An estimated 13.1 million legal resident aliens resided in the United States on January 1st, 2011.
Resident aliens are subject to the same tax laws as U.S. citizens, including a tax responsibility for all of their world wide income.
From a tax stand point of view, a resident alien is
- a foreign national who has either obtained a green card (i.e., permanent resident), or
- passed a substantial presence test.
Green card test
Once a foreign national has gone through the process of obtaining a green card, it is no longer necessary to maintain a physical presence in the United States.
Residency begins the first day of physical presence after receiving a green card, or the first day of the next year if the alien resident does not travel to the United States within the first year.
Resident aliens who have a green card must also go through an expatriation process to break away from U.S. residency.
Substantial presence test
The IRS measures the substantial presence test based on the number of physical days spent in the United States over a three year period.
Only the days from the current year get full credit toward residency.
Each of the three years is subject to the following formulas:
- 2nd prior year – multiply number of days by 1/6
- 1st prior year – multiply number of days by 1/3
- Current year – full credit
A foreign national must have been physically present within the U.S. for a minimum of 183 days during this time frame.
Resident alien tax status obtained through the substantial presence test can be broken when the foreign national leaves with no intent of returning and establishes residency in another country.
There are multiple factors that can influence the substantial presence test, including residency start and finish dates and nominal presence exceptions.
Expert tax advice that saves money
Resident aliens leave millions of dollars of unclaimed tax credits and benefits every year. PIASCIK international tax professionals understand how important it is to take advantage of the tax deductions for which they qualify.
With over 75 years of combined international tax law experience, we know how resident alien taxation can affect everything from worldwide taxation, joint tax return filings, use of foreign tax credits, to trust estate planning and retirement income planning.
PIASCIK international tax professionals are well versed in every venue of resident alien tax rules and regulations to ensure you get the most out your resident alien tax return.
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