A U.S. person for tax purposes is anyone the IRS treats as subject to American tax on their worldwide income. Federal law puts five groups inside that label: U.S. citizens, resident aliens, domestic partnerships, domestic corporations, and certain trusts and estates.1Office of the Law Revision Counsel. 26 USC 7701 – Definitions The classification decides which forms you file, whether you owe U.S. tax on income earned abroad, and whether you face some of the harshest penalties in the tax code for not disclosing foreign accounts.
Citizens and Green Card Holders
Every U.S. citizen is a U.S. person. Where you live, where you earn, and whether you also hold another passport are all beside the point. If you were born in the United States or naturalized, you owe U.S. tax on your worldwide income for as long as you remain a citizen.
Dual citizens often assume they only owe tax where they actually live and work. They don’t. The IRS requires all citizens living abroad to file annual returns reporting worldwide income, no matter how long they have been overseas.2Internal Revenue Service. Frequently Asked Questions About International Individual Tax Matters The foreign earned income exclusion and the foreign tax credit can reduce or eliminate double taxation, but the filing obligation itself does not lapse on its own.
Lawful permanent residents are U.S. persons too. Your resident status begins the first day you are present in the country with a green card and continues until it is formally surrendered in writing to USCIS, administratively terminated, or judicially revoked by a federal court.3Internal Revenue Service. US Tax Residency – Green Card Test Years abroad don’t end it. A valid green card keeps you in the worldwide-income net even if you spend eleven months a year in another country.
How Visitors Become U.S. Persons: The Substantial Presence Test
Citizenship and a green card are not the only routes in. Spend enough time in the country and the IRS classifies you as a resident alien through a day-counting formula called the substantial presence test. You meet it for a given calendar year if you were physically present at least 31 days that year and a weighted three-year count reaches 183 or more.4Office of the Law Revision Counsel. 26 USC 7701 – Definitions
The weighting: each day in the current year counts as one full day, each day in the year before counts as one-third, and each day two years back counts as one-sixth. Add the weighted totals. If the sum reaches 183 and you cleared 31 days in the current year, you are taxed as a resident alien on your worldwide income.
Someone spending 120 days in the United States each year for three straight years lands at 180 weighted days (120 + 40 + 20) and just clears the line. Push the annual stay to 125 days and the total crosses 183.
Exceptions That Keep You Off the Roll
Several exceptions let people who trip the day count avoid U.S. person status. They matter because crossing 183 unaware could put you on the hook for a full U.S. tax return you never expected.
Exempt Individuals
Foreign government employees and diplomats on A or G visas, along with full-time employees of international organizations, do not count their days at all.5Internal Revenue Service. Exempt Individuals – Foreign Government-Related Individuals Students on F, J, M, or Q visas also get an exemption, but it has a shelf life. Once you have been exempt as a student, teacher, trainee, or exchange visitor for any part of more than five calendar years, the exemption expires unless you can show the IRS you don’t intend to stay permanently and have complied with your visa’s terms.6Internal Revenue Service. Exempt Individual – Who Is a Student Claiming the exemption requires filing Form 8843.
Closer Connection to a Foreign Country
If you were in the United States fewer than 183 days in the current year but still trip the weighted formula, you can avoid resident alien status by showing a closer connection to a foreign country. You must have kept a tax home there for the entire year, and your personal and economic ties to that country must outweigh your ties here.7Internal Revenue Service. Closer Connection Exception to the Substantial Presence Test The IRS weighs where your permanent home is, where your family lives, where you hold a driver’s license and bank accounts, and where you vote. One fact kills the exception: an application for a green card, or a pending adjustment of status, blocks any closer-connection claim. The form is 8840.
Medical Condition
Days you couldn’t leave because of a medical condition that arose after you arrived can be excluded from the count, with a physician’s certification that you were unable to travel. Days do not qualify if you came to the country for medical treatment, if the condition existed before you arrived, or if you recovered enough to leave and stayed beyond a reasonable window for arranging departure.8Internal Revenue Service. Form 8843 – Statement for Exempt Individuals and Individuals With a Medical Condition
Tax Treaty Tie-Breakers
When you qualify as a tax resident of both the United States and a treaty country, the treaty’s tie-breaker provision assigns you to just one. The tests run in a fixed order: permanent home, then center of vital interests, then habitual abode, then nationality, stopping at the first that resolves the question.9Internal Revenue Service. Determining an Individual’s Residency for Treaty Purposes
There is a catch for citizens. Most treaties include a savings clause preserving each country’s right to tax its own citizens as if the treaty did not exist, so U.S. citizens generally cannot use treaty provisions to reduce their American tax bill, with narrow exceptions for specific income types.10Internal Revenue Service. Tax Treaties Can Affect Your Income Tax Anyone taking a treaty-based position on a return must disclose it on Form 8833.11Internal Revenue Service. About Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
Domestic Corporations, Partnerships, and LLCs
The label extends to business entities. Any corporation or partnership created or organized in the United States, or under the law of any state, is a domestic entity and therefore a U.S. person.1Office of the Law Revision Counsel. 26 USC 7701 – Definitions The nationality of the owners is irrelevant. A Delaware corporation with entirely foreign shareholders is still a domestic corporation because the entity was organized under Delaware law.
Single-member LLCs cause confusion. For federal income tax purposes, a single-member LLC is a disregarded entity unless it files Form 8832 to elect corporate treatment. Income and deductions flow through to the owner’s return, and the LLC uses the owner’s taxpayer identification number for income tax reporting.12Internal Revenue Service. Single Member Limited Liability Companies The entity is still organized domestically and subject to U.S. reporting rules, but it isn’t a separate taxpayer.
Domestic entities provide Form W-9 to payers, certifying U.S. status and giving a taxpayer identification number. Without a valid W-9, the payer must withhold 24% of reportable payments as backup withholding.13Internal Revenue Service. Instructions for the Requester of Form W-9
Estates and Trusts
An estate is a U.S. person unless it meets the definition of a foreign estate, which generally means an estate whose non-U.S.-source income unconnected to a U.S. business is excluded from gross income. Most estates of U.S. citizens and residents sit on the domestic side.
Trusts must pass two tests at once to count as domestic. A U.S. court must be able to exercise primary supervision over the trust’s administration (the court test), and one or more U.S. persons must have authority to control all substantial decisions of the trust, such as making distributions, selecting beneficiaries, and deciding whether to terminate the trust (the control test).1Office of the Law Revision Counsel. 26 USC 7701 – Definitions Fail either and the trust is foreign, which triggers a different and more punishing set of reporting rules.
What Being a U.S. Person Actually Requires
Worldwide income is the headline: U.S. persons file returns reporting income from every source, wherever earned. Layered on top is a set of foreign-asset disclosures with steep penalties for missing them.
FBAR (FinCEN Form 114)
If you have a financial interest in or signature authority over foreign financial accounts whose combined value exceeds $10,000 at any point in the year, you must file the FBAR electronically with FinCEN. The statutory penalty for a non-willful failure started at $10,000 per violation and, with inflation adjustments, now runs above $16,500 per account, per year. Willful failures carry the greater of roughly $100,000 (also inflation-adjusted) or 50% of the account balance at the time of the violation.14Internal Revenue Service. 4.26.7 Bank Secrecy Act Penalties A willful violation on an account holding $500,000 can generate a $250,000 penalty for one year.
FATCA (Form 8938)
FATCA adds a separate reporting layer. U.S. persons with specified foreign financial assets above certain thresholds must file Form 8938 with the tax return. Unmarried filers in the United States hit the trigger at $50,000 on the last day of the year or $75,000 at any point during the year; joint filers, $100,000 and $150,000.15Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets Thresholds are much higher abroad: $200,000 and $300,000 for single filers, $400,000 and $600,000 for joint filers. Failing to file draws a $10,000 penalty plus $10,000 for each 30-day period the failure continues after an IRS notice, up to an additional $50,000.16Internal Revenue Service. Instructions for Form 8938
Foreign Entity and Foreign Trust Reporting
Interests in foreign corporations bring Form 5471; interests in foreign partnerships, Form 8865. Missing either draws $10,000 per form, per year, with $10,000 per 30-day continuation penalties (up to $50,000 more) after an IRS notice goes unanswered for 90 days.17Internal Revenue Service. Instructions for Form 5471 Transactions with, distributions from, or ownership of foreign trusts require Form 3520. The initial penalty for unreported contributions to a foreign trust is the greater of $10,000 or 35% of the amount not reported; for unreported ownership, the greater of $10,000 or 5% of the trust’s total assets.18Internal Revenue Service. International Information Reporting Penalties
How U.S. Person Status Ends
For citizens, the only exit is formal renunciation. For long-term green card holders (those who held the card in at least 8 of the last 15 tax years), the equivalent is officially abandoning permanent resident status. Either path requires Form 8854 to certify compliance with all federal tax obligations for the five years before expatriation.19Internal Revenue Service. Instructions for Form 8854 – Initial and Annual Expatriation Statement
The IRS imposes an exit tax on anyone it classifies as a covered expatriate. You become one if any of these is true: your average annual net income tax liability for the five preceding years exceeds an inflation-adjusted threshold ($206,000 for 2025; roughly $211,000 for 2026), your net worth is $2 million or more on the expatriation date, or you fail to certify tax compliance on Form 8854.20Internal Revenue Service. Expatriation Tax The third trigger catches people. Skipping the certification alone makes you a covered expatriate, no matter your income or net worth.
Covered expatriates are treated as if they sold all their worldwide assets at fair market value the day before expatriation. The resulting gain is taxed at regular capital gains rates, with an inflation-adjusted exclusion ($890,000 for 2025) sheltering a portion. Failing to file the required annual expatriation statement under Section 6039G carries a separate $10,000 penalty per year.21Office of the Law Revision Counsel. 26 USC 6039G – Information on Individuals Losing United States Citizenship