How the IRS treats foreigners in the US

Via TaxProf Blog, a new paper by Linda Dodd-Major and Paula N. Singer: “When Immigration and Tax Converge“, which criticises the the IRS’ confusing treatment of foreign nationals living in the U.S. I’ve quoted some choice bits below.


Consistent with definitions in IRC section 7701(b), the IRS labels U.S. tax residents and nonresidents as “resident aliens” and “nonresident aliens,” terms that are confusing both to foreign nationals and to their employers, payers, and advisers because they conflate tax and immigration terminology. To avoid confusion with the immigration terms “resident alien” and “nonimmigrant,” which have related but different meanings from tax residency labels used by the IRS, foreign nationals who are resident aliens in tax parlance are referred to hereinafter as “U.S. tax residents,” and foreign nationals who are NRAs in tax parlance are referred to as “U.S. tax nonresidents.”

Since IRS forms and procedures incorporate and reference immigration terms, forms, and procedures, thereby making basic understanding of such terms and procedures vital to correct application of U.S. tax law, it is critical for payers and their advisers to understand fine distinctions among the terms as well as if, when, and how these terms apply. Unfortunately, as this article will discuss, immigration terms used for tax administration are not always used correctly, leading to more confusion about how the two bodies of law interdepend.

In short: the IRS’ terminology for different types of foreign taxpayers is so confusing that these two professors are plain old going to refuse to use it in their own paper. They go on for a total of twenty pages discussing the interaction between U.S. immigration law and tax law — and they don’t even get into FBAR, let alone the even more ridiculous treatment of U.S. Persons abroad. Regardless, I especially liked their ending:

Age-old concepts of natural justice and procedural fairness hold that enforcement of law is fair to the extent that targets of enforcement are aware of it and able to comply. In a context such as [non-resident alien] taxation, this seems all the more true because those affected are foreign nationals whose first language is not English, who are not versed in U.S. law, and/or who count on published guidance and information from government-provided resources to comply with U.S. law and prevent negative consequences. As a matter of logic, furthermore, it is difficult to understand how government entities that represent “the law” can expect compliance if rules are inadministrable because “the rules” are not published, clear, complete, or coordinated.

This is similar to what’s been said on this blog before: the IRS is the biggest obstacle to compliance.

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4 thoughts on “How the IRS treats foreigners in the US

  1. When filing FBARs or tax returns must also be careful with beneficiary and annuitant with spousal RRSPs because the Candian definition is NOT the same as the US one.

  2. The professors make the assumption that all immigrants and foreigners that come to the US are are from non-English speaking countries, which is far from true, but their points on the IRS having its own very confusing terminology, even for those whose native language is English, are very true and very pertinent.

  3. Pingback: Video: Robert Wood speaks with Scott Drake on loss of U.S. citizenship | The Isaac Brock Society

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