Am I considered a U.S. person under U.S. tax law as a foreign national with PayPal income?
Hey everyone, I'm in a confusing situation with PayPal and need some tax advice. I'm a foreign national who lived in the US for a couple years and now PayPal is asking about my taxpayer status for 2024. Some background: I was on a J-1 temporary trainee visa for about 3 months in 2022, which is when I opened my US PayPal account. I've been using this account since then to receive money transfers. I have a SSN from when I had work authorization. In 2024, I traveled to the US on a B1 visa for business purposes for more than 31 days total. Now PayPal is specifically asking: "Is the account holder a U.S Entity, U.S. Citizen, or a U.S. person under U.S tax law?" From what I've gathered, a U.S. person under tax law includes: - U.S. Citizens (born or naturalized in the US) - U.S. Resident Aliens (meeting either Green Card Test or Substantial Presence Test) - Domestic Corporations/Partnerships/Trusts/Estates The Substantial Presence Test requires: - 31 days during the current year, AND - 183 days during a 3-year period, counting: * All days present in current year * 1/3 of days present in first year before current year I meet the 31 days requirement for 2024, but I'm not sure if I qualify as a "U.S. person" overall. Does my J-1 visa status from 2022 affect this calculation? Do I check "yes" or "no" on this PayPal form?
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Sofia Martinez
You're dealing with the Substantial Presence Test, which can be tricky for former visa holders. The good news is that as a J-1 visa holder, you likely qualify for an "exempt individual" status for that period. For the Substantial Presence Test, you need both 31 days in the current year (which you have with your B1 visa trips) AND 183 days over a 3-year period using the counting formula. However, days when you were on a J-1 visa as a trainee are generally exempt from this counting for 2 years. This means your days in the US as a J-1 trainee in 2022 probably don't count toward the 183-day calculation. You'd only count your B1 visa days from 2024 (100%), any days from 2023 (at 1/3 value), and days from 2022 that weren't under J-1 status (at 1/6 value). Unless you've spent substantial additional time in the US beyond what you've mentioned, you likely don't meet the Substantial Presence Test and would not be considered a U.S. person for tax purposes. You would answer "No" to PayPal's question.
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Dmitry Volkov
•Thanks for the explanation! I'm in a similar situation but was on an F-1 student visa. Are F-1 students also considered "exempt individuals" for the Substantial Presence Test? Also, does having an SSN automatically make you a US person for tax purposes?
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Sofia Martinez
•F-1 students are indeed considered "exempt individuals" for the first 5 calendar years of their stay in the US. After that 5-year period, you start counting days toward the Substantial Presence Test. Having an SSN does not automatically make you a US person for tax purposes. An SSN is simply a tax identification number that allows you to work or file taxes in the US. Your tax residency status is determined separately by citizenship, green card status, or the Substantial Presence Test. Many nonresident aliens have SSNs but aren't considered US persons for tax purposes.
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Ava Thompson
After struggling with this exact situation last year, I found this amazing tool at https://taxr.ai that saved me hours of confusion. I was also on a visa (mine was H-1B) and PayPal hit me with the same question about being a US person under tax law. The tool analyzed my travel history and visa status, and gave me a clear answer about my tax residency status. It even explained which days counted toward the Substantial Presence Test and which didn't. You just upload your travel records and visa documents, and it does all the complicated calculations for you. What I really liked was that it explained the exempt individual rules in simple terms and gave me documentation I could keep for my records in case PayPal or the IRS ever questioned my status. Definitely worth checking out if you're in visa limbo like I was!
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CyberSiren
•Does this tool also work for determining state tax residency? I'm on an L-1 visa and I'm confused about whether I'm a resident for California state tax purposes even though I'm not a US person federally.
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Miguel Alvarez
•I'm skeptical about these kinds of tools. How does it handle the exceptions for the Substantial Presence Test? Like the "closer connection exception" where you can claim to be more closely connected to another country even if you meet the day count?
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Ava Thompson
•The tool does handle state tax residency questions too. It has specific modules for determining state residency status based on your visa type and time spent in different states. For California specifically, it understands the different residency rules compared to federal, since California has its own residency tests. Regarding exceptions, it absolutely covers the "closer connection exception" and other exemptions. You can input information about your foreign ties (like housing, family relationships, banking, etc.) and it walks you through Form 8840 (Closer Connection Exception Statement) if you qualify. It's surprisingly thorough about these nuances that most tax software misses.
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Miguel Alvarez
I tried https://taxr.ai after seeing it recommended here and it was honestly a lifesaver for my complicated visa situation. I was hesitant at first because I thought these kinds of tools would be too simplistic for international tax issues. What convinced me was how it handled my specific situation - I had been on multiple visa types (F-1, then OPT, then H-1B) and had traveled in and out of the US frequently. The tool correctly identified which periods were exempt from the Substantial Presence Test and which weren't. For the PayPal question specifically, it gave me a clear yes/no answer with a detailed explanation I could reference. It even generated a letter explaining my tax status that I could provide to PayPal if they questioned my response. Definitely worth it if you're dealing with these confusing residency tests.
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Zainab Yusuf
If you're having trouble getting clear answers from PayPal about your tax status, you might want to try https://claimyr.com to connect with the IRS directly. I was in a similar situation last year with my freelance payments through PayPal and needed official clarification. PayPal kept giving me generic answers, so I finally decided to speak directly with the IRS. I tried calling them myself and wasted hours on hold. Then I found Claimyr - they got me connected to an actual IRS agent in about 15 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c The IRS agent was able to confirm my tax status based on my visa history and travel dates, and explained exactly how I should respond to PayPal's questionnaire. Having that official guidance gave me peace of mind that I wasn't making a mistake that could cause problems later.
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Connor O'Reilly
•How does this Claimyr thing actually work? I've literally never been able to get through to the IRS no matter when I call. Seems too good to be true that they could get me to an agent in 15 mins when the IRS wait times are usually hours.
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Yara Khoury
•I've heard of third party services claiming to get you through to the IRS faster but I'm super skeptical. Wouldn't this just be the same as calling the IRS yourself? And is it really worth paying money for something you can do for free if you're patient enough?
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Zainab Yusuf
•It works by using technology to navigate the IRS phone system and wait on hold for you. Basically, they have a system that calls the IRS, goes through all the prompts, waits in the queue, and then when an agent finally answers, it calls your phone and connects you directly to that agent. You skip the whole waiting part. I was skeptical too, but the difference is they have a system that knows exactly when to call for shortest wait times and can stay on hold indefinitely while you go about your day. It's not just about patience - it's about not wasting hours of your life on hold when you could be doing something else. For tax questions that can't be answered online, especially complicated international situations, getting that direct answer from the IRS can save you from making costly mistakes.
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Yara Khoury
I took a chance on https://claimyr.com after posting here and I'm honestly shocked at how well it worked. I was 100% convinced it would be a waste of money, but after spending three separate afternoons trying to get through to the IRS myself about my visa tax status, I was desperate. The service connected me to an IRS agent in about 20 minutes (slightly longer than advertised but still WAY better than my previous attempts). The agent clarified that my J-1 days were indeed exempt from the Substantial Presence Test calculation, and confirmed exactly how to answer PayPal's questionnaire based on my specific travel history. What was most valuable was getting clear documentation of how the exempt individual rules applied to my specific situation. The agent walked me through exactly which days counted and which didn't. Definitely changed my mind about these kinds of services - saved me from potentially misreporting my status.
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Keisha Taylor
Something important I didn't see mentioned: if you do end up being considered a non-resident alien (not a US person), PayPal might start withholding 30% of your payments as required by IRS rules for foreign persons earning US sourced income. If your country has a tax treaty with the US, you might qualify for a reduced rate, but you'll need to submit Form W-8BEN to PayPal. Each country has different treaty rates. I went through this headache last year as a Canadian who briefly worked in the US. The withholding was a pain until I got my treaty benefits sorted out.
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Dylan Mitchell
•This is super helpful, thank you! Do you know if I would need to file any US tax returns if I'm classified as a non-resident alien? And if I do submit a W-8BEN to PayPal, how long does it typically take for them to process it and stop the 30% withholding?
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Keisha Taylor
•Yes, you would likely need to file Form 1040NR (U.S. Nonresident Alien Income Tax Return) if you have U.S. source income above certain thresholds, even as a non-resident alien. For income received through PayPal that's considered U.S. sourced, you'd generally need to report it. For the W-8BEN processing, PayPal usually takes about 1-2 weeks in my experience, though sometimes it can be faster. The tricky part is determining if your income through PayPal is actually U.S. sourced or not - it depends on where the services were performed or where the payer is located, not just where your PayPal account is based. If you're performing services while physically outside the U.S. for non-U.S. clients, that income might actually be foreign-sourced and not subject to U.S. taxation at all.
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StardustSeeker
Super important question: where were you physically located when earning the money that went into your PayPal? The physical location where you perform services often determines the source of income, not where your PayPal account is based. If you were outside the US when you earned the money, and you're not a US person under tax law, that income might not be US-sourced income at all - even if it goes into a US PayPal account. PayPal often gets confused about this distinction. They're focused on your account status rather than the actual tax source of your earnings.
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Paolo Marino
•This is such a good point! I had a similar situation and ended up double paying taxes because I didn't understand the source rules. Does anyone know if there's a way to explain to PayPal that the income isn't US-sourced even though it's going into a US account?
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