J1 research scholar, 2.5 years in USA. Resident or Non resident for tax purpose?

[xoxomboree]

Hello,

I arrived in the USA in August, 2021, under a J-1 visa status (Research Scholar). I utilized Sprintax for filing my taxes for the years 2021 (August-December) and 2022 (January-December). As the two-year limit of my J-1 visa will commence in August 2023, I am uncertain about my tax filing status for the year 2023 (Resident or Non resident?). 

Given that approximately seven months (January - July 2023) fall within the initial two-year period of my J-1 visa, and the remaining five months (August -December 2023) extend beyond this limit, I am seeking clarification on whether I should file as a non-resident or resident for tax purposes for the tax year 2023.

Can someone help me clarify this? @DaveF1006 @LinaJ2020 

Many thanks,

Xomboree

[Vanessa A]

This will depend on whether or not you met the substantial presence test. 

You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:

1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
   • All the days you were present in the current year, and
   • 1/3 of the days you were present in the first year before the current year, and
   • 1/6 of the days you were present in the second year before the current year.

"In general, an alien in J-1 status (hereafter referred to as a “J-1 alien”) will be treated as a U.S. resident for federal income tax purposes if he or she meets the substantial presence test." J-1 Immigration Status

If you have been in the US since August of 2021, then you would meet the substantial presence test. This would mean you would be able to file as a US Resident for tax purposes, using TurboTax. 

[xoxomboree]

Thank you, @Vanessa A!

What about the 2-year exempt period? I thought the substantial presence calculation should start after the 2-year exempt period, isn't it? 

Kind regards,

Xomboree

[Vanessa A · Accepted solution]

Yes, you are correct.  You can start counting your substantial presence days on January 1, 2023 when you take into consideration your 2 year exempt period.  However, if you never left the US during 2023, you would have met the substantial presence test on July 2, 2023.  If you left the US during that period, obviously the timing and days would be different. 

See example from IRS Tax Residency Status below

Solution:

Date of entry into United States: 08-29-2021
Research scholar J-1 visa
Exempt individual for 2 calendar years: 2021 and 2022
Begin counting days on 01-01-2023
Number of nonexempt days in United States during 2023: 365 days

Count days as follows:

Current year (2023) days in United States (365) × 1 = 365 days
Prior year (2022) days in United States (0) × 1/3 = 0 days
Year before that (2021) days in United States (0) × 1/6 = 0 days
Total = 365 days

A met the substantial presence test on 07-02-2023 (the 183rd day of 2023). A's residency starting date under IRC § 7701(b) is 01-01-2023 (the first day of presence in the United States during the calendar year in which A met the substantial presence test).

Which federal income tax returns will A file for 2021, 2022, and 2023?

2021:

A will file Form 1040-NR as a nonresident.

2022:

A will file Form 1040-NR as a nonresident.

2023:

A will file Form 1040 as a U.S. resident.