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.
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