Determining U. S. Residency Status

All individuals can be classified in one of four groups for U.S. tax purposes:

  • U. S. Citizen
  • Permanent Resident Alien
  • Resident Alien for tax purposes
  • Nonresident Alien for tax purposes
U. S. Tax System Nonresident Alien Tax System
Taxed on world-wide income Taxed only on U. S. sourced income
Receives Forms W-2 and 1099 Receives Forms 1042-S and W-2
Files Form 1040 tax return Never receives a Form 1099
Eligible to itemize deductions Files Form 1040NR / 1040NR-EZ
May claim unrestricted withholding allowances May NOT itemize deductions
  May not claim standard deduction
  Restricted withholding allowances

Substantial Presence Test

To identify a Resident Alien or a Nonresident Alien for tax purposes, the Substantial Presence Test must be performed. This test counts the number of days present in the United States during a period of three calendar years according to the following formula:

Number of Days Total
Current Year ________   ________
1st Preceding Year ________ Divide by 3 = ________
2nd Preceding Year ________ Divide by 6 = ________
    TOTAL = ________

If the TOTAL is less than 183 days, the individual is a Nonresident Alien for tax purposes. If the TOTAL is equal to or greater than 183 days, the individual is taxed just like a U. S. Citizen.

Exemptions from the Substantial Presence Test

The following situations exempt individuals from counting the days present in the United States:

Visa Type Description
F, J, M, Q Students: Exempt* five calendar years
J or Q  Non-Students (Scholars): Exempt* two of the past six calendar years
J-1 What is "primary purpose" for being present in the U. S.? Find this information on line 4 of the Immigration Form 1AP-66. Could impact decision to withhold Social Security and Medicare tax.

* In these examples, "Exempt" has nothing to do with whether the individual is exempt from Social Security, federal income tax or filing an income tax return.