The Green Card Test and Substantial Presence Test

The IRS addresses these rules in Publication 519, U.S. Tax Guide for Aliens. A person is usually a resident alien for tax purposes if they meet the green card test or the substantial presence test, unless an exception applies.

The green card test is straightforward: if you’re a lawful permanent resident of the United States at any time during the calendar year, you’re generally a resident alien for tax purposes. The substantial presence test is more mathematical — you generally meet it if you were physically present in the U.S. for at least 31 days during the current year and 183 days during a three-year measuring period, counting all days in the current year, one-third of the days in the first preceding year, and one-sixth of the days in the second preceding year.

Form 1040 vs. Form 1040-NR

U.S. citizens and resident aliens generally file Form 1040 and are taxed on worldwide income. Publication 519 puts it plainly: resident aliens are generally taxed the same way as U.S. citizens. That means wages, self-employment income, interest, dividends, capital gains, rental income, and many other items from both U.S. and foreign sources may need to be reported.

Nonresident aliens, by contrast, generally file Form 1040-NR and are usually taxed only on U.S.-source income and income effectively connected with a U.S. trade or business. The 2025 Instructions for Form 1040-NR explain categories of income that appear on Schedule NEC and clarify that nonresident reporting depends heavily on whether an item is effectively connected with a U.S. trade or business.

That difference between worldwide taxation and more limited source-based taxation is often the single biggest practical distinction between resident and nonresident filing.

Information Reporting and Foreign Accounts

Tax residency also affects information reporting outside the core income tax return. Because resident aliens are generally taxed on worldwide income, they may also have separate foreign asset and foreign account reporting obligations. FinCEN administers the FBAR filing for foreign financial accounts, and the IRS administers Form 8938 under separate thresholds. Those rules don’t apply in the same way to every nonresident alien.

A person can be a tax resident of one country under that country’s domestic rules, a tax resident of the United States under U.S. domestic rules, or both at the same time before a treaty tie-breaker is applied. Tax treaties can matter, but they don’t erase the need to first analyze the domestic-law framework.

Dual-Status Years and Common Mistakes

In a year when someone changes status, part of the year may be treated under resident rules and part under nonresident rules. Publication 519 addresses dual-status aliens and explains that special filing considerations apply. Those returns tend to be more technical and usually deserve more careful planning than a standard resident or nonresident filing.

Getting this wrong has real consequences. Underreporting foreign income on a resident return can create tax, penalties, and information-return exposure. Overreporting worldwide income on a nonresident return can produce unnecessary complexity or incorrect tax. Filing the wrong return can also create problems with withholding claims, treaty benefits, amended filings, and future immigration or financial documentation consistency.

If you’re unsure whether you should be filing Form 1040 or Form 1040-NR, the answer should come from a careful review of green card status, days of presence, exceptions, treaty positions, and income sourcing — not from guesswork.