How the IRS Defines and Verifies Tax Residency

How the IRS defines and verifies tax residency

Tax residency determines which U.S. tax rules apply to you — primarily whether you must report worldwide income to the IRS (resident status) or only U.S.-source income (nonresident status). The IRS uses two bright-line tests (the Green Card Test and the Substantial Presence Test) and a set of exceptions and special rules. It then verifies residency through immigration data, employer and payer reports, tax returns, and documentation you file when claiming exemptions.

Below is a practical, up-to-date guide (2025) explaining the tests, common exceptions, how the IRS checks residency, and what to keep in your files.

The two primary tests

• Green Card Test (resident by immigration status)

• If you are a lawful permanent resident (you hold a green card) at any time during the calendar year, you are a U.S. resident for tax purposes for that year. This is a binary test — possession of lawful permanent residency triggers resident status unless you have officially surrendered or lost your green card.

• IRS reference: see “Green Card Test” guidance at the IRS site (Alien tax residency definition).

• Substantial Presence Test (resident by days physically present)

• You meet this test and are treated as a U.S. resident if:

  1. You are physically present in the U.S. for at least 31 days during the current year, and
  2. The total of: all days present in the current year + 1/3 of days in the prior year + 1/6 of days in the year before that equals 183 days or more.

• Example: If you were in the U.S. 120 days this year, 150 last year, and 90 the year before, your count is 120 + (150/3) + (90/6) = 120 + 50 + 15 = 185 days — you meet the test and are a resident for tax purposes.

• IRS reference: see the Substantial Presence Test page for details and lists of “exempt individuals.” (IRS)

Common exceptions and special rules

• Exempt individuals: Certain people do not count days of presence toward the Substantial Presence Test. Typical categories include: students on F, J, M, or Q visas (who meet conditions), certain teachers/trainees, and some diplomats or foreign government-related individuals. The IRS lists categories and the documentation required on the Substantial Presence Test page.
• Closer connection exception: Nonresidents who meet the day-count test may still avoid residency if they have a closer connection to a foreign country and meet other conditions; they normally file Form 8840 (Closer Connection Exception Statement for Aliens). See IRS guidance for the Closer Connection Exception.
• First-year and dual-status rules: You can be a dual-status alien in the year you arrive or depart. Special rules determine the portion of the year when you are treated as a resident and when as a nonresident.

Who’s affected and typical filing forms

• Resident aliens: Generally file Form 1040 and report worldwide income. If you have foreign accounts, you may also have FBAR (FinCEN Form 114) and Form 8938 reporting requirements.
• Nonresident aliens: Generally file Form 1040-NR to report U.S.-source income and claim treaty benefits where applicable.
• Exempt individuals: May still need to file Form 8843 even if they have no U.S. income (e.g., many students).
• ITINs and SSNs: Non-U.S. persons who need to file must obtain an ITIN (Form W-7) or SSN; the IRS uses those identifiers to match records.

How the IRS verifies residency

The IRS does not rely on a single source. Verification commonly uses a combination of:

• Immigration and border records: I‑94 arrival/departure records, passport stamps, and visa issuance/termination can be used to calculate days present. U.S. Customs and Border Protection (CBP) and Department of Homeland Security (DHS) data are accessible to the IRS for compliance purposes.
• Third-party wage and income reporting: Employers file Forms W‑2; payers file Forms 1099. These feeds let the IRS confirm employment dates and income sources.
• Tax filings and supporting forms: The IRS reviews Form 1040, 1040-NR, Form 8840, Form 8843, W‑7, and supporting schedules where you claim exceptions, treaty benefits, or foreign tax credits.
• State and local records: State returns, driver’s license/address records, and property records can be used in residency audits, especially when state and federal residency differ.
• Bank and travel records: Bank statements, lease agreements, airline itineraries, and passport pages are often requested in audits or information requests.
• Matching and automated checks: The IRS uses automated cross-checks (matching employer reports to return data) and may send notices (e.g., CP2000) when mismatches occur.

When the IRS has questions about residency, it typically issues a written request for documentation before moving to audit or assessment.

What the IRS examines in an audit of residency

In residency-focused examinations, IRS agents may request:

• Copies of passport pages (entry/exit stamps)
• I‑94 travel records or airline itineraries
• Hotel, rental, and utility records showing physical presence
• Employment contracts, paystubs, and W‑2 forms
• Immigration paperwork (visa type, green card information, Form I‑551)
• Tax treaty documents or Forms 8233/1042‑S if claiming treaty benefits

The IRS evaluates both the numeric day test and the taxpayer’s intent and ties: family, home, business, and economic center.

Real-world scenarios and consequences

• Accidental residency: A short-term contractor who travels frequently may unknowingly become a U.S. tax resident under the Substantial Presence Test. Result: obligation to file Form 1040, potential social security/Medicare withholding issues, and the need to report foreign-sourced income.
• Dual-status year: An individual arriving in July may be nonresident for the first half and resident for the second half of the year. Filing rules differ, and computing tax can be more complex.
• Treaty relief: Tax treaties may override residency rules for specific items or provide credits; however, treaty claims generally require a clear factual basis and documentation.

Practical documentation checklist

Keep at least three years of the following when you have cross-border activity:

• Passport pages showing U.S. entries/exits and I‑94 records
• Airline itineraries and boarding passes
• Lease agreements, mortgage statements, and utility bills
• Employers’ W‑2s, paystubs, and contract letters
• Copies of Forms 8840/8843/1040-NR/W‑7 if filed
• Records of days spent in the U.S. maintained in a simple spreadsheet or travel app

Professional tips

• Start tracking travel daily: Build a simple log (date, arrival time, departure time, purpose) and back it up with digital receipts.
• When in doubt, consult early: Residency rules affect filing status, deductions, and foreign tax credit options; correcting an error later can be more costly.
• Understand treaty provisions: If you claim a treaty, retain the underlying documents and the treaty article you rely on.
• Use the IRS worksheets: The Substantial Presence Test worksheet (available on the IRS website) helps you calculate day counts and identify exemptions.

Common mistakes to avoid

• Relying solely on passport stamps: Electronic I‑94 records and other evidence matter. Passport stamps can be absent or unclear.
• Forgetting to file required supplemental forms: Students and teachers often forget Form 8843, which can raise questions even without taxable income.
• Overlooking state residency triggers: State rules differ and can create filing obligations even when federal residency is not triggered — see our guide on State Tax Residency for more.

Further reading and internal resources

• For a deeper comparison of legal concepts, see our glossary entry: Residency vs. Domicile for Tax Purposes.
• If you’re an expatriate concerned about reporting foreign earnings, see: Tax Rules for Foreign Earned Income Exclusion: What Expats Must File.

Author note and professional disclaimer

I am a CPA with 15+ years advising individuals on cross-border tax issues and residency questions. In my practice, careful day-count records and early consultation often prevent costly filing errors. This article is educational and does not substitute for personalized tax advice. Tax rules and IRS procedures change; consult a qualified tax professional or the IRS directly for decisions affecting your situation.

Authoritative IRS sources (selected)

• IRS — Alien Tax Residency Definition (Green Card Test): https://www.irs.gov/businesses/international-businesses/alien-tax-residency-definition
• IRS — Substantial Presence Test: https://www.irs.gov/businesses/international-businesses/substantial-presence-test
• IRS — Form 8843: https://www.irs.gov/forms-pubs/about-form-8843
• IRS — Closer Connection Exception (and Form 8840): https://www.irs.gov/individuals/international-taxpayers/closer-connection-exception

If you need help interpreting your travel history or whether you meet the tests, keep your records handy and contact a CPA or enrolled agent with international tax experience.