Exempt individuals are certain types of Individuals ,whose physical presence in the USA , is not counted for tax residency purposes. In an earlier article on tax residency, readers were informed that a substantial presence test determines a person’s tax residency.
It was also stressed that certain physical presence days are not counted for determining the tax residency under the Internal Revenue Code (IRC). Apart from exempt days, U.S. tax law also provides that the number of days of the presence of certain individuals may not count for determining the number of days of substantial presence in the USA.This benefit is allowed to a very limited number of persons referred to as exempt Individuals.
Who are Exempt Individuals?
Here is a list of persons who are regarded as exempt Individuals, i.e. their presence may not be counted for the number of days. They are considered exempt individuals.
(i) Government Related Individuals
- 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 the USA as delegates for specific purposes.
- A teacher or trainee temporarily present in the United States under a “J” or “Q” visa who substantially complies with the visa requirements.
- 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.
- 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 the United States recognizes,
- 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.
- The immediate family members 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.
Do household staff fall under exempt individuals?
The answer is negative.Anyone who is a personal employee, attendant, or domestic worker for either a foreign government or international organization official/is not considered a foreign government-related individual. So, his/her presence will count all your days of presence in the United States for the substantial presence test.
(ii) Teachers and trainees
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.
What about family members of teachers & trainees?
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 the following conditions.
- You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the six preceding calendar years,
- A foreign employer paid all of your compensation in 2015,
- You were present in the United States as a teacher or trainee in any of the six prior years, and
- A foreign employer paid all of your compensation during each of the preceding six years you were present in the United States as a teacher or trainee.
A foreign employer includes an American entity’s office or place of business in a foreign country or a U.S. possession.
(iii) Student of US university ?
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. They are considered exempt individuals. Also included are immediate family members of exempt students.
However, a student will not be an exempt individual if he/she was exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you meet both of the following requirements.
- You establish that you do not intend to reside permanently in the United States.
- You have substantially complied with the requirements of your visa.
(iv) Professional athletes as Exempt Individuals?
A professional athlete 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.
Medical grounds for Exempt Individual
This is an extra ordinary circumstance and 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 an exempt Individual who claims to exclude days on medical grounds from substantial presence test.
Have you tested `Tax Residency Calculator ?
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