Non-Resident Alien or Resident Alien?


A blog friend started a discussion on tax filing for Aliens here . Yannick and I have been filing as Non-resident alien and then Resident alien for years, and we may have to file as “Aliens” for a few more years if the Green Card waiting lines gets longer 😦 So we can not help sharing our experience.

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50 Responses to “Non-Resident Alien or Resident Alien?”

  1. Yannick Says:

    I realized that my discussion on the topic with mOOm and Golbguru was a bit too fragmented. Therefore, I am recompiling my comments in the following:

    F-1 and J-1 student visa holders are generally considered nonresident aliens for any part of the first five calendar years they are in the U.S. in that visa status. F-1 and J-1 students who have been in the U.S. for more than five consecutive calendar years are considered to be resident aliens for tax purposes.

    To know why, first you should know that IRS is mainly concerned with the number of years you’ve been to US, not your immigration status defined by INS (USCIS recently).

    You can get the spirit of the tax law from the IRS publication : 
”The residency rules for tax purposes are found in I.R.C. § 7701(b). Although the tax residency rules are based on the immigration laws concerning immigrants and nonimmigrants, the rules define residency for tax purposes in a way that is very different from the immigration laws. Under the residency rules of the Code, any alien who is not a RESIDENT ALIEN is a NONRESIDENT ALIEN. An alien will become a RESIDENT ALIEN in one of three ways:
    (1) by being admitted to the United States as, or changing status to, a Lawful Permanent Resident under the immigration laws (the Green Card test);
    (2) by passing the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States);
    or (3) by making what is called the “First Year Election” (a numerical formula under which an alien may pass the Substantial Presence Test one year earlier than under the normal rules).
    Under these rules, even an undocumented (illegal) alien under the immigration laws who passes the Substantial Presence Test will be treated for tax purposes as a RESIDENT ALIEN.”

So the Substantial Presence Test is the relevant part for most F1 or J1 holders.

    In the IRS Publication 519, US Tax Guide to Aliens, it says that you don’t count any day you are an F1 student towards presence in the US for the substantial presence test. However, after saying students (F1) were one of the “exempt” cases, the “exempt” status were automatically taken away after 5 years.

    “You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you establish that you do not intend to reside permanently in the United States and you have substantially complied with the requirements of your visa.”

    So enjoy the Resident Alien status which allows you to claim same number of deductions as a US Citizen after five years of consecutive F1 status and claim tax treaty benefit if your country has a tax treaty with the US. Even better, full-time students enrolled in a university and working part-time for the same university are exempted from FICA payroll taxes.

    • nag Says:

      hai i came on 08/03/2008 to u.s on f1 -opt still im staying in f1 opt only for this tax year i treated as resident or non resident…………. could any one tell me asap…….

  2. Elkin Arroyo Says:

    Finally somebody that knows the facts and support it with documents…. Very nice and consise explanation. It was very helpful to me
    Thanks,

  3. latestarters Says:

    Our pleasure. Good luck!

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  5. vvume Says:

    Reading through publication 519, it gives the impression that it might be possible to declare as a non-resident even after the 5 year period as long as you establish that you “do not intent to stay in the US”. Perhaps you could show proof of an international voting card/drivers license/property owned, etc. As long as you have not attempted to change your status, I don’t see why the non-resident status must necessarily end after 5 years. Page 5 and 6 of 519 shows what constitutes a “significant tie” and I don’t think it is difficult to show that. Could someone clarify on this?

  6. latestarters Says:

    Hi vvume,

    Thanks for your insightful comments. You’re absolutely right that one can opt for non-resident status. However, that will remove the standard deduction as well, which leads to unfavorable tax treatment. The above case is to enjoy the standard deduction for resident alien status while keeping the tax treaty benefit from non-resident alien days. I hope this helps.

    Best regards,

    Yannick

  7. lucielu Says:

    Hi Yannick,

    Your comments are so helpful. If I opt for non-resident status (I have been an F-1 student for 6 years, the last one on OPT), isn’t it better since I can ask my employer for a refund of Social Security and Medicare taxes? (As a non-resident alien, one doesn’t have to pay these taxes)

    Thank you,
    Lucie

  8. latestarters Says:

    I’m glad you found them helpful. As a NONRESIDENT F-1 student, you don’t need to pay FICA regardless of resident status. Good luck in getting the refund!

  9. Sunny S Says:

    Insightful discussion. I like Yannick have stayed in the US with an F1 visa for more than 5 years and have opted to be resident alien for tax purposes. I have a question though. When I work with banks (e.g opening account) or credit cards, when asked the question whether we are resident alien or not, whats the right answer. Since by IRS definition, I am a resident alien, but since I am a foreign citizen with a visa, I am a non-resident alien in USCIC’s (INS) eyes. So what it the right answer? Anybody?

    • LV Says:

      The bank wants to know your immigration status (USCIC), which is not necessarily the same as your tax status (IRS). The IRS status, really, only the IRS cares about.

  10. latestarters Says:

    Banks are prbably more concerned with your tax withholding in compliance with IRS policies in this case. So Resident Alien is the right answer, IMHO.

  11. AR Says:

    Hi Yannick,

    Thanks, this post is really helpful. I’d appreciate a clarification though: If I was an F-1 student for just under 5 years, then an H-1 employee for three years, and then became an F-1 student once again for the past three years, I need to file as resident for tax purposes, correct? I’m not sure if the clock resets for the new F-1 visa status, but your post indicates that it does not, and that I would need to file as a resident for tax purposes.

    Thanks,
    AR

  12. latestarters Says:

    Correct. The presence test is concerned with your physical presence, not Visa status in general. There are exemptions such as for F1 which you can use to opt for not counting your days in US towards the resident status, however, it does not “reset the clock”. So you will need to file as a resident alien.

  13. eRIC Says:

    great forum I’ve been more than 6.3 years here as F1 student (now F1 opt status). I have 4 questions:

    1) Do I file 8843 or 8840 to be attached w/ 1040NR or NR-EZ?
    2) Do I have to include my 1099 INT and 1042S in 1040NR ?
    I have lots of interest income. I dont know if I should report it or not.
    3) I work as CPT to the City and work at school (2 different employers). Do I file the 2 employees ID number in one form or separately ?

    I think its better to have nonresident status if you have lots of unearned income from outside US that wont be taxable if you are non resident alien. once u are resident alien, every income will be taxed outside and inside unless there are exceptions. right ?

    please help and thank you for your reply

    Eric

  14. latestarters Says:

    Hi Eric,

    Thanks for you interest in our blog. I’m not a tax professional, therefore, can only provide you my understanding of the tax code.
    1) If you plan to file as a non-resident, then yes.
    2) Yes. If you file as a non-resident, then you don’t need to report interest income derived from sources outside of U.S. However, for interest income derived from U.S. sources such as those recorded in 1099 INT, you need to report them.
    3) I assume you have a SSN. Just use your SSN to report your incomes from both employers. In fact, you only file one 1040 (or 1040 NR) even if you have more than two employers.
    4) Correct. If your income from outside of US is more than $5000, then it’s better to file as a non-resident alien.

    I hope this helps. Good luck!

    Yannick

  15. GC Says:

    Hi,
    I am an international student and have been studying in the US for almost 2 years. Although I can file taxes as a non-resident, is it ok for me to file as a resident alien instead? I know I am exempt from the substantial presence test, but if I choose to use that test to prove that I am a resident alien, can I still do that?
    Thanks for your help!
    GC

  16. latestarters Says:

    Hi GC,

    I don’t think you can file US Federal tax return as a resident alien yet, since it requires about 5 years of presence in US. You may be able to file state tax return as a resident with most states since they usually require only 1 year residence.

    Yes, you can choose to use your time in the substantial presence test, meaning you give up the exemption. That’s how most international students get to file as a resident alien after 5 years of residence in US.

    I hope this helps. Good Luck!

    Yannick

  17. Daniel Says:

    Hi Yannick,

    Very interesting blog. I am in my fifth year as a NR student. I have 2 tax concerns:
    1. Can I file as a resident alien, even though it’s not past my fifth year? Should I? Which forms will that involve? Or should I just wait till the next year?
    2. To clarify Lucie’s question, if we file as a resident alien, we still do NOT have to pay SS & Medicare taxes?

    Thanks tons for your help!
    Daniel

  18. latestarters Says:

    Hi Daniel,

    Sorry for my late response. I hope you’ve either sent out your tax return or filed an extension. Here are my answers:
    1. Use Form 8843 and Substantial Presence Test .

    2. Correct, if you are full time F-1 students.

    Good Luck!

  19. Daniel Says:

    Thanks for your response. Hmm, I thought that the IRS does not care if I file my taxes past the Apr 15th deadline, as long as I do not owe them money? I’m going to be getting returns, for sure.

  20. mauricio Says:

    Hi,
    I am a nonresident alien and might be opening a TD Ameritrade account under which conditions any balance that is not invested will be transfered to a Money Market Deposit Account. I hear that people may hold both MMDAs and baking accounts, so my three questions are:
    + How can I open a banking account (not debit) in the US given my status (B1/B2 and I visa holder)?
    + What if I want to move from there to getting a credit card in the US?
    + Will securing an IRS number help me on this tasks?
    Thank you!!!

  21. latestarters Says:

    Hi Mauricio,

    I’m pretty sure that you can open both as I opened both types of accounts on F1 visa. Maybe the brokerage will not offer you a margin account, but I don’t expect problems with you MMDA account. Without a SSN or tax ID, the bank and brokerage are likely to deduct taxes from your interests and captial gains directly. The best approach to start is to contact the customer service of TD Ameritrade and banks directly.

    Given the tightening of consumer credit, it may be difficult to get US credit card without a SSN.

    Yes, IMHO.

    Good luck!

    Yannick

  22. mauricio Says:

    Hi Yannick,
    Thanks alot for your help!!
    Mauricio

  23. Abhishek Says:

    Very informative blog! Thanks.
    One question. I am on F1, working full-time on an OPT. I have been in the US for more than 6 years now (all the time on F1). I was wondering if I can open an IRA or a 401K account? I have filed my taxes as a non-resident up until now, filing the 8843 alongwith.
    Thanks for any input! cheers…

  24. latestarters Says:

    Thanks for visiting us. Yes, you definite can. I recommend you to open a Roth IRA. You can open a 401K account if your employer offers one.

  25. Abhishek Says:

    Thanks!
    I am actually plan to open both, as my employer does offer one. Was just wondering if there are any strings since I am still on F1.

  26. 401K and IRA for foreigners in the United States? « Late Starters’ Journey to Financial Freedom Says:

    […] Comments Abhishek on Non-Resident Alien or Resident…latestarters on Non-Resident Alien or Resident…Abhishek on Non-Resident Alien or […]

  27. latestarters Says:

    Hi Abhishek, in case you don’t know yet, I did a new post to answer your question, since the answer is a bit long and it’s no long on the same topic of this post. You can follow the above linkback after your comment. Cheers.

  28. Rachel Says:

    Hi,
    I arrived on Sept 2004, I am a F1 student since then, Am I qualified as a resident for 2008 tax return. Thanks!

  29. Yoon Says:

    Hi,

    This is very informative blog.

    I have hold F1 status for five years but not consecutive.
    From 2005 summer to 2006 summer I had B1/B2 status and I was in my mother country.
    FYI, here is details.

    I have used CINTAX software, specially designed for international student. But this year, the program said I became Resident Alien. From 2003 fall semester to 2005 spring semester I enrolled at a U.S. university. After getting my MS degree I went back to my country. And at the same year once I visited U.S. again with B1/B2 status. After then since 2006 fall semester I have continued my Ph.D. program at another U.S. university.
    Am I eligible for resident alien as CINTAX said?

  30. Ramesh Says:

    Hello,

    Thanks for all the information and discussion on this site. It has proved very informative.

    I have a couple of questions. I am a student on F-1 visa and I have been in the US for more than 5 years. As I understand, I have the option of choosing to file as either non-resident or resident alien. Is that right?

    From what I understand (and please correct me if I am wrong)

    As non-resident alien
    —————————
    a) You don’t have to pay FICA taxes, taxes on 1099-int reported interests.
    b) You can claim the standard deduction (provided you do not itemize any deductions) using the Tax Treaty with the home country (US-India Tax treaty)
    c) You cannot claim earned income credit, the fees you paid for school (1098-T)

    As a resident Alien
    ———————–
    a) You don’t have to pay FICA taxes BUT you have to pay taxes on 1099-int reported interests.
    b) You can claim the standard deduction (provided you do not itemize any deductions)
    c) You can claim earned income credit, the fees you paid for school (1098-T)

    My Questions
    —————–
    1) If I have some investments in my home country, do I have to report that when I file?
    2) It looks like, as long as your interest income is more than the sum of earned income credit and 1098-T, it makes sense to file as non-resident, especially if the answer to question 1 is Yes
    3) Are there any other credits/deductions that are available to residents which are not available to non-residents
    4) If one decides to file as non-resident, how would one go about doing it?

    I have compiled this list of questions after searching the website for answers and not finding them. If I have overlooked and re-posted any questions – sorry about that.

    Thanks
    Ramesh

  31. Siva Says:

    Hi
    I have a brother who was on F1 means Non resident Alien, I am a Resident Alien who is on H1. I payed Fee for my brother. How to cliam that on my tax return. I noticed i cannot add him as dependent as he is on F1. Please help me out is there any way that i can get the return for the fee i payed.

    Thank you
    Siva

  32. latestarters Says:

    Hi All,

    Sorry for the late response. My life has been quite hectic for the past month, and hope my answers are not too late for all of you.

    Rachel- You can file as a resident if so you chose. You’re probably required to show your calculation using the Substantial Presence Test in my first comment above. Otherwise, you can still file as a non-resident since F1 is an exempt type.

    Yoon- Again the answer lies in the Substantial Presence Test above. It doesn’t concern with your visa type change, but rather the actual days you spent in US for the past 3 years as you’ve passed the 5 year limit even for F1 exempt type. Here is the original text:

    You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you
    1. 31 days during the current year, and
    2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    o All the days you were present in the current year, and
    o 1/3 of the days you were present in the first year before the current year, and
    o 1/6 of the days you were present in the second year before the current year.
    Ramesh- You’ve done excellent research and thanks for laying out information so nicely for me and my readers. The information you provided are mostly accurate, except as a non-resident alien, you don’t need to pay taxes on 1099-int reported interests earned in US only if you can show that the capital was of foreign source.

    I’ll try to provide you some helpful info below:
    0. Right, you have the option of choosing to file as either non-resident or resident alien.
    1. You will need to report the investments in your home country if you decide to file as a resident alien.
    2. Even if you report your investment income in India as a resident alien, you’re likely not required to pay tax to IRS because of foreign tax credit provided you paid tax to India government.
    3. Almost all other tax credits and deductions. For example, the Standard deduction is usually unavailable to non-resident aliens. Students from India are exceptions because of tax treaty.
    4. Filing as a resident usually comes out ahead. However, if you indeed want to continue to file as a non-resident alien, then you need to establish that “you do not intend to reside permanently in the United States and you have substantially complied with the requirements of your visa”. Please refer to the original IRS Substantial Presence Test document through link provided above.

    Good luck!

    Yannick

  33. latestarters Says:

    Siva-

    I’m sorry that I’m not aware of any deduction you can claim for fees paid for your brother even if you can claim him as your dependent. Were the fees related to his education?

    Yannick

  34. Steve Mago Says:

    Hi there, thanks for all the advice above. I have a question:

    I have been on F-1 status since 2003, and so have been exempt from FICA tax and have filed 1040NR-EZ so far. However, this year, I have to file as a resident for tax purposes since it has been 5 years since I started. My question is regarding FICA. My employer did not take any FICA out of my paycheck last year, since they thought I was still exempt. My W-2 therefore says 0 for those boxes. When I file my return, if I put 0 (in Turbo Tax), it doesn’t say I owe anything. Is this right? Do I in fact owe FICA tax to the IRS? If so, how should I go about this?

    Thanks!

  35. Che Says:

    Hi, thanks for all the helpful information,

    I and my wife are both F1- student. She is determined by cintax as a resident alien for tax purpose, while I’m still a non-resident alien this year. My question is, can we file as resident alien jointly?

    Thanks.

  36. latestarters Says:

    Hi Steve, thanks for visiting. The exemption from FICA is determined by your trainees status, independent of your residents status. Therefore enjoy FICA exemption as long as you are a student.

    Hi Che, yes you can. Here is the relevant IRS document: http://www.irs.gov/publications/p519/ch01.html#d0e1603. good luck!

  37. SM Says:

    Hi,
    I was reading this blog and I feel some information related to FICA may not be correct. A non-immigrant student (F1 OPT) who becomes resident alien for tax purposes will have to pay social security and FICA taxes. From IRS website:
    http://www.irs.gov/businesses/small/international/article/0,,id=129427,00.html
    “Since the social security/Medicare tax exemption for foreign students, scholars, teachers, researchers, and trainees under the Code requires that the payee be a “NONRESIDENT ALIEN”, then the social security/Medicare tax exemption ceases to exist at the point the payee becomes a “RESIDENT ALIEN” under the residency rules of section 7701(b) of the Code.”

    Correct me if I am missing something. I came on F1 in 2004 and so for 2009 (still on F1 OPT), I am resident alien. Shouldnt I be paying social security and medicare taxes for 2009??

  38. latestarters Says:

    Hi SM,

    Thanks for pointing it out and giving us the link.

    I have not come back to the IRS publications for a while. Through the link, I agree that your understanding is probably correct. I’ve updated my original comments according the new publication.

    Best Regards.

  39. Franz Says:

    Well I think that not ALL F1 students can claim the FICA exemption, but surely a significant portion can, as long as they meet the requirements by IRS here:
    http://www.irs.gov/charities/article/0,,id=120663,00.html
    since this apply for all students, national and foreign.
    Correct me if I’m wrong, but this is the typical case for most international students in science and engineering.

  40. Yana Says:

    Hi,
    I have a question. I understand that F1 students can file as residents after 5 years. But does it have to be full 5 years, like 365 days every year?
    I was in the US on an F1 visa for:
    365 days in 09
    40 days in 08
    365 in 07
    365 in 06
    30 days in 05
    365 days in 04
    250 days in 03
    Can I file as a resident?
    Thank you for your help.

  41. Inhignosteogs Says:

    Hi there!

    I’m new to this forum and just wanted to say hi. So Hi!

    bye!

  42. Rosalyn Berry Says:

    If only I had a penny for each time I came here! Superb read!

  43. Quick Facts Says:

    Maybe you could change the post subject Non-Resident Alien or Resident Alien? Late Starters’ Journey to Financial Freedom to something more specific for your webpage you write. I loved the the writing yet.

  44. Continuous 1042s Says:

    […] Non-Resident Alien or Resident Alien? « Late Starters' Journey to … 2) Do I have to include my 1099 INT and 1042S in 1040NR ? I have lots of interest income. I dont know if I should report it or not. 3) I work as CPT to the City and work at school (2 different employers). Do I file the 2 employees ID . […]

  45. Pallab Ghosh Says:

    Hi,
    I an an F1 student. I did not know very much about the nonresident alien vs resident alien tax filling. So, I used Turbo tax for my tax filling for the year of 2008 and 2009. Now, I came to know that I should have filled 1040NR form. Will there be any problem for this wrong filling?

    Thanks.

    PG

  46. Andrea Says:

    Okay. My problem is that I did my taxes with H&R block as a Resident Alien. I was in OPT and have been in the US for almost 5 years but not more than 5 years… it is like 4 years and 8 months so I guess I am a Non resident. SO they did the 1040X and NR something like that and the lady told me I had to give back the money that I had from my taxes now… WTH? Is this right? I was on OPT … so would I be receiving still the money?? I am so confused and the deadline is monday… PLEASE HELPPPP the h&r block lady told me that the money they send back to me because i thought i was a resident alien had to go back … Why?? okay please please let me know what should i dooo

    Thanks!

  47. Natefong Says:

    Hello,

    First of all, congratulate for this awesome website. This information is priceless and it is of such a great help.

    I am an international student. I came in 2002 with a F1 visa, and now I have a J1 visa. During 2009, I stayed in the US only 11 days, but I was told that I will still apply as a resident alien. Is that right?

    Another question is, if I file my taxes as a resident alien, can I also submit form 843 and form 8316 too receive my Social Security and Medicare taxes refund? or, on the other hand, I lose that money?

    The last question, in general, if I file as a resident alien, can I also, at the same time, take advantage of my country’s tax treaties with United States?

    Thank you

    NATE

  48. Rueben Says:

    Very nice post. I just stumbled upon your blog and wished to mention that I have truly loved browsing your weblog posts.

    After all I will be subscribing for your rss feed and
    I am hoping you write again soon!


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