Most aliens who have resided in the United States for more than 183 days are automatically classified as a resident alien for tax purposes, regardless of their immigration status. If IMGs meet the substantial presence test or have applied for permanent residency, they are automatically classified as resident aliens for tax purposes. But because IMG housestaff are being trained for a profession, they may exclude the days they spend in the United States as a trainee and possibly avoid meeting the terms of the substantial presence test. This exception can be used for up to two years, but IMGs may not use the exemption if they were in the country during any portion of two of the preceding six years. If you are a nonresident alien and not covered by any tax treaty, income from all sources is considered and treated essentially as earned income.
Earned income includes income earned from hospitals as a result of work-related training.
IMGs are taxed at the single tax rate, regardless of marital status. Besides the one personal exemption, IMGs may also deduct casualty losses and charitable contributions. Once IMGs no longer qualify as nonresident aliens, they must file as resident aliens. Resident aliens are required to file a regular Form 1040 and are subject to all applicable employment taxes. Charles Solcher, a member of the faculty at the University of Texas at Dallas, specializes in federal income taxation.