Stranded In The US Due To Travel Restrictions – Can The IRS Tax B1/B2 Visitor Visa Holders?

Posted on July 30, 2021
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Many travelers to the U.S. are stranded in the U.S. due to the travel restrictions imposed during the pandemic. This raises concerns regarding taxation rules in the U.S. that might impact temporary visitors on B2 visas and non-resident aliens. According to the U.S. immigration law, most visitors coming to the U.S. are not permitted to work here. The IRS Publication 513 Tax Information for Visitors to the USA outlines the norms under which a visitor to the U.S. may be taxed under certain circumstances.

What Is The Double Taxation Avoidance Agreement?

According to the Double taxation avoidance agreement (DTAA), IRS allows to take into account the taxes paid in one country when calculating the tax liability in the other country. For example, the governments of the U.S. and India entered into a double taxation avoidance agreement. 

These tax treaties with the visitor’s home country helps determine whether he will be taxed in the U.S. during his visit or can avoid the double taxation in both his home country as well as in the U.S. 

Related Read: More Information On DTAA 

Please note: While temporary visitors to the U.S. are not allowed to work in the U.S. or earn any other form of income through business, etc., your stay here can make you liable for taxes. Always consult with a U.S. tax advisor if you have been stranded in the U.S. due to unforeseen circumstances.

The visitor is considered non-resident alien, unless he satisfies one of the following two tests – 

  1. Green Card test – A test that determines U.S. residency status, or
  2. Substantial Presence test – A test based on numerical formula, which measure the days you are present in the U.S.

The IRS uses the 183-days benchmark to determine if a visitor should be considered resident for taxation purposes. This requirement is met if the visitor has been physically present in the U.S. for at least 31 days during the current year and for 183 days in total in both the current year as well as the two years immediately preceding it.

Related Read: THIS Is How NRI’s Benefitted From Tax Relief This Year

To calculate substantial presence in the U.S., and therefore taxable, the following formula is applied to arrive at the 183 benchmark – 

  • All of the days present during the current year which is more than 31 days

+

  • One-third of the days present during the previous year

+

  • One-sixth of the days present two years previously.

Related Read: How to Report Foreign Earned Income on your US Tax Return

Who Must File an Income Tax Return In The U.S?

As long as your visit to the U.S. is temporary and you receive no income from any venture in the U.S. or associated sources, you do not have to file a U.S. income tax return.

Related Read: Indian Income Tax Act Redefines NRI Status

As for non-resident aliens, if you are engaged in a trade or business while in the U.S. you must file a U.S.  the following circumstances are considered to be a trade or business that can be taxable – 

  1. Perform personal services as an employee of or under a contract with a non-resident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the U.S.; 
  2. Perform work for an office or place of business maintained in a foreign country or possession of the U.S. by a USA corporation, a USA partnership, or a USA citizen or resident;
  3. You perform these services while you are a non-resident alien temporarily present in the USA for a period or periods of not more than a total of 90 days during the tax year;

Related Read: Complete NRI Guide To File Taxes In The U.S

What Income Will You Be Taxed On?

Non-resident aliens can be taxed on income from the following U.S. sources (this is just the basic, not the entire taxable income structure) – 

  • Wages, salaries, commissions, fees, tips, etc., for services performed in the U.S.
  • Gains and losses from the sale of certain real estate property.
  • Interest (with certain exceptions) and dividends received, in the U.S.
  • Rents and royalties earned when in the U.S.
  • Profits or losses earned from the sale of any kind of merchandise within the U.S. 

Whatever be your situation, it is important to consult with a professional tax accountant or a U.S. tax attorney to ensure that you are covered and are not endangered by any U.S. tax liabilities due to your extended stay in the U.S. during the pandemic.

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