Question

Hannah Legaleagle is an attorney. She is an Irish citizen who vacationed in the U.S. for 14 days in 2017. Because of her fondness for living in the U.S., Hannah’s Irish employer law firm, gave her a temporary assignment in the U.S. from August 1 through December 31, 2018. She earned $120,000 while working in the U.S. , earned $220,000 for the year working in Ireland, and she also earned about $40,000 in interest and dividends, all from Irish banks and publicly traded Irish companies.

Hannah asks you to advise her of the U.S. tax consequences for 2018.

Answer 1

First of all we will determine the residential status of Hannah Legaleagle that is whether she is US resident or non resident.

Foreign citizens are considered as resident if either they are green card holder or they fulfill both the conditions mentioned below :-

a . They are present in US for at least 31 days in the current period, and

b .They were present in US for atleat 183 days in current year plus last 2 years.

In the case of Hannah she is not a green card holder. Now we will check whether she is fulfilling both the other conditions.

a . She is present for more than 31 days in the year 2018 for the period from 1 Aug to 31 Dec.

B. She is present for 153 days in the year 2018 plus 14 days in 2017 I.e. total of 167 days which is less than 183 days.

Since she is not fulfilling one of the both conditions therefore she will be treated as non resident for US taxation

Non resident is only liable to pay taxes on the income which are sourced in US and for income sourced outside US not liable to pay any tax.

Therefore, Hannah Legaleagle is required to pay tax only on income $120000 which she earned while working in US.