Resident aliens in the United States are taxed on their world wide income. Nonresident aliens are taxed on their U.S source income.
Code Section 7701(b)(1)(A)
An alien will be considered a U.S resident in any calendar year if he meets Green Card Test or Substantial Presence Test.
Code Section 7701 (b)(1)(A)(i)
Green Card Test:
If at any time in the year an alien is a lawful permanent resident of the United States he will be treated as U.S resident for a calendar year.
Code Section 7701 (b)(6)
An alien who has been legally given a green card and has not revoked or abandoned the privilege of residing permanently in the United States as an Immigrant.
Code Section 7701(b)(2)(a)(i)
The green card holders are treated as U.S residents for tax purposes even if they are not physically present in the U.S during the year.
Aliens who have received green card and have not moved to U.S are expected to pay taxes on the same basis as U.S Citizens.
Substantial Presence Test
Code Section 7701 (b)(3)(A)
If an alien who is not holding a green card and stays in U.S for 183 days or more is considered a resident for the calendar year.
Example 1:
X is not a U.S citizen and does not hold a green card. He just stays in U.S from Jan 01 to July 31 in a year. X is a resident of U.S for tax purposes because his continuous stay in the United States is more than 183 days.
Example 2:
X is not a U.S citizen and does not hold a green card. In year 1 he is present in the United States for 90 days, in year 2 for 150 days and in year 3 for 120 days. He is not present in the United States for 183 days in any year. But if we look at carry over days the test is met in 3rd year according to formula given below:
3 (120 + (1/3 x 150) + 1/6 (90)) = 185 days
Regulation 301.7701(b)-2(d)
To determine if a taxpayer has a closer connection with a foreign country than the United States requires a consideraton of all the facts and circumstances, such as the location of the individual’s family, permanent residence, personal belongings, location of individual’s social, political, cultural an religious relationships.
Disclaimer:
This information is for educational purposes only. It does not constitute any legal advice or opinion. Please do not use any of its contents without seeking a professional advice.
References:
www.jct.gov/publications.html
http://www.law.cornell.edu
http://www.irs.gov/publications
U.S Taxation of International Transactions by Robert J. Misey, Michael S. Schadewald
Introduction to United states International Taxation by Paul R. McDaniel, Hugh j. Ault and James R. Repetti
International Taxation by Joseph Isenbergh
International Taxation in a nutshell by Richard L. Doernberg.
International Income Taxation, Code and Regulations by Robert J. Peroni – CCH
Mansoor Suhail (Mani)
Accountant
BSBA – EA – ICIA – RA
Tax for Canada and U.S.A
Web: www.theaccountingandtax.com and www.taxservicesguru.com
Blog: http://taxservicesguru.blogspot.ca
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