What is a dual-status alien?
A dual-status alien/taxpayer is someone who in a single year lives in the US long enough to qualify as a resident alien, and lives outside of the US for long enough to qualify as a nonresident alien. Most dual-status taxpayers have obtained green cards to work legally in the US for a substantial part of the year.
Foreign nationals are generally taxed as a nonresident alien or a resident alien – if they have maintained both statuses in the same calendar year, they’re taxed as a dual-status alien by the IRS.
The IRS has a ‘substantial presence test’ to determine who qualifies. Taxpayers who qualify will need to file a form 1040 to the IRS.
The substantial presence test
To pass the substantial presence test and face US taxation:
- Have been physically present at least 31 days during the current year and;
- The IRS uses 183 days as a threshold to determine whether people who are neither US citizens nor permanent residents should still be considered residents for US tax purposes. To pass, you must be present 183 days during the three-year period that includes the current year and the two years immediately preceding it.
Example of a dual-status taxpayer
For example, a Mexican citizen arrives in the US on a H visa on June 1, 2019, and leaves on December 31, 2019. This person was in the US for over 183 days of the year, therefore meeting the substantial presence test. This means that they qualify as a nonresident alien for the period of January 1 to May 31, and a resident alien from June 1 to December 31.
US tax obligations for dual-status aliens
Dual-status aliens will be taxed on income from all sources received during their residence in the US, and only taxed on US based income they received when they lived abroad. So, for the part of the year you are a nonresident alien, any income sourced outside of the US that is not ‘effectively connected’ to a trade or business in the US is not taxable by the IRS.
How to file a dual-status tax return
As a dual-status alien, Form 1040-NR will report only your US sourced income for your period as a nonresident. Form 1040 will report your worldwide income for the period you were a resident.
If you’re a dual-status alien and were a U.S. resident at the end of the tax year, then you must file a 1040 with a 1040-NR attachment. Write ‘Dual-Status Return’ across the top of the return.
If you’re a dual-status alien and were a nonresident at the end of the tax year, then you must file a 1040-NR with a 1040 attachment. Write ‘Dual-Status Statement’ across the top.
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Restrictions when filing a dual-status return
If you’re filing a dual-status US tax return for the tax year, the following restrictions apply:
- Although you can itemize certain allowable deductions, you can’t use the standard deduction allowed on Form 1040 (your income tax return).
- You can’t use the head of household Tax Table column or Tax Rate Schedule.
- You can’t file a joint return, unless a dual-status alien is married to a US citizen or resident alien who elects to file a joint return.
- As a dual-status taxpayer, you may be able to claim a dependent on your tax return. In general, a dependent is a qualifying child or a qualifying relative. You may be entitled to claim additional deductions and credits if you have a qualifying dependent.
– If you are a nonresident alien and married to a U.S. citizen or resident alien for all or part of the tax year, and you do not choose to file jointly with your spouse, you must use the Tax Table column or Tax Rate Schedule for married filing separately to figure your tax. You cannot use the Tax Table column or Tax Rate Schedules for married filing jointly or single.
- A nonresident alien married to a US citizen or resident alien for all or part of the tax year, who doesn’t choose to file jointly, must use the Tax Table column or Tax Rate Schedule for married filing separately.
- You can’t use the Tax Table column or Tax Rates Schedules for married filing jointly or single filers.
- For tax years following December 31, 2017, aliens and nonresident aliens can’t claim a personal exemption deduction for themselves, their spouses, or their dependents.
- A nonresident alien who is married to a US citizen or resident alien may not take the earned income credit, the credit for the elderly or disabled, or an education credit unless you elect to be taxed as a resident alien jointly with your spouse in lieu of these dual-status taxpayer rules.
When and where do I file my tax return as a dual-status alien?
If you’re a resident alien on the last day of the tax year, you need to file by April 15, for the year following the close of your tax year.
If you’re a nonresident alien on the last day of your tax year, you need to file by April 15 of the year following the close of your tax year, if you receive wages subject to withholding. If you didn’t receive wages subject to withholding, you’ll need to file by June 15.
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