"U.S. person" in the eyes of the IRS

When it comes to U.S. tax obligations, the term “U.S. person” is critical. The IRS defines a “U.S. person” as someone who is subject to U.S. tax laws, regardless of where they live. Even if you were born abroad and hold dual citizenship, you are still considered a U.S. person for tax purposes until you formally renounce your U.S. citizenship. Failing to understand and meet your U.S. tax obligations can lead to steep penalties.

According to the IRS, a U.S. person is any of the following:

A U.S. citizen — anyone with a U.S. passport, and minors who have at least one U.S. citizen parent.
U.S. corporations, partnerships, trusts, estates, or limited liability companies created or organized in the U.S. or under the laws of the U.S. or of any State.
A U.S. lawful permanent resident — Green Card holder, even with an expired Green Card, until you formally abandon it.
A non-U.S. citizen (a nonresident alien) who meets the Substantial Presence Test by having either been in the U.S. for at least 31 days during the current tax year, AND 183 days or more during the 3-year period, calculated as:
- All days in the current year, plus
- 1/3 of the days in the previous year, plus
- 1/6 of the days in the year before that.

If you fall under any of these categories, you are considered a U.S. tax resident and must file a U.S. tax return annually — reporting worldwide income and foreign financial assets, not just income earned in the U.S.

What is the Substantial Presence Test?

The Substantial Presence Test (SPT) is a rule used by the IRS to determine whether a non-U.S. citizen (a nonresident alien) should be considered a U.S. tax resident for a given tax year, based on the number of days physically present in the United States.

For example, you do not meet the SPT for 2025 if you were in the U.S. for:

120 days in 2025
120 days in 2024
120 days in 2023

Your total for the SPT is: 120 (2025) + 40 (1/3 of 2024) + 20 (1/6 of 2023) = 180 days (less than 183 days). If you were present for 130+ days in each year, you would meet the test.

Note: You can quickly determine whether you meet the Substantial Presence Test by using our 📅 interactive calculator.

Exceptions: When you don't become a U.S. tax resident

Even if you meet the SPT, you may still avoid U.S. tax residency if:

You qualify for the "Closer Connection Exception":
- You were in the U.S. fewer than 183 days in the current year, and
- You can prove a closer connection to a foreign country where you maintain a tax home (filing Form 8840).
You're an exempt individual, such as:
- Students on F, J, M, or Q visas (for a limited time)
- Teachers/trainees on J or Q visas
- Diplomats
- Certain professional athletes

❗ Important note: These individuals may exclude some or all days from the SPT calculation.

What happens if you pass the test?

If you meet the SPT and no exceptions apply, the IRS considers you a U.S. tax resident. This means:

You are taxed on your worldwide income, not just U.S. income, if you earned more than the minimum threshold.
You must file a Form 1040 (not 1040-NR).
You may be eligible for tax benefits like the standard deduction and certain credits, depending on your status.

Tax obligations for U.S. persons: Minimum filing requirements

As a U.S. person, you are required to file a U.S. income tax return if your U.S. and worldwide income (earnings and wages) exceeds the annual filing threshold, which in 2025 ranges from $14,600 to $32,300, depending on your filing status and age. These obligations apply even if you live and work abroad, and even if you owe no tax due to exclusions or credits.

You may also be required to report foreign financial accounts and file the informational FinCEN Form 114 (FBAR) if the combined value of your foreign bank, investment, or other financial accounts exceeded $10,000 at any point during the year. This applies even if each account individually holds less than $10,000. For example, if you have a foreign checking account with a balance of $5K, a savings account with $0, an investment account worth $2K, and a retirement account worth $4K, you must file an FBAR.

You must also report any interest in foreign corporations, partnerships, or trusts, and disclose all foreign-source income, including interest, dividends, and capital gains. The IRS has strict penalties for failing to report foreign income and assets.

How will the IRS know if you earn foreign income or have foreign accounts?

The IRS is actively expanding its efforts to identify U.S. taxpayers with unreported foreign income or accounts. This includes hiring international staff, enforcing reporting obligations on foreign institutions, and leveraging information-sharing treaties with other countries. For U.S. persons who have not met their tax obligations, it is only a matter of time before the IRS discovers noncompliance. Voluntarily becoming compliant before being caught can help avoid severe penalties. At TFX, we have tax professionals available to answer your questions and file a U.S. tax return on your behalf.

Tax obligations for non-U.S. persons

A non-U.S. person is generally required to file a U.S. tax return (Form 1040-NR) if any of the following apply:

They engage in a trade or business in the U.S. during the year, even if there is no income or the income is exempt by treaty.
They receive U.S.-source income subject to U.S. tax (e.g., wages, dividends, rental income, royalties, gambling winnings, etc.) on which the correct tax was not withheld.
They want to claim a refund of over-withheld taxes.
They act as the representative of a deceased nonresident or estate with U.S. assets or income.

Unlike U.S. persons, nonresident aliens do not follow the same income thresholds. Instead, if you have any U.S.-source income not subject to full withholding, you may need to file, even if the amount is as little as $1.

Filing tax returns to apply for a Green Card for a spouse

If you are sponsoring a spouse for a U.S. Green Card, you are typically required to provide your U.S. tax returns for the past three years as part of the immigration application. TFX can assist with preparing sponsoring spouse's tax returns, even if you haven’t filed them yet. Our experts are experienced in handling past-due filings and ensuring they meet the documentation standards required for immigration purposes. To get started, refer to the TFX tax preparation process for step-by-step guidance on submitting your information and documents.

Required documents to prepare your U.S. tax return

To accurately prepare your U.S. tax return, your tax preparer needs identifying information about you, your spouse (if filing jointly), your dependents, and detailed documentation of your income and expenses. While carefully completing your Tax Questionnaire (TQ), you are required to upload all relevant supporting documents. These documents help determine your eligibility for deductions, exclusions, and tax credits.

Any missing or incorrect information in your TQ may result in errors on your return, IRS notices, or audits. To avoid this, we require the general and income & deduction documents from all clients.

General documents

Documents we need	Why we need them
Calendar of your U.S. visits (if you visited the U.S. during the tax year)	Determines your U.S. residency status and eligibility for exclusions like the Foreign Earned Income Exclusion (FEIE). Keep an accurate travel calendar.
Your most recent U.S. and state tax return (if you filed in the last three years)	Helps your tax preparer check for accuracy and carry over relevant data, and identify deductions that may have been missed previously.
Proof of foreign taxes paid — your resident country tax declaration (e.g., UK P60/P45, Australian NOA, Hong Kong BIR60)	Required to calculate the Foreign Tax Credit or apply tax treaties to avoid double taxation.
Details of dependent children (full names, dates of birth, SSNs or ITINs) and supporting documentation of child care or children's higher education expenses	Needed to claim Child Tax Credit, Dependent Credit, education credits, and other related tax benefits.
U.S. tax forms (e.g., 1099-MISC, 1099-R, SSA-1099, etc.)	These forms report income like retirement, investments, and self-employment. They are sent to the IRS by U.S. financial institutions and must be reported on your U.S. tax return.

Income & deduction documents

Type of income or expenses	Documents we need	Notes
Wages, salary, tips	U.S. Form W-2, or foreign equivalent (e.g., P60, P45) with your employer's name, the amount received in wages throughout the year, and the tax withheld. Pay stubs or bank statements if no official form.	Foreign income taxes may be deducted.
Self-employment income	Detailed spreadsheet of gross income and business expenses. Foreign tax payments and invoices, if applicable.	Keep cash receipts for deductible business expenses.
Interest / dividends	Form 1099-INT / 1099-DIV or equivalent from foreign banks.	Each interest-earning account requires its own form, even accounts closed within the tax year.
Investment income / capital gains	Year-end brokerage statements sent by your broker detailing sales, purchase prices, and dates.	Needed to calculate capital gains or losses.
Employer stock options	Statement showing grant and exercise dates, option type, and amounts.	Tax treatment depends on your residency and the type of option.
Retirement distributions / pensions	Form 1099-R or year-end bank statements from the institution where the pension is held. Form 1099-R is mailed by your employer's financial institution reporting withdrawals from your IRA, pensions, or other retirement accounts. Form SSA-1099 reports Social Security benefits.	May be taxable or eligible for treaty exclusions.
Foreign pensions	Year-end bank statements or pension provider summary.	Some pensions may be taxable in the U.S.
Unemployment / alimony / child support	Form 1099-G for unemployment, agreement or proof of payment for alimony or child support.
Real estate sales / rental income & expenses	Proof of mortgage interest paid on the rental property, rental income statements, repair receipts, property tax bills. For real estate sales, provide purchase/sale dates and prices.	Certain expats are allowed to deduct a portion of their foreign housing expenses.
Other income (e.g., trusts, partnerships, etc.)	Schedule K-1 or foreign equivalents report business or trust interests. Form 1099-MISC reports any other miscellaneous income.
Student loan interest / tuition expenses	Form 1098-E for student loans, Form 1098-T, or tuition receipts for education expenses.	May be eligible for American Opportunity or Lifetime Learning Credits.
Charitable donations	Donation receipts from qualified organizations.	For deductions, documentation must include the amount and date.
Medical expenses / unreimbursed expenses	Receipts or statements showing expenses paid.	These may be deductible if they exceed a certain percentage of your income.
Gifts to family members, business expenses that were never reimbursed, etc.	Keep accurate records and upload supporting documents.	These are expenses that usually result in deductions.

❗ Important notes:

We do not submit these documents to the IRS. We use them to verify your answers in the Tax Questionnaire.
If you cannot locate any form, ask the issuer (e.g., employer or financial institution) to resend the form.
THE GOAL IS TO PROTECT YOU from becoming the subject of an IRS inquiry. Any mismatches between your return and data already reported to the IRS (e.g., by a bank, employer, or other sources) and any income or form the IRS receives that is not reported on your return will likely result in an IRS notice, audit, or penalties. It is much easier and wiser to simply do things right the first time.
If you have no copy of U.S. tax documents, which you should have received, e.g., Form W-2 from a previous employer, we recommend obtaining a copy of it from the IRS website at www.irs.gov/individuals/get-transcript.
If you don't have some (or all) foreign tax documents, you can still submit a questionnaire, and your tax preparer will work on a draft return.
If you don’t pay tax in your local country, see: Tax Documents Required to File US Tax Return From Countries With No Personal Tax.
If you don't have a scanner, see how you can get a scanned copy of a document and the accepted file types.