Foreigners to the US – “Extreme Vetting”: AND… IF You Get There, Don’t Forget Your Taxes

The Department of State (DOS) has now issued a painstaking and extensive questionnaire on Form DS-5535 to be used at all US Embassies and Consulates for “extreme vetting” of individuals applying for immigrant and non-immigrant visas to enter the United States.  Following on the heels of the various travel bans, this new form is yet another measure instituted by President Trump’s Administration hard lining US immigration policies and practices to more rigorously evaluate applicants for terrorism or other national security-related concerns.

NEW DOS Form DS-5535

The questionnaire is three pages long and requests very detailed information.  Completion of the questionnaire will not be required of all visa applicants, but it will be required of those whom the consular officer believes require a more rigorous interview and background check.  The ability of the consular officer to make this determination lies within the officer’s sole discretion.

Currently, there is no published profile of a “typical” visa applicant who would be required to complete the form.  The officer’s discretion to require it of a visa applicant will be based on information the applicant has given in the standard visa application form, or verbally during the visa interview.

One thing is for sure, time will be added to the visa application process and this means that individuals applying for visas should leave extra-leeway before anticipated travel dates.

What Will Form DS-5535 Require?

When a visa applicant is required to complete the form, the information includes:

  • The applicant’s travel history over the past 15 year period, including dates, length of stay and the source of funding for that travel;
  • Addresses and employment history of the applicant over the last 15 years;
  • Details of all passports that were ever held by the applicant;
  • Names and dates of birth for the following individuals whether living or deceased — all siblings (full, half, step-, adopted), children, current and former spouses, or civil or domestic partners;
  • Social media platforms and identifying user names (also known as “handles”) used in the past five years; and
  • Phone numbers and email addresses used by the applicant over the last five years.

Social Media and Forgotten Accounts

As a group, students are usually highly active and engaged with social media. It seems probable that some foreign students wishing to study in the US will receive the form.  Along with students, other visa applicants have concerns that they are unable to remember all the information Form DS-5535 requires, especially when it comes to social media or email accounts that have been unused for significant time frames.

According to the Department of State: “[f]ailure to provide requested information will not necessarily result in visa denial, if the consular officer determines the applicant has provided a credible explanation why he or she cannot answer a question or provide requested supporting documentation, such that the consular officer is able to conclude that the applicant has provided adequate information to determine the applicant’s eligibility to receive the visa. The collection of social media platforms and identifiers will not be used to deny visas based on applicants’ race, religion, ethnicity, national origin, political views, gender, or sexual orientation.”

DOS estimates that approximately only 65,000 of a projected 13 million visa applicants will be required to complete the questionnaire (this number is about 0.5 percent of all visa applicants).  At the moment, these new vetting procedures will remain in effect until November.  Commentators believe that this time frame will be extended on a continuous basis, however, and that the procedure may simply become permanent in due time.

Entry to the US and Your US Tax Obligations

Assuming a visa applicant clears all the hurdles and enters the United States, he or she cannot forget that such entry may implicate US tax issues due to the number of days of physical presence in the US. Students, teachers, trainees and professional athletes who are temporarily in the US have special concerns and rules that apply to them.

Worldwide Taxation on US “Residents”

Once a non-US individual is classified for income tax purposes as a “resident” he is subject to income tax in the same manner as a US citizen: i.e., taxed on his worldwide income (meaning income from all sources whether from within or outside the US) at a maximum rate of 39.6 percent. This worldwide income tax covers the period from commencement of the residency period until its conclusion (determination of which is also tricky under the tax laws). Income that is taxed includes but is not limited to wages, interest, dividends, rents, capital gains, royalties, gambling winnings etc. regardless of whether these items arose from outside the US.

The person also becomes responsible for filing tax returns and various information returns (such as foreign bank and financial account reports also known as “FBAR”). Once an individual qualifies as a “resident”, a series of complicated tax rules come into play if that person is a beneficiary of a non-US trust or if he owns stock in a closely held non-US corporation, or even has an ownership interest in something as simple as a foreign mutual fund.

“Residency” Determination for US Income Tax Rules

The determination of residency for income tax purposes is very precise. A foreigner is considered a US “resident” for a particular calendar year if he meets the requirements of either the “green card” test or the “substantial presence” test for that year.  Simply holding a green card is enough to subject you to US income taxation on your worldwide income – even if the terms of the card have long ago expired under the immigration rules. As relevant to visa holders, the focus is on the “substantial presence” test, a numerical test that involves counting each day of physical presence in the US.

Exempt Individuals

As a general matter (subject of course to exceptions), days of physical presence do not count in certain cases for a so-called “exempt individual”. The term “exempt individual” does not refer to someone exempt from US tax, but to anyone in the following categories who is exempt from counting days of physical presence in the US:

  • An individual temporarily present in the United States as a foreign government-related individual;
  • A teacher or trainee temporarily present in the United States under a “J ” or “Q ” visa, who substantially complies with the requirements of the visa;
  • A student temporarily present in the United States under an “F, ” “J, ” “M, ” or “Q ” visa, who substantially complies with the requirements of the visa;
  • A professional athlete temporarily in the United States to compete in a charitable sports event.

If you exclude days of presence in the United States because you fall into a special category, you must file a fully-completed Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition (PDF).   You must also make sure that no exception applies to your particular case that would prevent you from being able to exclude days of physical presence (for example, even if you meet the aforementioned requirements, you cannot exclude days of presence in the current tax year as a student if you were exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you establish that you do not intend to reside permanently in the United States).  Professional advice should be taken in any such instance.

Mechanics of the “Substantial Presence” Test

For all others who must count days of physical presence, an individual will qualify under the substantial presence test if either he is physically present: (1) in the US for 183 days or more during the current calendar year or, (2) for at least 31 days during the current calendar year and the sum of the days present in the US during the current calendar year, plus one-third of the days he was present in the US during the immediately preceding calendar year, plus one-sixth of the days he was present in the second preceding calendar year, is 183 days or more.

To illustrate the operation of the “look-back” period rules, assume that in 2016 a foreign person spends 15 days investigating business opportunities in the US and 20 days on holiday there. Later that year, he spends 30 days meeting with his employer’s customers. In 2015, the individual spent 120 days in the US for treatment of a pre-existing medical condition. In 2014, he spent 60 days purchasing property and seeking investments and 60 days on business for his employer.

The number of days counted for purposes of the substantial presence test for 2016 are 125: 2016 = 65 days + 2015= 40 (one-third of 120) + 2014 = 20 days (one-sixth of 120). In this example, the individual would not be considered a US resident for the 2016 calendar year. He was neither in the US during 2016 for at least 183 days, nor was the weighted average over the three-year “look-back” period equal to or more than 183 days.

Note for Students

Finally, many foreign students use scholarships and grants as a means of financing their education. It is important for them to have a good understanding of the US laws regarding the taxation of scholarships and grants, even if they are treated as “exempt individuals”. Details can be found in my US tax blog post here.


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