Do Nonresidents Have to File a US Tax Return?

The United States is known for many things, but a simple tax system is not one of them.  Many lifelong citizens find American tax laws too complex to navigate without professional assistance, so it’s not surprising that expatriates in the US are often completely baffled.

But do expats even have to deal with US taxes? Let’s take a look.

Who Isn’t Subject to US taxes?

Here’s who doesn’t need to worry about US taxes:¹

1. Students with F, J, M, or Q Visas
2. Government individuals with A or G Visas
3. Teachers with J or Q Visas
4. Athletes who are in the US for a tournament or charity event

If one doesn’t fall into any of the above categories, then the need to file US taxes will be determined by one of two tests²: the Green Card Test or the Substantial Presence Test.

Green Card Test

Unfortunately, the answer to this test isn’t a simple “yes” or “no.” Instead, it depends on if one has closer connections to the US or to their home country and if that other country has a tax treaty with the United States.

“Closer connections” is a vague phrase, but for the purposes of this test, it requires these three parameters to be met:

1. Reside in the US less than 183 days in the current year
2. Maintain documents that indicate a tax residence in another country, such as bank accounts, tax filings, and bills paid
3. Prove a closer connection to this other country through facts like family, church affiliation, permanent home, work, etc.

Substantial Presence Test

For people without a green card, the requirement to file US taxes will be based on a two-step formula.

Step 1. Has the individual spent 31 days in the US this year? If not, filing is not required. If so, continue to…

Step 2. Has the person spent at least 183 days in the US over the past three years combined? Follow this formula to calculate:

If the total equals or exceeds 183 days, then filing will be needed.

Since US tax law generally requires people to pay taxes on all worldwide income, consulting a tax professional with international experience may be beneficial, not only for guidance on the already complex rules governing US tax returns, but also on how to satisfy the requirements of more than one potential tax jurisdiction (for example, if one also worked in another country within the same tax year).

There are other specific “tie-breaker” rules between the US and other foreign countries. You’ll want to know what rules apply to your situation so you don’t risk overpaying, underpaying, or putting yourself at risk of a litany of fees and penalties. This is especially important for people whose right to live or work in the United States could be put in jeopardy if they fail to file taxes correctly. Investing in a little expert guidance generally pays off both in peace of mind and some unexpected deductions.

Hopefully, with a little patience and some good advice, tax day will be less a day of dread and more a moment of satisfaction.

Sources:

1. IRS, https://www.irs.gov/individuals/international-taxpayers/foreign-persons.
2. IRS, https://www.irs.gov/publications/p54
3. IRS, https://www.irs.gov/individuals/international-taxpayers/tax-treaties