During the COVID-19 pandemic, the U.S. government distributed Economic Impact Payments (EIP) to millions of Americans as part of its relief efforts. However, for international students studying in the United States, these payments may involve complex tax considerations. Many students remain uncertain about their eligibility and proper reporting procedures. This article examines the tax residency status of international students and clarifies the relationship between EIP and tax filing requirements.

Economic Impact Payments: Eligibility and Reporting

Beginning in March 2020, the U.S. government implemented several economic stimulus measures through the Coronavirus Aid, Relief, and Economic Security (CARES) Act to mitigate the financial impact of the pandemic. The first round of EIP provided direct cash payments to qualifying U.S. residents.

These payments were generally available to U.S. citizens or resident aliens who were not dependents of another taxpayer and whose adjusted gross income fell below certain thresholds. The IRS automatically sent payments to eligible individuals who had filed tax returns for 2018 or 2019.

Determining Tax Residency: The Substantial Presence Test

For international students, determining tax residency status is crucial. According to Internal Revenue Service (IRS) regulations, a nonresident alien is defined as someone who fails both the green card test and the Substantial Presence Test. Typically, international students are considered nonresident aliens during their first five years in the United States.

The Substantial Presence Test calculates residency status based on physical presence in the country. The formula counts all days present in the current year, plus one-third of days from the previous year, plus one-sixth of days from the year before that. If the total equals or exceeds 183 days, the individual may be classified as a resident alien for tax purposes.

Implications of Tax Residency Status

Tax residents and nonresidents have significantly different tax filing obligations. While tax residents must report their worldwide income, nonresidents only need to declare income earned within the United States. International students should carefully assess their tax residency status to ensure proper compliance with tax laws.