6 IRS Must-Knows for Non US Citizens


Whether you are just visiting the United States for an extended period or planning to become a citizen, you may still owe U.S. taxes to the IRS for 2013.
Don’t be fooled into thinking that the U.S. has a more logical and practical tax system than the one you left behind in your home country.
The IRS can be every bit as complicated and bureaucratic – and then some.
1. There is a difference among the terms “tax resident” as used in U.S. tax law and “resident” or “legal resident” in U.S. immigration law. For example, you can be a tax resident but not a legal resident.
IRS 1042 story
For our purposes, it is key to determine whether you are a tax resident – meaning that you are subject to U.S. taxation.
If you are a tax resident, the most important question for your CPA to determine is when you became a resident for the purposes of taxation.
Why is this so important?
Because the tax treatment varies greatly between non residents and residents.
Tax residents, for example, are expected to pay taxes on their worldwide income – not just the money they earned on U.S. soil.
There are other differences too, such as the application of withholdings, standard deductions, personal exemptions, disclosure of foreign accounts, etc. The experts at Magnani CPA can help you understand how you will be affected.
2. There are two tests to determine whether you are a U.S. tax resident.
If you meet the requirements of either of these two tests, you are considered a U.S. tax resident.
The first test occurs when you receive your alien registration card or “green card.” You are considered a U.S. resident from the first day you are physically present in the U.S. from the initial year that your “green card” was issued.

The second test looks at the number of days you are physically present in the U.S. over a three-year period.
You will be considered a U.S. tax resident if the number of days you are physically present in the U.S. equals or exceeds 183 days in a particular tax year, or 183 days during a three-year period.
For 2013, you must count all of your days you were physically present in the U.S.  For 2012, count one third of your days you were physically present in the U.S. And for 2011, count one-sixth of the days that you were physically present in the U.S.
3. It’s just as important to determine when tax residency ends in the U.S. as when it begins. The general rule is that tax residency ends on the last day of the calendar year in which you were last physically present in the U.S.
But even this general rule has an exception.
4. Residency is deemed to end on the last day that you were present in the U.S. in the year that you moved from the U.S. and established a residence in another country.
You must have established a tax home in another country. Be prepared to show that you have a closer connection to that other country going forward.
5. Unfortunately, it is possible, and quite common, for someone to be both a U.S. resident and nonresident in the same tax year.
This can occur in the year that you move to the U.S., and in the year that you depart the U.S. to resume residence in another country.
Individuals in this category are referred to as “dual-status taxpayers.” If you are a dual-status taxpayer, you are treated as a nonresident for one portion of the tax year and as a resident for the other portion of the year.
The residency tax rules would be much simpler if everyone fit neatly into a certain category such as resident or nonresident but that’s not the case.
6. Sometimes it is more favorable from a tax perspective to be treated as a resident rather than a nonresident. There is an election available that allows foreign nationals to be taxed as a resident in the initial year of U.S. arrival even if one of the residency tests is not met for that year.
To qualify for this election, you must meet certain requirements, which your CPA can explain to you.
We have covered only a small portion of the tax rules used to determine whether you will be considered a tax resident in the U.S.
We have not even touched on the impact of numerous tax treaties, which vary from country to country.
In some cases you may be expected to pay taxes in both your home country and in the U.S. so it’s best to speak with an expert.
To understand your status, please call Magnani CPA for a free consultation at 786-332-3362 or 305-610-6247.