TN Visa Holder: Are You a U.S. Tax Resident or Nonresident?

His assumption was understandable, but immigration status and tax residency answer different questions. TN holders generally count their U.S. days toward substantial presence. Mexican TN professionals face the same basic residency test; nationality alone does not change the day-count formula.

The client's situation: a Canadian engineer in TN status

The engineer moved to South Florida early in the year and worked there through December, with several trips back to Canada. He retained Canadian checking, investment and retirement accounts and received investment income abroad. He had no green card and had not previously prepared U.S. foreign-account reports.

He wanted to know whether U.S. payroll withholding settled everything. His employer's Form W-2 covered wages, but it could not determine his personal residency starting date or disclose the accounts he continued to hold abroad.

What went wrong

The proposed Form 1040-NR approach relied on the temporary nature of TN status rather than his physical presence. It would have missed the worldwide-income analysis for his resident period and the separate review of Canadian accounts. We also needed to distinguish citizenship, Canadian tax residence and U.S. tax residence rather than treating them as interchangeable.

The tax or reporting requirement

U.S. tax residency generally follows the green card test or substantial presence test. TN holders are not exempt individuals merely because of TN status; qualifying F/J/M/Q day exclusions do not extend to TN professionals. Substantial presence generally requires 31 current-year days and 183 weighted days: all current-year days, one-third of the preceding year's and one-sixth of the year before that.

A resident generally files Form 1040 and reports worldwide income for the resident period. The first year may be dual-status, and the residency starting date must be checked. A nonresident generally files Form 1040-NR when required. Treaty tie-breaker rules may affect a person resident in both countries, but require a facts-based analysis and potentially Form 8833.

The closer-connection exception is distinct from a treaty tie-breaker and generally is not available with 183 or more days of actual U.S. presence in the current year. Foreign tax credits on Form 1116 may reduce double income taxation, subject to source and other limits. They do not automatically eliminate reporting duties.

Forms potentially involved:

• Form 1040 or Form 1040-NR, with appropriate dual-status documentation.
• Form 1116 for eligible foreign tax credits and Form 8833 when required for treaty disclosure.
• FinCEN Form 114 (FBAR) and Form 8938, under their separate rules.
• Form 8840 only if a closer-connection claim is available and appropriate.

The potential IRS exposure

An incorrect nonresident return can omit taxable investment income and produce additional tax, interest and possible penalties. Foreign-account reporting has its own potential penalties, independent of whether the accounts generate much income. Certain Canadian or Mexican retirement and savings accounts can have U.S. reporting implications; their local tax treatment should not be assumed to control U.S. treatment.

How Chirino USA analyzed the situation

Chirino USA reconciled travel records with work calendars and prior visits. His actual current-year presence exceeded 183 days, so he met substantial presence without needing the weighted prior years. We established the first-year starting date and reviewed whether dual-status treatment applied rather than treating him as resident from January automatically.

We inventoried foreign income and accounts, requested maximum balances and foreign tax records, and screened for treaty issues. We did not assume Canadian citizenship established a treaty tie-breaker claim. His housing, family and economic connections needed review, and the closer-connection exception was not available under his current-year presence facts.

How we addressed the issue

We recommended a Form 1040-based resident filing approach with the appropriate first-year dual-status treatment and documentation. We reviewed investment income and eligible foreign tax credits, and coordinated questions about Canadian treatment with his Canadian adviser. Retirement and savings accounts were flagged for account-specific review rather than treated as ordinary deposits without investigation.

We also tested FBAR and Form 8938 independently and set a recordkeeping plan for future years. Moving money between his own accounts was separated from income so that transfers were not taxed merely because funds reached a U.S. bank.

The result

The recommended strategy aligned his return with the residency tests and created a separate foreign-account reporting checklist. He understood that payroll withholding was only one part of compliance. No particular tax savings or treaty outcome was promised; the benefit was a supported filing position and fewer assumptions about assets left behind.

What other TN professionals should know

• Track actual travel even when your employer has already withheld U.S. tax.
• FBAR generally uses an aggregate foreign-account threshold over $10,000 at any time. Form 8938 has different thresholds; for a single filer living in the U.S., generally $50,000 at year-end or $75,000 anytime.
• Florida has no state individual income tax, but federal reporting still applies and other states may require review.

How Chirino USA can help

Chirino USA Accountants & Advisors specializes in U.S. international tax matters for foreign nationals moving to, working in, or investing in the United States. We can review your days in the U.S., your income and your assets abroad, and tell you which U.S. returns and reports apply to you. We advise on taxes only; questions about your visa or immigration status should go to an immigration attorney. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• IRS — Substantial Presence Test
• IRS Publication 519 — U.S. Tax Guide for Aliens
• IRS Publication 514 — Foreign Tax Credit for Individuals
• IRS — Comparison of Form 8938 and FBAR Requirements