The United States of America is one of the few countries in the world that treats all of its citizens independent of where they actually live as tax residents. This means that all citizens must report their worldwide income and pay federal income tax on that income even if they have not been to the United States in decades. The rules for determining if a non-citizen individual is a tax resident of the United States are somewhat more complex.
The United States Internal Revenue Service uses 2 main tests to determine if a non-citizen is a tax resident of the United States: the green card test and the substantial presence test.
Under the green card test, an individual is deemed a tax resident of the United States if that individual has a Permanent Resident (“Green”) Card, independent of the number of days that individual spends in the United States. Bear in mind that that the United States Citizenship and Immigration Services can revoke somebody’s green card if they discover that the green card was obtained using fraudulent means (e. g. a fake marriage), the holder commits certain serious crimes, or if the holder “abandons” their permanent residency by showing intent to establish permanent residency outside of the United States (this is often interpreted to mean absences from the United States exceeding 183 days in a row).
The 2nd test used by the IRS to determine US tax residency status is the “substantial presence test”. Under this test, an individual is deemed a US tax resident if they are physically present in the United States for at least 31 days during the current tax year as well as at least 183 days during a 3-year period that includes the current year and the preceding 2 years. In counting those 183 days spent in the United States, one must count all days in the current year, a third of the days in the 1st year before the current year, and a sixth of the days in the 2nd year before the current one.
For example, let’s say a non-citizen of the United States who is also not in possession of a green card visits the United States for the first time in 2020, spending 100 days, then visits the United States again in 2021, spending another 100 days, and then another 100 in 2022. The total number of “weighted days” spent under the substantial presence test would be 151 (100 days in 2022, 34 days in 2021, and 17 days in 2020), which is below the minimum necessary to qualify for US tax residency. On the other hand, if that individual was in the United States for a mere 75 days in 2020, plus 75 days in 2021, but a whopping 150 in 2022, the total number of “weighted days” would be 188, making the individual a tax resident of the United States for the year 2022.
The days spent in the United States are not counted if the individual in question is a tax resident of Canada or Mexico and is commuting to the United States for work, the individual spends less than 24 hours in the United States in transit between 2 locations outside of the country, the individual is a crew member of a foreign vessel, or the individual cannot leave the United States because of a medical condition. Note that individuals with a medical condition must prove so to the IRS by filing Form 8843.
In addition, days spent in the United States as an exempt individual are not counted. Exempt individuals include foreign government-related individuals (employees of international organizations, diplomats, and consular personnel) under an “A” or “G” visa; teachers or trainees under an “F” or “J” visa; students under an “F”, “J”, “M”, or “Q” visa; or a professional athlete competing in a charitable sports event.
Finally, individuals who would normally qualify to be treated as a US tax resident under the substantial presence test can be treated as a non-resident if they can demonstrate “closer connection” to a foreign country. This can be done if the individual was present in the US for less than 183 in a given year, had a closer connection to a foreign country where a tax home was maintained, and did not take steps to apply for US permanent residency.
A&M Logos International can assist individuals, C and S corporations, partnerships, trusts, employee benefit plans, and exempt organizations with obtaining US tax residency certification. If you have questions regarding your US tax residency status and need help applying for tax residency certification (Form 6166), feel free to call us at (212) 233-7061 or e-mail us at info@apostille.us. You may also wish to watch our video on US tax residency certification or apply via our website.