Resident Aliens and Non Resident Aliens (Expatriates)

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What is an Expatriate?

Expatriates are U.S. citizens and U.S. resident aliens who live and work outside the U.S. In general, wages earned by U.S. citizens and resident aliens working in a foreign country are subject to federal income tax withholding unless the wages can be excluded from the employee’s gross income. Note that U.S. citizens and U.S. resident aliens working outside the U.S. are generally subject to federal income tax withholding on that income unless it can be excluded under the Internal Revenue Code.

Resident Aliens and Nonresident Aliens

The taxation and reporting of income earned by foreign citizens (aliens) working in the U.S. depend on whether the employee is a resident or nonresident alien. Generally, foreign citizens working in the U.S. are considered nonresident aliens unless they qualify as residents. The determination of residency made under the Internal Revenue Code applies only to the alien’s status for U.S. income tax purposes, not immigration or other federal and state taxes. Click here for more information on topic number 851 resident vs non resident aliens.

Resident aliens are generally subject to federal income tax withholding and social security and Medicare taxes on the same basis as U.S. citizens.

What is a resident alien?

A resident alien is an individual who passes either the lawful permanent resident (green card) or substantial presence test for determining resident status in the U.S. Resident aliens are generally subject to federal income tax withholding and social security and Medicare taxes on the same basis as U.S. citizens. The lawful permanent resident test is based on the alien’s legal right to be in the U.S., not on the alien’s physical presence in the U.S., and a green card holder is treated as a U.S. resident until that status is revoked or abandoned.

How to determine if an alien is a resident alien:

To qualify as a nonresident alien, an individual will need to satisfy the substantial presence of test and are therefore treated as a resident alien for a calendar year. To qualify as a nonresident alien, a person will need to meet the following requirements if they have been physically present in the United States on at least:

31 days during the current year, and

183 days during the 3-year period that includes the current year and the 2 years immediately preceding the current year. To satisfy the 183-day requirement, count:

All of the days you were present in the current year,

One-third of the days you were present in the first year before the current year, and

One-sixth of the days you were present in the second year before the current year.

Note: The substantial presence test does not involve the alien’s intent to stay in the U.S. or whether the alien has an immigrant or nonimmigrant visa.

What is a nonresident alien?

A nonresident alien is an individual from a foreign country working in the U.S. who does not pass either the lawful permanent residence test or the substantial presence test but is subject to federal income tax on U.S. source income. Nonresident aliens, however, are taxed only on their income from U.S. sources, with some exceptions.