What Is a Dual-Status Taxpayer?
A dual-status taxpayer is a citizen of another nation who, in a single calendar year, lives in the U.S. long enough to qualify as a resident alien and lives outside the U.S. for long enough to qualify as a non-resident alien.
- A dual-status taxpayer is a foreign citizen who lives in the U.S. for a substantial part of a year.
- That person will owe taxes on all income received while in the U.S., and on U.S.-sourced income while outside the U.S.
- The IRS has a "substantial presence test" to determine who qualifies.
The Internal Revenue Service (IRS) requires dual-status taxpayers to file a form 1040. The dual-status taxpayer is taxed on income from all sources received during residence in the U.S. and only U.S. income received while outside the U.S.
Understanding the Dual-Status Taxpayer
The dual-status taxpayer designation is based on the number of days the foreign national resides in the United States.
The basic cutoff is 183 days, but the IRS has a substantial presence test to determine whether or not a taxpayer falls into this category. A foreigner who does not live in the United States long enough to meet the substantial presence test is categorized as a non-resident alien.
Most dual-status taxpayers come to the U.S. to work and have obtained green cards permitting them to work legally. Many will have this status for only one tax year, the year in which they arrive, and perhaps one more year, the year in which they leave. In between, most will be living and working in the U.S. for the full year.
Example of a Dual-Status Taxpayer
Brigitta is an Austrian citizen who had never visited the U.S. until she arrived with a visa on June 10, 2019, and stayed for the remainder of the year. Because she was in the US for more than 183 days, she meets the requirements of the substantial presence test.
Brigitta is a dual-status alien because she was both a non-resident alien and a resident alien in the same year. She is considered a non-resident alien from January 1 to June 10, and a resident alien for the remainder of the calendar year.
Non-Resident and Resident Taxation
For the part of the year in which she was classified as a resident alien, she will owe U.S. federal taxes on all income she received from any sources. For the non-resident portion of the year, only the income she received from U.S. sources will be taxed.
Most nonresident aliens can claim one withholding allowance on their payroll W-4 forms though some may be permitted more under certain circumstances.
Restrictions When Filing Dual-Status Returns
Many of the benefits of U.S. citizenship are not available to dual-status taxpayers. Notable among these is the inability to take the standard deduction on Form 1040, although certain itemized deductions are allowed.
For instance, one can claim exemptions for a spouse and dependents for the portion of the year when the taxpayer's filing status was resident alien. But dual-status tax filers cannot file as a head of household or filing jointly with a spouse, although the latter option is available if the person is married to a US citizen by the last day of the tax year.
Which US tax form to file depends on the person's status on the last day of the year. It is important to write at the top of the tax form “Dual-Status Taxpayer.” The IRS has extensive information on U.S. taxes on foreign nationals on its website.