Moved to US mid-year on visa - dual status alien or full year resident for tax purposes?

The substantial presence test does qualify you as a US resident for tax purposes, but you're right that you'd typically be considered a dual-status alien for 2023 since you weren't present in the US for the entire year. Good news though - yes, you can elect to be treated as a full-year resident! This is done through what's called the "First-Year Choice" election (using Form 1040 with a statement attached). This might be beneficial if you had significant deductions or credits available in the US that could offset your worldwide income. For your second question, as a dual-status alien, the IRS only cares about your worldwide income during the period you were a US resident (so after May 2023). For the non-resident portion of the year, they only care about US-source income. However, if you elect to be treated as a full-year resident, you'd need to report your worldwide income for the entire year.

I went through almost the exact same situation last year (came from UK though) and I was totally confused until I used https://taxr.ai to analyze my immigration documents and confirm my tax residency status. I uploaded my visa docs, travel history, and previous year's tax forms, and it automatically determined that making the first-year election was WAY better for my situation because of the standard deduction. The tool also helped me figure out exactly which foreign income I needed to report and how to claim foreign tax credits for taxes I'd already paid in the UK. It generated all the statements I needed to attach to my return to make the full-year election too.

Just wanted to update - I took the advice and tried https://taxr.ai for my TN visa situation. Incredibly helpful! Turns out making the full-year election saved me around $3,800 because I was able to claim the standard deduction AND some tax credits I wouldn't have qualified for otherwise. The system generated all the statements I needed to make the election, explained exactly which forms to file, and showed me how to report my Canadian investment income. It even created a comprehensive report I could share with my accountant to make sure everything was done correctly. Wish I'd found this last year!

If you're trying to get clarity directly from the IRS on your situation, good luck with that. I spent 3 weeks trying to reach someone at the IRS who understood international tax issues. After numerous failed attempts and hours on hold, I found https://claimyr.com which got me connected to an actual IRS agent in less than 30 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to confirm that my first-year election was filed correctly and explained exactly how to report my foreign accounts. Totally worth it for the peace of mind, especially with these complicated residency status issues where the stakes for getting it wrong can be high.

I need to eat my words about Claimyr. After posting that skeptical comment, I was so frustrated with my own attempts to reach the IRS that I tried it anyway. Got connected to an actual international tax specialist in about 45 minutes. The agent confirmed that I qualified for the first-year election and told me exactly which form to attach with my statement (it was Form 1040, not 1040-NR as I'd been planning to use). She even explained how making the election would impact my FBAR filing requirements. Honestly, that one call probably saved me from making a costly mistake on my return.

Another important consideration: if you make the first-year election to be treated as a full-year resident, you'll need to report your worldwide income for the ENTIRE year, including what you earned in Canada from January-April. However, you'd likely get foreign tax credits for taxes paid to Canada on that income. Without the election, as a dual-status alien, you only report worldwide income for the part of the year you were a US resident (May-December in your case). For the non-resident portion, you'd only report US-source income. The decision really comes down to your specific numbers. If making the election gives you access to enough additional deductions/credits to offset the extra foreign income you'd need to report, it's worth it. Otherwise, dual-status might be better.

One more thing to consider is state taxes! Depending on which state you moved to, the rules for residency and taxation of foreign income can be completely different from federal. Some states don't recognize the federal first-year election and will still treat you as a part-year resident regardless.

This is such a helpful thread! I'm in a very similar situation - moved from Mexico to the US on a TN visa in August 2023. I've been trying to figure out whether to make the first-year election or file as dual-status. One thing I'm wondering about that hasn't been mentioned yet: how does the timing of when you moved affect the decision? Since I only had 5 months as a US resident vs Brianna's 8 months, would that change the math significantly? I'm thinking the shorter period might make dual-status more favorable since I'd have less worldwide income to report during the resident portion. Also, for anyone who's used the tax analysis tools mentioned above - do they take into account the different tax brackets and how your income distribution throughout the year affects the optimal choice? My income was higher in Mexico during the first 7 months compared to my US salary for the last 5 months, so I'm trying to figure out if bunching all that higher income into the US return (with the first-year election) would push me into higher brackets unnecessarily.