Your Worldwide Income May be Subject to US Tax if You Spend as Little as 122 Days in the US

The Internal Revenue Code provides that anyone who spends more than 182 days in the United States may be classified as a resident alien, subject to US taxation on their worldwide income. This rule is known as the “Substantial Presence Test.” The rule is not nearly as user-friendly as merely counting the days spent in the US in the current year. Instead, there is a formula where one has to count all of the days in the present years, add 1/3 of the days of the prior year and 1/6 of the days of two years ago. Under this formula, a person fails the Substantial Presence Test if such person is present in the US for 122 days in three consecutive years. (122 + 122/3 + 122/6 = 183 days),

If a person fails the test under the above provided example (by exceeding an average of 122 days spent in the US) such person may avoid being classified as a resident alien if such person does not spend more than 182 days in the US in the current year. In such a situation, this person must file Form 8840, Closer Connection Exception Statement, with the Internal Revenue Service. This Form is used to certify that one has a closer connection to another country and therefore should not be subject to taxation in the US under the Substantial Presence Test.

Disclaimer: This Article is for general information purposes only and is not intended as legal advice. All situations are unique. Thus before taking any action, you should consult with legal counsel on the applicability of the above to your circumstances