Form 8840 & 8833: How to Avoid US Tax Residency in 2025

The “183-Day” Escape Plan: Using Form 8840 and 8833 to Avoid US Residency

One of the most stressful realizations for our international clients in 2025 was accidentally becoming a “U.S. Tax Resident.” As we discussed in [Blog #4], the Substantial Presence Test is a weighted formula that can turn a few long trips into a full-blown IRS reporting obligation.

However, the law provides a way out. If you meet the test but your “heart and home” remain outside the U.S., you may be able to claim a Closer Connection Exception.

1. Form 8840: The Closer Connection Statement

If you were in the U.S. for fewer than 183 days in 2025, but the 3-year weighted formula pushes you over the limit, Form 8840 is your shield.

To qualify, you must prove you have a “Closer Connection” to a foreign country based on:

• Permanent Home: Where you maintain your primary residence.
• Family & Social Ties: Where your spouse, children, and social belongings (cars, furniture) are located.
• Economic Interests: Where your primary bank accounts and business activities are based.
• Official Documents: Where you hold a driver’s license and are registered to vote.

The 183-Day Hard Stop: You cannot use Form 8840 if you were physically present in the U.S. for 183 days or more in the single year of 2025. At that point, you are a resident unless a Tax Treaty says otherwise.

2. Form 8833: Treaty-Based Return Position

What if you did spend more than 183 days in the U.S. in 2025? Form 8840 is off the table, but Form 8833 might save you.

If your home country has a tax treaty with the U.S. (like India, Canada, or the UK), you can use the “Tie-Breaker Rules” to claim residency in your home country instead of the U.S.

• The Benefit: You file as a Non-Resident Alien (Form 1040-NR).
• The Protection: You only pay U.S. tax on U.S.-sourced income, keeping your foreign bank accounts and mutual funds out of the IRS’s reach.

3. The $1,000 Penalty for Silence

The IRS takes these disclosures seriously. Failure to file Form 8833 when required can result in a $1,000 penalty for individuals (and $10,000 for C-Corporations). More importantly, if you don’t file the form, the IRS will default you to “Resident” status, potentially triggering hundreds of thousands of dollars in back taxes on your global assets.

4. Key 2026 Deadlines for Non-Residents

• April 15, 2026: Deadline if you had wages subject to U.S. withholding.
• June 15, 2026: Deadline if you had no U.S. wages (standard for many 1040-NR filers).

How KKCA Secures Your Status

Claiming a “Closer Connection” is not a box you just check; it’s a legal argument you present to the IRS. At KKCA, we help you:

1. Analyze the “Days” Calculation: Ensuring your 3-year weighted average is 100% accurate.
2. Draft the Narrative: We help you compile the evidence needed to satisfy the IRS’s “Facts and Circumstances” test.
3. Treaty Optimization: We identify specific articles in the U.S.-India (or other) treaties to protect your foreign-sourced dividends and interest.

Looking for personalized tax services about your specific tax situation, please contact us. We are here to help you with your specific tax matters.

Disclaimer

This blog is intended for informational purposes only and does not constitute legal or tax advice. Please consult a qualified U.S. CPA or tax attorney for guidance specific to your situation.