You must first determine whether you are a “resident alien” or “non-resident alien” for tax purposes in order to determine which forms to use and what income should be taxed. “Resident aliens” generally are taxed on their worldwide income, the same as U.S. citizens. However, a portion of income earned outside of the United States may be eligible for exclusion.[1] “Non-resident aliens” are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States.
Even if you are not a lawful permanent resident for immigration law purposes, you may, and probably often will, be considered a “resident alien” for tax purposes.
According to Section 7701(b) of the Internal Revenue Code (IRC), a “resident alien” is anyone who maintains a “substantial presence” in the United States, which requires:
- 31 days of presence in the U.S. during the year in question, and
- The sum of the number of days of presence during the year in question plus the two preceding years is at least 183 after weighting.
- To meet the second criteria, days from the present year are multiplied by one, days from the prior year are multiplied by one-third, and days from the second preceding year are multiplied by one-sixth, and then the resulting numbers are added.
Thus, immigrants living in the United States full time are probably considered “resident aliens” for tax purposes. “Resident aliens” are required to file Form 1040 while they are in the United States, and when back in their home country, may continue to be treated as “resident aliens” as long as the substantial presence test is satisfied.
Note: Filing taxes as a “non-resident alien” can affect your status as a permanent resident, as it can be used as a basis for the government to claim that you are a resident in another country and have abandoned your permanent residence in the United States. Likewise, paying taxes in another country could create the presumption that you also reside in that country.[2]