Non Resident Alien Page by Don Fitch CPA (877)CPA-Help

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NonResident Alien

OVERVIEW

A main concern for an alien individual (that is, an individual who is not
or does not become a U.S. citizen) is whether he is considered a resident
or non-resident alien of the United States for income tax purposes. If the
individual is a resident alien, the individual is taxed as a U.S. citizen;
that is, the individual generally is subject to U.S. taxation on income
derived from all sources, including from sources outside the United
States. Reg. Section 1.871-1. On the other hand, if the individual is a
non-resident alien, the individual generally is taxed only on income from
U.S. sources and certain income that is effectively connected with the
conduct of a U.S. trade or business.

An alien's status as a resident or non-resident alien for income,
employment and excise tax purposes is determined under Code Section
7701(b). In general, an alien individual is treated as a resident alien
for tax purposes if the individual satisfies either: (1) a green card
test, discussed in Section 164.2, or (2) a substantial presence test,
discussed in Section 164.3 Code Section 7701(b)(1)(A). An individual is a
non- resident alien if he is neither a U.S. citizen, nor a resident
alien. Code Section 7701(b)(1)(B). However, in the case of
alien individuals who are considered U.S. residents and residents of a
foreign country, treaty rules may override these definitions. See
Section 164.4 In addition, aliens who are married to U.S. residents or
citizens, and certain other aliens who are present in the United States
for a significant period of time or at the end of a year can elect to be
treated as residents. See Section 164.6 and Section 164.7

CAUTION: These rules do not apply for estate, gift, or generation-
skipping tax purposes. Instead, for these purposes, residency
generally depends on domicile at the time of the gift or death.
Reg. Section 20.0-1(b)(1), Reg. Section
25.2501-1(b). See Section 754.1

An individual can be both a non-resident alien and a resident alien during
the same year. This generally occurs in the year the individual arrives in
or departs from the United States. See Section 164.5

The IRS does not ordinarily rule on whether an alien individual is either
a resident or a nonresident of the United States in situations where the
determination depends on facts that cannot be confirmed until the close of
the taxable year (including, for example, the length of the alien's stay
or the nature of the alien's activities). Rev. Proc. 2002-7, 2002-1
I.R.B. 249, Section 4.01(27).