Tax Rules for Non-Citizens

It might seem that you are not required to pay income taxes to the IRS if you are not a U.S. citizen. That’s not true. Citizens of other countries are also subject to taxation in the United States if they spend enough time there.

What Are the Requirements for Non-Citizens in Terms of Paying U.S. Taxes?

The United States tax system may require non-citizens to pay taxes. A non-citizen immigrant who meets the tax requirements is required to render taxes, or else they may face certain legal consequences. This will depend on their immigration status and sometimes their length of time in the country.

Who Is Required to Pay U.S. Taxes as a Non-Citizen?

Tax-wise, non-U.S. citizens are categorized in three different categories:

• Permanent Residents: All lawful permanent residents are required to pay income taxes. Green card holders are permanent residents. As “tax residents,” they must pay taxes like citizens.
• Certain non-permanent aliens: Non-immigrants who have spent a total of 183 days of the current year in the U.S. must also pay taxes.
• “Weighted” system: Non-immigrants who have spent less than 183 days of the current year may be required to pay taxes if they have spent a total of 183 days in the U.S., using a complicated “weighted” system. According to this system, each day in the U.S. from the previous year counts as 1/3 of a day, and each day from the previous year counts as 1/6 of a day. A person must pay taxes if the total number of days over the three years reaches 183.

Non-immigrants can face many challenges in this last category. For example, it may be difficult for them to calculate how many days they have spent in the U.S. in the last three years. To avoid committing a tax violation, it may be necessary to hire an immigration lawyer.

Who Are Green Card Holders?

Green card holders are lawful permanent residents of the United States, regardless of where they live. Even if you live abroad most of the time, you must pay U.S. taxes.

What About Nonimmigrant Visa Holders?

Those with nonimmigrant visas who are in the U.S. temporarily are required to pay U.S. income taxes if they meet the substantial presence test. There are many exceptions to this test, which makes it complicated.

To satisfy this test, you must be physically present in the U.S. for at least:

• 31 days during the present year, and
• 183 days during a 3-year period, including the current year and the two years immediately before that.

However, you don’t count all the days spent in the U.S. in the past two years. If you were present in the first year before the current year, then you count 1/3 of those days, and if you were present in the second year before the current year, then you count 1/6 of those days.

For example, you spent 122 days in the United States for three consecutive years. You can determine whether you meet the substantial presence requirement for the most recent year by counting the full 122 days you were present that year, 41 days for the year before that (1/3 of 122), and 20 days for the year before that (1/6 of 122). For the most recent year, you are considered a resident based on the 3-year total of 183 days.

The Number of Days Spent in the United States

Whenever you are physically present in the United States, at any time during the day, you are considered to be present in the country. The following, however, are not counted:

• Your regular commute from Canada or Mexico to the United States
• When you are traveling in the United States for fewer than 24 hours
• If you are unable to leave the United States due to a medical condition that develops during your stay,
• You are exempt (for example, you are a student, teacher, or trainee temporarily present on an “F,” “J,” “M,” or “Q” visa; or a diplomat, foreign government employee, or someone related to one).

Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition, is required if you exclude days in the U.S. because you fall into a special category.

What Is the Closer Connection Exemption?

It is possible to avoid U.S. income taxes even if you satisfy the substantial presence test if you:

• Are present in the U.S. for fewer than 183 days during the current year
• Do not have a green card
• Connect more closely with a foreign country than with the U.S.
• During the year, maintain a tax home in this foreign country.

For this test to be successful, you must demonstrate to the IRS that you have more significant contacts with a foreign nation than with the U.S.

How to File Your Taxes

As a resident alien, all tax rules that apply to United States citizens also apply to you. If you were a resident alien for the whole tax year, you could claim the same deductions as U.S. citizens. The standard deduction can be claimed if you do not itemize your deductions. As with U.S. citizens, resident aliens generally claim tax credits and report tax payments, including withholding.

Dependents living in the United States, Canada, or Mexico for part of the calendar year can claim personal exemptions. In addition, if your spouse does not have gross income for U.S. tax, you may claim an exemption for them on your Married Filing Separate return. It is possible to claim this exemption even if your spouse has not lived in the United States for a full tax year or has not been here for a full tax year.

Resident aliens should not be taxed in both countries on the same income derived from a foreign country and in the United States. Nonresident aliens can claim a foreign tax credit if their U.S. tax liability for income from foreign sources is less than the lesser of their home country’s taxes or their foreign tax credit.

You must file your tax return and pay any taxes due by April 15 of the year following the tax year for which you are filing. You have an automatic extension to June 15 if your main place of business and home is outside the United States and Puerto Rico on April 15. Form 4868 can also extend your filing deadline until October 15 if you file it by April 15.

If a Non-Citizen Fails to Pay Taxes When Due, What Happens?

When immigrants are in the country illegally or have overstayed their visas, they may be hesitant to deal with taxes. In either case, immigrants or non-immigrants who fail to pay their taxes can face severe legal consequences.

The consequences may include, for example:

• Possible criminal tax consequences, such as a monetary fine, citation, or jail sentence
• Their chances of changing status, or applying for U.S. citizenship, may be lost
• In serious cases of tax violations (such as tax evasion or tax fraud), deportation or removal may be necessary

Lastly, non-citizens who aren’t considered tax residents may still need to file taxes if their employer has been withholding taxes from their wages. In the long run, it may reflect well on their immigration record if they qualify for a refund.

Are There Tax Laws I Need to Be Aware of as an Immigrant? Do I Need the Help of a Lawyer?

It is often very difficult for immigrants to understand the tax rules. If you need help understanding how tax laws apply to non-citizens, you should contact an immigration lawyer immediately. By reviewing the laws in your area, your attorney can ensure that you do not commit any tax violations. In addition, your lawyer can represent you in court if you are summoned.