Alien leaving permanently - residency termination statement?

[Ellauyz]

Hi everyone,

I have questions about filing taxes for 2022, and how to understand the rules for resident/nonresident aliens leaving the country.

I’ve been looking for information quite a bit, I want to make sure I understood things correctly.

Here is my situation:

- I was considered a resident alien for 2021 under a J1 visa (lived in the US for the entire year, no green card)

- I filed my taxes for my 2021 income earlier this year, using the 1040 form

- I permanently left the US on January 15th 2022 (moved back home), with my J1 visa ending date set as December 29th, 2021. I have not been back to the US since, and I do not plan to return

- I have not received any US-based income throughout 2022 (only a small amount of interest from a savings account, should be excluded from gross income based on publication 519)

First question: what is my filing status for 2022?

I found the following paragraph on the IRS publication 519:

If you were a U.S. resident in 2021 but are not a U.S. resident during any part of 2022, you cease to be a U.S. resident on your residency termination date. Your residency termination date is December 31, 2021, unless you qualify for an earlier date as discussed later.

Based on this: since I have less than 31 days of presence in the US for 2022, I am considered as a non-resident alien for tax purposes in 2022 based on the substantial presence test, and my residency termination date would be December 31, 2021.

Does this sound correct?

Second question: what are my filing obligations for 2022?

According to publication 519:

You do not need to file Form 1040-NR if you meet any of the following conditions:

You were a nonresident alien student, teacher, or trainee who was temporarily present in the United States under an “F”, “J,” “M,” or “Q” visa, and you have no income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc.

Through 2022, I have not received any US based income (only a small amount of interest from a savings account held in the US).

If I am considered as a non-resident for 2022, this would mean I do not need to file taxes for 2022. Is this correct?

Third and last question: Is there anything specific I need to do to make sure the IRS knows I left?

Since I was present in the US under a J1 visa, I fall under of the exceptions of form 1040-C. If I understand it correctly, this means I did not have to file 1040-C for 2021, and do not need to obtain a sailing permit from the IRS.

However, publication 519 mentions a statement required to establish my residency termination date.

Does this apply to all aliens, or only lawful permanent resident aliens/green card holders? Or when people want to claim a residency ending date earlier in the year than December 31st?

Based on my situation, do I need to send such a statement?

Thank you very much for your help, I appreciate any suggestions 🙂

[tagteam]

Perhaps @pk can help here.

[pk]

@Ellauyz As I understand from your post ;   (a) you worked/ earned in the USA  from XXX till end of 2021 under J visa; (b ) for 2021 you files a return using form 1040 --- resident alien for tax purposes; (c) your J-visa terminated at the end of the 2021 but you stayed in the USA for another 15 days  -- Jan 15th. 2022,  -- (with DHS permission or ?); (d) you have only a minimal income ( interest income) from US sources post departure.  Question now  is :

1. What is your immigration status for filing 2022 return ?  Because you were a Resident for tax purposes only , your J visa expired at the end of the year 2021 and you are not  present in the USA,  your status would be Non-Resident Alien ( NRA).  Thus you have to file form 1040-NR  ( which is not supported by TurboTax ).  You should be use a tax  professional  ( familiar with US taxes ) in your resident country or on-line sources like  TurboTax  partner SprinTax.

2. What are your filing obligation for the USA ?   Because you  have US sourced income, you need to recognize these  and pay taxes on these .   First you need to inform the bank ( and any other financial institutions that you deal with)  that is paying you the interest  , that you are no longer in the USA and that your status is now Non-Resident Alien ( NRA).  This would result in these entities issuing you a 1042-S  ( instead of 1099-INT/DIV etc. ) and withholding required NRA tax ( 30% ).  These withholding will be reconciled  with actual taxes due  when you file a return on form 1040-NR. 

 About 1040-C, sailing permit and/or a statement declaring that you have left the country is no-longer pertinent since you have already filed a form 1040 for the year 2021.  So just forget doing anything about this retroactively --- these are ways to make sure that you pay your taxes for the last year you were present in the USA.

Is there more I can do for you ?

pk

[Ellauyz]

@pk Thank you for your answer!

Here are the answers point by point:

(a) yes.

(b) yes.

(c) yes. This is allowed through the J1 Visa, under the notion of “grace period”. We can stay in the US up to 30 days after the end of the visa in order to arrange for our travel back home.

(d) yes.

For the taxation of interest income of nonresident aliens, I found the following information on the IRS website:

Nonresident aliens (NRAs) are not taxed on certain kinds of interest income as follows, per Internal Revenue Code subsections 871(i) and (h), provided that such interest income arises from one of the following sources:

- A U.S. bank

- A U.S. savings and loan association

- A U.S. credit union

- A U.S. insurance company

- Portfolio Interest (Described in “3. Exclusions From Gross Income" – “Nonresident Aliens” - "Interest Income" and its subsection "Portfolio interest" of Publication 519, U.S. Tax Guide for Aliens)

Source = https://www.irs.gov/individuals/international-taxpayers/nontaxable-types-of-interest-income-for-nonr...

This is also showed in this page of the IRS website:

Aliens temporarily present in the United States as students, trainees, scholars, teachers, researchers, exchange visitors, and cultural exchange visitors are subject to special rules with respect to the taxation of their income.

[…]

Filing IS NOT required by nonresident alien students and scholars who have income ONLY from:

-Foreign sources

-Interest Income from a: U.S. bank, U.S. savings & loan institution, U.S. credit union, U.S. insurance company, An investment that generates Portfolio

[…]

Source = https://www.irs.gov/individuals/international-taxpayers/foreign-students-scholars-teachers-researche...

Based on this, since (a) my visa category was as a J1 scholar, (b) I am a nonresident alien for 2022, and (c) the only US sourced income for 2022 is the interest income comes from savings account in a US credit union, this suggests that I would not have to file a 1040-NR for 2022.

For the 1040-C, I don’t think I had to file it at all, since my situation corresponds to one of the exceptions for filing this form (J1 visa). I confirmed this with my US employer before leaving as well.

Overall, it seems like my situation for 2022 now falls under the regulations for nonresident aliens.

From what I understand, I might still have to file Form 8843 to let the IRS known how many days I was present in the US in 2022, but I will look further into this as well.

Thank you very much for your help!

[pk · Accepted solution]

@Ellauyz 

section 871(a) 1 and (A)  says this:

26 U.S. Code § 871 - Tax on nonresident alien individuals

(a)Income not connected with United States business—30 percent tax

               (1)Income other than capital gains Except as provided in subsection (h), there is hereby imposed for each taxable year a tax of 30 percent of the amount received from sources within the United States by a nonresident alien individual as—

(A)interest (other than original issue discount as defined in section 1273), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income,

section 26CFR 871(h) deals with  "  interest of  NRA received from certain portfolio debt investments"  -- which have  special treatment.

Thus my conclusion is a person whom is NRA and not living in the United States is subject to 30% tax on  ordinary interest earned  like savings bank etc. from US sources  and no connected with United Sates Business.

Page 15 of Pub 519 ( which you quote) -- under the heading  Non-Resident Alien  ( implying while  in the USA and being a Non-Resident Alien ) and then further on read pages  17 ---through  page 21

Nonresident Aliens
A nonresident alien's income that is subject to
U.S. income tax must be divided into two categories.
1. Income that is effectively connected with a
trade or business in the United States, and
2. Income that is not effectively connected
with a trade or business in the United
States (discussed under The 30% Tax,
later).
The difference between these two categories
is that effectively connected income, after
allowable deductions, is taxed at graduated
rates. These are the same rates that apply to
U.S. citizens and residents. Income that is not
effectively connected is taxed at a flat 30% (or
lower treaty) rate.

All of these line come back to same that you , as an NRA and not residing in the USA and not in business , are subject to 30% tax on gross earnings ( with some restrictions).   Perhaps , depending on amount of your earnings from US sources , you may want to consider  filing a return on form 1040-NR  ( mentioned above).   A good source of help often is the nearest US consulate in your country--- they often have an IRS affiliate there  and they are usually quite helpful.

Is there more I can do for you ?

pk

[Ellauyz]

@pk Thank you very much for all your help! I’ll keep reading through information. Getting in touch with an IRS affiliate is a great idea too.

Again, thank you very much 🙂