# Can someone please help? US resident status and income source?



## Sunhk (Aug 4, 2014)

Hi everyone,

1. We are not sure about our status for the 2014-15 US tax year. So basically my husband (J1 visa) and I (J2 visa) stayed in the US from 2011 Oct- 2014 July. As advised by tax advisers in the US, we filed our tax as non resident aliens for the first two years and filed as resident aliens last year (2013-2014). Our UK tax advisers said we could file as non resident aliens for the 2014-15 because we were in the US for fewer than 183 days; however, after reading different materials online, we're a bit confused. From the IRS website,

"Substantial Presence Test: You will also 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:
1.	31 days during the current year, and
2.	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.
Taxation of Nonresident Aliens "

I believe we've met both requirements as we were in the US for about 160 days during the current year, and in 2012 and 2013, we were present in the US for more than 200 days. But then I've found this:

"Do not count days when you are physically present in the US under the following circumstances:
•	Days you are an “exempt individual”.

An “exempt individual” for purposes of this test refers to the following individuals:
•	A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa.
•	A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.
https://turbotax.intuit.com/tax-too...esident-and-Non-Resident-Aliens/INF19970.html "

So we both held J visas and my husband was a post-doctoral researcher in a university which I don't know if he's considered a teacher or a student. Anyone can kindly provide us some advice on this matter?

2. My second question is about my US income. I have been working as a self-employed editor for a US company since 2012 (my only income source). If I file as a non resident alien for 2014-15, my understanding is my income this year from the US is subject to US tax, even though I am physically present in the UK after 2014 July. My source:

"Which Income to Report
A nonresident alien's income that is subject to U.S. income tax must generally be divided into two categories:
•	Income that is Effectively Connected with a trade or business in the United States
Taxation of Nonresident Aliens 

Effectively Connected Income (ECI)
Generally, when a foreign person engages in a trade or business in the United States, *all income from sources within the United States connected with the conduct of that trade or business is considered to be Effectively Connected Income.* *This applies whether or not* there is any connection between the income, and *the trade or business being carried on in the United States, during the tax year.*
http://www.irs.gov/Individuals/International-Taxpayers/Effectively-Connected-Income-(ECI) "

However, we have talked to two US-UK tax companies in London, and they both said I ONLY pay US tax on the income earned while I was in the US. I should pay the UK tax on the income earned from a US source while I was in the UK. So where I was physically present in is the key factor, not the source of the income. Is that right? Or did I misunderstand anything? 

Sorry for the long post. We would really appreciate if anyone can share his or her opinion on these two issues. Thanks in advance!

Iris


----------



## Bevdeforges (Nov 16, 2007)

> So where I was physically present in is the key factor, not the source of the income


Correct. You are deemed to be "working in" the country in which you were physically present while earning the income. Where your employer/customer is based is irrelevant (at least for US tax purposes).



> Our UK tax advisers said we could file as non resident aliens for the 2014-15 because we were in the US for fewer than 183 days; however, after reading different materials online, we're a bit confused.


I think your UK tax advisers may be a bit confused here. The 183 day rule really doesn't come into play in the US tax laws. But if you were exempt, due to your visa category, then you're exempt in any event. 

The UK tax year covers two calendar years (i.e. April year 1 to April year 2). The US tax year is the calendar year, January through December. If you do file at all, you would only report income from January 2014 until you left the US (i.e. July). 
Cheers,
Bev


----------



## Sunhk (Aug 4, 2014)

Thank you Bev for your quick reply! Sorry that I didn't quite understand what you meant by "183 day rule really doesn't come into play in the US tax laws." I thought the Substantial Presence Test which includes the "183 days during the 3-year period" is a way to determine if we are resident aliens for tax purposes. 

Also, it looks like we are exempted because of the J visas we held; however our US tax adviser filed our tax as resident aliens for the 2012-2013 tax year, and according to him, that's because our situation has changed after living in the US for some time. So it seems that the Green Card Test and Substantial Presence Test (as provided by IRS) are not the only two ways to determine one's status for tax purpose. Could you please tell me if there is a relatively more clear way to find out one's status? Thanks again!

Iris


----------



## Bevdeforges (Nov 16, 2007)

> our US tax adviser filed our tax as resident aliens for the 2012-2013 tax year,


This is the part I'm not sure about. Did you file as resident aliens for the 2013 calendar year? Or for the 2012 calendar year? Or both?

If you are indeed subject to US taxes, then for 2014, it sounds like you'd be filing as dual-status aliens - i.e. with part resident and part non-resident filing. This may shed some light on the situations: http://www.irs.gov/Individuals/International-Taxpayers/Dual-Status-Aliens
Cheers,
Bev


----------



## Sunhk (Aug 4, 2014)

Hi Bev, we filed as resident aliens for the 2013 calendar year. Sorry for the confusion!

Iris


----------

