You Passed The Substantial Presence Test
You are considered a resident of the U.S. for tax purposes, beginning with the first day you were present in the United States during the current calendar year.
- If you did not pass the substantial presence test for the prior calendar year, you are considered a resident for the entire year if you were present on January 1 of the current year.
- If you passed the substantial presence test for the prior calendar year, you are considered a resident for the current calendar year, even if you were not present on January 1.
Dual Status Incoming: When you arrive in the United States as a nonresident during the calendar year and pass the substantial presence test, your residency starting date is the day of your arrival. You are therefore classified as a dual status alien, and you generally must file a dual status return. On a dual status return, you report only your US source income (if any) during the period you are a nonresident, and your worldwide income during the period you are a resident.
Joint Return Election for Married Taxpayers: If you are married, and would rather file a joint return, there is an option. For dual-status taxpayers, an election allows you and your spouse to file a joint resident return, and be treated as residents of the U.S. for the entire year [Sec. 6013(h)]. If you file a joint resident return, you can claim a spousal exemption, the joint standard deduction and the more favorable rates for joint filing. However, you must report worldwide income of both spouses for the entire year. Double taxation can be reduced or eliminated with the foreign tax credit. Lower joint return rates, the higher standard deduction, and broader allowance of deductions and credits generally make a joint return more advantageous than filing separately, but a high amount of non-US income offsets these benefits.
Dual Status Outgoing: If you passed the substantial presence test, then left the United States permanently during the calendar year, you cease to be a U.S. resident on your residency termination date, which is generally December 31. However, if your tax home was in a foreign country and you had a closer connection to that foreign country after your departure from the United States, your residency termination date can be the last day during the calendar year that you were physically present in the United States.
A statement must be filed with your tax return to establish your residency termination date, if earlier than December 31. You must sign and date this statement and include a declaration that it is made under penalties of perjury.
With a termination date earlier than December 31, you are a dual status alien and must file a dual status return. On a dual status return, you report only your U.S. source income during your period of non-residency, and your worldwide income during the period of residency.