Who Are Exempt Individuals Under US Tax Residency Laws ?

exempt individualsExempt individuals are certain types of individuals whose physical presence in USA is not counted fro tax residencey purpose .In earlier articles on tax residency , readers were informed that for determining the tax residency , a substantial presence test is done to determine if the person concerned was in USA for specific number of days .It was also stressed that certain physical presence days are not counted or exempt days for determination of tax residency under Internal Revenue Code. Apart from exempt days , US tax law provides that number of days of presence of certain individuals may may not count for determining the number of days of substantial presence in USA. This benefit is allowed to very limited number of persons referred as exempt Individuals. 

Who are Exempt Individuals ?

Here are list of persons who are regarded as exempt Individuals i.e their presence may ot be counted for the number of days ., they are considered exempt individuals .

Government Related Individuals

  1. An individual  having  “A” or “G” visa, other than individuals holding “A-3” or “G-5” class visas. These are generally government related persons who have come to USA as delegates for specific purpose.
  2. A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa.
  3. A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.
  4. A professional athlete temporarily in the United States to compete in a charitable sports event.

When is one considered to have  full time diplomatic status ?

An individual is considered to have full-time diplomatic or consular status if he or she:

  • Has been accredited by a foreign government that is recognized by the United States,
  • Intends to engage primarily in official activities for that foreign government while in the United States, and
  • Has been recognized by the President, Secretary of State, or a consular officer as being entitled to that status.
  • Members of the immediate family include the individual’s spouse and unmarried children (whether by blood or adoption) but only if the spouse’s or unmarried children’s visa statuses are derived from and dependent on the exempt individual’s visa classification. Unmarried children are included only if they:
    • Are under 21 years of age,
    • Reside regularly in the exempt individual’s household, and
    • Are not members of another household.

Are Household staff fall under exempt individuals?

The answer is in negative.

Anyone who  is a personal employee, attendant, or domestic worker for either a foreign government or international organization official , he/she is not considered a foreign government-related individual . So his/her presence will count all your days of presence in the United States for purposes of the substantial presence test.

What about teachers and trainees who visits USA  temporarily ?.

A teacher or trainee , other than a student, who is temporarily in the United States under a “J” or “Q” visa and substantially complies with the requirements of that visa are exempt individuals.

Members of the immediate family of teachers and trainees include the individual’s spouse and unmarried children (whether by blood or adoption) but only if the spouse’s or unmarried children’s visa statuses are derived from and dependent on the exempt individual’s visa classification.

Unmarried children are included only if they:

Are under 21 years of age,

Reside regularly in the exempt individual’s household, and

Are not members of another household.

You will not be an exempt individual as a teacher or trainee  if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. However, this rule may not be applicable in following conditions.

  • You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years,
  • A foreign employer paid all of your compensation during 2015,
  • You were present in the United States as a teacher or trainee in any of the 6 prior years, and
  • A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee.

A foreign employer includes an office or place of business of an American entity in a foreign country or a U.S. possession.

When is a Student considered exempt Individual ?

A student is any individual who is temporarily in the United States on an “F,” “J,” “M,” or “Q” visa and who substantially complies with the requirements of that visa are considered exempt Individual . Also included are immediate family members of exempt students.

But , a student will not be an exempt individual  if you were exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you meet both of the following requirements.

  1. You establish that you do not intend to reside permanently in the United States.
  2. You have substantially complied with the requirements of your visa.

Professional athletes as Exempt Individual ?

A professional athlete who is temporarily in the United States to compete in a charitable sports event is an exempt individual. In figuring the days of presence in the United States, the individual athlete  can exclude only the days on which he actually competed in a sports event.

You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events.

Exemption on Medical Ground : File Form 8843

An alien  can exclude days present in the United States for purposes of the substantial presence test because you:

  • Were an exempt individual, or
  • Were unable to leave the United States because of a medical condition or medical problem.

Form 8843 must be filed by exempt individual  who claim to exclude days on medical grounds from substantial presence test

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