Substantial Presence Test for F-1 Student: Resident or Non-Resident?

[JeffreyR77]

The are no examples that support your position to skip consecutive years in accounting for the Substantial Presence Test. I do not believe your position is defendable if challenged by the IRS.

[ahcalde]

@JeffreyR77 Sprintax (www.sprintax.com) hasn't yet gotten back to me as to how their software made that determination, but I believe they're following the logic I am trying to explain as there wouldn't be any other explanation.

[ahcalde]

@JeffreyR77 This is the closest example I can find on the IRS website, although the "6-year lookback rule" doesn't seem to apply to F-1 students:

Example 9
D was a citizen and resident of a foreign country just prior to her arrival in the United States. She arrived in the United States for the first time ever on 08-15-2013 as a student on an F-1 visa. She remained in F-1 status until she graduated in June 2018. She left the United States on 06-30-2018 and returned home. On 08-01-2019 she returned to the United States as a researcher on a J-1 visa. Determine her residency starting date for her most recent visit.

Solution:
Analysis for 2019
Date of (second) entry into United States: 08-01-2019
Exempt individual: 08-15-2013 through 12-31-2017
Nonexempt individual: 01-01-2018 through 06-30-2018 and 08-01-2019 through 12-31-2019

Begin counting days of presence in the United States on 08-01-2019. Because D is currently a J-1 non-student, apply the 6-year “lookback rule”. Because she had already been an exempt individual as an F-1 student during 2 of the 6 years prior to 2019, she cannot be an exempt individual during 2019 and must start counting days of presence on the date of her arrival in the United States. During her prior visit as an F-1 student, applying the 5-year rule, she ceased to be an exempt individual on 12-31-2017.

Number of nonexempt days in United States during 2019: 153 days (08-01-2019 through 12-31-2019)

https://www.irs.gov/individuals/international-taxpayers/alien-residency-examples

[JeffreyR77]

Your absence for all of 2015 is what removes any leeway in interpretation.  You have a change in status from 2014 to 2015 to 2016 and a break in presence which resets the clock for consideration.  The F1 exempt rules begin applying calendar year 2016.

[ahcalde]

@JeffreyR77  Where does the IRS say that the absence would "reset the clock"?

[ErnieS0]

I was able to see your table and did further research.

You can file as a resident. You have five years of J1/F1 status. The J-1 student visa status follows the same rules. F1 and J1 have a lifetime look back.

Refer to Example 2 in Alien - Exempt Individual Examples

[ahcalde]

@ErnieS0 Yes, I am going to file as a resident. I got in touch with a couple of other tax services specialized in non-resident taxes, and they also confirmed I am now considered a resident for tax purposes given that the 5-year exemption is only once in a lifetime, meaning I can never be exempt as a student again. Thanks for looking further into that!

[Zion0131]

Hi @ErnieS0, tax year 2020 will be my 6th year as a student (2010 and 2011 as J1, while 2017, 2018 and 2019 as F1), hence, I will exceed the 5-year life time rule for students and trainees. On the other hand, there is an exception to the 5-year rule for students as long as they meet the requirements set by IRS here:

https://www.irs.gov/individuals/international-taxpayers/the-closer-connection-exception-to-the-subst...

If I have changed status in 2020 from F1 to H-1B on October 1, 2020, can I still file for the exception for the days in the US in 2020 that I was on F1 (January 1 - September 30, 2020), given that I have transitioned away from F1 and I am no longer a student at the end of 2020?

If I can exempt the days on F1 I will not meet the substantial presence test and I can file as a nonresident alien. If I can not exempt the days under F1 as I have changed visas in 2020 and I am no longer a student, I have to file as a resident.

Thanks

[DaveF1006]

According to this IRS link, you are eligible to be an exempt individual for 5 calendar years (2017through 2021) so you can file exempt for 2020, even though it is a part of a year.  

[Zion0131]

Thanks Dave, the complication is that I was on J1 visa in 2010 and 2011, which years count towards the 5-year life time limit based on my understanding. Do you read it differently?

Thanks,

[ahcalde]

@Zion0131 You are correct. The 5-year rule never resets, so after you use it you cannot exclude days anymore. I am on a similar situation as you, and I filed as a resident this year. I was J-1 in 2012, then F-1 in 2016-2019. In 2020, since days couldn't be excluded anymore, I passed the substantial presence test.

There is a lot of confusing advice in this forum. You can also go to the Sprintax website and start filling out your tax return. The first step is the substantial presence test. You will enter all your entry and exit dates (and associated statuses) into the US. The test will tell you if you are a resident or not.

[Zion0131]

Thanks @ahcalde . The only thing that is not clear from the IRS website is whether I can apply for the exception and extend the 5-year life time limit while on F1 in 2020, although I changed to H-1B at the end of 2020. Have you looked into it when filling your taxes?

Thanks,