IRS Publication 519
Candlefocus EditorThe most relevant thing to understand about IRS Publication 519 is that nonresident aliens are only taxed on income they get from U.S. sources. Generally, this means that income earned while present in the United States, as well as income from business activities conducted in the United States (such as sale of goods, services and real estate) are subject to taxation. While U.S. sourced income is taxable, foreign sourced income is usually not unless it’s invested in the United States.
A resident alien, on the other hand, is generally taxed the same as a U.S. citizen and is generally subject to all the same rules and regulations. This means that they must pay taxes on all their income, regardless of whether it’s from U.S. or foreign sources.
Those who are classified as dual-status or a combination of non-resident and resident alien during the same taxable year are subject to special rules for when and how taxes are paid. This includes separate calculations for income earned during each of the two statuses and the recognition of certain exemptions for working in the United States.
IRS Publication 519 outlines the procedure for filing taxes for aliens, as well as the guidelines for claiming certain deductions and credits. Additionally, the publication contains information about exceptions or special rules of which aliens should be aware. For example, aliens who have resided in the United States for fewer than five years may be eligible for the foreign earned income exclusion, which excludes up to $105,900 of earned income from U.S. taxes in 2018.
Tax laws applicable to aliens are becoming increasingly complex, and can vary depending on individual circumstances. Therefore, it’s strongly advised to consult with a tax advisor to ensure that proper filing is done. IRS Publication 519 is the primary source of guidance, which covers the various taxes applicable to both resident and non-resident aliens. It also covers special rules that apply to dual-status aliens, as well as information about how to file taxes, claim deductions and credits, and other helpful guidance.