Resident Aliens in the United States | Avoidance of Double Taxation With Respect to Taxes on Income Earned in the U.S.

By:  Coleman Jackson, Attorney, CPA
April 01, 2015

“Resident aliens” are individuals who are permanent residents of the United States pursuant to 26 U.S.C.S. §7701(b)(1).  They must pay U.S. income taxes on their income earned in the United States.  That means that they have to include, such earnings, as wages and compensation for services in their gross income.

However, a resident alien may exclude from gross income for U.S. tax purposes their income received as an employee of a foreign government or international organization pursuant to 26 U.S.C.S. §893.  But this exemption can be waived by a resident alien; and it must be waived by an alien seeking adjustment of status to lawful permanent resident (Green Card Status).  Thus a resident alien residing in the U.S. could be subject to double taxation (in the country of their citizenship and in the United States) on their income earned from a foreign government or international organization.  The exact impact of waiving the §893 tax exemption could be modified by a double taxation avoidance treaty between the U.S. and the resident alien’s country of citizenship.  That could depend upon the exact wording of the treaty.

To waive the Internal Revenue Code §893 tax exemption, the resident alien must file USCIS Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities under Section 247(b) of the Immigration and Nationality Act (INA).  Form I-508 is filed by persons whose occupational status entitles them to nonimmigrant in A, G or E status who are seeking to apply for adjustment of status as permanent residents who are working as a Government Official, Treaty Trader or Treaty Investor, or International Organization.  Once Form I-508 is filed, the permanent resident alien is no longer exempt from U.S. taxes on their income received from a foreign government or international organization.  Therefore, beware of double taxation possibilities when filing Form I-508.  Again the 26 U.S.C.S. §893 tax waiver do not exempt  income earned in the U.S. that is received by the resident alien after Form  I-508 is filed under INA 247(b) of the Immigration and Nationality Act.  See Ying v. Commissioner, 99 T.C. 273, 293 (1992).

This tax blog is written by the Tax & Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel with respect to your particular set of circumstances.

Coleman Jackson, P.C. | Immigration & Tax Law Firm | www.cjacksonlaw.com | (214) 599-0431