How can I determine my tax liability in the US?
For tax liability, the Alien Tax Status must first be determined. A person who is not a US citizen can either have the Alien Tax Status "Nonresident Alien" or "Resident Alien." Nonresident Aliens do not have a domicile or a habitual abode in the US. They have only limited liability for taxation, i.e., liability for certain income only. Resident Aliens have a domicile or a habitual abode in the US. They have unlimited tax liability on their world income.











How do I determine my Alien Tax Status - Resident Alien or Nonresident Alien?
A person can be deemed a Resident Alien within one calendar year if he/she has US citizenship, if he/she has owned a Green Card at any given time of the calendar year and has entered the US, or due to his/her physical presence in the US for at least 183 days. Article 4 of the Convention defines a resident as a person who is subject to taxation under the law of a state due to domicile, residence, citizenship, place of management, or any criterion of similar nature. A person is deemed a Nonresident Alien in the US if he/she does not have US citizenship or a Green Card, or is physically present in the US less than 183 days (see Substantial Presence Test). The following chart may helpt to determine your Alien Tax Status (Source: IRS).



















How do I calculate the days of my physical presence in the US via Substantial Presence Test?
For the computation of longer stays in the US, the Internal Revenue Service (IRS) has developed the so-called Substantial Presence Test, which is based on the "Lookback Formula" to avoid tax evasion. A person has to be physically present in the US for at least 31 days in the current year, and he/she has to be physically present in the US for at least 183 days over the course of the previous three years (consisting of the current year, and the two years directly prior) to be deemed a Resident Alien. To calculate the 183 days one has to count:

• All days of the current year, and

• 1/3 of the days of the year directly before, and

• 1/6 of the days of the year directly before that.

The IRC includes a catalogue of so called "Exempt Individuals" whose days of physical presence are not counted in the "Substantial Presence Test," i.e., days of physical presence in the US spent as an Exempt Individual are NOT counted in the "Substantial Presence Test." Exempt Individuals are persons in government service of another State, teachers and trainees with J- or Q-Visas, and students with F-, J-, M- or Q-Visas.




Relevant Links:

Determination of Alien Tax Status: http://www.irs.gov/businesses/small/international/article/0,,id=96392,00.html

Definition of "Nonresident Alien": http://www.irs.gov/taxtopics/tc851.html

Definition of "Resident Alien": http://www.irs.gov/taxtopics/tc851.html

Green Card Test: http://www.irs.gov/businesses/small/international/article/0,,id=96314,00.html

Substantial Presence Test: http://www.irs.gov/businesses/small/international/article/0,,id=129390,00.html

Internal Revenue Service (IRS): http://www.irs.gov

Definition of "Exempt Individuals":
http://www.irs.gov/businesses/small/international/article/0,,id=129390,00.html