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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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Non-Resident: Definition & Overview

Updated: November 25, 2022

The United States has relatively strict rules on who counts as a citizen. 

Unless you pass one of two conditions, everyone who is not a citizen of the United States is regarded as a nonresident of the country for taxation reasons. If you pass either the significant presence test or the green card test for the calendar year, you are considered a resident of the United States for tax purposes.

Read on as we take you through the ins and outs of non-residents.

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    KEY TAKEAWAYS

    • A non-resident is an individual who lives or resides in a specific region but also has interests somewhere else. 
    • The classification of non-resident status plays an important role in several areas. These include government benefits, eligibility for taxes, voting, education, and jury duty.
    • Non-resident aliens are foreigners who don’t have a big presence in the United States. If a non-resident has income in the United States, they’re required to file taxes.

    Who Is a Non-Resident? 

    If an individual mainly resides in a specific jurisdiction or region but has interests elsewhere, they’re considered to be a non-resident. Essentially, the individual is classified as a non-resident by government authorities in the region where they don’t reside. 

    Certain circumstances dictate the classification of the non-residency status. This can include, among others, how much time is spent in a region throughout a calendar year. It’s worth mentioning that non-resident classification is based on where the individual resides. It doesn’t focus on or take into consideration citizenship.

    Usually, non-residents only file a state tax return if they happen to also earn income in the same region. That said, there are certain types of income that meet tax residency rules. And this is the case even if you don’t work and live in the state. 

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    What Are the Qualifications for a Non-Resident? 

    To get classified as a non-resident there are a few qualifications to meet beforehand. Basically, if you’re not a citizen of the United States then you’re considered a non-resident for tax purposes. 

    Qualifications for residency vary. However, this can change depending on the outcome of two separate tests. An individual will be considered a resident if they meet either of the:

    • Substantial presence test, which runs the calendar year from January 1 to December 31
    • The Green Card test

    Non-residents are individuals who live or work in a specific area or region but also have interests in other areas. Taxpayers usually are only able to be residents of a single state. But, sometimes there are situations where an individual files tax returns as a non-resident of one state and a resident of another. 

    Resident vs. Non-Resident

    Some of the biggest considerations that go into classifying a resident or a non-resident depend on location and service. Let’s take a closer look at a few of the biggest differences. 

    • Education — Several colleges and universities offer in-state students a lower tuition amount compared to students from out of state. If you wanted to go to a world-class university outside your state, you could move and live there for a year to become a non-resident. Then, you would be eligible for the lower tuition educational programs. 
    • Voting — This is all going to depend on the specific state. Some states allow residents to vote right away. Other states might have a 30-day residency requirement. 
    • Taxes — If someone owns multiple homes in different states, they often look to claim residence in the state with the best tax rates. Each state has different requirements which can make things complicated. For example, some states have the 183-day rule, which states if you spend more than half a year in the state then you’re considered a resident. 
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    Examples of a Non-Resident 

    One of the easiest ways to understand the classification of non-residency is for someone who lives and works in two different states. When it comes to tax time, the individual will have to file two separate state tax returns. One would be for the income they earn in another state, and the other would be for their state of residence. 

    Another example is someone that owns more than one home in different states. For example, Jennifer lives and works in New York but also has a vacation home in Florida. The individual would probably explore filing state taxes as a Florida resident since Florida has no income tax. 

    What Are Non-Resident Aliens? 

    Non-resident aliens are foreigners without a substantial presence or legal residency in the United States. These can often include businesspeople, seasonal workers, or individuals who commute across the border. 

    The Internal Revenue Service (IRS) bases residency on the substantial presence test if you don’t have a green card. If you earn income in the United States but don’t reside here, you’re still required to file a tax return. Non-residents use form 1040-NR to file.

    Summary

    A non-resident is an individual who lives in a specific region or jurisdiction but has interests in other areas. How much time is spent in the jurisdiction is taken into consideration when determining residency status. 

    Non-resident classification is based on where you reside, not your citizenship. Understanding how residency works can have an impact on several areas, including taxes.

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    FAQs About Non-Resident

    Can I Have a Residency in Two States?

    Technically, yes you can have residency in two states. However, individuals often look to file residency in the state where they can receive the most benefits in return, such as lower taxes. 

    Who Is Non-Resident for Tax Purposes?

    A non-resident for tax purposes is an individual who doesn’t meet the substantial presence test, have a green card, or isn’t a U.S. citizen.

    Do Non-Residents Need to File a Tax Return?

    If non-residents have income that is subject to tax, they must file form 1040-NR, U.S. Nonresident Alien Income Tax Return.

    Can You Work in Another State Without Being a Resident?

    Yes, you can work in another state without being a resident. Yet, you will have to file two separate tax returns for residency laws. One will be for your residency in the state you live and the other will be for income earned in the state you work.

    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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