One of my correspondents from South America asked me a quick question and I thought it would be best to respond with a blog post.  Here you go, D.  🙂


You are not a citizen of the United States.  You come to the United States to go to school.  What are your U.S. tax filing and tax payment obligations?


The tax question is whether you are a “resident” of the United States for income tax purposes.  This is not the same as “resident” for immigration purposes, and it is certainly not the same as “resident” in ordinary understanding.

You can become a resident by being in the United States “too many days” in a year.  I won’t discuss the abstract mathematics involved in calculating “too many days” because it doesn’t matter for answering this question.

Yay!  A tax question that does not involve math!  Win!


For students there is a unique bit of metaphysics at work.  You can be physically in the United States and yet be treated as if you are not physically in the United States.  Here is how you qualify.

We first look at your visa status.  You should hold a visa in the F, J, M, or Q visa categories.  If you hold a permanent resident visa, also known as a “green card,” you are dead meat.  You are a resident of the United States for income tax purposes, and you pay income tax on your worldwide income.

Next we determine if you are in substantial compliance with the requirements for your visa status.  Go to school full time.  Don’t work.  Etc.

If both of these facts are true, then you are an “exempt individual” and the days that you are in the United States in real life are not treated as “days you are in the United States” for the tax test of being a resident.


You have a “J” visa and you are in the United States for 365 days in 2009.  Ordinarily this would make you a resident of the United States for income tax purposes, because you were in the U.S. for too many days in 2009.

However, you don’t count days in the U.S. for any day that you were present in the United States while holding the “J” visa being in substantial compliance with the visa requirements.  So for determining whether you are an income tax resident of the United States, you were physically present zero days in 2009.

Confusingly written.  Yep.  That’s tax law for you.


The regulations say if you are in this situation you should file Form 8843 to declare your status to the IRS.


If you go through this analysis and decide that it fits your situation, then what?  Well, you are a nonresident alien for U.S. tax purposes.  (“Alien” in this case means you are not a citizen of the United States.  Yes I know, it sounds like science fiction but you can blame the people who wrote the Federal laws for using the word “alien.”)

D’s specific question was about the notorious FBAR form — Form TD F 90-22.1.  Is a student who satisfies all of these rules required to file this form?  Or not?

To figure this out let’s look at the instructions to Form TD F 90-22.1.  Who is required to file this form?

Who Must File this Report. Each United States person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing this report with the Department of the Treasury on or before June 30, of the succeeding year.

A “United States person” must file the FBAR form.

What is a “United States person?” Let’s go back to the instructions for Form TD F 90-22.1:

United States Person. The term “United States person” means a citizen or resident of the United States, or a person in and doing business in the United States. See 31 C.F.R. 103.11(z) for a complete definition of “person.” The United States includes the states, territories and possessions of the United States. See the definition of United States at 31 C.F.R. 103.11(nn) for a complete definition of United States. A foreign subsidiary of a United States person is not required to file this report, although its United States parent corporation may be required to do so. A branch of a foreign entity that is doing business in the United States is required to file this report even if not separately incorporated under U.S. law.

For the purposes of our student, we know for a fact that he is not a citizen of the United States. We have decided (because it is the right kind of visa, and the student is in substantial compliance with the visa requirements) that he is not a “resident” of the United States under the “count the days” test. And trust me on this one — a human being is a “person” even for purposes of Title 31 of the United States Code.

Sounds pretty logical so far, right?


Except for one thing. Our definition of “resident” of the United States comes from Title 26 of the United States Code — Section 7701 to be precise. The FBAR filing requirements are entombed in Title 31 of the United States Code. Stuff in Title 26 doesn’t apply to stuff in Title 31. Necessarily.

(Aren’t you proud of me that I haven’t gone on a potty-mouth rant about this idiocy yet?)

See, the definition of “resident” that we are relying on for our poor little student is found in the tax law — Section 7701(b) of the Internal Revenue Code, which is Title 26 of the Big Book of Federal Laws. And Section 7701(b) says that the definition applies only “for purposes of this title.” That’s Title 26. Title 31 is the part of the Big Book of Federal Laws that imposes the FBAR filing requirement.

Gaah. We’re back where we started. WTF is a “resident” of the United States for purposes of the FBAR filing requirement?


The FBAR requirement springs from the loins of Title 31, Subtitle IV, Chapter 53, Subchapter II. Specifically, the reporting requirement comes from Section 5314.

Subchapter II has definitions at Section 5312. No definition of “resident” there.

Section 5314(b)(1) gives the Secretary of the Treasury (that’s the IRS Commissioner’s boss) the power to “prescribe . . . a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section.”

Let’s look beyond the United States Code. Let’s look at the Code of Federal Regulations. 31 CFR 103.11 is helpfully titled “Definitions.” No definition of “resident” there. Rats.


Fortunately, the Internal Revenue Service has put this whole situation in a holding pattern. In Announcement 2009-51, the IRS says “Yeah, we know we f-ed up when we revised Form TD F 90-22.1 and changed the definition of who is required to file the form, so until we figure this out, you all can use the OLD definitions and the NEW form.”

Yeah, really. That’s what you have to do. New form, old definitions.

The old form says that “U.S. residents” have to file an FBAR.

We’re back where we started. Is a student who is physically present in the United States on a valid visa a “resident” of the United States for purposes of Title 31 of the United States Code? For sure the student is NOT a resident of the United States for income tax purposes — Title 26. But Title 31? Hmmmm.


The Big Book of Procedures for the IRS to follow is called the Internal Revenue Manual. This contains the procedures for Revenue Agents to follow when auditing taxpayers, assessing penalties, etc. Yes, this is the very same set of procedures that the IRS is ignoring with its Voluntary Disclosure Program.

In our case the Internal Revenue Manual gives us a hint that things may be OK. Internal Revenue Manual Section (2008) says that an individual can establish nonresidency for FBAR purposes if he/she does not have a green card visa, does not meet the substantial presence test (that’s the “too many days” test), and hasn’t made an election to be treated as a resident.

A “resident” of the United States is a permanent resident. “Permanent resident” is not defined in the FBAR instructions, regulations, or statute. The definition of “resident alien” found in IRC § 7701(b) is not applicable for FBAR purposes. The plain meaning of the term ” resident” (in this context, someone who is living in the U.S. and not planning to permanently leave the U.S.) should be used for FBAR examination purposes. Although IRC § 7701(b) is not applicable, an individual can establish that he is not a resident for FBAR purposes if he can show that none of the following three criteria apply:

  1. The green-card test – Individuals who at any time during the calendar year have been lawfully granted the privilege of residing permanently in the U.S. under the immigration laws automatically meet the definition of resident alien under the green-card test; or
  2. Individuals who are not lawful permanent residents are defined as resident aliens under the substantial-presence test if they are physically present in the U.S. for at least 183 days during the current year, or they are physically present in the U.S. for at least 31 days during the current year and meet the specifications contained in IRC § 7701(b)(3); or
  3. The person files a first year election on his income tax return to be treated as a resident alien under IRC §7701(b)(4).

Therefore, if none of the three criteria listed above apply, then the person is not a resident for FBAR purposes.

Here, finally, we seem to have an answer. Our student is not required to file an FBAR. He doesn’t have a green card. He doesn’t meet the substantial presence test because he is a student and you don’t count any of the days he is in the United States for determining whether the substantial presence test (aka “count the days”) is met or not. And our poor student hasn’t filed a first-year election to be treated as a resident of the United States on a tax return.


But with the IRS busily ignoring existing protocols and procedures and the Internal Revenue Manual in its haste to crucify ordinary folks who are participating in the Voluntary Disclosure Program, the LAST thing I would do is rely on the IRS’s own internal procedures. The IRS in its Offshore Voluntary Disclosure Program has — plainly put — proven themselves unworthy.  Let me modify that.  As part of the Voluntary Disclosure Program I have found the Revenue Agents handling the cases to be businesslike and forthright.  It’s upper management I don’t trust.


Furthermore, I wonder whether the IRS has the legal power to make the Internal Revenue Manual apply in this case. Remember that 31 U.S.C. Section 5314(b)(1) gives the Secretary power to write the rules for determining who is/is not required to file an FBAR form?

Well, is internal guidance to employees of the Internal Revenue Service sufficient for the purpose? Is writing a rule in the Internal Revenue Manual a proper exercise of delegate regulatory power under the United States Code?

Who . . . knows. I’m going to stop right here because I have to take my son to a Boy Scout meeting. Some thing are more important than blogging. Or tax.

I would just point you to the extremely scary post from Jack Townsend titled “Can Signatories Filing FBARS During the Administratively Extended FBAR Filing Period Be Prosecuted for Failure to File?” Jack recounts the decision in United States v. Simon.

Cut to the chase. The IRS administratively gives an extension of time for people to file FBAR forms. Administrative pronouncement. Remember that. The underlying statute still sits there with a filing requirement.

A Federal prosecutor takes Mr. Simon to court. Says “Hey, buddy, you filed your FBARs late!” Mr. Simon replies, “Yeah, but the IRS Commissioner told me I could.” Federal prosecutor: “Tough s___, buddy!” Judge: “Win for the Federal prosecutor. Mr. Simon, you’re going downnnnnnnn!”

This bothers the living F out of me.

This should bother the living F out of you, too. If you’re in the amnesty program it means that the IRS Commissioner went all cowboy on you and this amnesty stuff may be nonbinding on the Federal government.

Read Jack Townsend’s calm blog post about this, and the comment thread. Me, I gotta go.


OK, Phil. You’re starting to rant a bit. Breathe in and out. All better. Reel it in and tell the folks where things stand.

  • A properly-configured student is a nonresident for income tax purposes. File a Form 8843 and all is well with not having to pay income tax as a U.S. resident.
  • Confusion and silence from the IRS on whether we can successfully rely on the tax law definition of “resident” and apply that to the FBAR for purposes of determining whether our poor student is a “resident.”