Tax Treatment for Aliens (Foreign National)

Tax Treatment for Aliens
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Every year, a huge number of alien (Foreign National) are beneficially utilized in the United States. Thousands more own investment property or procure revenue or profits from US speculations. This article examines the tax filling necessities for alien.

In case you are an alien (not a US resident), you are viewed as an alien outsider
except if you meet one of two tests:

  1. Substantial Presence Test
  2. Green Card Test

Substantial Presence Test:

A person will be seen as a United States resident for tax purposes in case you
meet the SPT for the current year. To qualify for this test, you have to be present in the United States (US), no less than 183 days during the year.
Look back test if not 183 days in current year. For this some steps to calculate
days for SPT:

> 31 days during the current year
> Number of days you were present in the current year.
> 1 by 3 of the days you were present in the 1 year before the current year.
> 1 by 6 of the days you were present in the 2 years before the current year.


  1. You were present 183 days in the US then you are considered as a resident for tax purposes. If not then look back rule comes into the picture.
  2. You were physically present in the US on 150 days in every one of the years 2019, 2020, and 2021. To decide whether you meet the substantial presence test for 2021, tally the full 225 days of presence in 2021, 150 days in 2021, 50 days in 2020 (1 by 3 of 150), and 25 days in 2019 (1 by 6 of 150).

Since the outright for the 3-year time span is 225 days, you are seen as an inhabitant under the considerable presence test: for 2021.

Green Card Test:

You are a resident, for US government tax purposes, in case you are a legal long-lasting inhabitant of the United States whenever during the scheduled year. This is known as the “green card” test.

You keep on having US occupant status, under this test, except if:

> You deliberately disavow and forsake this status recorded as a hard copy to the USCIS,
>Your foreigner status is officially ended by the USCIS, or
> Your foreigner status is judicially ended by a US government court.

If you meet the green card test at whatever point during the timetable year, yet don’t meet the SPT for that year, your residency starting date is the primary day on which you are onboard in the United States.

Filing Requirements for Nonresident Aliens

Alien outsiders are by and large subject to US annual tax just on their US source pay. They are dependent upon two diverse tax rates, one for adequately associated pay, and one for fixed or definite, yearly, or intermittent (FDYI) pay.

Effectively connected income is earned in the US from the doing a business in the US or is personal service income received in the US (such as wages or self-employment income). It is burdened for an alien at similar graduated rates with respect to a US individual.

FDYI income is unearned income such as interest, dividends, rents or royalties. This pay is charged at a level 30% rate, except if a treaty indicates a lower rate.

Alien outsiders should document and pay any tax due utilizing Form 1040NR, US Alien Income Tax Return or Form 1040NR-EZ, US Annual Tax Return for Certain Nonresident Aliens without any Dependents.

Filing Requirements for Dual-Status Aliens:

Dual status is also the type of residency in the USA. If foreign national reaches in the USA then he/she will be considered as “dual status arrival” and if they return from the USA then they will be considered as “dual status departure”.

Dual filing status in on arrival: If you first time became a lawful permanent resident of the US (received a green card) or meet SPT during 2021 and were not a US resident during 2020, your period of US residency begins with the first day in 2021 that you are present in the US with the status of lawful permanent resident or first day of your arrival while meeting SPT. Prior to that date, you are an alien outsider.

This means that if you become a lawful permanent resident or meet SPT during 2021 and remain a resident at the end of the year, you have a dual-status tax year. In this case, you attach a separate statement showing the income for the part of the year you are an NR. Structure 1040NR will be utilized as the statement. Write ‘Dual-Status Return’ on the top of Form 1040 and ‘Dual-Status Statement’ on the top of Form 1040NR or 1040NR-EZ.

In dual status departure case, Form and statement will get change.

Filing Requirements for Resident Aliens:

If foreign national is meeting all condition for their residential status to qualify as US resident then tax treatment will be same like a US citizen.

Want to know more about Tax Treatment for Aliens or planning to outsource your tax preparation services. Connect with our team call us on +1 929 254 6300 or email us on

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