Page 76 - Life In Naples Magazine December 2014 Edition
P. 76
FINANCE
U.S. RESIDENCY STATUS
NON-CITIZENS BEWARE
by Michael Wiener, E.A.
U nder current tax provisions a United States Citizen “ The income tax treaty with
is taxed on worldwide income. A non-U.S. citizen
a foreign country must
is taxed in various ways depending upon marital
status, visa type, and residency status. If a non-U.S. citizen is contain a provision that
found to be a “resident alien,” then he or she is taxed in the
same manner as a U.S. Citizen. provides for resolution
The primary determinants that establish United States
Residency (for a non-U.S. citizen) are known as the “green of conlicting claims of
card test” or the “substantial presence test.” residence.
• Green Card Test – The person is a lawful permanent ”
United States resident if he or
she has been given the privilege, Factors that determine a closer connection include (but are
not limited to):
according to immigration laws
• Must be present in the U.S. less than 183 days in the
of residency, as a permanent
current year
immigrant. The person has this
status if the U.S. Citizenship and • Maintain a tax home in a foreign country
Immigration Service (USCIS) has • Country of residence designated on forms and documents
issued an alien registration card, • Location of the person’s family, personal belongings,
known as a green card. business activities, and driver’s license
• Substantial Presence Test – The • Current social, political, cultural, or religious activities
substantial presence test consists In addition tax treaty provisions can override the
of a two-step process. If you were definition of residency. The income tax treaty with a foreign
physically present in the United States for less than 31 days in country must contain a provision that provides for resolution
the current year, then you are not considered a resident alien. of conflicting claims of residence. If the person is treated as a
If you were present in the U.S. for 183 days or more, then resident of a foreign country under a tax treaty, then he/she is
you automatically meet the substantial presence test (SPT). treated as a non-resident alien for computing U.S. income tax.
Finally, if you were in the U.S. more than 31 days but less As in most areas of tax law, the taxation of resident
than 183, then the residency status is determined using the and non-resident aliens can be quite complex and careful
following formula: consideration needs to be given on a case by case basis.
Add all days in the U.S. during the current year; plus 1/3
of the days in the U.S. of the preceding year; plus 1/6 of the
days in the U.S of the second preceding year. If the total days If you should have a topic that you would like me to
are more than 183, then you meet the SPT. discuss or if you should have a question, please feel
There are certain exceptions to the days counted towards free to call 239.403.4410 or e-mail me at
the SPT. For example commuting to and from work from mike@cctaxandaccounting.com.
a Canadian or Mexican residence, days spent while working
on a foreign vessel or days an individual is unable to leave An enrolled agent, licensed by the US Department
the U.S. because of a medical condition that arose while the of the Treasury to represent taxpayers before the IRS
individual was in the U.S. for audits, collections and appeals. To attain the en-
rolled agent designation, candidates must demonstrate
If an individual can demonstrate they have a closer
connection to a foreign country during the year, they can be expertise in taxation, fulfill continuing education
treated as a non-resident alien, even though the substantial credits and adhere to a stringent code of ethics.
presence test is met using the “closer connection exception.”
76 Life in Naples | December 2014
U.S. RESIDENCY STATUS
NON-CITIZENS BEWARE
by Michael Wiener, E.A.
U nder current tax provisions a United States Citizen “ The income tax treaty with
is taxed on worldwide income. A non-U.S. citizen
a foreign country must
is taxed in various ways depending upon marital
status, visa type, and residency status. If a non-U.S. citizen is contain a provision that
found to be a “resident alien,” then he or she is taxed in the
same manner as a U.S. Citizen. provides for resolution
The primary determinants that establish United States
Residency (for a non-U.S. citizen) are known as the “green of conlicting claims of
card test” or the “substantial presence test.” residence.
• Green Card Test – The person is a lawful permanent ”
United States resident if he or
she has been given the privilege, Factors that determine a closer connection include (but are
not limited to):
according to immigration laws
• Must be present in the U.S. less than 183 days in the
of residency, as a permanent
current year
immigrant. The person has this
status if the U.S. Citizenship and • Maintain a tax home in a foreign country
Immigration Service (USCIS) has • Country of residence designated on forms and documents
issued an alien registration card, • Location of the person’s family, personal belongings,
known as a green card. business activities, and driver’s license
• Substantial Presence Test – The • Current social, political, cultural, or religious activities
substantial presence test consists In addition tax treaty provisions can override the
of a two-step process. If you were definition of residency. The income tax treaty with a foreign
physically present in the United States for less than 31 days in country must contain a provision that provides for resolution
the current year, then you are not considered a resident alien. of conflicting claims of residence. If the person is treated as a
If you were present in the U.S. for 183 days or more, then resident of a foreign country under a tax treaty, then he/she is
you automatically meet the substantial presence test (SPT). treated as a non-resident alien for computing U.S. income tax.
Finally, if you were in the U.S. more than 31 days but less As in most areas of tax law, the taxation of resident
than 183, then the residency status is determined using the and non-resident aliens can be quite complex and careful
following formula: consideration needs to be given on a case by case basis.
Add all days in the U.S. during the current year; plus 1/3
of the days in the U.S. of the preceding year; plus 1/6 of the
days in the U.S of the second preceding year. If the total days If you should have a topic that you would like me to
are more than 183, then you meet the SPT. discuss or if you should have a question, please feel
There are certain exceptions to the days counted towards free to call 239.403.4410 or e-mail me at
the SPT. For example commuting to and from work from mike@cctaxandaccounting.com.
a Canadian or Mexican residence, days spent while working
on a foreign vessel or days an individual is unable to leave An enrolled agent, licensed by the US Department
the U.S. because of a medical condition that arose while the of the Treasury to represent taxpayers before the IRS
individual was in the U.S. for audits, collections and appeals. To attain the en-
rolled agent designation, candidates must demonstrate
If an individual can demonstrate they have a closer
connection to a foreign country during the year, they can be expertise in taxation, fulfill continuing education
treated as a non-resident alien, even though the substantial credits and adhere to a stringent code of ethics.
presence test is met using the “closer connection exception.”
76 Life in Naples | December 2014
