territory under the sovereignty of the United Nations or a government other than that of the United States,
2. The territorial waters of the foreign country (determined under U.S. law),
3. The seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over which the foreign country has exclusive rights under international law to explore and exploit natural resources, and
4. Possessions and territories of the United States.

Establishing a closer connection.   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. In determining whether you have maintained more significant contacts with the foreign country than with the United States, the facts and circumstances to be considered include, but are not limited to, the following.

1. The country of residence you designate on forms and documents.
2. The types of official forms and documents you file, such as Form W-9, Form W-8BEN, or Form W-8ECI.
3. The location of:
   1. Your permanent home,
   2. Your family,
   3. Your personal belongings, such as cars, furniture, clothing, and jewelry,
   4. Your current social, political, cultural, or religious affiliations,
   5. Your business activities (other than those that constitute your tax home),
   6. The jurisdiction in which you hold a driver's license, and
   7. The jurisdiction in which you vote.

It does not matter whether your permanent home is a house, an apartment, or a furnished room. It also does not matter whether you rent or own it. It is important, however, that your home be available at all times, continuously, and not solely for short stays.

You cannot claim you have a closer connection to a foreign country if either of the following applies:

1. You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or
2. You had an application pending for adjustment of status during the current year.

Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms.

• Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities
• Form I-485, Application to Register Permanent Residence or Adjust Status
• Form I-130, Petition for Alien Relative, on your behalf
• Form I-140, Immigrant Petition for Alien Worker, on your behalf
• Form ETA-750, Application for Alien Employment Certification, on your behalf
• Form OF-230, Application for Immigrant Visa and Alien Registration

Form 8840.   You must attach a fully completed Form 8840 to your income tax return to claim you have a closer connection to a foreign country or countries.

If you do not have to file a return, send the form to the Internal Revenue Service Center, Philadelphia, PA 19255, by the due date for filing an income tax return. The due date for filing is discussed later in chapter 7.

If you do not timely file Form 8840, you cannot claim a closer connection to a foreign country or countries. This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements.

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