{"id":33,"date":"2017-10-20T02:50:26","date_gmt":"2017-10-20T02:50:26","guid":{"rendered":"http:\/\/www.irstaxapp.com\/?p=33"},"modified":"2020-07-15T05:08:16","modified_gmt":"2020-07-15T05:08:16","slug":"what-is-first-year-choice-for-tax","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/","title":{"rendered":"First Year Choice for tax residency under US Tax Law Simplified !"},"content":{"rendered":"\n<p>First-year choice is a great option for a nonresident alien! The tax residency law under the Internal Revenue Code ( US Code 26 ) is provided in <a rel=\"noopener noreferrer\" href=\"https:\/\/www.irstaxapp.com\/internal-revenue-code-or-title-26-of-us-code\/us-code-7701-b-definition-of-resident-alien-and-nonresident-alien\/\" target=\"_blank\">I.R.C. \u00a7 7701(b)<\/a>. \u00a0A non-US citizen is called an alien. Every alien will have to take\u00a0substantial presence test in\u00a0order to determine if he\/she is tax resident of USA . In general, a nonresident alien individual who  do not meet either the Substantial Presence Test or the Green Card Test, is ordinarily not considered U.S. resident. However, by an election under IRC<br>\u00a7 7701(b)(4), commonly referred to as the \u201cFirst-Year Election\u201d. however, an individual can be considered U.S. tax resident aliens for at least part of the tax year, as opposed to being considered a nonresident alien for the entire taxable year.<br><\/p>\n\n\n\n<!--more-->\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_62 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662d9be8bd1c3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-662d9be8bd1c3\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#What_is_First_Year_Choice\" title=\"What is First Year Choice?\">What is First Year Choice?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#What_are_the_criteria_for_First_Year_Choice\" title=\"What are the criteria for First Year Choice?\">What are the criteria for First Year Choice?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#What_is_the_5_days_Relaxation\" title=\"What is the 5 days Relaxation?\">What is the 5 days Relaxation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#What_Days_of_Presence_in_USA_Not_Counted_for_First_Year_Choice\" title=\"What Days of Presence in USA Not Counted for First Year Choice?\">What Days of Presence in USA Not Counted for First Year Choice?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#What_is_the_starting_day_of_tax_residency_in_case_of_first_year_choice\" title=\"What is the starting day of tax residency in case of first year choice?\">What is the starting day of tax residency in case of first year choice?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax\/#First_year_choice_statement\" title=\"First year choice statement \">First year choice statement <\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_First_Year_Choice\"><\/span>What is First Year Choice?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><a href=\"https:\/\/www.irstaxapp.com\/what-is-first-year-choice-for-tax-residency-under-us-tax-law\/what-is-first-year-choice\/\" rel=\"attachment wp-att-40\"><img decoding=\"async\" src=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2016\/02\/What-is-First-Year-Choice-300x169-1.jpg\" alt=\"First Year Choice \" class=\"wp-image-40\" title=\"\"><\/a><\/figure><\/div>\n\n\n\n<p>In simple terms, a first-year choice is for a person to chose another year as tax residency than the year in which he actually passed Substantial Presence Test. So , if you passed substantial presence test for Calendar Year 2019, if it benefits you and you fulfill the conditions, you can actually become tax residence in the calendar year 2018 .<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_criteria_for_First_Year_Choice\"><\/span>What are the criteria for First Year Choice?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Criteria are :<\/h3>\n\n\n\n<ol><li>You must pass <a href=\"https:\/\/www.irstaxapp.com\/use-substantial-presence-test-calculator\/\">substantial Presence Test<\/a> for a year . Say you want to test for tax year 2020.<\/li><li>Then , just before that year i.e 2020 , you must be physically present in USA for 31 days at a stretch.<\/li><li>After the first day when the 31st day starts, you must be present for at least 75% of all the days between the first date and the last date of the calendar year 2019 .<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_5_days_Relaxation\"><\/span>What is the 5 days Relaxation?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For first year choice , the counting of 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2018 ( example year) is done. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States. <strong>In other words, even if you were not in USA , upto 5 days you can actually count as present.<\/strong> <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Days_of_Presence_in_USA_Not_Counted_for_First_Year_Choice\"><\/span>What Days of Presence in USA Not Counted for First Year Choice?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While computing 31 days or second conditions of 75% (conditions for making first year choice ) ,you should  not count the following as days of presence in the United States .<\/p>\n\n\n\n<ul><li>Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico.<\/li><li>Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States.<\/li><li>Days you are in the United States as a crew member of a foreign vessel.<\/li><li>Days you are unable to leave the United States because of a medical condition that arose while you are in the United States.<\/li><li>Days you are in the United States under a NATO visa as a member of a force or civilian component to NATO. However, this exception does not apply to an immediate family member who is present in the United States under a NATO visa. A dependent family member must count every day of presence for purposes of the substantial presence test.<\/li><li>Days you are an exempt individual.<\/li><\/ul>\n\n\n\n<p>Read <a href=\"https:\/\/www.irstaxapp.com\/exempt-days-tax-residency-usa-law\/\">FAQs on exempt days for tax residency<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_starting_day_of_tax_residency_in_case_of_first_year_choice\"><\/span>What is the starting day of tax residency in case of first year choice?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Your residency starting date for 2019 is the <\/p>\n\n\n\n<ul><li>First day of the earliest 31-day period  that you use to qualify for the choice. You are treated as a U.S. resident for the rest of the year. <\/li><li>If you are present for more than one 31-day period blocks and you satisfy condition of 75% of presence as described above, your residency starting date is the first day of the first 31-day period. <\/li><li>If you are present for more than one 31-day period blocks but you satisfy condition of 75 %  above only for a later 31-day period, your residency starting date is the first day of the later 31-day period<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Examples for First Year Choice <\/h3>\n\n\n\n<h4 class=\"wp-block-heading\">I was in USA for two 31 days block &#8211; one starts from 05\/01\/2019 to 06\/10\/2019 and then 11\/01\/2019 to 5th Dec. 2019. Which block can I adopt?<\/h4>\n\n\n\n<p>Anyone you can take. But counting of 75% of days will start from that date.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">In the above example, which will be the first date from when my tax residency start if I desire to opt for First Year Choice?<\/h4>\n\n\n\n<p>The first day of any block you desire can be chosen, provided <strong>you pass the 75% presence test.<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">What else is required If I opt for a Calendar Year as First Year Choice tax residency?<\/h4>\n\n\n\n<p>You must attach a statement to Form 1040 to make the first-year choice say , for 2018. The statement must contain your name and address and specify the following.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">If I desire to have Calendar Year 2018 as First Year Choice, is there a time limit within which I must pass Substantial Presence Test for Calendar Year 2019?<\/h4>\n\n\n\n<p>The general rule is that you must pass Substantial Presence Test by 15th April . But you can apply for the extension of filing <a href=\"https:\/\/www.irstaxapp.com\/irs-1040-form-15-reasons-for-filing-it\/\">Form 1040<\/a>. Please talk to you tax lawyer in this regard.You can read <strong><a href=\"https:\/\/www.irs.gov\/forms-pubs\/about-publication-519\" target=\"_blank\" rel=\"noopener\">Publication 519<\/a> <\/strong>on this<\/p>\n\n\n\n<p>If you fulfill the conditions, <strong><em>you can opt for the calendar year 2019 as<\/em><\/strong> <a href=\"https:\/\/www.irstaxapp.com\/how-to-find-if-you-are-tax-resident-of-usa\/\">tax residency <\/a>year instead of year 2020, if that is what suits you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"First_year_choice_statement\"><\/span>First year choice statement <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You must attach a first year choice statement to tax Form 1040 to declare the first-year choice for the current year. The statement must contain the following:<\/p>\n\n\n\n<ul><li>Your Name and address<\/li><li>That you are making the first-year choice for the current year.<\/li><li>That you were not a U.S. resident in the prior year.<\/li><li>That you are a U.S. resident under the substantial presence test in the following year.<\/li><li>The number of days of presence in the U.S. during the following year.<\/li><li>The date or dates of your 31-day period of presence and the period of continuous presence in the U.S. during the current year.<\/li><li>The date or dates of absence from the U.S. during the current year (that you are treating as days of presence under the first-year choice \u2013 see (2), above).<\/li><\/ul>\n\n\n\n<p style=\"background-color:#f1d589\" class=\"has-background\"><strong>Once you make the first-year choice, you may not revoke it without the approval of the Internal Revenue Service.<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><span style=\"border-radius: 2px; text-indent: 20px; width: auto; padding: 0px 4px 0px 0px; text-align: center; font: bold 11px\/20px 'Helvetica Neue',Helvetica,sans-serif; color: #ffffff; background: #bd081c no-repeat scroll 3px 50% \/ 14px 14px; position: absolute; opacity: 1; z-index: 8675309; display: none; cursor: pointer;\">Save<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>First-year choice is a great option for a nonresident alien! The tax residency law under the Internal Revenue Code ( US Code 26 ) is provided in I.R.C. \u00a7 7701(b). \u00a0A non-US citizen is called an alien. Every alien will have to take\u00a0substantial presence test in\u00a0order to determine if he\/she is tax resident of USA [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":40,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[6],"tags":[273,275,289,274,290,115,272,291],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/33"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=33"}],"version-history":[{"count":0,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/33\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/40"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=33"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=33"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=33"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}