Information
provided on this site is for general guidance only
and is often simplified. Actual IRS procedures are
complex, and taxpayers should obtain professional
assistance or use IRS sources for complete information.
Introduction
And Residence
Generally
speaking, the US is not an attractive location for
resident expatriate executives seeking to limit taxation.
There are however some particular features of the
US tax system which are attractive for certain individuals
in certain situations.
For tax
purposes, an alien is an individual who is not a US
citizen. Aliens are classified as non-resident aliens
and resident aliens. Resident aliens generally are
taxed on their worldwide income, in the same way as
US citizens. Non-resident aliens are subject to different
tax laws than those that apply to US citizens; for
example, many non-resident aliens working temporarily
in the US can claim treaty benefits. In general, non-resident
aliens are taxed only on their income from sources
within the US and on certain income connected with
the conduct of a trade or business in the US.
An individual
is considered a nonresident alien for any period that
he or she is neither a US citizen nor a US resident
alien. He or she is considered a resident alien if
meeting one of two tests for the calendar year.
The first
test is the green card test. If at any time during
the calendar year an individual was a lawful permanent
resident of the US, according to the immigration laws,
and this status has not been rescinded, or administratively
or judicially determined to have been abandoned, he
or she is considered to have met the green card test.
The second
test is the substantial presence test. To meet this
test, an individual must have been physically present
in the US on 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.
To satisfy the 183 days requirement, an individual
must count all of the days he or she was present in
the current year, and one-third of the days he or
she was present in the first year before the current
year, and one-sixth of the days he or she was present
in the second year before the current year. An individual
need not count any day he or she was present in the
US as an exempt individual.
An exempt
individual may be anyone in the following categories:
- A
foreign government-related individual;
- A
teacher or trainee with a J or Q visa who substantially
complies with the requirements of the visa;
- A
student, with an F, J, M, or Q visa who substantially
complies with the requirements of the visa;or
- A
professional athlete temporarily present to compete
in a charitable sports event.
Also,
any day where an individual is present in the US because
of a medical condition need not be counted.
Even if a person meets the substantial presence test,
he or she can be treated as a nonresident alien if
he or she is present in the US for fewer than 183
days during the current calendar year, and maintains
a tax home in a foreign country during the year, and
has a closer connection to that country than to the
US. This does not apply if a person has applied for
status as a lawful permanent resident of the US, or
has an application pending for adjustment of status.
Sometimes,
a tax treaty between the United States and another
country will provide special rules for determining
residency. An alien whose status changes during the
year from resident to nonresident, or vice versa,
generally has a dual status for that year, and is
taxed on the income for the two periods under the
provisions of the law that apply to each period.
In September
2006, the
IRS announced that it would begin charging user fees
for processing applications for United States Residency
Certifications.
The application
form in question, Form 8802, is used to request Form
6166, a letter that the applicant may use as proof
of their status as a resident of the United States
to claim benefits under an income tax treaty, or an
exemption from a value added tax (VAT) imposed by
a foreign country.
A single
Form 8802 can be used to request multiple Forms 6166.
The initial user fee of $35 covers a single Form 8802
requesting up to 20 Forms 6166 for a single Taxpayer
Identification Number (TIN), regardless of the country
for which certification is requested, or the tax period
to which the certification applies. An additional
$5 covers up to 20 additional Forms 6166 on the same
Form 8802.
The IRS
is advising applicants to include all Form 6166 requests
on a single Form 8802 to avoid a new $35 user fee
charge for processing a second Form 8802 application.
The following
fee schedule applies based on the number of Forms
6166 requested per Form 8802:
1 to 20
— $35
21 to 40 — $40
41 to 60 — $45
61 to 80 — $50
The IRS
said that it has implemented the new fee as a result
of an Office of Management and Budget directive instructing
federal agencies to charge fees reflecting the full
cost of goods or services that “convey special
benefits to recipients beyond those accruing to the
general public”
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