What is an E-3 Visa For Australians: IRS Tax Overview

What is an E-3 Visa For Australians

What is an E-3 Visa For Australians

What is an E-3 Visa For Australians: While there are many different types a visa is available for nonresident aliens seeking temporary entrance/residence in the United States, citizens of Australia have a specific US Visa they can apply for in order to obtain temporary rights in the United states as a resident. It is referred to as an E-3 visa (Specialty Occupation Workers From Australia). While having the E-3 Visa can provide a great opportunity for nationals of Australia who want to work in the US temporarily — it is very important to note that if the E-3 visa holder remains in the United states for a sufficient amount of time, they will be deemed a US Person for tax purposes — by way of the Substantial Presence Test — and required to report all of their worldwide income and foreign assets (such as Superannuation, Commonwealth Accounts, and Mortgage Setoff Accounts).

As provided by the IRS:

Eligibility Criteria for E-3 Visa

• To qualify for an E-3 visa, you must demonstrate, among other things, that you:

  • • Are a national of Australia

    • Have a legitimate offer of employment in the United States

    • Possess the necessary academic or other qualifying credentials

    • Will fill a position that qualifies as a specialty occupation

Applying for an E-3 Visa from Within the United States

The Form I-129, Petition for Nonimmigrant Worker, is used to apply for a change of status to or an extension of stay in the E-3 nonimmigrant temporary worker classification.

E-3 Visa Supporting Documents

Your Form I-129 should include the following documents:

• • • A Labor Condition Application (LCA) that indicates that it has been filed to support an E-3 classification

    • Academic or other credentials demonstrating qualifications for the position

    • Job offer letter or other documentation from the employer establishing that you will be engaged in a specialty occupation and that you will be paid the higher of the actual or prevailing wage

    • If required, before you may commence employment in the specialty occupation, you must have the necessary license or other official permission to practice in the specialty occupation

Period of Stay/Extension of Stay

Substantial Presence Test & E-3 Visa

Substantial Presence Test: When a person is a Permanent Resident or U.S. citizen, they are considered a U.S. person for tax purposes. Instead, if a nonresident resides in the U.S., they are not automatically subject to U.S. tax and IRS asset reporting. But, a nonresident (such as an E-3 Visa Holder) may also be subject to tax as a U.S. person if they meet the Substantial Presence Test. The Substantial Presence Test can be complicated. The U.S. Government has developed a counting days test to determine if a person becomes a U.S. resident for tax purposes.

Who Does Substantial Presence Apply to?

The test applies to non-U.S. Citizens and non-Legal Permanent Residents who spend significant amounts of time in the U.S. — and do not qualify for an 8840 closer connection test or 8843 Exemption.  When a person meets substantial presence, they become subject to U.S. Tax and Reporting on their worldwide income. This also requires reporting of offshore accounts, assets, and investments on forms such as the FBAR and FATCA Form 8938. The failure to report may result in significant fines and penalties, which can be reduced or avoided with IRS Offshore Disclosure.

Met the Substantial Presence Test?

The Substantial Presence Test is a complex undertaking. Anyone who meets the IRS Substantial Presence Test (unless exempted), is taxed on their worldwide income — even through they are not U.S. Citizens or Legal Permanent Residents.  

A person who is a U.S. Citizen or Legal Permanent Resident (Green Card Holder) is generally required to file a 1040 Tax Return.

When filing a 1040 Tax Return, if the person has foreign bank accounts and meets the minimum threshold requirement, then they are required to file an FBAR (Report of Foreign Bank and Financial Accounts).

Non Citizens & Green Card Holders

What Foreign Nationals must understand is that the responsibility to file a 1040 (and report foreign bank accounts) is not just for US Citizens or Legal Permanent Resident. If an E-3 Visa Holder Foreign National meets the Substantial Presence Test, they are also required to file a 1040 and FBAR (if they meet certain threshold requirements) even though they are not a US Citizen or Legal Permanent Resident.

U.S. Tax Rules

When a person first comes to the United States to live, if they earned income they are required to file a tax return. Until they become a Legal Permanent Resident or US citizen, they finally 1040-NR.

The problem for many people is that once they have lived in the United States for a certain amount of time, they become subject to regular taxation just as if they were a US citizen or Legal Permanent Resident. Not only does this mean that the United States will tax the person on the worldwide income, but they are also required to comply with all foreign account reporting requirements.

The failure to comply with foreign account reporting may result in significant fines, penalties, and even criminal investigation depending on the facts and circumstances of their case. In addition, if the person is found to be willful and their failure to report then their entire foreign accounts can be subject to a 100% penalty.

Substantial Presence Test Calculation Example

As a non-US citizen and non-US green card holder, you are generally only required to pay tax on your “US Effectively Connected Income” (money you earn while working in the United States). However, if you qualify for the Substantial Presence Test, then the IRS will tax you on your WORLDWIDE income.

IRS Substantial Presence Test generally means that you were present in the United States for at least 31 days in the current year and a minimum total of 183 days over 3 years, using the following equation:

• 1 day = 1 day in the current year
• 1 day = 1/3 day in the prior year
• 1 day = 1/6 day two years prior

Example A: If you were here 100 days in 2016, 30 days in 2015, and 120 days in 2014, the calculation is as follows:

• 2016 = 100 days
• 2015 = 30 days/3= 10 days
• 2014 = 120 days/6 = 20 days
• Total = 130 days, so you would not qualify under the substantial presence test and NOT be subject to U.S. Income tax on your worldwide income (and you will only pay tax on money earned while working in the US).

Example B: If you were here 180 days in 2016, 180 days in 2015, and 180 days in 2014, the calculation is as follows:

• 2016 = 180 days
• 2015 = 180 days/3= 60 days
• 2014 = 180 days/6 = 30 days
• Total = 270 days, so you would qualify under the substantial presence test and will be subject to U.S. Income tax on your worldwide income, unless another exception applies.

Offshore Amnesty Program Summary

If you are out of compliance with US tax and offshore reporting, the IRS Amnesty Programs were developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.

Some of the more common programs, include:

• Voluntary Disclosure Program (VDP or “New” OVDP)
• Streamlined Domestic Offshore Procedures
• Streamlined Foreign Offshore Procedures
• Delinquency Procedures
• Reasonable Cause

Golding & Golding International ax Lawyers Represent Clients Worldwide

The Golding & Golding offshore tax law team specializes exclusively in international tax, and specifically IRS offshore disclosure. 

Contact our firm for assistance.