Table of Contents
You have a dual-status tax year when you have been both a resident alien and a nonresident alien in the same year. Dual status does not refer to your citizenship, only to your resident status in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident.
The most common dual-status tax years are the years of arrival and departure. See Dual-Status Aliens in chapter 1.
If you are married and choose to be treated as a U.S. resident for the entire year, as explained in chapter 1, the rules of this chapter do not apply to you for that year.
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Income subject to tax,
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Restrictions for dual-status taxpayers,
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Exemptions,
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How to figure the tax,
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Forms to file,
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When and where to file, and
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How to fill out a dual-status return.
Publication
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503 Child and Dependent Care Expenses
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514 Foreign Tax Credit for Individuals
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524 Credit for the Elderly or the Disabled
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575 Pension and Annuity Income
Form (and Instructions)
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1040
U.S. Individual Income Tax Return -
1040-C
U.S. Departing Alien Income Tax Return -
1040-ES
Estimated Tax for Individuals -
1040-ES (NR)
U.S. Estimated Tax for Nonresident Alien Individuals -
1040NR
U.S. Nonresident Alien Income Tax Return -
1116
Foreign Tax Credit
See chapter 12 for information about getting these publications and forms.
You must file your tax return on the basis of an annual accounting period called a tax year. If you have not previously established a fiscal tax year, your tax year is the calendar year. A calendar year is 12 consecutive months ending on December 31. If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December, or a 52-53 week year) and are considered to be a U.S. resident for any calendar year, you will be treated as a U.S. resident for any part of your fiscal year that falls within that calendar year.
For the part of the year you are a resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien. The income is taxable even if you earned it while you were a nonresident alien or if you became a nonresident alien after receiving it and before the end of the year.
For the part of the year you are a nonresident alien, you are taxed on income from U.S. sources and on certain foreign source income treated as effectively connected with a U.S. trade or business. (The rules for treating foreign source income as effectively connected are discussed in chapter 4 under Foreign Income.)
Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.
Income from U.S. sources is taxable whether you receive it while a nonresident alien or a resident alien unless specifically exempt under the Internal Revenue Code or a tax treaty provision. Generally, tax treaty provisions apply only to the part of the year you were a nonresident. In certain cases, however, treaty provisions may apply while you were a resident alien. See chapter 9 for more information.
When determining what income is taxed in the United States, you must consider exemptions under U.S. tax law as well as the reduced tax rates and exemptions provided by tax treaties between the United States and certain foreign countries. For a further discussion of tax treaties, see chapter 9.
The following restrictions apply if you are filing a tax return for a dual-status tax year.
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Married resident of Canada, Mexico, or the Republic of Korea (South Korea), or
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Married U.S. national.
See the instructions for Form 1040NR to see if you qualify. A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.
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You are married, and
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You choose to be treated as a resident for all of 2007 by filing a joint return with your spouse who is a U.S. citizen or resident, as discussed in chapter 1.
As a dual-status taxpayer, you usually will be able to claim your own personal exemption. Subject to the general rules for qualification, you can claim exemptions for your spouse and dependents when you figure taxable income for the part of the year you are a resident alien. The amount you can claim for these exemptions is limited to your taxable income (figured before subtracting exemptions) for the part of the year you are a resident alien. You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period.
Special rules apply to exemptions for the part of the tax year you are a nonresident alien if you are a:
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Resident of Canada, Mexico, or the Republic of Korea (South Korea),
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U.S. national, or
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Student or business apprentice from India.
For more information, see Exemptions in chapter 5.
When you figure your U.S. tax for a dual-status year, you are subject to different rules for the part of the year you are a resident and the part of the year you are a nonresident.
All income for your period of residence and all income that is effectively connected with a trade or business in the United States for your period of nonresidence, after allowable deductions, is added and taxed at the rates that apply to U.S. citizens and residents. Income that is not connected with a trade or business in the United States for your period of nonresidence is subject to the flat 30% rate or lower treaty rate. You cannot take any deductions against this income.
Use the Social Security Benefits Worksheet in the Form 1040 instructions to help you figure the taxable part of your social security and equivalent tier 1 railroad retirement benefits for the part of the year you were a resident alien.
If you received U.S. social security benefits while you were a nonresident alien, the Social Security Administration will send you Form SSA-1042S showing your combined benefits for the entire year and the amount of tax withheld. You will not receive separate statements for the benefits received during your periods of U.S. residence and nonresidence. Therefore, it is important for you to keep careful records of these amounts. You will need this information to properly complete your return and determine your tax liability.
If you received railroad retirement benefits while you were a nonresident alien, the U.S. Railroad Retirement Board (RRB) will send you Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, and/or Form RRB-1099-R, Annuities or Pensions by the Railroad Retirement Board. If your country of legal residence changed or your rate of tax changed during the tax year, you may receive more than one form.
This discussion covers tax credits and payments for dual-status aliens.
As a dual-status alien, you generally can claim tax credits using the same rules that apply to resident aliens. There are certain restrictions that may apply. These restrictions are discussed here, along with a brief explanation of credits often claimed by individuals.
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You were born after January 1, 1990.
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You were a full-time student.
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Your exemption is claimed by someone else on his or her 2007 tax return.
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Your adjusted gross income is more than $26,000.
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Was under age 17 at the end of 2007.
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Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew).
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Is a U.S. citizen, a U.S. national, or a resident alien.
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Did not provide over half of his or her own support for 2007.
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Lived with you more than half of 2007. Temporary absences, such as for school, vacation, or medical care, count as time lived in the home.
You can report as payments against your U.S. income tax liability certain taxes you paid, are considered to have paid, or that were withheld from your income. These include:
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Tax withheld from wages earned in the United States,
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Taxes withheld at the source from various items of income from U.S. sources other than wages,
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Estimated tax paid with Form 1040-ES or Form 1040-ES (NR), and
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Tax paid with Form 1040-C, at the time of departure from the United States.
The U.S. income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year.
If you are a resident alien on the last day of your tax year and report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year. If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. In either case, file your return with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215.
If you are a nonresident alien on the last day of your tax year and you report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year if you receive wages subject to withholding. If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. If you did not receive wages subject to withholding and you report your income on a calendar year basis, you must file no later than June 15 of the year following the close of your tax year. If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 6th month following the close of your tax year. In any case, file your return with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215.
If the regular due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day that is not a Saturday, Sunday, or legal holiday.
Sam R. Brown is single and a subject of the United Kingdom (U.K.). He temporarily entered the United States with an H-1 visa to develop a new product line for the Major Product Co. He arrived in the United States March 18, 2007, and left May 25, 2007, returning to his home in England.
The Major Product Co. later offered Sam a permanent job, and he returned to the United States with a permanent visa on September 10, 2007.
During Sam's temporary assignment in the United States, the Major Product Co. paid him $6,500. He accounted to his employer for his expenses for travel, meals, and lodging while on temporary assignment, and was reimbursed for his expenses. This amount was not included on his wage statement, Form W-2, given to him when he left the United States.
After Sam became permanently employed, his wages for the rest of the year were $21,800, including reimbursement of his moving expenses. He received a separate Form W-2 for this period. His other income received in 2007 was:
Interest income paid by the U.S. Bank (not effectively connected):
March 31 | $45 |
June 30 | $48 |
September 30 | $68 |
December 31 | $89 |
Dividend income paid by Major Product Co. (not effectively connected):
April 3 | $120 |
July 3 | $120 |
October 2 | $120 |
Interest income (in U.S. dollars) paid by the U.K. Bank:
March 31 | $ 90 |
June 30 | $110 |
September 30 | $118 |
December 31 | $120 |
Sam paid the following expenses while he was in the United States:
Moving expenses incurred and paid in
September |
$8,300 |
VA State income tax | $ 612 |
Contributions to U.S. charities | $ 310 |
Before Sam left the United States in May, he filed Form 1040-C (see chapter 11). He owed no tax when he left the United States.
Sam completes Form 1040NR as follows.
Sam completes Form 1040 as follows.
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
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