Residency & Source of Income Disputes

Generally, the United States collects income taxes from non-U.S. citizens who earn income in the United States. The extent to which a foreign citizen is liable for income taxes to the United States is based primarily on that individual’s status as a resident alien or a non-resident alien. Residency, for U.S. income tax purposes, is measured by the amount of time an individual physically spends in the United States.

Of course, the IRS collects income taxes from U.S. citizens wherever they earn their income. However, pursuant to the foreign earned income exclusion, a qualified U.S. citizen may exclude a portion of his earned income from taxation if he was working abroad and had a "tax home" in a foreign country. Any U.S. citizen whose tax home is in a foreign country and who meets either the bona fide residence test or the physical presence test qualifies for the foreign earned income exclusion.

In determining a U.S. or a non-U.S. citizen’s residency for federal income tax purposes, the IRS considers a wide range of facts and circumstances. The determination is critical as it impacts the taxpayer’s tax liability.

In addition to residency, the IRS considers the source of the income. Specifically, they look at whether the income was earned inside the United States or outside.

The Thorn Law Group is experienced in helping taxpayers in disputes with the IRS regarding their residency and source of income. For more information on how our experienced tax attorneys can help you resolve your dispute with the IRS, please contact Managing Partner Kevin E. Thorn today at 202 349-4033.