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Taxes for Individuals Who are Not U.s. Citizens

  1. Expatriate
  2. Tax Treaty
  3. IRS Publication 519
  4. Worldwide Income
  5. Backup Withholding
  6. Nonresident Alien
  7. Non-Resident

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Understanding IRS Publication 519: US Tax Guide for Aliens

Updated: November 25, 2022

The tax system in the United States can be tricky at the best of times.

But when you’re a non-citizen, things can become even more complicated. That’s where the IRS Publication 519 comes into play. 

But what exactly is this publication? And how does it relate to aliens in the United States? Read on as we take a look at everything to do with IRS Publication 519. 

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    KEY TAKEAWAYS

    • Aliens residing in the United States can get tax information, rules, and advice in IRS Publication 519.
    • Whether a person has a resident or non-resident alien status, or dual status, will affect how much tax they pay.
    • Both U.S. and foreign governments may impose income taxes on non-residents.

    What Is IRS Publication 519?

    IRS Publication 519 is the U.S. Tax Guide For Aliens. It is a publication by the Internal Revenue Service (IRS) that outlines the tax laws for aliens. Which is essentially any people who are not U.S. citizens.

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    What Does IRS Publication 519 Contain?

    IRS Publication 519 contains all of the necessary tax information and guidance that is needed for aliens in the United States.

    An alien is a person who is not a U.S. citizen for tax reasons. There are two categories of aliens: resident aliens and nonresident aliens. You may find out your status and get the details you need to prepare your US tax return by consulting Publication 519.

    How Does IRS Publication 519 Work?

    Not all foreign nationals are obliged to pay American taxes. Aliens who have been in the country for a specific amount of time are liable to the same taxation on their worldwide income as residents. Non-resident aliens are only subject to taxation on specific categories of international and domestic income.

    So the IRS publication 519 works by giving information regarding the tax procedures for any individual who is looking to pay taxes that is not currently a citizen of the United States. 

    How to Determine Tax Residency Status

    The IRS uses physical presence in the United States via the substantial presence test to quantify residency. The following regions are included in the phrase “United States” (U.S.):

    • Both the District of Columbia and all 50 states.
    • The United States territorial waters.
    • The seabed and subsoil of the underwater regions contiguous to U.S. territorial seas over which the country enjoys sole exploration and resource-exploitation rights under international law.

    The phrase excludes American territories and airspace.

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    Non-resident Alien or Resident Alien

    The definition of a taxpayer’s status as a non-resident alien or a resident alien utilizing the substantial presence test or the green card test, which is the basis for the applicable tax laws, is the most crucial part of IRS Publication 519. Taxpayers should also ascertain the tax status of any spouses because they may be regarded as dual-status aliens.

    A person has dual status if they meet the requirements to be both a resident and a non-resident in the same calendar year. Additionally, a married person may decide to treat their non-resident spouse like a resident alien.

    What Are the Eligibility Criteria for IRS Publication 519?

    According to the IRS website, in order to pass the eligibility test, the person in question must reside in the United States for: 

    • “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 before that, counting:
      • All the days you were present in the current year, and
      • 1/3 of the days you were present in the first year before the current year, and
      • 1/6 of the days you were present in the second year before the current year.”

    What Is the Taxation of Non-resident Income?

    The income of a nonresident immigrant that is liable to U.S. income tax has to be split into two groups. These are:

    • Income from a trade or business in the United States that is effectively connected.
    • Income from a trade or business in the United States that is not effectively connected.

    The main difference between these two groups is that effectively connected income is taxed at progressive rates after any permitted deductions. The same rates apply to citizens and residents of the United States. A flat tax of 30% is applied to any income that is not effectively connected.

    Summary

    IRS Publication 519 helps people who are aliens in the United States understand their tax obligations. It can be a stressful time moving to a separate country, especially if you are looking to set up your own business. By having access to this guide, non-citizens can get a grip on their tax returns and make sure that they avoid any penalty fines. 

    It’s important to remember that, in general, and regardless of where you live, if you are a U.S. citizen, you are subject to U.S. income taxes. This is on top of the taxes you pay on all of your international income.

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    FAQS on IRS Publication 519

    Is a Resident Alien the Same as a Permanent Resident?

    Yes. A resident alien is a person who has a permanent address in a country but is not a citizen of that country. A person must either now hold a green card or have one from the prior year in order to qualify for this category in the United States.

    Are All U.S. Citizens Tax Residents?

    Under the Internal Revenue Code, all U.S. citizens and U.S residents are treated as U.S. tax residents.

    How Do You Calculate Residency Days?

    The IRS uses what’s known as the 183-Day Rule. This essentially means that if you were physically present in the United States for at least 31 days of the current year and 183 days over a three-year period, the IRS will consider you a resident of the country. The same year the calculation file took place and the two years before it make up the three-year span.

    How Do You Prove Residency to the IRS?

    You can prove residency to the IRS in a number of ways. This includes school, medical, or social services records. As well as letters from a business employer, or a landlord or property manager letter. 

    Taxes for Individuals Who are Not U.s. Citizens

    1. Expatriate
    2. Tax Treaty
    3. IRS Publication 519
    4. Worldwide Income
    5. Backup Withholding
    6. Nonresident Alien
    7. Non-Resident

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