Tax residency must be determined prior to paying a visitor. Residency for tax purposes is different from residency determined for immigration purposes. The determination of tax residency impacts other decisions such as:
- what income to report,
- what forms are required to report the income,
- what taxes the visitor is liable for, and
- what tax return(s) the visitor should file.
Determining Residency for U.S. Tax Purposes
Internal Revenue Service Publication 519 contains a flowchart that canbe used to determine residency for tax purposes. The IRS uses the current calendar year to determine tax residency. The flowchart asks questions to determine residency for tax purposes:
- Were you a lawful permanent resident of the United States (had a "green card") at any time during the calendar year thatmost recentlyended?
- Ifyes, then you are aresidentalien for U.S. tax purposes for thatyear.
- Otherwise, see the next question.
- Were you physically present in the United States on at least 31 days during the calendar year that just ended?
- If yes, go on to next question.
- Ifno, you are anonresidentalien for U.S. tax purposes for that year.
- Were you physically present in the United States on at least 183 days during the 3-year period consisting of the last three full calendar years, counting all days of presence in the calendar year that just ended, 1/3 the days of presencein the year before, and 1/6 the days of presence in the year before that?
- If yes, go on to the next question.
- Ifno, you are anonresidentalien for U.S. tax purposes.
- Were you physically present in the United States on at least 183 days during the calendar year that most recently ended?
- Ifyes, you are aresidentalien for tax purposes.
- If no, go on to the next question.
- Can you show that for the calendar year most recently ended you have a tax home in a foreign country and have a closer connection to that county than to the United States?
- Ifyes, you are anonresidentalien for U.S. tax purposes.
- Ifno, you are aresidentalien for U.S. tax purposes.
The publication is available at the IRS website and a link is provided in related information on the right.Please see other examples of how to count days of residency which are provided in the Residency Test portal articles.
When determining residency for tax purposes the following definitions are usedto define an individual’s status.
| Category | Definition |
| U.S. Citizen | An individual who is a citizen of the United States by birth right or by the naturalization process. |
| Permanent Resident | An individual who has been granted lawful permanent residence in the United States. |
| Resident Alien | An individual who becomes a resident for tax purposes based upon their physical presence in the United States. (See Substantial Presence Test) |
| Non-Resident Alien | An individual who is not a citizen, permanent resident or resident for tax purposes. |
California Residencyfor Tax Purposes
The state of California defines a resident for tax purposes to be any individual who is in California for other than a temporary or transitory purpose and, any individual domiciled in California who is absent for a temporary or transitory purpose.
An individual who comes to California for a purpose which will extend over a long or indefinite period will be considered a resident. An individual who comes to California to perform a service for a short duration will be considered a nonresident.
Franchise Tax Board (FTB) Publication1031 in PDF format, "Guidelines for Determining Resident Status" can assist an individual in determining residency for tax purposes.
