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PostedThe substantial presence test explained
Phil Hodgen
Attorney, Principal
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My quest is to make it easy for you to figure out the basic stuff. Send me the hard problems. :-)Here's a basic one. It applies to individuals who are not citizens of the United States but they intend to spend time in the United States. How do they figure out whether the U.S. will treat them as a resident for income tax purposes?This came about because today someone wants me to do an opinion letter (for real money) about whether a person is or is not a U.S. resident for income tax purposes. Not to get all jargon-y on you 'n stuff but it has to do with the "substantial presence test." (See how I planted a keyword phrase in there for El Goog?)I said "Hey wait a minute, here's how it works" and in the course of a few minutes she determined her own answer. Free. (Don't weep bitter tears for me. There are plenty of harder problems that need solving. I keep myself busy.)I'm going to do the same for you. Here is the quick explanation of the substantial presence test I gave her over the phone. I get the sense that doing it in writing will make it a bit easier to follow.
What you're trying to figure out
Your question starts with "Am I going to be a resident of the United States for calendar year 2010?" (I'm using 2010 as an example; insert your favorite year if it pleases you).Mathematics of the substantial presence test
The math is actually pretty easy. Here's what you do:- Count the number of days that you were in the United States in 2010. Write down that number.
- Count the number of days that you were in the United States in 2009. Divide by three. Write down that number, including the fraction if you have one.
- Count the number of days that you were in the United States in 2008. Divide by six. Write down that number, including the fraction if you have one.
- Add the three numbers you wrote down.
- If the sum of the three numbers is equal to or greater than 183, the substantial presence test says you will be treated as a U.S. resident for income tax purposes in 2010.