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For federal income tax purposes, individuals who are “United States (U.S.) persons” are subject to tax on their worldwide income. Section 7701(a)(30)(A) of the Internal Revenue Code (IRC) defines “United States persons” as “a citizen or resident of the United States.”

Individuals who are not “United States persons,” are only taxed on U.S. source income.[1] However, foreign individuals who are not U.S. citizens (“aliens”) may be taxed like citizens if they qualify as residents.[2] Consequently, it is important for individuals to know whether or not they are a U.S. resident because there may be significant tax implications of being found to be a resident alien.

This primer explains the rules for determining whether a foreign individual is considered a “U.S. resident alien” for the purpose of federal income taxation. First, it reviews how an individual may qualify as a U.S. resident alien under the “green card” test, First Year Elections, and the substantial presence test. Then, it discusses exceptions to these tests, which can allow an individual to claim the status of a non-resident alien. Finally, it explains how Tax Foresight can provide legal certainty by assessing an individual’s residency status using cutting-edge predictive research tools.

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[1] See: https://www.irs.gov/businesses/taxation-of-nonresident-aliens-1.

[2] See: https://www.dhs.gov/immigration-statistics/lawful-permanent-residents.

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