The tool assesses whether an individual meets the criteria to be considered a U.S. resident for tax purposes based on their physical presence within the United States during the calendar year. It utilizes a formula counting all days present in the current year, plus one-third of the days present in the immediately preceding year, and one-sixth of the days present in the year before that. If the resulting sum equals or exceeds 183 days, and the individual was present in the U.S. for at least 31 days during the current year, the test is generally met.
This determination is crucial for individuals who are not U.S. citizens or green card holders, as it dictates their U.S. tax obligations. Understanding residency status impacts which income is subject to U.S. taxation and the forms that must be filed with the IRS. This calculation is often integrated into tax preparation software and online tools to simplify what can be a complex process. Previously, individuals relied on manual calculations, which increased the risk of error. The advent of digital tools provides a more accurate and efficient method for determining residency status.
