Are You A U.S. Person for Tax Purposes?

Published: March 25, 2015 at 10:47 by Renate Harrison

The United States taxes U.S. persons based on that person’s worldwide income. It does not matter where the U.S. person lives. If he/she is a U.S. person, that person is subject to U.S. tax.

A U.S. person who owes U.S. taxes and does not pay the taxes when due may be liable for substantial penalties for as well as for interest on unpaid taxes.

Who is a U.S. person?
1. All US citizens. An individual is a citizen if that person was born in the United States or if the individual has been naturalized as a US citizen.
2. A child born outside of the United States or its possessions to two U.S. citizen parents, provided one of the parents had, prior to the birth of the child, been resident in the United States or one of its possessions.
3. Child born in wedlock to one U.S. citizen parent and one non U.S. citizen parent on or after November 14, 1986. A child born outside of the United States to one U.S. citizen parent and one non-U.S. citizen parent may be entitled to citizenship providing the U.S. citizen parent had been physically present in the United States or one of its outlying possessions for five years, at least two years of which were after s/he reached the age of fourteen. This period of physical presence must have taken place prior to the birth of the child.
4. Child born in wedlock to one U.S. citizen parent and one non-U.S. citizen parent between December 24, 1952 and November 13, 1986, provided that the U.S. citizen parent had, prior to the birth of the child, been physically present in the United States for a period of ten years, at least five years of which were after s/he reached the age of fourteen.
5. Child born out of wedlock to a U.S. citizen mother, provided that the U.S. citizen mother had been physically present in the United States for a continuous period of at least one year at some time prior to the birth of her child.
6. A child born outside of the United States to an U.S. citizen father where there is no marriage to the non-American mother is entitled to U.S. citizenship providing the American citizen father had been physically present in the United States for the period of time as specified in previous paragraphs for children born in wedlock to one U.S. citizen and one non-U.S. citizen parent, either before or after November 14, 1986; and
a. the alien mother completes an “Affidavit to establish paternity of child;” and
b. the father signs a sworn statement agreeing to provide financial support for the child until s/he reaches the age of 18 years; and
c. the father acknowledges paternity or paternity is established by a competent court before the child attains the age of 18 years.
7. Tax residents of the United States. A resident is a person who has either been granted a Green Card by the U.S. Citizenship and Immigration Services considering him/her as a lawful permanent resident, or someone who fulfills the “substantial presence test.”

Tax Residents of the United States

Green Card Test: Green card holders have a tax filing requirement and possible obligation to pay U.S. taxes until they either surrender their green card or there has been a final administrative or judicial determination that the green card has been revoked or abandoned. Therefore, even if the US Citizenship and Immigration Service (USCIS) no longer recognizes the validity of the green card, a green card holder must continue to file tax returns until there has been a final determination that is not subject to appeal that the green card has been revoked or abandoned.

Substantial Presence Test: One can be considered a U.S. resident for tax purposes if he/she meets the substantial presence test for the calendar year. To meet this test, one 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: (a) All the days you were present in the current year, and (2) 1/3 of the days you were present in the first year before the current year, and (3) 1/6 of the days you were present in the second year before the current year.

Remember that if you are born a U.S. citizen you are a U.S. person. Having your birth registered or obtaining a U.S. passport is not a prerequisite. You are a citizen and will remain a U.S. citizen and subject to U.S. tax unless you renounce your citizenship.