Resident or Nonresident Aliens status for 2023 tax year

Forum|Forum|3 years ago
May 21, 2023
1 reply
9 views

Hi,

My current client who was in H1 visa and was filing resident tax return 1040 for the past 3 years, due to the new job she is moving out of US back to her country on 5/18/2023 which is less than 183 days in 2023.

Does the Substantial Presence Test apply at the end of resident?

Since she already filed 1040 used 2022 as resident.

All the examples from IRS website is for income to US.

ProConnect Tax

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TaxGuyBill

Level 15

If you saying they lived in the US for most or all of 2021 and 2022, yes, they are Resident Aliens for 2023.

The 'default' is to be a full-year Resident, but there is an election to be taxed as a Dual Status Alien, but that may have added complexities.

You may want to review Publication 519.

puravidapto

Level 7

I agree with TaxGuyBill, I can see he is serious in reading the tax laws. Here I just want to provide the authority "301.7701(b)-4 Residency time periods" at https://www.law.cornell.edu/cfr/text/26/301.7701(b)-4 which says:

"
(b) Last year of residency—(1) General rule. An alien individual who is a United States resident during the current year but who is not a United States resident at any time during the following calendar year will cease to be a resident for tax purposes on the individual's residency termination date. Generally, the residency termination date will be the last day of the calendar year.

(2) Exceptions. Notwithstanding paragraph (b)(1) of this section, the residency termination date for an alien individual who meets the substantial presence test is the last day during the calendar year that the individual is physically present in the United States if the individual establishes that ...
"

Dual-status is not so complex, I do it on a routine basis. If the taxpayer satisfy the exception, then you should compare which option is better for the taxpayer.

However on the flip side, when someone comes to the the United States for the first time during the year as a non-exempt individual, even on January 2, she will be a dual status. There is no law that says that the residency start date could be the first day of the calendar year. TaxGuyBill, you agree? Thanks.

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TaxGuyBill

Level 15

@puravidapto wrote:

However on the flip side, when someone comes to the the United States for the first time during the year as a non-exempt individual, even on January 2, she will be a dual status. There is no law that says that the residency start date could be the first day of the calendar year. TaxGuyBill, you agree? Thanks.

That's when you hope they are married so they can make the election for both of them to be full-year Residents. 😁 As a side note, it really bugs me that election is only available to married taxpayers, and that single taxpayers can't make the election.

Dual status may not be difficult, but you need to know what the changes are. Maybe ProConnect and Lacerte are good at it, but ProSeries sucks with it, so you need to know what is allowed, not allowed and/or needs to be done.

Does the Substantial Presence Test apply at the end of resident?

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