Read time: 2 to 4 mins
Tax is a question that many people ask to late for anything to be done. Federal individual income tax states that a resident of the United States is required to pay taxes on all income effectively connected to the US. A US citizen is required to pay income tax on a worldwide basis.
A US resident is defined as a natural person (human) with a green card or situated in the US for at least 183 days (at least 31 days must be within the US in the current year) within 3 years according to a specific formula.
Year 1 = 100% of Days spent in US counts toward the Substantial Presence Test
Year 2 = 1/3rd of Days spent in US counts toward the Substantial Presence Test
Year 3 = 1/6th of Days spent in US counts toward the Substantial Presence Test
Ex. Bob spent 73 days in the US during the current year. Last year he spent 180 days in the US and the year before that spent 120 days in the US.
Year 1 = 73 Days x 100% = 73 Days
Year 2 = 180 Days / 3 = 60 Days
Year 3 = 300 Days / 6 = 50 Days
Total Days Spent Within the US = 183 Days
You’ve just passed the Substantial Presence Test because you’ve been in the country for 83 days or more.
Congrats! You get to pay tax!