T, a citizen and life-long resident of Japan, comes to the United States on July
ID: 2487530 • Letter: T
Question
T, a citizen and life-long resident of Japan, comes to the United States on July 5 of year 1 on a two-year assignment to the New York office of T’s employer, a Japanese corporation. T stays in the United States continuously until June 20 of year 3, when T returns to Japan, where she stays for the remainder of the year. T’s only other visit to the United States was in January of year 1, when she traveled to Hawaii for nine days of vacation. T’s income consists of salary and income from investments in Japan. How will she be taxed by the United States for years 1, 2 and 3?
Explanation / Answer
Solution.
T have to file nonresident income tax return and show worldwide income.
The first thing you must know in order to file your tax return is whether you are a resident or nonresident for U.S. tax purposes. If you find that you are both a resident and nonresident in the same year, you are a dual status alien for which special rules apply. The designation of resident for tax purposes is completely separate from your immigration status. You might qualify as a resident for tax purposes while remaining a nonimmigrant alien for immigration purposes.
A nonresident files a special tax form (Form 1040NR), pays tax only on U.S. source income, is subject to special rates, and might qualify for treaty exemptions. Conversely, if you are a resident for U.S. tax purposes, you are generally under the same rules and file the same forms as a U.S. citizen. That means you report your worldwide income rather than just U.S. source income
To determine your residency status, see Your Tax Residency and progress through the questions. Then come back here for further explanation. The two tests for determining whether you are a resident or nonresident alien are explained on the first few pages of publication 519. Following is a condensed version of that explanation.
The Green Card Test
You are a lawful permanent resident of the United States if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services (CIS) has issued you an alien registration card, also known as a "green card" (although it is not actually green).
You are a U.S. resident for tax purposes beginning on the first day you are present in the U.S. as a lawful permanent resident. As a resident taxpayer you must report, for U.S. tax purposes, your worldwide income. You are also eligible to claim all deductions and credits available to U.S. citizens. You can file Form 1040, 1040A or 1040-EZ, whichever is applicable to your situation, and if you are married you can file a joint return with your spouse. See the instructions for the forms. As a resident taxpayer, you still might be eligible to claim certain treaty benefits under the U.S. tax treaty with your home country. See Tax Ttreaties.
If you receive permanent residency status during the year, you are automatically a resident for U.S. tax purposes from that point forward. However, you might not be considered a resident for U.S. tax purposes for the portion of the year you did not have permanent residency status. That means you might be a dual status alien. See the discussion below about dual status aliens.
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