A dual-status taxpayer is someone who is classified as both a nonresident alien and a resident alien during the same tax year. Oftentimes, dual status happens when a person moves to the U.S. partway through the year, and it can make the tax filing process more complex. Dual status typically results from acquiring or giving up a Green Card, entering or leaving the U.S. on a visa, or certain expatriation problems. As a foreign national, you may be taxed in one of three ways: as a non-resident alien, a resident alien, or a dual-status alien. If you hold both statuses within a single year, you will need to file a dual–status tax return.
Who qualifies as a dual-status taxpayer
To qualify as a dual-status taxpayer, you must meet the requirements for the substantial presence test or green card test. If you don’t quite qualify for either requirement, the first-year choice is an option for a foreign national who comes to the U.S. and want to elect residency for tax purposes in their initial year. Note that dual-status does not refer to your citizenship; it’s only in reference to your resident status specifically for tax purposes in the U.S.
Maintaining two statuses at different times means the dual-status tax year has to be split into two parts—one for the resident part of the year and another for the non-resident part.
- Part one: resident alien – For the part of the year when you are a resident alien, filing taxes is similar to that of a U.S. citizen, in that you are taxed on worldwide income—income from all sources. So, if you receive income from another country, it is still taxable.
- Part two: nonresident alien – For the part of the year when you are a nonresident alien, you are taxed only on the income you receive from U.S. sources.
Understanding the IRS restrictions for filing dual-status tax returns
It’s important to know which credits and deductions apply to you and your dual-status return so you can utilize the benefits and understand any restrictions. For example, when using Form 1040, you can’t take the standard deduction, but you can itemize certain allowable deductions. The following restriction apply for filing dual-status tax returns:
- You cannot use the standard deduction on Form 1040, but you can itemize certain allowable deductions.
- You cannot claim a personal exemption deduction for yourself, your spouse, or your dependents.
- You can only file a joint return. if you are married to a U.S. citizen or resident.
- If you’re a nonresident married to a U.S. citizen or resident and don’t file jointly, use the Tax Table or Tax Rate Schedule for married filing separately.
- Nonresidents married to a U.S. citizen or resident cannot claim the Earned Income Credit, credit for the elderly or disabled, or education credits unless they choose to be taxed as residents jointly with their spouse.
Electing to file jointly as married couple
If you’re a dual-status alien married to a U.S. citizen or resident alien, you may choose to treat the nonresident spouse as a U.S. resident for tax purposes by filing a joint return. This choice means you’ll be treated as a resident alien the entire year, and your worldwide income will be subject to U.S. reporting for the entire tax year. While this may cause you to lose eligibility for certain tax treaty benefits available to foreign residents, it also opens the door to valuable advantages, like claiming the standard deduction and qualifying for various tax credits. These benefits can significantly reduce your overall tax liability.
You can choose to do this if all the following apply:
- You are a nonresident alien at the beginning of the year,
- A resident alien or U.S. citizen at the end of the year,
- You are married to a U.S. citizen or resident alien at the end of the year, and
- You and your spouse make the choice together with both signatures.
How to file dual-status tax return
How you file your taxes depends on which parts of the year you held each status. You’ll need to complete two forms as part of your return, and both must include your name, address, and taxpayer identification number (TIN).
- If you’re a resident alien at the end of the year, you’ll file Form 1040 as your main return. Write “Dual-Status Return” at the top. You’ll also attach Form 1040-NR as a statement showing your U.S. income during the nonresident portion of the year, labeled “Dual-Status Statement.”
- If you’re a nonresident alien at the end of the year, the process is reversed. You’ll file Form 1040-NR as your main return with “Dual-Status Return” written at the top, and attach Form 1040 as the statement, marked “Dual-Status Statement.”
Keep in mind that dual-status returns cannot be e-filed. However, you can still fill them out digitally, print them, and mail them to the IRS.
When to file a dual-status tax return
If you’re a resident alien on the last day of your tax year, your tax return is generally due by April 15 of the following year. If you’re living abroad, you may qualify for an automatic two-month extension to file, moving your deadline to June 15 – but remember that any taxes you owe are still due by April 15 to avoid interest. On the other hand, if you are a nonresident alien on the last day of your tax year, your filing deadline may also be June 15 instead of April 15.
