US TAXATION OF NONRESIDENTS

The United States has one of the most complex tax law regimes in the world. A regime which nonresidents should try to avoid, if possible. Recent tax law changes have only increased the reporting requirements for United States citizens and residents, and nonresidents could be subject to the same rules, depending on their visa status, amount of time spent in the US, and activity conducted in the United States, among other things. 

Nonresidents are normally taxed in the United States on their share of United States source income or income that is considered effectively connected with a trade or business in the United States. Nonresidents that meet either the green card test or the substantial presence test are taxed in the United States the same way a United States citizen would be taxed. 

Under the green card test, an individual would be considered a tax resident any year in which such taxpayer becomes a lawful permanent resident of the United States. In contrast, the substantial presence test requires a bit more of analysis. Under the substantial presence test, an individual would be considered a tax resident if 1) such individual was physically present in the United States for at least 31 days in the current calendar year and 2) for a total of 183 days for the current calendar year and the two proceeding years, where current calendar years count as 1, each day of the preceding calendar year counts as 1/3, and each of the second preceding calendar year count as 1/6.

The United States grants exemptions under the substantial presence test for days in which an individual spends in the United States as 1) an exempt individual, 2) an individual who couldn’t leave the United States because of a medical condition that arose while the individual was present in the United States, 3) an individual transiting between two points outside of the United States, 4) an individual who resides in Mexico or Canada and who commutes to and from employment in the United States, and 5) an individual who is temporarily present in the United States as a member of the crew of a foreign vessel.

Are you a nonresident spending a substantial amount of time in the United States? Do you qualify for a substantial presence test days exemption? Are you deemed to be conducting a trade or business in the United States with reporting requirements? These are the type of questions that professionals at Kaufman Accounting PC can help you answer. We have a dedicated team to help nonresidents analyze their United States reporting requirements so that they concentrate on what really matters.