Foreign Income & Foreign Income Exclusion
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Do I have to meet the 330-day presence test or have a valid working resident visa to meet the requirement for foreign income exclusion?
To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following: - A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
- A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
References: I am a nonresident alien. Can I take the foreign earned income exclusion if I meet the bona fide resident test or physical presence test? If yes, what is the tax form used for nonresident taxpayer?
No, nonresident aliens do not qualify for the foreign earned income exclusion. Only if you are a U.S. citizen or a resident alien of the United States and live abroad, may you qualify to exclude up to $80,000 of your foreign earned income for 2002.
References: 13.4 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - General I am a foreign national and came to this country on June 30th of last year. I have a H-1 visa. What is my tax status regarding resident, nonresident alien, or resident alien?
You were a dual status alien last year. As an H-1 visa holder in the U.S. for 183 days or more, you likely became a resident, for tax purposes, on June 30th. For the part of the year you are a resident alien, you are taxed on income from all sources.
For the part of the year that you are not a resident alien, you are taxed on income from sources outside the United States, unless the income is effectively connected with a trade or business in the United States.
Income from U.S. sources is taxable whether you receive it while a nonresident alien or a resident alien unless specifically exempt under the Internal Revenue Code or a tax treaty provision. Generally, tax treaty provisions apply only to the part of the year you were a nonresident and only if you are a resident of a country that has a treaty with the United States and you are resident for treaty purposes for the taxable year.
For that part of the year that you are a nonresident, file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. For that part of the year you are a resident, file Form 1040 (PDF) or Form 1040A (PDF).
References: I have an H-1 visa and my husband has an F-1 visa. We both lived in the United States all last year and had income. What kind of form should we file? Do we file our taxes separately or jointly?
You will have met the substantial presence test and will be taxed as a resident alien for the previous year. You may file a joint tax return if your husband makes the choice to be treated as a resident for the entire year. Generally, you cannot claim tax treaty benefits as a resident alien on Form 1040 (PDF), U.S. Individual Income Tax Return. Please refer to Publication 519 (PDF), U.S. Tax Guide for Aliens, for additional information.
References: I was an international student (F-1 visa) until October 1, then my visa status was changed to H-1. Should I file my income tax return as a dual status or nonresident alien?
Assuming you were not in the U.S. on your F-1 student visa for over 5 years, you may file as a nonresident for the entire year or, if you qualify under the first year choice, you may file as a dual status alien. Please refer to Publication 519 (PDF), U.S. Tax Guide for Aliens, for additional information.
References: 13.5 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Tax Withholding I entered the U.S. in August and I have a J-2 visa with an Employment Authorization (work permit). Can I be considered as a U.S. resident for tax purposes under the substantial presence test? Since my visa does not allow me to stay in this country am I subjected to social security tax and Medicare tax?
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States 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 that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
For purposes of the substantial presence test, certain days of physical presence do not count. Please refer to Publication 519 (PDF), U.S. Tax Guide for Aliens, for additional information.
In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. In limited situations, these taxes apply to wages for services performed outside the United States. Your employer should be able to tell you if social security and Medicare taxes apply to your wages.
References: Under my visa as a temporary nonresident alien, I'm not subject to social security and Medicare withholding. My employer withheld the taxes from my pay. What should I do to get a refund of my social security and Medicare?
If social security tax was withheld in error from pay received which was not subject to the tax, contact the employer who withheld the tax for reimbursement. If you are unable to get a refund from the employer, file a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.
Attach the following to your claim: - a copy of the [Form W-2], Wage and Tax Statement, to prove the amount of social security tax withheld,
- a copy of INS Form I-94, Arrival/Departure Record,
- a copy of INS Form I-538, Application of Nonimmigrant Student (F1) for Extension to Stay, School Transfer or Permission to Accept or Continue Employment, and
- a statement signed by the student stating that he/she has asked the employer for reimbursement of social security tax withheld in error but has been unable to get a refund.
File the claim for refund (with attachments) with the IRS office where the employer's returns were filed. If you do not know where the employer's returns were filed, file the claim with the Internal Revenue Service Center, Philadelphia, PA 19255
For more information, refer to Publication 519 (PDF), U.S. Tax Guide for Aliens.
References: I am a U.K. resident and I need to recover withholding tax on a U.S. capital gain. Do I need an ITIN?
Yes, you need to secure an Individual Taxpayer Identification Number, or ITIN. To secure an ITIN, you must file Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number. Along with the completed Form W-7, you must submit document that verify both your identity, that is, contain your name and photography, and your foreign status. If you have one document that verify both, such as a passport, then that one document is enough. You may, however, have to provide a combination of documents for this purpose.
You can apply for your ITIN by mail or in person at most IRS offices in the U.S. If you apply in person, your documents will be reviewed and returned to you. Publication 1915 (PDF), Understanding Your IRS Individual Taxpayer Identification Number, has a list of IRS offices abroad which can accept Form W-7. If you apply by mail, use the address shown in the W-7 instructions and the Publication 1915. If you send original supporting documentation with your application, your documentation will be returned within 14 days. Once you have applied, you should get acknowledgment that your Form W-7 was received within 14 days; you should receive your ITIN within 4 to 6 weeks.
References: - Publication 515 (PDF), Withholding of Tax on Nonresident Aliens and Foreign Corporations
- Publication 519 (PDF), U.S. Tax Guide for Aliens
- Publication 1915 (PDF), Understanding Your IRS Individual Taxpayer Identification Number
- Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number
- Tax Topic 857, Individual Taxpayer Identification Number - Form W-7
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