The US tax filing process can raise some common questions early on. “What should I declare?” is one of the most frequently asked questions about the subject.
If you have income connected to the United States, be it rental income from a property located in the country, salaries, participation in a US company, or others connected to the US, you must prepare your tax return, even if you are not considered a US tax resident. On the other hand, the tax resident must declare, in addition to their connected income, their overall income.
A US tax resident is an individual who holds citizenship, a green card, or a person who passes the Substantial Presence Test (SPT). The SPT, or physical presence test, is a way for the IRS to determine whether or not you will be considered a US tax resident based on the number of days you have been in the country over the past 3 years.
The magic number 183 and the tally uses the percentage of days the individual spent in the country during those 3 years. 100% of the present days in the fiscal year in question, 33% of the present days in the previous year, and 16% of the present days in the following year are used. If this number is greater than 183, you will be considered a US tax resident and will be required to report sources of income globally.
However, for this tally, there are days exclusions for some specific cases. Some of them include: students, trainees and teachers. This also applies to some resreach.
Written by Rodrigo Siracusa, Tax Leader of Drummond Advisors, and Fernando Azzolini, Accounting Analyst Sr. I of Drummond Advisors