Filing A Dual Status Tax Return

A dual-status tax year exists when you are treated as both a U.S. resident and a nonresident for tax purposes during the same calendar year. It usually occurs the year that you arrive or depart from the United States. Different tax rules apply to the part of the year in which you are the U.S. resident and the part of the year in which you are a nonresident. This is where US international tax issues can get complicated based on the circumstances of your situation, and you should consult an international tax attorney for specific advice. In this article we will address the first two questions people ask when this becomes an issue.

Must I Pay U.S. Taxes in a Dual-Status Tax Year?

Yes, when have a dual-status tax year, you will be taxed on your income from all sources for the part of the year that you have U.S. resident status. http://www.irs.gov/publications/p519/ch06.html. As with U.S. citizens and other U.S. residents, any income you earn from outside the United States is taxable if you received it during the part of the year that you are considered a U.S. resident for tax purposes.

For the part of the year that you are considered a nonresident, then you will be taxed on income from U.S. sources as well as according to the rules for taxation of foreign income. The rules pertaining to taxation of foreign income are complicated, but in essence, you can be taxed on foreign income when it is effectively connected to a U.S. trade or business. If the foreign income you receive is not effectively connected to a U.S. trade or business, then you will not be taxed on it while you are a nonresident. This is true even if you are a U.S. resident when you earn it, or if you receive the income while a nonresident but become a U.S. resident or U.S. citizen before the end of the year. http://www.irs.gov/publications/p519/ch06.html.

How Do I Fill Out a Dual-Status Tax Return?

Your obligations in filling out a dual-status tax return will depend on whether you are considered a U.S. resident or a nonresident for tax purposes at the end of the year. If you are a U.S. resident at the end of the year, but you were a nonresident earlier in the year, then you should fill out a Form 1040 tax return with the words “Dual-Status Return” written at the top of the return. You must also include a statement, such as a Form 1040NR, that shows your income for the part of the year that you were a nonresident. http://www.irs.gov/pub/irs-pdf/f1040nr.pdf.

If you are considered a nonresident at the end of the year, but you were a U.S. resident for an earlier part of the year, then you should complete a Form 1040NR with the words “Dual-Status Return” written at the top of the form. As with the other situation, you must attach a statement showing your income for the part of the year that you were considered a U.S. resident for income taxation purposes. You can use a standard Form 1040 for this statement, as long as you write “Dual-Status Return” at the top of the form.

How a Tax Attorney Can Help with Your Dual-Status Tax Year

If you are a U.S. Citizen or U.S. resident for taxation purposes for part of a tax year, but you are a nonresident for the rest of the year, you may have a dual-status tax year. In this situation, you may need the assistance of a knowledgeable tax attorney to help you evaluate all aspects of your circumstances.

The Tax Lawyer - William D. Hartsock has been successfully helping clients comply with U.S. International Tax Laws and deal with issues related to worldwide taxation since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.