Resident Alien is a person who is not born in the U.S. and does not have U.S. citizenship but is considered an immigrant who is legally present as a U.S resident.
A legal resident in the United States is considered one that holds a “green card” or pass the “substantial presence” test. To pass the “substantial presence” test, a person must be in the United States for more than 31 days in the current year plus stay over 183 days in a 3-year period that includes the current year. It means counting all days in the current year in which the person was physically staying, but only 1/3 of the number of stays in the previous year and only 1/6 of the number of stays in the year before the previous year.
According to the U.S. Citizenship and Immigration Services, there are 3 types of residency:
Permanent Resident – Anyone legally granted permission by the U.S. government to live there.
A conditional Permanent Resident – who receives a green card valid for a period of two years. These are usually people who have applied for a residency status due to marriage or are entrepreneurs in the U.S.
Returning resident – who was outside the U.S. and returned back. This person must apply for re-entry to the U.S. if he stays outside the United States for a period of more than 180 days.
The main issue for U.S. residents is in the aspect of the tax law. For example, a U.S. resident is eligible for a foreign tax credit while foreign residents are not eligible for this credit.
Generally, a U.S. resident owes the same taxes as a U.S. citizen, while a non-resident owes tax only on the portion of income generated within the U.S. territories, not including capital gains.
U.S. residents must report all their sources of income worldwide, both in the United States and abroad. This income is reported on a form called Form 1040.
Foreign residents, on the other hand, must report their income generated in the United States on a form called Form 1040NR.
A nonresident is a person who is not a U.S. citizen and does not hold a “green card” or does not pass the “substantial presence” test or alternatively has been exempted from meeting those conditions.