Every year, millions of people travel to the US, oftentimes for extended periods of time to escape cold, harsh winters in other countries. While it may be surprising, non-US citizens may be liable for US taxation for the time they are present in the US. Confused? We understand–let David McKeegan, Greenback’s Co-Founder, explain the ins and outs of non-US citizen taxation.
Hi, everybody. I’m David McKeegan with Greenback Expat Tax Services. Our question today is around reporting requirements for non-US citizens. Now, there’s one of two tests you need to pass in order to be taxable as a US person. The first one would be if you have a Green Card, basically you’re a lawful, permanent resident of the United States at any time during a calendar year, then you need to file a tax return.
The second one is a bit more complicated. It’s the substantial presence test. This would apply to individuals with non-immigrant visas. This could be people traveling extensively in the United States or there for extended holidays every year, that type of situation. Under the substantial presence test, you would be taxable in the United States if you were there for at least thirty-one days during the current year and a hundred and eighty-three days during the current and preceding two years.
The way you calculate this is in the current year, all the days that you’re in the United States are counted. In the year before that, you count one third of the days that you’re in the United States. In the year before that, you count one sixth of the days that you’re in the United States. If all that adds up to over a hundred and eighty-three days, then you are going to be taxed in the United States.
As you would imagine, it’s extremely important to document your time in the United States probably more specifically to make sure that you don’t go over the hundred and eighty-three days because you probably don’t want to be taxed in the United States. If you are taxed in the United States, and you’re living in the United States, you need to file by April fifteenth.
If you’re residing overseas if you live abroad but you’re going to be taxed in the United States, then you have until June fifteenth to file your tax return. Another thing you need to know is what you will be taxed on if you are taxed in the United States. This would be your worldwide income, wages, interest, dividends, capital gains, royalties. Any sort of income would be taxable in the United States.
You would also receive any of the deductions or credits that other people taxable in the United States receive. That would include the Foreign Earned Income Exclusion. That would include the Foreign Tax Credit, as well as the tons of other deductions that people get. It’s possible, let’s say if you’re a Canadian person that likes to go to Florida for the winter, that you would be taxable in the United States, but that you wouldn’t have a big tax burden in the United States because you’re probably already paying taxes in Canada.
It’s also important to note that if you’re engaged in a trade or business in the United States, even if you don’t have income from that trade or business, you may have to file a tax return in the United States reporting that. If you have income and investment income, interest dividends, these kind of things from holdings in the United States that tax is not withheld at the source then you might have to file a 1040NR or a 1040NR-EZ reporting that income. That can be K-1 income, business income, interest [tech 0:46], all these different kinds of income that people have.
If you have any questions, please let us know, and we’ll be happy to help you out.
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