Tax Residents and Non-Tax Residents How to Tell the Difference

When it comes to individuals subject to U.S. taxation, there are two classes: tax residents and non-tax residents. Immigrants to the U.S. frequently wonder about the technicalities of their status and what taxes, if any, apply to them.

The relationship between immigration and taxes entails certain complexities that behoove both immigrants and their employers to be aware of, as tax payment is often required even in the absence of citizenship.

Requirements for tax filing and payment are contingent on classification as a tax resident. Green card holders, for example–those authorized to stay indefinitely in the U.S.–qualify as tax residents. But this status does not necessarily apply to all non-immigrant visa holders.

U.S. tax residents are mandated by law to report and pay taxes to the IRS on their entire income. Regardless of whether this income was generated in the U.S., it must be reported, though this does not necessarily mean that income generated in other countries will be taxed by the IRS, as these decisions are determined by international tax codes.

Acquisition of a green card automatically classifies an individual as a U.S. tax resident required to report all income earned either abroad or domestically. A common misconception is that an immigrant’s tax status is determined by the number of days spent in the U.S. This misconception derives from confusion about the difference between tax laws affecting those with non-immigrant visas and laws affecting persons with green cards. For green card holders, total absence from the U.S. in a given tax year still requires reporting of all income to the IRS.

Green card holders who fail to file U.S. taxes may endanger their chances of obtaining U.S. citizenship and may risk deportation if they are found guilty of intentional non-payment.

In contrast to green card holders, those with non-immigrant visas may or may not be required to report income and pay U.S. taxes. Those with non-immigrant visas only qualify as tax residents upon spending a minimum of 183 days of the current year within the U.S. Complicating matters further, a weighted system exists that can qualify a non-immigrant visa holder as a tax resident who has spent fewer than 183 days in the country in the current year.

According to the weighted system, all days in the current year count as one day, all days in the previous year count as 1/3 of a day, and all days in the year before that count as 1/6 of a day. Added up, if the sum equals at least 183 days, income must be reported to the IRS. (Excluded from this rule, however, are select governmental employees, certain professionals, and students.)

For individuals seeking further explanation of guidelines governing immigration and tax status, detailed information can be found in the  IRS Form 519, U.S. Tax Guide for Aliens.

In summary, as with green card holders, an individual spending a minimum of 183 days in the U.S. in combination with a non-immigrant visa is required to file taxes using IRS Form 1040 on all U.S. earned income. In contrast to individuals with green cards, those with non-immigrant visas are not required to pay taxes on income generated outside the U.S.

Though tax laws may be complicated, filing your taxes shouldn’t be. At E-file.com, it’s simple to file even complex tax returns, and we provide free professional tax support to help you clarify any questions and resolve any concerns that might arise in the filing process.