US Tax Guide for Dual-Status Aliens

Filing taxes can be a daunting task for anyone. For foreign nationals who received their Green Card, this process gets even more complicated. In this post we will go over what exactly are dual-status aliens and how this effects your tax returns.

In some cases, foreigners that live in the United States may be considered a dual-status alien for U.S. tax purposes. When foreign nationals receive a Green Card midway through the year or only spent part of the tax year in the U.S. this results in a dual-status alien. This could also happen when a non-US citizen moves to or from the United States.

Lets look at an example:

A Mexican citizen, Alex arrived in the United States on an H visa on May 1, 2022. Alex then left and went back to Mexico on November 1, 2022. Since Alex was in the United States for more than 183 days he meets the substantial presence test. This results in qualifying as a nonresident alien from January 1 to April 31 and a resident alien from May 1 to December 31. Alex is a dual-status alien.

U.S. Tax Implications

Dual-status aliens still pay U.S. taxes.They are taxed on a dual-status tax year. This implies that the tax year is split into two parts; The part of the year they were recognized as a non-resident alien and the part of the year they were recognized as a resident alien. As a non-resident they would be taxed on U.S. sourced income and as a resident they would be taxed on worldwide income.

How Are US Residents Taxed?

Let’s take a look at how US residents are taxed on their worldwide income. These numbers reflect tax rates for single residents:

  • $0 – $10,275 – 10%
  • $10,276 – $41,775 – 12%
  • $41,776 – $89,075 – 22%
  • $89,076 – $170,050 – 24%
  • $170,051 – $215,950 – 32%
  • $215,951 – $539,900 – 35%
  • $539,900 and over – 37%

Residents are also required to pay a self-employment tax. This tax covers Medicare/Social Security contributions that would usually come from the employer.

Residents file their taxes using IRS Form 1040: US Individual Tax Return. There are several filing statuses that depend per person on their person. (Single, Married, Married filing jointly etc.)

How Are US Non-Residents Taxed?

There are differences for how Non-Residents are taxed in the United States.

Non-residents are taxed only on their US-source income. Non-residents are also not required to pay the self-employment tax. Most tax rates are the same progressive rate but some forms of passive income are taxed at a flat rate of 30%. These forms of income include Interest, Dividends, Rents and Royalties.

When filing taxes, non residents are required to use one of these two forms:

One of these will be your main form that you will file with. Depending on your personal situation it is important to understand:

  • If you’re a dual-status alien and were U.S resident at the end of the tax year, then you must file a 1040 with a 1040-NR attachment.
  • If you’re a dual-status alien and were a nonresident at the end of the tax year, then you must file a 1040-NR with a 1040 attachment.

Joint Filing

Perhaps in your situation, you are a dual-status alien looking to file a joint return with your spouse. You will eventually find that there are restrictions to this. However, there is an exception if all of the following apply:

  • You were married to a US resident at the end of the year
  • You were considered a resident at the end of the year
  • You were considered a non-resident at the beginning of the year

Streamlined Filling

In the case of Dual-Status Aliens, filing taxes can become pretty complicated. It is important to make sure you are not falling behind on deadlines. Every US citizen is required to file an annual US tax return no matter what country they live in.

There are millions of expats around the world and if you are one of many who didn’t know a US tax return is still an obligation, do not worry. The IRS provides an a program to help you get into right standing. This program is known as the Streamlined Filing Compliance Procedure.

Get Help Now

Here at Americas Tax Firm we are dedicated towards helping you in your tax situation. Seek help today from a licensed professional to guide you through your next tax return.