Who is a U.S. Person for Tax Purposes?

Who must pay US taxes you ask? Who is a US person for tax purposes? Who is in the crosshairs of the IRS? The answer is not quite as simple as you may think…and something that confuses many people living and operating a business in the US.

Who is a U.S person for tax reporting purposes? Who are these unfortunate soles who must file an FBAR, report their foreign assets on IRS Form 8938, and pay tax on their worldwide income?

As those of you know who have met me at conferences or read my articles, I often ramble on about the many filing requirements for those living and working abroad. I won’t go in to them again here, but you can see my taxation page for more information.

First, a U.S. person is ANYONE with a U.S. passport. It doesn’t matter if you currently live in the United States, nor does it make a difference that you have never lived in the U.S. So long as you hold a passport from the U. S. of A., you are required to pay up and report everything.

That is the easy answer. But, what about those who were not blessed at birth with a blue passport and the honor of giving half of what they earn to the American machine?

For example, I recently had someone in my office that had been living in the United States for the five years on a Green Card. He had been filing his U.S. tax returns, and paying tax on his U.S. income, but had done nothing about his international obligations.

He was considering obtaining U.S. citizenship and was wondering what that would do to his tax situation. He had no idea that he was already screwed and a U.S. person for tax purposes.

A U.S. person for tax purpose includes any of the following: (see the IRS website):

A U.S. Citizen, which is anyone with a U.S. passport,
A green card holder (see: http://www.irs.gov/Individuals/International-Taxpayers/Alien-Residency—Green-Card-Test), or
A U.S. resident for tax purposes – most commonly defined as someone who spends more than 183 days in the US under the Substantial Presence Test. A U.S. resident for tax purposes is commonly referred to as a resident alien.

Therefore, if you have a U.S. passport or green card, or are a resident alien for tax purposes, you must report income from all sources within and outside of the U.S. For more information, see Publication 525, Taxable and Nontaxable Income.

Also, if you are a U.S. citizen, green card holder, or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad. See the IRS website for information on how to file as a resident alien abroad.

So, a U.S. person for tax purposes is just about anyone with immigration ties to the U.S., or spends most of their time here. If you want to enjoy the benefits of America, it’s going to cost you…and if you are unaware of these obligations, it can cost you big time!

I hope you find this brief article helpful. For additional information, or questions on your tax filing