Policies and Procedures
Policy 1120 – Tax Status of Foreign Nationals
July 1, 2004
October 13, 2017
Director of Payroll Services
The University will determine tax status based on terms and categories related to immigration law, in conjunction with terms and categories related to tax law.
I. Determining Resident Alien Status
For purposes of the tax law, individuals may qualify as resident aliens by satisfying either the "green card test" or the "substantial presence test." The application of these classification tests is mandatory and determined through the Windstar System; a foreign national cannot choose a classification.
1. Green Card Test
If, for any part of a year, a foreign national holds a green card that authorizes him or her to reside permanently in the U.S. as an immigrant under the U.S. immigration laws, s/he is classified as a resident alien for that year. Resident alien status continues until such time as the person's green card is either rescinded or administratively or judicially determined to have been abandoned.
2. Substantial Presence Test
The substantial presence test is based on the number of days the foreign national is physically present in the U.S. and is applied for each calendar year that the foreign national is present in this country. To satisfy the substantial presence test for a particular calendar year, one must be physically present in the U.S. a minimum of:
31 days in the current calendar year being tested, AND
183 days during the three-year period that includes the current year and the two years immediately before that, counting:
all the days present in the current year, PLUS
1/3 of the days present in the immediate preceding year, PLUS
1/6 of the days present in the second preceding year.
Days present as an "exempt individual" (those in the U.S. on temporary visas) are not applicable when conducting the substantial presence test. (Please note that the term "exempt individual" refers to being exempt from counting days toward the substantial presence test. It does not refer to being exempt from U.S. tax.)
II. Exempt Individuals
Included in the definition of exempt individual are (1) students, temporarily present in the U.S. under an F, J, M, or Q visa, and (2) teachers, researchers, or trainees (hereafter referred to as "teachers and researchers") temporarily present in the U.S. under a J or Q non-student visa.
A student is not considered to be an exempt individual if, at any time during his/her entire life, s/he has been exempt as a teacher, trainee, or student for any part of more than five (5) calendar years.
For example, an F-1 student who arrives in the U.S. on December 15, 2003, will not count days of presence in the U.S. for the remainder of 2003 (his/her first calendar year of exemption) and will not count days for the four additional calendar years of 2004, 2005, 2006, and 2007. On January 1, 2008, the five-year exemption would terminate, and at that time the student would begin counting days toward the substantial presence test.
Please note that students who exceed the five-calendar-year time period may be able to continue to avoid counting days toward the substantial presence test if they can establish to the satisfaction of the IRS that they do not intend to permanently reside in the U.S.
Teachers and researchers who are in the U.S. on a non-student J or Q visa cannot exclude days of physical presence for a particular calendar year if the person was previously considered an "exempt individual" student, teacher, or researcher for any part of two or more of the six calendar years immediately preceding the year being tested.
As with exempt individual students, presence in the U.S. in exempt individual status for any part of a calendar year counts as a full calendar year.
For example, if on July 1, 2003, a teacher enters the U.S. on a J visa, whether s/he will be treated as an exempt individual for 2003 will depend on her/his status during the years 1997-2002. If s/he was an exempt individual (under either the student or the teacher/trainee category) for two or more years during this six-year period, s/he will not be an exempt individual for 2003, because s/he has used up her/his two-year-out-of-six exemption. But if s/he was an exempt individual for one year or less during this period, s/he will be an exempt individual in 2003. (If s/he was an exempt individual in a year prior to the 1997 - 2002 time period, say, 1996, that status will be ignored in making the two-year-out-of-six computation.)
III. IRS Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition
Exempt individuals are required to file a statement with the IRS if they wish to avoid resident alien classification by excluding days of presence under the substantial presence test. This statement should be filed with the nonresident alien's Form 1040NR (or separately if no Form 1040NR is filed) with the Internal Revenue Service Center in Philadelphia, Pennsylvania. This filing requirement can be satisfied by completing Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition.
Failure to file this form will not permit the person to count days of presence toward the substantial presence test that cannot otherwise be counted under the "exempt individual" rules discussed above. In other words, a person cannot elect resident alien status simply by not filing this form.
Reason for Policy
U.S. immigration and tax laws are complex yet intricately intertwined in determining the tax status of foreign nationals. This policy is created to present, in the clearest fashion possible, the various considerations that are used in making such determinations.
- 1120.1 - Determining Tax Status of Foreign Nationals
This policy provides general information about tax issues for foreign nationals. Although every effort has been made to provide accurate information in this policy and the related procedure, we cannot guarantee accuracy and completeness due to the complexity of the tax regulations and their capacity to change. This policy does not purport to give legal advice. For complex situations, individuals are advised to consult a tax attorney or other reputable tax advisor familiar with U.S. taxation of foreign nationals.
Please note that residency or nonresidency for tax purposes may vary from residency or nonresidency for immigration status. This policy primarily addresses tax issues. International Student & Scholar Services (ISSS) can assist foreign nationals with all questions that they might face.
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