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Robin D.
Robin D., Senior Tax Advisor 4
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HI am on H1B visa currently and opened an c -Corp. But recently

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HI am on H1B visa currently and opened an c -Corp. But recently applied for an S-corp elections and it got approved by IRS. But now When I look at few forms many people say that only US citizen or GC holder or EAD can form s corp. So I am not sure what to do about this now. I searched online and found this on irs website which says a person who meets the substantial present test and a resident alien for tax purposes can open a scorp. and I meet that criteria. SO can I continue on S corp or not?
Also I appointed a CFO who is a GC holder .. And he is not the share holder of the company .. If I can continue as S corp my next question would be will it be beneficial if I have a GC holder as a share holder too? what are the advantages or disadvantages of it.. How can I make this change now ? And how it actually works during tax filing . Please help
Here is the article which I found on irs website.
Substantial Presence Test

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

Example:

You were physically present in the United States on 120 days in each of the years 2007, 2008, and 2009. To determine if you meet the substantial presence test for 2009, count the full 120 days of presence in 2009, 40 days in 2008 (1/3 of 120), and 20 days in 2007 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2009.
Days of Presence in the United States

You are treated as present in the United States on any day you are physically present in the country, at any time during the day. However, there are exceptions to this rule. Do not count the following as days of presence in the United States for the substantial presence test.

Days you commute to work in the United States from a residence in Canada or Mexico, if you regularly commute from Canada or Mexico.
Days you are in the United States for less than 24 hours, when you are in transit between two places outside the United States.
Days you are in the United States as a crew member of a foreign vessel.
Days you are unable to leave the United States because of a medical condition that develops while you are in the United States.
Days you are an exempt individual.

For details on days excluded from the substantial presence test for other than exempt individuals, refer to Publication 519, U.S. Tax Guide for Aliens,.
Exempt Individual

Do not count days for which you are an exempt individual. The term "exempt individual " does not refer to someone exempt from U.S. tax, but to anyone in the following categories who is exempt from counting days of presence in the U.S.:

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).

Closer Connection Exception to the Substantial Presence Test

Even if you passed the substantial presence test you can still be treated as a nonresident alien if you qualify for one of the following exceptions;

The closer connection exception available to all aliens. Please refer to Conditions for a Closer Connection to a Foreign Country.
The closer connection exception available only to students. Please refer to The Closer Connection Exception to the Substantial Presence Test for Foreign Students and Sample Letter.


Please help

Robin D :

Hello and thank you for using Just Answer,
All of an S corporation's shareholders must be U.S. citizens or resident aliens of the U.S. Foreign individuals and foreign businesses cannot be shareholders of an S corporation.
If you have met the substantial presence test and are a resident alien of the US you can be a shareholder in an S corp.
This is exactly from the IRS:


To qualify for S corporation status, the corporation must meet the following requirements:



  • child">
    Be a domestic corporation



  • Have only allowable shareholders



    • including individuals, certain trust, and estates and



    • may not include partnerships, corporations or non-resident alien shareholders





  • Have no more than 100 shareholders



  • Have one class of stock



  • Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.


Robin D :

Note the rule says Non-resident Alien

Robin D :

As a resident alien you will be taxed just like a Green Card holder, on your worldwide income for US purposes.

Customer:

Hi ,

Robin D :

Hi

Robin D :

When did you first come to the US?

Customer:

I came to usa in 2006

Customer:

on F1 Visa and got my H1 in oct 2008

Robin D :

Ok so since 2008 you have been here?

Customer:

since then I have out of country only 2-3 times for just a month vacation .. Yes I am working in usa since then..

Robin D :

Then you have pretty much been a resident alien since at least 2009. Hav eyou been filing US 1040 tax return or 1040NR?

Customer:

But I worked in different states almost each year.. there were situations when i was in 2-3 different states in a single year so even last year i was in 2 different states as I will be moving for projects.. so am not 100% sure if i filed as a resident alien.. even though I am..

Customer:

will that be a problem..

Robin D :

The states are not relevant for federal residency rules. Yes that will be a problem.

Robin D :

You need to look back at those returns.

Robin D :

You need to see what you filed.

Customer:

ok I will look in to it today..

Robin D :

As far as your original question, your S corp status is fine.

Customer:

so company can be on scorp if i havent filed for 1040 NR correct ?

Robin D :

Yes

Robin D :

You are not a nonresident alien and have not been one for some time.

Customer:

ok thanks last few questions robin..

Robin D :

You are most welcome

Robin D :

If you filed incorrectly please amend those

Customer:

what is my status robin if I am party year resident.assume i worked 6 months in california and 6 months in texas. am i still considered a resident alien

Robin D :

For federal yes, we are the United States of America but for the states you are part year for each.

Robin D :

Texas has no personal income tax

Robin D :

but

Robin D :

CA does

Customer:

am looking at one of my tax returns and I filed as part year resident for each state i worked ... chicago, texas, NY ,NJ and now california .. yes i worked in all of these states from past 4 years

Customer:

so now that i filed as a part year resident can the company be still on s corp .. please suggest

Robin D :

Good for the states so on teh Federal you filed a 1040 form or does it say 1040NR at top

Customer:

yes looks like it..

Robin D :

1040?

Customer:

yes 1040

Robin D :

You have been compliant then and no worries on the tax issue

Customer:

oh great, thanks for your suggestion robin, its really helpful. and one last question is if I can add a GC holder as a share holder for my company..

Robin D :

Yes, they are resident aliens too!

Customer:

Thanks a lot for all your answers..

Robin D :

You are most welcome

Robin D :

Your positive rating is always thanks enough.

Customer:

sure

Robin D :

Best wishes

Customer:

thank u Robin :)

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