What is a 'Resident Alien'
A resident alien is a foreign person who is a permanent resident of the country in which he or she resides, but does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year. People can also fall under the U.S. classification of resident alien if they have been in the United States for more than 31 days during the current year, along with having been in the United States for at least 183 days over a three-year period, including the current year.
BREAKING DOWN 'Resident Alien'These two qualification processes for a resident alien are referred to as the green card test and the substantial presence test. However, it's possible to be considered exempt from resident alien status, in which case a person does not need to prove compliance with the green card test or the substantial presence test. Situations in which a person is present in the United States on government-related issues or when a student or teacher is temporarily present in the United States are both examples of exemptions.
The main issue with resident aliens is that of tax law. Resident and non-resident aliens have different filing advantages and disadvantages. For example, a resident alien can use foreign tax credits, whereas a non-resident cannot. However, in general, a resident alien is subject to the same taxes as a U.S. citizen, while a non-resident alien only pays tax on domestic income that is generated within the Unites States, not including capital gains. Therefore, resident aliens are required to report worldwide income from sources both within and outside the United States. Income is reported using form 1040EZ, form 1040A or form 1040. Non-resident aliens, on the other hand, report domestic income using form 1040NR or form 1040NR-EZ.
An Example of a Resident Alien
Often times, resident alien status provides positive benefits for the United States and for those seeking the status. For example, Cristela Alonzo, an actress, comedian and a contributor to Time Magazine, had a mother and brother who were both granted resident alien status. Her mother, a single parent, immigrated from Mexico with her eldest son and tried for years to obtain resident alien status.
After numerous attempts, both Alonzo's mother and her older brother received the desired status. Then, Alonzo's mother had three natural born citizens, bringing the total number of her children to four. As of today, each of the four kids hold respectable jobs and are contributing members of society, helping the U.S. economy. This family would not have been able to add value to the American economy and realize a better life had Alonzo's mother not been granted resident alien status.