Classification of Persons
Classification of persons for U.S. Tax purposes
U.S. law treats U.S. persons and foreign persons differently for tax purposes. Therefore, it is important to be able to distinguish between these two types of taxpayers.
U.S. Citizens and Resident Aliens Abroad
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.
When to File
If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension. For a calendar year return, the automatic 2-month extension is to June 15.
If you are unable to file your return by the automatic 2-month extension date, you can request an additional extension to October 15 by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, before the automatic 2-month extension date. However, any tax due payments made after June 15 will be subject to both interest charges and failure to pay penalties.
A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, a foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. financial institution if the foreign branch is a qualified intermediary. Generally, the U.S. branch of a foreign corporation or partnership is treated as a foreign person.
A nonresident alien is an individual who is not a U.S. citizen or a resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.
Married to U.S. Citizen or Resident Alien
Nonresident alien individuals married to U.S. citizens or residents may choose to be treated as resident aliens for certain income tax purposes. However, these individuals are still subject to the NRA withholding rules that apply to nonresident aliens for all income except wages. Wages paid to these individuals are subject to the withholding rules that apply to U.S. citizens and residents and not the NRA withholding rules. Refer to Tax Withholding on Foreign Persons
A resident alien is an individual that is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year.
Generally, the days the alien is in the United States as a teacher, researcher, student, trainee, exchange visitor, or cultural exchange visitor on an “F”, “J”, “M”, or “Q visa are not counted. This exception is for a limited period of time. For more information on resident and nonresident status, the tests for residence, and the exceptions to them, refer to Publication 519, U.S. Tax Guide for Aliens.
The term ” United States person” means:
- A citizen or resident of the United States ,
- A partnership created or organized in the United States or under the law of the United States or of any State, or the District of Columbia ,
- A corporation created or organized in the United States or under the law of the United States or of any State, or the District of Columbia ,
- Any estate or trust other than a foreign estate or foreign trust. (See Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust.), or
- Any other person that is not a foreign person.
The term “United States Citizen” means:
- An individual born in the United States ,
- An individual whose parent is a U.S. citizen,
- A former alien who has been naturalized as a U.S. citizen,
- An individual born in Puerto Rico ,
- An individual born in Guam , or
- An individual born in the U.S. Virgin Islands.
Foreign Earned Income Exclusion
If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions.
If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013). In addition, you can exclude or deduct certain foreign housing amounts.
You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 15-B, Employer’s Tax Guide to Fringe Benefits for more information.
· Can I Claim the Exclusion or Deduction?
· foreign housing deduction
- Form 2555, Foreign Earned Income
- Form 2555-EZ, Foreign Earned Income Exclusion
- Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
- Form 2350, Application for Extension of Time to File U.S. Income Tax Return
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- U.S. Citizens and Resident Aliens Abroad
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad,
- Youtube – Tax Tips – Choosing a Tax Preparer
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