Taxation of Dual-Status Aliens
What Is a Dual-Status Alien?
You are considered a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident. Usually dual status tax years occur the years of arrival and departure.
When You are a Resident Alien
For the part of the year you are a resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien. The income is taxable even if you earned it while you were a nonresident alien or if you became a nonresident alien after receiving it and before the end of the year.
When You are a Nonresident Alien
For the part of the year you are a nonresident alien, you are taxed on income from U.S. sources only.
Not Effectively Connected Income
If you receive income while you are a nonresident alien from income sources outside the U.S. that is not effectively connected with a business in U.S., then it is not taxable. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.
Income from U.S. Sources
Almost all income from U.S. sources is taxable whether you are a nonresident alien or a resident alien. Sometimes there is a specific exemption under the Internal Revenue Code or tax treaty.
Remember
When determining what income is taxed in the United States, you must consider exemptions under U.S. tax law as well as the reduced tax rates and exemptions provided by tax treaties between the United States and certain foreign countries.
What Can You Do if You Have a Dual Status Alien Tax Problem?
If you were a dual status alien for a tax year and have problems, an international tax lawyer may be able to advise you about your options. Tax law by itself is a difficult area of law, so you should not try taking chances with International Tax law.
Consult a Lawyer - Present Your Case Now!
Last Modified: 07-21-2011 10:36 AM PDT
