Taxation of Dual-Status Aliens

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 What Is a Dual-Status Alien?

A person is considered a “dual-status alien” when they have been both a resident alien and a nonresident alien in the same tax year. In the United States, dual status is only used for tax purposes.

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. In most cases, dual-status tax years occur during the year of arrival and departure.

Who Is a Permanent Resident Alien?

A permanent resident alien is any person who is not a United States citizen living in the United States under a recognized and valid immigration visa, granting them permanent resident status to work and live in the United States indefinitely.

Typically, proof of such permanent residency status is evidenced by possessing a permanent resident card, also known as a green card. The term “permanent resident status” can also refer to immigrants who have been granted permanent residency after entering the country under a conditional residency status.

Lawful permanent residents are also known as “resident alien permit holders,” “green card holders,” or “permanent resident aliens.”

Residents of the United States are granted many rights and privileges inherently granted to citizens. A permanent resident alien may work at any job legally in the United States, own property, and does not have to return home.

Permanent residents may travel to and from their home country anytime if their green cards remain valid. Permanent residence status may lead to the opportunity to apply for U.S. citizenship.

How am I Taxed as a Resident Alien?

During the part of the year when you are a resident alien, you are taxed on all your income. Income from sources outside the United States is taxable if you receive it while you are a resident alien.

How am I Taxed as a Nonresident Alien?

For the part of the year when you are a nonresident alien, you are taxed on income from U.S. sources only.

What About Income from Foreign Sources?

As a nonresident alien, income from foreign sources that is not “effectively connected” to a business in the U.S. is not taxable. Regardless of whether you earned the income while a resident alien or became a resident alien or U.S. citizen after receiving it, it is not taxable.

What About Income from American Sources?

Most income from U.S. sources is taxable whether you are a nonresident alien or a resident alien. Sometimes, however, there are specific exemptions under the Internal Revenue Code or tax treaties.

How Do I Obtain Permanent Residency Status?

You cannot simply request a permanent residency card for any reason. Permanent residency status requires first filing an immigration petition with the United States Immigration Services and meeting other eligibility requirements to apply to be a permanent resident.

Permanent residency can be obtained in a variety of ways, including the following:

  • Family Member Based Permanent Residency: Family members of U.S. citizens or family members of permanent residents may be able to apply for permanent residence status because of their relationship with them.
    • The Immigration & Nationality Act and the United States Citizenship and Immigration Services (USCIS) allow spouses, parents, and unmarried children (younger than 21 years old and unmarried) of United States citizens to apply for permanent residency status;
  • Employment-based Permanent Residency: Individuals who are hired for qualified positions or wish to start business ventures in the United States may, after some time, be eligible for a green card and granted permanent residency status. Further, immigrants may be able to permanently work and reside in the United States in special cases, such as with professional athletes from foreign countries;
  • Fiancé(e) Visa: A fiancé(e) of a citizen or permanent resident is usually granted conditional resident status when entering the United States. After some time, they can apply to have the conditions removed to obtain permanent status by filing “Form I-129F, Petition For Alien Fiancé(e)” and intending to marry one another within 90 days of entering the United States;
  • Individuals Seeking Asylum and Refugees: Persons filing for permanent residency status under this category can usually apply for permanent residency after one year.
    • Refugees or asylees usually flee persecution or dangerous circumstances in their home country. The process of obtaining permanent residency status for refugees and asylees differs from other groups. Thus an experienced immigration attorney should be consulted in these matters; or
  • Diversity Visa Lottery: The diversity visa lottery program allows immigrants to travel to the United States and later apply for permanent residency status.

What Are the Rights of Permanent Residents?

As a permanent resident, you have similar rights to those born in the United States inherently, including:

  • Live permanently anywhere in the United States, as long as your permanent status is not lost by abandonment or removal, also known as deportation;
  • Legally work in the United States, although some jobs are limited to natural-born United States citizens;
  • Own property;
  • Apply for a driver’s license in your state;
  • Attend public schools and colleges;
  • Own or purchase a firearm, as long as there are no local laws prohibiting it;
  • Travel to and from the United States; and
    • Leaving the United States for an extended time or moving to another country to remain there permanently will likely result in your permanent residency status being abandoned.
  • All of the laws of the United States protect you.

Who Is Eligible to Apply?

Some non-U.S. citizens may be eligible to apply for adjustment of status to that of a lawful permanent resident, including:

  • An immediate relative of a U.S. citizen, such as a spouse, unmarried child who is under 21 years of age, or a parent who is 21 years of age or older;
  • An immediate relative of a lawful permanent resident who meets the age requirements and is either a spouse, parent, or child;
  • Persons admitted entry into the U.S who are either the fiancé or child of a fiancé of a U.S. citizen. It should be noted that the fiancé of a U.S. citizen may only file Form I-485 after they marry the U.S. citizen to whom they are currently engaged;
  • The widow or widower of a U.S. citizen;
  • Immigrant workers who are sponsored by U.S. employers or qualify as an alien entrepreneurs;
  • Those who meet the criteria to be deemed a “special immigrant” (e.g., religious workers) or have been living in the United States for at least a year as a refugee or asylee;
  • Those who are a victim of human trafficking or another crime; or
  • Those who have won the diversity visa lottery

The instructions for Form I-485, which can be found on the USCIS website, list several other categories.

What if I Have a Dual-Status Alien Tax Problem?

If you were a dual-status alien for a tax year and have problems, a tax lawyer may be able to advise you about your options. By itself, tax law is a difficult area of law, so international tax law should not be taken lightly.

You will not want to face any immigration issues on your own. You will not want to get into tax trouble with the U.S. government. For these reasons, use LegalMatch to find a tax lawyer in your area.

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