Last year residency status under substantial presence test

[ematyi]

Hi,
After studying IRS 519 in-depth and reading many discussions on this platform,  I am still wrapping my head around the question whether I have the option to file my 2023 tax return as a resident or am I obliged to file as a dual-status individual?

Here are the details of my situation:
- a) I have been living and working in the US from 2018 to 09/2023 with my spouse and kids.
- b) We are not-US citizens and were on an 'O' visa for the last years.
- c) We returned to our home country in 09/2023 and had foreign income throughout the year.

Here is my interpretation and the issues I am hoping to get some input from the community:
-1)  I clearly fulfill the substantial presence test for 2023, not the green card test. --> I am pretty sure I am a resident for at least part of 2023
- 2) IRS 519 says: "If you were a U.S. resident in 2023 but are not a U.S. resident during any part of 2024, you cease to be a U.S. resident on your residency termination date. Your residency termination date is December 31, 2023, unless you qualify for an earlier date, as discussed later. " --> I assume this means resident status for the entire year of 2023?
- 3) "Earlier residency termination date.You may qualify for a residency termination date that is earlier than December 31. This date is:The last day in 2023 that you are physically present in the United States, if you met the substantial presence test --> I fulfill this criterion but it is not clear to me whether "may qualify" indicates an optional choice here?!
- 4) I assume residency termination date before 12/31/2023 would make me a dual-status individual (meaning I could not file jointly with my spouse, and had to submit both a 1040 and 1040NR to the IRS), while residency termination on 12/31/2023 would allow me to simply file a 1040 form married-jointly (and make my foreign income subject to federal taxes the whole year?) --> again, I am wondering if I have a choice here?  

Thanks so much for your insights!

[Vanessa A · Accepted solution]

Here is my interpretation and the issues I am hoping to get some input from the community:
-1)  I clearly fulfill the substantial presence test for 2023, not the green card test. --> I am pretty sure I am a resident for at least part of 2023
- 2) IRS 519 says: "If you were a U.S. resident in 2023 but are not a U.S. resident during any part of 2024, you cease to be a U.S. resident on your residency termination date. Your residency termination date is December 31, 2023, unless you qualify for an earlier date, as discussed later. " --> I assume this means resident status for the entire year of 2023?  Yes, if you left the country in 2024, you would be considered a resident for all of 2023.
- 3) "Earlier residency termination date.You may qualify for a residency termination date that is earlier than December 31. This date is:The last day in 2023 that you are physically present in the United States, if you met the substantial presence test --> I fulfill this criterion but it is not clear to me whether "may qualify" indicates an optional choice here?! May qaulify means that it is optional.  So if you meet the criteria to choose the early termination date, you can either select the last day that you were present in the US or you can select December 31, 2023.
- 4) I assume residency termination date before 12/31/2023 would make me a dual-status individual (meaning I could not file jointly with my spouse, and had to submit both a 1040 and 1040NR to the IRS), while residency termination on 12/31/2023 would allow me to simply file a 1040 form married-jointly (and make my foreign income subject to federal taxes the whole year?) --> again, I am wondering if I have a choice here?  You are correct in your assumption.  If you choose to end early you would be a dual status and not able to file jointly.  If you choose to end on December 31st, you would be able to file a joint return with your spouse. 
 

[ematyi]

Fantastic! Thank you so much for the clarification!