Passed Substantial Presence Test for US Taxes - What steps do I need to take now?
Hey everyone, I'm kinda panicking a bit here. I just realized I've been in the US long enough that I passed the Substantial Presence Test for tax purposes. I've been here on a work visa for about 18 months now (came in July 2023), and I just calculated my days using that formula thing on the IRS website. Looks like I definitely qualify as a US resident for tax purposes. The problem is I have no idea what I'm supposed to do now! Do I need to file some special form? Will I get in trouble for not doing anything about this sooner? I still have income and some investments back in my home country (Australia if that matters), and I'm totally confused about how I report that or if I even need to. My employer has been withholding taxes from my US salary, but nobody ever mentioned anything about this substantial presence stuff during onboarding. Any advice would be super appreciated!!
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Hailey O'Leary
The Substantial Presence Test is basically the IRS's way of determining whether you should be taxed as a US resident. Since you've passed it, you'll need to file Form 1040 (the regular US individual tax return) instead of Form 1040-NR (for non-residents). As a US tax resident, you're required to report your worldwide income - including that income and those investments from Australia. Don't panic though! The US has a tax treaty with Australia that helps prevent double taxation. You might be able to claim foreign tax credits for taxes you've paid to Australia using Form 1116. For your foreign accounts, if the total value of all your foreign financial accounts exceeds $10,000 at any point during the year, you'll also need to file an FBAR (FinCEN Form 114) electronically. This isn't filed with your tax return but separately through the FinCEN BSA E-Filing System.
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Cedric Chung
•Thanks for explaining this! I have a similar situation but with Canadian accounts. For the FBAR thing, does that include retirement accounts too? I have about $15k in a Canadian RRSP (kinda like a 401k). Also, is there a deadline for filing this form?
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Hailey O'Leary
•Yes, the FBAR requirement includes retirement accounts too. Your Canadian RRSP would count toward that $10,000 threshold, so you would need to report it on the FBAR since you have $15k in there. The FBAR deadline is April 15th, but there's an automatic extension to October 15th if you miss the April deadline. No need to specifically request this extension - it's granted automatically. Just make sure you file by October to avoid penalties.
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Talia Klein
I went through exactly the same panic when I realized I passed the Substantial Presence Test last year! After trying to make sense of all the international tax rules (and failing miserably), I found this service called taxr.ai (https://taxr.ai) that literally saved my sanity. They specialize in analyzing tax situations for people like us who straddle multiple countries. I uploaded my Australian tax documents and US income info, and they generated a detailed report explaining exactly what forms I needed to file and how the tax treaty between US and Australia applied to my specific situation. They even identified some deductions I could take that I had no idea about!
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Maxwell St. Laurent
•How does it work with foreign language tax documents? My stuff from Poland is obviously not in English. Would I need to get official translations first?
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PaulineW
•Sounds interesting, but how do they handle privacy? I'm paranoid about uploading financial docs to some random website. Do they store your documents permanently or delete them after analysis?
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Talia Klein
•They actually have built-in translation capabilities for major languages, so you shouldn't need separate translations for Polish documents. Their system can analyze the key information even from non-English documents, which saved me from paying for translations of my German bank statements. Regarding privacy, they use bank-level encryption and have a pretty clear policy about data handling. Documents are only stored temporarily while they're being analyzed, then automatically deleted after 30 days. You can also request immediate deletion once you've received your report if you're concerned.
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PaulineW
Just wanted to follow up about my experience with taxr.ai - I was skeptical at first but decided to give it a try since my tax situation was a mess with accounts in both Japan and the US. The analysis was actually really comprehensive! It highlighted issues with my foreign pension reporting that would have caused problems, and gave me step-by-step instructions for completing the FBAR and Form 8938 correctly. It even explained exactly how the US-Japan tax treaty applied to my specific situation. Saved me from a potential audit headache and probably hours of research!
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Annabel Kimball
If you need to talk directly to someone at the IRS about your Substantial Presence Test situation (which I would highly recommend), good luck getting through on their international taxpayer line. I spent THREE WEEKS trying to reach someone before I found Claimyr (https://claimyr.com). They have this callback system that somehow gets you through the IRS phone maze. I was able to speak with an actual IRS representative about my specific situation within hours instead of days of trying. Check out their demo video here: https://youtu.be/_kiP6q8DX5c to see how it works. Totally changed my perspective on dealing with the IRS! The agent walked me through exactly what forms I needed as a German citizen who passed the substantial presence test.
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Chris Elmeda
•Wait, how does this actually work? Does someone else call for you or something? I don't understand how they can get through when nobody else can.
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Jean Claude
•Yeah right. The IRS barely answers their own phones. No way some third-party service magically gets special access. Sounds like a scam to get your money.
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Annabel Kimball
•They don't call on your behalf - it's more like they navigate the phone system and secure your place in line, then the system calls you back when an IRS agent is available to talk. It uses some automated technology to work through the phone tree and hold times, so you don't have to sit through all that yourself. I was totally skeptical too initially. The way it works is they continually redial and navigate the IRS phone system until they secure a spot in the queue. Once they have that spot, they connect you directly when an agent becomes available. I understand the skepticism - I felt the same way until I tried it and was literally talking to an IRS agent about my substantial presence issues within a couple hours.
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Jean Claude
I need to eat my words about Claimyr. After seeing everyone here saying it worked, I gave it a shot yesterday because I was desperate to talk to someone about my substantial presence situation and FBAR requirements. I expected nothing, but got a call back in about 1.5 hours with an actual IRS international tax specialist on the line! The agent confirmed exactly which forms I needed for my Australian accounts and explained how the tax treaty would apply in my situation. Saved me from potentially filing incorrectly. Still seems like magic, but it actually worked.
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Charity Cohan
One thing nobody's mentioned yet - depending on your visa type, you might qualify for closer connection exception! I was on J1 and even though I passed the substantial presence test, I was able to file Form 8840 claiming closer connection to my home country (Brazil) and avoid being treated as a US resident for tax purposes. Worth looking into depending on your specific situation.
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Josef Tearle
•Does this work for all visa types? I'm on H1B and definitely don't have stronger ties to my home country anymore since I've moved most of my life to the US.
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Charity Cohan
•The closer connection exception doesn't work for all visa types - it's primarily for those who are temporarily in the US and maintain stronger ties to their home country. For H1B holders who have established significant presence in the US (like having a permanent home here, moving family here, etc.), you likely wouldn't qualify since you've already moved most of your life to the US. The exception works best for students, teachers, or temporary workers who clearly intend to return to their home country and maintain stronger ties there than in the US. Each case is different though, so if you're uncertain, consulting with an international tax specialist is your best bet.
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Shelby Bauman
Quick tip from someone who's been through this: If you have any PFICs (Passive Foreign Investment Funds) in Australia like certain mutual funds or ETFs, be super careful. The US tax treatment is brutal and requires filing Form 8621 which is insanely complicated. I had to sell all my Australian index funds because the reporting requirements were such a nightmare.
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Quinn Herbert
•Is this true for all foreign investments? I have some index funds in my UK account worth about £20,000 total. Should I just sell them before filing US taxes?
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Amina Toure
•Unfortunately yes, most UK index funds would likely be classified as PFICs from a US tax perspective. The £20,000 amount definitely makes this worth addressing properly. Before you sell them though, I'd strongly recommend getting professional advice first - there might be ways to handle this that don't involve losing your investment positions entirely. Some people elect mark-to-market treatment under Section 1296 which can simplify the reporting, but you need to make that election in the first year you hold the PFIC as a US tax resident. Don't make any hasty decisions without understanding all your options!
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