When does a tax residency status change?

[pashapuh]

Hello. I was a student of F1 visa from January 2021 till December 2022. I worked on F1 OPT from December 2022 till December 2023.

For tax years 2021 and 2022 I was filing as non-resident alien since I was exempt individual for tax purposes during those two years.

I have transitioned to H1B on December 17th, 2023 after my OPT expired.

I have a question about the status change. I need to open savings account (IRA) to start contributing portion of my income to it, but the financial institutions don’t allow opening IRAs if you’re not a resident alien for taxation purposes. I also would like to change my brokerage account status from non-resident alien to resident alien, but they told me the same: “come back when you are a resident alien and we’ll send you a form to fill to change your status”.

When do I become resident alien, and can open an IRA account?

—Is it when I meet the substantial presence, so in about 6 months since my H1B started in late December;
—Or is it only after the full year of working on H1B, and after I submit my first tax return as resident alien?

Thank you for any guidance and advice.

[Anonymous_]

I'll page @pk

[pk · Accepted solution]

@pashapuh , what I get from your post is that:

(a)  you entered USA as a  student ( F-1 ) in 2021 --- thus your exempt status ( assuming this was your first entry) was valid for  2021 through  2025.

(b) However your status was adjusted to H1-B  on 12/17/2023.  Thus your exempt status ended on that date.

(c) So  you start counting days present   SPT ( towards  Substantial Presence Test ) from12/18/2023.

Thus for the year 2023 you are still a Non-Resident Alien  ( assuming that there Are no other contravening  facts / circumstances ).

You will  satisfy the SPT in 2024 and therefore for 2024 you  can  be a dual status or  a  Resident for Tax purposes.

Does that make sense ?

[pashapuh]

Thank you for response and help you provide.

It does make sense for the tax filing purposes, but could you please clarify how does it apply to opening different accounts (for example, IRA) that require tax residency?

In other words, can I consider myself resident alien on the day I acquire my 6 months of SPT in June 2024? I need to know what is the earliest date I can come to the bank and tell them “hey, I’m resident alien now, so I can now open an IRA account with you guys”.

Thank you.

[pk]

@pashapuh ,  if you go to www.irs.gov and search for  "residnecy start date " you will see that  for SPT or GreenCard you are resident from the first  day of the you were present in the USA legally.  Thus , even though you will not pass the SPT till 183 days from when you started counting days present, for 2024 , you have been here since 01/01/2024 --- so the bank should have no issue  using your SSN and issuing you  1099s when the time comes .   They may argue that you may leave before reaching SPT and therefore they will be left holding the bag.

That is where I stand -- there is no legal basis -- just policy of a private entity.

-- 

Don 't know how I can help you more .

pk