If you’re wondering “What is a nonresident alien?” there’s a good chance you’re exploring the opening process for a US bank account for non-residents.
In this article, we’re going to share exactly what a nonresident alien is from a banking perspective and we will also be discussing how you can go about opening a US bank account without ever visiting the United States.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is a Nonresident Alien?
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
What Is a Nonresident Alien?
Nonresident alien is a term used by the IRS (Internal Revenue Service) to indicate that a foreign national has not passed the substantial presence test or green card test. That said, a nonresident alien can still be subject to taxation and filing requirements in the United States.
Variables impacting filing requirements for a nonresident alien include residency rules, visa status, immigration status, and generating taxable income at any point during the tax year. Taxable income in the United States can come from a wide range of sources, certain accounts generating high yields may fall into this category, so make sure you understand APY vs APR.
When nonresident aliens have filing obligations, they typically need to submit IRS Form 1040NR. Form 1040NR is the Nonresident Alien Income Tax Return and is the primary tax form that nonresident aliens submit to the IRS.
That said, not all nonresident aliens are treated equally. this is true both in terms of taxation but also in terms of banking options. Many e-wallets and transfer platforms restrict non-residents, such as Venmo transfer limits, or don’t let non-residents open accounts at all.
And, there is one unique group of individuals that requires special acknowledgment, which is international students. Generally speaking, international students are considered “nonresident aliens” for the first five years in the United States.
Of course, to determine whether or not you have filing requirements, and which filings you need to complete, you should speak with a qualified professional or CPA.
How Do I Know If I Am a Nonresident Alien?
To confirm if you are a nonresident alien, there are two specific tests that you should complete, which are the green card test and the substantial presence test.
The “green card test” asks whether or not you are a lawful permanent resident of the United States, a green card holder. If your answer is yes, you are not a nonresident alien instead you are a permanent resident.
The second test is the “substantial presence test” which asks whether you have stayed 31 days in the current year and a minimum of 183 days in total over the three preceding years using the IRS’s unique formula.
The “substantial presence test” formula requires you to count all of the days in the current year, one-third of the days from the prior year, and one-sixth of the days from two years prior.
While this form of calculating presence may seem confusing, it essentially boils down to never exceeding more than 120 days in the United States in a given year.
So, if you do not have permanent residency and you do not exceed more than 120 days per year in the United States as a foreign national, you are a nonresident alien.
Of course, if you still have questions about this, you should speak with a qualified professional to review your specific situation. This is especially important if you believe that you have tax filing requirements that you need to meet.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into what a nonresident alien is. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is an Example of a Nonresident Alien?
An example of a nonresident alien is anyone who does not pass the green card test or the substantial presence test, following the specific criteria set for both by the Internal Revenue Service (IRS).
What Is the Difference Between Resident Aliens and Nonresident Aliens?
The main difference between resident aliens and nonresident aliens is that resident aliens have the right to work and remain in the United States as permanent residents while nonresident aliens generally do not have a right to work or remain in the United States.
Ready to Open Accounts With Banks in the USA?
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