What are Closer Connection Exceptions for Substantial Presence Test?

Closer Connection Exceptions

Closer connection exception provides a relief to a person who fulfills three years presence condition as provided under the substantial presence test but was not present in USA for 183 days . In such case, on account of Closer Connection Exception, he can claim to be non-resident alien in current year. in other words, even if one passes the substantial presence test , one can still be treated as a nonresident alien

What are conditions for claiming closer connection exception to SPT?

Closer Connection Exception to the Substantial Presence Test applies , if following conditions are fulfilled:

  • The individual must be present in the United States for less than 183 days during the year
  • he /she has a tax home in a foreign country during the year.
  • Have a closer connection during the year to one foreign country in which he/she has a tax home than to the United States.

How to demonstrate a closer connection to two countries?

You can demonstrate closer connection to at most two foreign countries if you fulfill all the following conditions:

  1. You have a tax home beginning on the first day of the year in one foreign country,
  2. You changed your tax home during the year to a second foreign country,
  3. You continued to maintain your tax home in the second foreign country for the rest of the year,
  4. You had a closer connection to each of those foreign countries than to the United States for the period during which you maintained a tax home in that foreign country, and
  5. You were subject to tax as a resident under the tax laws of either foreign country for the entire year or subject to tax as a resident in both foreign countries for the period during which you maintained a tax home in each foreign country.

How to prove a closer connection?

You will have to satisfy IRS that you actually have maintained more significant contacts with the foreign country than with the United States.This can be done by bring out following the facts and circumstances

  • Various forms and documents, you filed shows your foreign country as residence
  • The types of official forms and documents you file, such as Form W-9, Request for Taxpayer Identification Number and Certification, W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, or W-8ECI, Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States.
  • The evidence to support location of:
    • Your permanent home,
    • Your family,
    • Your personal belongings, such as cars, furniture, clothing, and jewelry,
    • Your current social, political, cultural, or religious affiliations,
    • Your business activities (other than those that constitute your tax home),
    • The jurisdiction in which you hold a driver’s license,
    • The jurisdiction in which you vote, and
    • Charitable organizations to which you contribute.

When are you not be eligible for the Closer Connection exception?

You cannot claim you have a closer connection to a foreign country if you tried to change your status to that of a Lawful Permanent Resident. In other words , if you filed any of following documents or you had an application pending for adjustment of status to Lawful Permanent Resident during the year, then your intent to become a Lawful Permanent Resident of the United States is deemed proven. In such a case,you may not be eligible for the Closer Connection Exception.

  • Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities
  • Form I-485, Application to Register Permanent Residence or Adjust Status
  • Form I-130, Petition for Alien Relative
  • Form I-140, Immigrant Petition for Alien Worker
  • Form ETA-750, Application for Alien Employment Certification
  • Form OF-230, Application for Immigrant Visa and Alien Registration

How to apply for the Closer Connection exception?

IRS provides Form 8840, Closer Connection Exception Statement for Aliens, that you must file with your tax return ,if you are filing a U.S. federal income tax return. However,if you do not have to file a U.S. federal income tax return, send Form 8840 to the Internal Revenue Service Center by the due date for filing the income tax return.

Filing Form 8840 with IRS within due date is obligatory if you desire to claim a closer connection exception to the substantial presence test.

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