The Tax Moves Blog

What Is the Substantial Presence Test?

The Substantial Presence Test is an IRS calculation used to determine if a foreign national has spent enough time in the United States to be treated as a U.S. resident for tax purposes, regardless of immigration status.

You meet the test if:

• You were physically present in the U.S. for at least 31 days in the current year, and

• The total of your days over the last three years equals 183 days, calculated as:

  • All days in the current year

  • 1/3 of days in the previous year

  • 1/6 of days from two years ago

Once the Substantial Presence Test is met, the IRS expects a resident tax return (Form 1040) instead of Form 1040NR.

How the IRS Counts Days for J-1 Visa Holders

This is where most J-1 workers get confused.

Not all days in the U.S. automatically count toward the Substantial Presence Test.

Many J-1 visa holders qualify as “exempt individuals” for a limited number of years, meaning:

• Certain days do not count toward the test

• But the exemption is temporary, not permanent

Failing to track exempt vs non-exempt days correctly is a major reason the IRS later reclassifies returns and freezes refunds.

Why the Substantial Presence Test Matters for J-1 Refunds

The IRS cross-checks:

• Your Form W-2

• Your Wage & Income Transcript

• Your days of presence

• Your filed tax form

If the IRS believes you should have filed Form 1040 but you submitted Form 1040NR (or the opposite), your refund may be:

• Delayed

• Frozen

• Reduced

• Flagged for review after payment

This happens even if your employer withheld taxes correctly.

Common Substantial Presence Test Mistakes J-1 Workers Make

J-1 visa holders frequently run into trouble due to:

• Counting exempt days incorrectly

• Assuming J-1 status automatically means nonresident

• Filing Form 1040NR after exemption years expired

• Using tax software that defaults residency incorrectly

• Not filing Form 8843 every year

• Ignoring prior-year presence history

These mistakes compound over time and often surface years later, when refunds are held or notices arrive.

IRS Forms Connected to the Substantial Presence Test

If you are a J-1 visa holder, these forms work together:

• Form W-2 – Employer wage reporting

• Form 1040NR – Nonresident return

• Form 1040 – Resident return

• Form 8843 – Mandatory exempt individual statement

• DS-2019 – Visa classification support

Understanding how these forms interact is essential to avoid misclassification.

Start With Your IRS Online Account

Before filing, every J-1 worker should verify what the IRS already has on file.

👉 Official IRS access: https://www.irs.gov/

Inside your IRS account, you can confirm:

• Reported W-2 income

• Name and SSN matching

• Prior-year filings

• Wage & Income Transcript accuracy

The IRS prioritizes employer-reported data over what you file.

Use the Substantial Presence Test Correctly

The Substantial Presence Test is not just a formula — it’s a classification system that determines how the IRS views you.

A correct calculation:

• Prevents refund delays

• Avoids IRS reclassification

• Protects treaty benefits (when applicable)

• Keeps your filing aligned with federal rules

J1 Go Tax – Specialized in J-1 Visa Tax Residency

J1 Go Tax prepares U.S. tax returns exclusively for J-1 visa holders with Form W-2 only.

We help J-1 workers:

• Apply the Substantial Presence Test correctly

• Determine Form 1040NR vs Form 1040

• File Form 8843 properly

• Avoid IRS refund holds and audits

• Align W-2 data with IRS transcripts

👉 Main Guide – Cornerstone:
https://j1visataxes.com/j1-visa-taxes/

👉 Tax Refund Calculator:
https://j1visataxes.com/tax-calculator/

Reminder: J1 Go Tax works only with J-1 participants who received Form W-2. We do not process cases without W-2 income.

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Texas / Florida / Washington / No-income-tax states

• Texas, Florida, Washington, Wyoming, Nevada, South Dakota, Alaska, New Hampshire and Tennessee do not impose a general personal income tax on wages (New Hampshire and Tennessee have historically taxed interest/dividends but have phased those out). If you worked only in a no-income-tax state, you typically won’t owe state wage tax — but check local or municipal rules (rare). Use a national list (Tax Foundation / major tax services) to confirm current status. Tax Foundation+1

Action: if you worked in any of the big hubs (NY, CA, NJ, MA, IL), expect state filing. If you worked in Florida or Texas, you likely do not owe state wage tax — but always double-check.

Withholding: your employer should withhold state tax (but mistakes happen)

Employers normally withhold federal and state income tax from wages on the W-2. Check Boxes 16–19 on your W-2 (state wages and state income tax withheld). If state withholding is missing or incorrect, you may still owe tax when you file your state return. If your employer paid you as a contractor (1099) instead of employee (W-2), state filing obligations can be different and potentially more complex. See our W-2 and 1099 explainers for details.
Interlinks: Form W-2, Form 1099.

Part-year residents, leaving the U.S., and multi-state issues

If you moved or left the U.S. mid-year, most states expect part-year filings. Generally:

• File a part-year or nonresident return where you have state-source income.

• Claim credits on the state return for taxes paid to another state (to avoid double taxation) where allowed.

• Keep documentation: DS-2019, passport entry/exit dates, pay stubs, W-2s, and employer addresses. Those items also feed your federal filing (Form 1040NR/8843) and residency assessment. Link: DS-2019 guide. IRS

Scholarships, stipends and the 1042-S — state treatment varies

Scholarships, fellowships, and some grants may be reported on Form 1042-S rather than a W-2. States disagree on whether these items are taxable and how to treat them — many treat scholarship income for services (i.e., work) as taxable wages; others exempt certain qualified scholarships. If you received a 1042-S, check your state rules and our 1042-S page. IRS
Interlink: Form 1042-S guide.