Tax Filing Tips for H-1B Holders

Tax Filing

January is already behind you, and if you were thinking time flies by, you should realize Tax Day is right around the corner. As usual, the deadline of your tax filing is set on April 18 except in 2020 and 2021 due to the chaotic global pandemic. If you just started work as a foreign worker in the U.S., particularly with a H-1B visa, you want to pay attention to this article since different tax rules will be applied depending on your status. Lastly, in case your H-1B application is still being processed, we offer a smart case tracker for both USCIS and NVC cases!

Is a H-1B holder a Nonresident Alien for U.S. Federal Tax Purposes?

The answer is it depends. Under the U.S. tax law, the definition of nonresident alien differs from what we usually think. In other words, you can be treated as if you are an alien (non-U.S. citizen) or a U.S. citizen. It's important for H-1B holders to know the qualification of nonresident alien for the purpose of tax law because it determines the extent to which your income is reported to the IRS.

Basically, if you are an alien, you are considered a nonresident alien unless you meet one of two tests: 1) the Green Card test or 2) the substantial presence test for the calendar year (January 1 – December 31). If you meet either test, you are considered a U.S. resident alien and are generally taxed in the same way as U.S. citizens. This means that your worldwide income is subject to U.S. tax and must be reported on your U.S. tax return. Take a look at the overview of the two tests below.

Green Card Test

You are a resident, for U.S. federal tax purposes, if you are a lawful permanent resident of the U.S. at any time during the calendar year. For you to be a lawful permanent resident of the U.S., at any time, you should've been given the privilege, according to the immigration laws, of residing permanently in the U.S. as an immigrant. You generally have this status if the USCIS issued you a Permanent Resident Card, Form I-551, or green card. You continue to have U.S. resident status, under this test, UNLESS:

  • You voluntarily renounce and abandon this status in writing to the USCIS,
  • Your immigrant status is administratively terminated by the USCIS, OR
  • Your immigrant status is judicially terminated by a U.S. federal court.

If you meet the green card test at any time during the calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day on which you are present in the U.S. as a lawful permanent resident.

Substantial Presence Test

You are considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the U.S. on at least:

  • 31 days during the current year AND
  • 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • All the days you were present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.

For Example:

You were physically present in the U.S. on 150 days in each of the years 2019, 2020 and 2021. To determine if you meet the substantial presence test for 2021, count the full 150 days of presence in 2021, 50 days in 2020 (1/3 of 150), and 25 days in 2019 (1/6 of 150). Since the total for the 3-year period is 225 days, you are considered a resident under the substantial presence test: for 2021.

Days of Presence in the U.S.

You are treated as present in the U.S. on any day you are physically present in the country, at any time during the day. However, there are exceptions to this rule. Do not count the following as days of presence in the U.S. for the substantial presence test:

  • Days you commute to work in the U.S. from a residence in Canada or Mexico if you regularly commute from Canada or Mexico.
  • Days you are in the U.S. for less than 24 hours, when you are in transit between two places outside the United States.
  • Days you are in the U.S. as a crew member of a foreign vessel. Days you are unable to leave the U.S. because of a medical condition that develops while you are in the United States.
  • Days you are an exempt individual see here.

If you, as a H-1B holder, have just arrived and started work in the U.S., make sure that you fall under a nonresident alien or a resident, and prepare all tax documentations accordingly. Check out the link for more details.

How to track USCIS and NVC case

If you are still going through a H-1B application process, you don't want to lose track of your case status. Lawfully came up with a ground-breaking solution to help all immigrants and non-immigrants learn what is going on with their applications. That is why Lawfully has launched USCIS Case Tracker. Since then, we have tirelessly improved its features with a firm commitment to immigration equality.

With a very small fraction of cost and time it would have taken to struggle with immigration attorneys and USCIS, give yourself 3 minutes to fill in the information about your application. BOOM! You can check your case status along with an expected processing time and compare yours with other similar cases at your fingertips. No need to check in on the USCIS website anymore. Lawfully will deliver updates on your case status in real-time. And don't miss the new feature of NVC case tracking in order to embrace visa applicants outside the U.S.

If you want to get more insights from a certain visa type, try Case Analysis Pro, and among other features, see your ranking compared to others who registered their cases so that you get a sense of where you stand.

Download Lawfully Case Tracker now and stay up to date!