What is a U.S. Person Under IRS Tax Rules?

The IRS has a very inclusive definition of a “U.S. person”—and it’s not just about citizenship. If you hold a green card, live abroad, have American parents, or even spend a certain number of days in the States, congratulations: you may be a U.S. person for tax purposes.

That matters because U.S. persons are required to report their worldwide income to the IRS, file annual income tax returns, and disclose foreign financial accounts under FBAR and FATCA rules. And yes, that’s true even if you’ve lived your whole life outside the U.S.

Understanding whether you fall into this category isn’t just a legal technicality—it’s the starting point for every U.S. tax obligation you have (or didn’t know you had). Let’s unpack who qualifies and what that means for your taxes.

What does “U.S. person” mean for tax purposes?

Under U.S. tax law, a U.S. person isn’t just someone with an American passport. The IRS defines a U.S. person as anyone who is:

• A U.S. citizen
• A U.S. resident alien (typically someone with a green card or who meets the substantial presence test)
• A domestic corporation, partnership, estate, or trust

If you fall into any of those categories, the key takeaway is this: you’re considered a taxpayer in the eyes of the IRS—and that means you’re taxed on your worldwide income, no matter where you live or earn it.

This classification also comes with serious reporting requirements. U.S. persons must comply with laws like:

• FBAR (Foreign Bank Account Reporting) for foreign bank accounts over $10,000.
• FATCA (Foreign Account Tax Compliance Act) for reporting certain foreign financial assets.
• Filing an annual U.S. tax return—even if your income is from a foreign country or is taxed elsewhere.

Types of individuals who qualify as a U.S. person

For U.S. tax purposes, not everyone who files a U.S. tax return is a citizen—but everyone the IRS considers a U.S. person has similar tax obligations. Here’s who qualifies:

• U.S. citizens: Whether you were born in the United States or became a citizen through naturalization, you’re considered a U.S. person for tax purposes.
• Green card holders: If you hold lawful permanent resident status, you’re taxed like a citizen, regardless of where you live.
• Substantial presence test: Even without a green card, you may be classified as a U.S. person if your weighted days of physical presence over a three-year period — calculated using specific IRS rules — meet or exceed 183 days.

In some cases, a closer connection to a foreign country can help nonresidents avoid U.S. person classification. But for most people who meet the tests above, the IRS considers you a United States person—which means your US-sourced and foreign income is all subject to U.S. tax rules under the Internal Revenue Code.

Entities that qualify as U.S. persons

The IRS doesn’t just apply the term “U.S. person” to individuals—it also applies it to certain business entities and legal structures. If your business or trust falls into any of the categories below, it’s subject to U.S. tax laws and reporting rules.

• U.S.-registered corporations: Any corporation formed under the laws of the United States or any U.S. state is considered a U.S. person for tax purposes.
• Domestic partnerships: Partnerships organized in the U.S., even if their business is conducted abroad, fall under this classification.
• U.S. trusts and estates: If the trust is governed by U.S. courts and controlled by U.S. persons, or the estate is administered under U.S. law, they’re also considered U.S. persons.

Why does this matter? Because entity classification affects everything from filing income tax returns to meeting foreign asset disclosure rules like reporting ownership in foreign corporations. In short: if your entity is a U.S. person, it’s playing by U.S. tax rules—no matter where it operates.

Grey areas: when your U.S. person status isn’t so clear cut

Not every taxpayer fits neatly into a category. Some individuals live in a permanent state of “maybe,” when it comes to their U.S. tax obligations. If any of the following scenarios sound familiar, it’s worth taking a closer look at your filing requirements and status for income tax purposes:

• Dual citizens who live abroad and aren’t sure if their U.S. obligations still apply
• Non-U.S. spouses married to U.S. citizens who may be filing jointly or sharing foreign financial accounts
• Accidental Americans—those born in the U.S. (even briefly) but who have lived in a foreign country their entire life
• Former citizens who believe they’ve renounced but haven’t completed all legal steps under U.S. citizenship laws
• Green card holders who left the U.S. but didn’t officially abandon their lawful permanent resident status

These grey areas often come down to residency tests, like the green card test or physical presence test, and how the IRS interprets your ties to the U.S. for a given tax year.

If your status feels fuzzy, don’t guess—misunderstanding your position can trigger missed filings, unexpected tax liability, or compliance issues down the road. A quick check with a tax professional can clarify whether you’re considered a resident of the United States for tax purposes—and what steps (if any) you need to take to fix it.

Tax obligations for U.S. persons abroad

Being a U.S. person doesn’t just mean carrying a blue passport—it also means carrying a tax obligation, no matter where in the world you live. If you’re classified as a U.S. person under IRS rules, you’re required to report your worldwide income every calendar year—even if you haven’t lived in the U.S. for decades.

This includes income from:

• Wages and freelance work
• Dividends and interest
• Rental property and capital gains
• Business income and foreign government pensions
• Foreign bank accounts and foreign financial assets

To stay compliant, you’ll typically file:

• Form 1040: Your U.S. income tax return.
• Form 2555: To claim the Foreign Earned Income Exclusion.
• Form 1116: To claim the Foreign Tax Credit.
• FBAR (FinCEN Form 114): If your foreign accounts total more than $10,000,
• Form 8938 (FATCA): To report foreign financial assets.
• Form 5471, 8865, or 8858: For ownership in foreign entities.

Failing to file the right forms can lead to significant tax liability, including fines and penalties for non-compliance. But with the right tax strategies in place—like claiming exclusions or credits—you may be able to reduce or eliminate your U.S. tax bill entirely.

Bottom line? If you’re a U.S. person living abroad, understanding your tax obligations isn’t just smart—it’s essential.

How to determine your status

Not sure if you’re a U.S. person for tax purposes? The IRS uses a few key tests to determine whether you’re considered a United States citizen, lawful permanent resident, or nonresident alien. Here’s a quick checklist to help clarify where you stand:

You’re likely a U.S. person if you:

• Hold U.S. citizenship (by birth or naturalization)
• Have a valid green card (even if you live abroad)
• Meet the substantial presence test (a weighted total of 183 days in the U.S. over the last three years)

Grey area? Consider whether the closer connection exception applies.

If you meet the substantial presence test but have stronger ties to a foreign country—such as a primary residence, job, or family—you may be able to claim nonresident status by filing IRS Form 8840.

When to consult a tax professional

If you’re unsure of your status, have dual citizenship, or recently moved abroad, it’s worth checking with an expat tax advisor. Misclassifying your status can lead to filing the wrong tax forms or missing key disclosures—so it’s better to get it right from the start.

Know your tax status before the IRS does

Living abroad? You might still be a U.S. person in the eyes of the IRS—and that comes with tax responsibilities.

Understanding your status is key to avoiding penalties, staying compliant, and filing your U.S. tax return correctly. From foreign income to financial accounts, knowing what to report (and when) makes all the difference.

Bright!Tax helps U.S. expats and global taxpayers navigate complex tax rules with confidence. If you’re unsure of your status or filing obligations, get in touch—we’re here to help.

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