IRS Form 8840: closer connection exception to avoid US taxation
If you spend significant time in the United States but consider another country your home, you might be surprised to learn that the Internal Revenue Service (IRS) could still classify you as a US tax resident – even without a green card. This often happens to business travelers, seasonal or temporary workers, and individuals who spend long vacations in the US.
If you are a foreign national who meets the requirements to be treated as a US tax resident but want to avoid this status, you may be able to use IRS Form 8840.
In this article, we’ll explain the filing requirements for this form, how to claim a closer connection exception, and how to avoid being classified as a US tax resident if you meet the substantial presence test but have stronger ties to another country.
This article is brought to you by Taxes for Expats (TFX) — a top-rated tax firm serving US citizens, residents, and anyone with US tax obligations, both at home and abroad. Are you a foreign national with potential tax obligations in the US? Not sure whether you need to file? We’re here to assist you with US tax requirements – learn more about our tax services or contact us.
What is IRS Form 8840?
Form 8840, closer connection exception statement for aliens, is used by certain foreign individuals to claim nonresident alien status for US tax purposes.
By filing this form, you declare that you have a closer connection to a foreign country (or countries) and therefore should not be treated as a US resident for tax purposes, even if you meet the substantial presence test.
Filing Form 8840 can prevent you from being taxed like a US resident, which would otherwise require reporting worldwide income and complying with US foreign asset reporting rules.
What is a substantial presence test?
The substantial presence test is used by the IRS to determine if an individual qualifies as a US tax resident. You meet the test if:
- You are present in the United States for at least 31 days during the current year, and
- The total number of days you are present over the current and previous two years (calculated using a weighted formula) equals or exceeds 183 days.
Even if you qualify as a tax resident under this test, you can still avoid this status by filing Form 8840 and claiming a closer connection exception.
If you don’t claim the closer connection exception but meet the substantial presence test, you’ll be subject to US taxation and reporting requirements (FBAR, FATCA, PFIC, etc.) on your worldwide income, accounts, assets, and investments.
Who needs to file Form 8840?
Some groups of foreign nationals are more likely to need Form 8840 to avoid being treated as US tax residents, including:
- seasonal or temporary workers on visas who return to their home country each year
- business travelers whose employment and primary residence remain abroad
- foreign nationals visiting the US frequently for family reasons, property management, studies, or vacations (such as Canadian “snowbirds”) while maintaining stronger ties elsewhere
You are not eligible to file Form 8840 if you:
- are a lawful permanent resident of the United States (green card holder)
- have applied for, or taken steps to apply for, a green card
- have an application pending to change your status to that of a lawful permanent resident
You also cannot claim the exception if you were physically present in the US for 183 days or more during the year.
How to demonstrate a closer connection to another country?
The closer connection exception recognizes that even though you spend significant time in the US, your real home – economically, socially, and personally – is elsewhere. To qualify, you must prove that your foreign ties are stronger than your US ties.
The IRS considers factors such as:
- country of residence listed on your official documents
- types of forms and documents filed in the US
- location of your permanent home, family, and personal belongings
- location of your financial accounts and business activities
- social, cultural, and community connections
In limited cases (such as certain visa holders), the IRS allows you to claim ties to two foreign countries. If you believe you may qualify for this exception, it is highly recommended to consult expat tax professionals to ensure you meet all the necessary criteria and to help you navigate the process of claiming a closer connection to two foreign countries
A key requirement is that you have a tax home in a foreign country for the entire tax year. Generally, your tax home is your main place of business or regular place of abode.
What if you don’t qualify for the closer connection exception?
If you don’t meet the closer connection requirements, you may still avoid US tax residency under an income tax treaty between the US and your home country. In such cases, treaty “tie-breaker” rules may determine your residency.
To claim treaty-based residency, you must file Form 8833. Without a treaty claim, you will likely be treated as a US tax resident.
Special exceptions for certain visa holders
Students, teachers, and trainees on certain US visas may qualify as “exempt individuals” and are not required to file Form 8840. Instead, they file Form 8843 to confirm their exemption from the substantial presence test.
However, this exemption from counting days does not mean exemption from US tax obligations. If you have US-source income, you may still be required to file Form 1040-NR. Once you no longer qualify as an exempt individual, you must determine your US residency status using the substantial presence test and consider filing Form 8840.
Form 8840 filing process
If you are filing a US federal income tax return, attach Form 8840 to the income tax return. If you do not need to file a federal return, send Form 8840 to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215. File the form by the due date of your tax return (including extensions).
While there is no penalty for late filing, failing to file Form 8840 means you cannot claim the closer connection exception and you could be taxed as a US resident.
Need help? Talk to expat tax professionals
Not sure if your travel days or living arrangements make you a US tax resident? The rules around Form 8840 can be complex, especially if you split your life between countries.
At Taxes for Expats, we’ve been helping cross-border taxpayers stay compliant and minimize tax burdens since 2001. Over 50,000 taxpayers worldwide have trusted our expertise.
FAQ
Yes, that’s exactly when you would file, if you also have a closer connection to a foreign country and can prove it.
You may still qualify for a closer connection exception if your primary home, personal, and economic ties are stronger outside the US.
If you have US-source income, yes, even if the exception applies.
Yes, you can use it as long as you continue to meet the requirements each year.
