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Armstrong Soo Tax Services

General Information regarding US Non-Resident

The content contained herein is intended for general discussion only. Please understand that many fine prints and exceptions to the rules are not articulated here. Please consult a tax professional for a detail evaluation of your individual situations.

For information specifically for foreign students, please visit the Foreign Student page.

Are you a Non-Resident?

Generally, US Citizens and US Residents are treated alike from tax law perspectives. However, the IRS’ definition of “US Residents” is very different from Immigration’s. In other words, IRS may consider you as a “US Resident” from a taxation point of view while the US Citizenship and Immigration Service (USCIS) may very well consider you otherwise.

Please be mindful that the tax laws contain many exceptions. However, in general, you are considered as “US Resident” from taxation point of view and will be taxed the same way as US Citizens and Permanent Residents if you meet one of the following conditions. If you do, you will file tax the same way as US Citizen/ Resident, please see “US Citizen/ PR” section.

1. You have a “Green Card” and you are a US Permanent Resident (known as the “Green Card Test”), or

2. You are present in the United States for at least 183 days in the past 3 years (known as the “Physical Presence Test”)

One exception is that your days in the US do not count towards the 183 days if you are in the US under “F”, “J”, “M” or “Q” visa.

Once you determined that you are Non-Resdeint .....

You ought to file Form 1040NR for your return if you were a Non-Resident for the entire tax year. If you have been both Resident and Non-Resident in the same year, you are considered as “Dual Status” and you need to file an Dual-Status Statement along with your return.

You will be taxed for your Effectively Connected Income (i.e. income connected to your engagement in US trade, business or job) and Not Effectively Connected Income (i.e. US-source income that is not connected with US trade, business or job). With some exception, interest you earned from your deposits at US financial institutions, interest-related dividends are not taxable. Scholarships and Fellowship grants that meet certain criteria is not taxable as well.

Your Effectively Connected Income (e.g. salary or wages) is taxed at a graduated rate. You Not Effectively Connected but US source income will be taxed at 30% or lower treaty rate.

Social Security and Medicare Tax

If you received wages for service performed as an employee in the US, US Social Security and Medicare taxes apply. US Social Security and Medicare taxes are not applied for “F”, “J”, “M”, “Q” visa if they meet certain requirement. Self-employment income is not subject to Social Security and Medicare taxes.

The US has entered into bilateral Social Security Agreements, also known as Totalization Agreement, with certain countries to eliminate dual coverage for its citizens. Generally, under these agreements, employees are subject to social security taxes only in the country where they are working. With some exceptions, self-employed individuals are covered by the social security of the country where they reside. For a list of countries that have entered into the Totalization Agreement with the US, please click here.

Tax Treaties

The US also entered into tax treaties with certain countries that exempt certain income from US taxation.

Departure Permits

Before leaving the US, all Non-Residents must obtain a certificate of compliance certifying that your US tax obligations have been satisfied according to available information. You should submit Form 1040-C or Form 2063 for departure permit at the IRS office 2 weeks before you plan to leave.

State Income Tax

The material discussed above is applicable to Federal Income Tax only. However, many States have their own income tax laws and they do not necessarily mirror Federal Income Tax Laws, and often do not recognize federal tax treaties. As a result, you may very well be subject to State income tax although you are exempted from Federal income tax.