Your first year on a visa: resident or nonresident for taxes?

Which return you file comes down to arithmetic: how many days you were physically here, weighted across three years. Tax residency and immigration status are separate questions, and neither one decides the other.

The substantial presence test

Two conditions have to hold in the same year before the test treats you as a United States resident for tax purposes. The first is at least 31 days of physical presence during the year itself. The second is 183 days once that year and the two years before it are taken together.

The second figure is not a plain sum. Days from the year you are filing for count at face value. Days from the year before that are discounted to a third apiece. Days from the year before that one are worth a sixth each.

The discounting is where intuition fails. Picture someone who spent an identical stretch here in each of three consecutive years, the same tally every time. Two-thirds of one year's days and five-sixths of another's fall away before anything is added up, so the weighted total can land short even though the raw days look ample. Do the arithmetic rather than estimating it.

Days that do not count

Some days spent inside the country are struck from the tally altogether.

• Regular cross-border commuting. If you live in Canada or Mexico and travel to work here on a regular basis, those commuting days drop out.
• Short transits. A stop of under twenty-four hours while traveling between two points outside the country does not count.
• Crew days. Time here working aboard a foreign vessel as a crew member is excluded.
• Days you could not leave, because a medical condition arose after you got here.
• Days spent as an exempt individual, which is the exclusion that settles most student and teacher cases.

Exempt individuals, which is most students

The label misleads. Exempt individuals are not exempt from tax. Their days simply never enter the count, which for a large share of readers ends the question before the arithmetic starts. Four groups qualify, each of them temporary.

• Foreign government-related individuals holding an A or a G visa, with the A-3 and G-5 classes left out.
• Teachers and trainees on a J or a Q visa, so long as they substantially comply with what their visa requires of them.
• Students on an F, J, M or Q visa, on that same condition of substantial compliance.
• Professional athletes here to compete in a charitable sports event.

Excluded days come with paperwork. Leave days out because you were an exempt individual, or because a medical problem kept you here, and Form 8843 has to go in with your income tax return. Where no return is due from you at all, Form 8843 still goes in on its own, to the address named in its instructions, by the date a return would have been due.

Nor does the exclusion run forever. How long it lasts turns on the visa and on how much time you have already spent here in that status, and Publication 519 is where that is worked out.

The arrival year is often split

Dual status means what it sounds like: resident for one stretch of a tax year, nonresident for the rest of it. Arrival years and departure years are where it usually turns up.

One year then gets taxed two ways. Everything you earned anywhere in the world falls inside the resident stretch. Only income with a United States source falls inside the other one.

Splitting a year like that is a procedure of its own, set out in Publication 519, and it is not a matter of choosing whichever form looks friendlier. This is where a preparer who handles these returns regularly earns the fee.

Two elections worth knowing exist

Two choices sit beside the ordinary rules. Someone who is a nonresident now but will pass the day-count test next year can, where certain tests are met, choose dual-status resident treatment for the current year instead. Separately, a dual-status individual married to a citizen or a resident can choose to file a joint return with that spouse. Publication 519 sets out both. Neither is something to elect off the back of a summary.

Which form, and what a treaty can do

Pass the test and you file the ordinary return. Fail it and you file Form 1040-NR. Either way the return needs a taxpayer identification number, and filing with an ITIN covers getting one where a Social Security number is not open to you. Who has to file is worth reading first as well, since a return may not be required of you in the first place.

One thing can override the arithmetic. Treaties generally carry an article that settles residency for the treaty's own purposes, and the answer it gives is not always the answer the Internal Revenue Code gives. Whether that helps you, and how much, depends on which country's treaty you are under. Read that treaty, or ask someone who works with it, rather than stopping at the day count.