Dual-Status Taxpayer Definition

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Dual-Status Taxpayer Definition

What Is a Dual-Status Taxpayer?

A dual-status taxpayer is a citizen of another country who spends enough time in the United States to qualify as a resident alien and enough time outside the country to qualify as a non-resident alien in the same calendar year.

As a non-resident alien, a resident alien, or a dual-status alien, you are normally taxed in one of three ways. If you had both statuses in the same calendar year, you must file as a dual-status taxpayer.

The classification of a dual-status taxpayer has no influence on an individual’s citizenship; it simply refers to one’s residence status in the United States for tax reasons.

Key Takeaways

  • A dual-status taxpayer is a foreign citizen who spends a significant portion of the year in the United States.
  • The dual-status taxpayer is taxed on income from all sources received while residing in the United States, as well as exclusively U.S. income obtained when residing outside the United States.
  • The majority of dual-status taxpayers come to the United States to work and have earned green cards that allow them to do so lawfully.
  • To decide who qualifies, the IRS uses a “substantial presence test.”
  • Dual-status taxpayers must submit Form 1040 with the Internal Revenue Service (IRS).

Dual-status taxpayers must submit Form 1040 with the Internal Revenue Service (IRS). The dual-status taxpayer is taxed on income from all sources received while residing in the United States, as well as exclusively U.S. income obtained when residing outside the United States.

Understanding the Dual-Status Taxpayer

The foreign national’s dual-status taxable status is determined by the number of days he or she spends in the United States. The fundamental threshold is 183 days, however the IRS uses a significant presence test to decide whether or not a person qualifies. A non-resident alien is a foreigner who has not lived in the United States long enough to fulfill the significant presence criteria.

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The majority of dual-status taxpayers come to the United States to work and have earned green cards that allow them to do so lawfully. Many will only have this status for one tax year, the year they arrive, and maybe one more (the year in which they leave).In the meanwhile, the majority will spend the whole year living and working in the United States.

Special Considerations

Restrictions When Filing Dual-Status Returns

Many of the advantages of having dual citizenship are not accessible to dual-status taxpayers. Among them is the inability to claim the standard deduction on Form 1040, despite the fact that some itemized deductions are permitted.

For example, a spouse and dependents may claim exemptions for the period of the year while the taxpayer’s filing status was resident alien. However, dual-status taxpayers are not permitted to file as a head of household or jointly with a spouse, but the latter option is possible if the individual is married to a U.S. citizen before the end of the tax year.

Which US tax form to submit is determined by the individual’s position on the final day of the year. It is essential to put “Dual-Status Taxpayer” at the top of the tax form. The IRS website has a wealth of information on US taxes on foreign nationals.

Example of a Dual-Status Taxpayer

Brigitta is an Austrian national who had never visited the United States until arriving with a visa on June 10, 2020, and staying for the rest of the year. She fulfills the significant presence test criteria since she was in the United States for more than 183 days.

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Brigitta has dual citizenship since she was both a non-resident alien and a resident alien in the same calendar year. From January 1 to June 10, she is a non-resident alien, and the rest of the year she is a resident alien.

She will owe U.S. federal taxes on any income she earned from whatever source during the portion of the year in which she was categorized as a resident alien. Only income earned in the United States will be taxed during the non-resident part of the year.

Most nonresident aliens are only allowed to claim one withholding allowance on their payroll W-4 forms, while some may be allowed more under specific conditions.

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