Immigration + Tax: A Strategic Duo in Global Mobility

Fragomen’s Immigration+ Blog series explores the intersection of immigration law with other areas of the law related to global mobility.

Immigration and tax are foundational pillars of global mobility. Immigration law determines whether a traveler may legally enter, remain, and work in the United States. That cross-border movement often triggers tax consequences.

These two areas of law form a closely connected legal framework for globally mobile individuals and the organizations that sponsor them. A traveler’s immigration status can materially shape the assumptions underlying a tax analysis. At the same time, tax consequences, compliance challenges or failures to satisfy tax obligations may affect immigration strategy, timing or eligibility for certain immigration pathways.

Regardless of why an individual crosses an international border, the core questions are the same.  Whether a traveler is studying abroad, taking a short business trip, embarking on an expatriate assignment, launching a new company or planning for permanent residence or naturalization, both immigration and tax analyses often turn on the following: immigration status, time spent in the United States, work location(s), payor of compensation, other income and long-term plans.

This blog post examines how immigration and tax intersect across common U.S. immigration classifications. Understanding these connections can help travelers, employers and their advisors identify risks earlier and make better-informed mobility decisions. Early coordination between immigration and tax advisors can reduce compliance exposure, avoid costly course corrections and keep cross-border plans on track.

U.S. Residency: Immigration vs. Tax

Immigration and tax use similar terminology with related but distinct legal meanings.

For immigration law purposes, “residency” typically refers to lawful permanent residency indicative of having a green card.

For U.S. federal income tax purposes, the “tax residency” of an individual who is not a U.S. citizen,  is generally determined under Internal Revenue Code (Code) rules of either (1) the substantial presence test (individual physically present in the United States for at least 31 days in the current year and 183 days over the Internal Revenue Service’s (IRS) weighted three-year formula) or (2) the green card test (U.S. lawful permanent resident status has been approved for immigration purposes and has not been formally relinquished). Therefore, an individual may be considered a nonresident based on immigration status but a resident for income tax purposes.

Citizenship may not be relevant, though a nonresident U.S. citizen remains taxable on worldwide income in a manner similar to a resident foreign national. For U.S. estate and gift tax purposes, residence is based on the individual’s domicile, which also is not impacted by the individual’s citizenship. Separate U.S. transfer tax rules apply to those who are U.S. citizens or residents (domiciliaries) versus those who are not. It is notable that income and transfer tax treaties may impact the residence of an individual separate from domestic law.

    

Upon each entry and exit from the U.S., non-U.S. citizen, non-lawful permanent resident travelers should check their I-94 and I-94 Travel History, if applicable, to ensure that they are admitted into the United States with the correct immigration status and to track their days that they are physically present in the United States for income tax residency purposes. The nature of the activities performed in the United States is also important. For immigration purposes, travelers are only authorized to work if they are admitted in a work authorized status. For tax purposes, it is important to track whether each day in the United States is a workday vs. a non-workday (e.g., a vacation). When determining compensation allocations, a workday will generally source compensation to the United States whereas non-workdays will not.

International Students and Exchange Visitors (Including Trainees)

International students and certain exchange visitors (including trainees) are uniquely positioned. For U.S. tax purposes, the Code treats many foreign nationals present under F, J, M or Q visa status as “exempt individuals” for purposes of the substantial presence test, meaning their days of U.S. presence under such visas will generally not count towards the substantial presence test. With certain exceptions, exempt status applies for the first five calendar years for students and two years for teachers and trainees. While classified as nonresident aliens, compensation earned by an F, J, M or Q visa holder typically does not result in a U.S. Social Security or Medicare tax (collectively known as ‘FICA’) for the individual or their employer on qualified authorized work.

This is an important consideration for employers of international students and exchange visitors (including trainees) when determining relevant payroll tax reporting and withholdings. Income tax residency, tax and FICA obligations are strategic considerations for F, J, M and Q visa holders and their employers when deciding whether and when to move from exempt visa status (e.g., F-1) to a non-exempt status (e.g., H-1B) or permanent residence.

Business Visitors

Short-term business travel requires careful and strategic planning from both an immigration and tax perspective. For immigration purposes, a business visitor is an individual traveling to the United States pursuant to a B-1 visa or ESTA under the Visa Waiver Program (for eligible travelers). These are typically short-term visits to the United States with permissible activities which include attending meetings or conferences, negotiating contracts or facilitating or participating in short-term training or after-sales service activities. An individual present in the U.S. in business visitor immigration status may not engage in “productive work” (though authorized work as a business visitor is considered U.S. services for tax purposes). While business visitors traveling on ESTA may be admitted to the United States for up to 90 days per entry with no eligibility for an extension, those entering the United States on a B-1 visa stamp may be admitted for up to six months, with eligibility for six-month extensions.

That distinction matters when circumstances change. What begins as a short trip can quickly become more complex when there are repeat visits, project-based work, hands-on activity, extended stays, multiple entities involved, productive work or compensation arrangements that do not fit neatly into the original plan. While business visitors under the immigration rules do not hold a work-authorized status and may not be employed by a U.S. employer, U.S. tax consequences can still arise for the visitor and the payor depending on the traveler’s physical presence in the United States and other criteria.

This is where immigration and tax advisors complement each other particularly well. Tax advisors may be the first to hear about compensation structures, intercompany arrangements or travel cadence that warrant closer immigration review. Immigration counsel may be the first to spot activity or travel patterns that suggest a broader tax-sensitive mobility issue. The sooner those perspectives are aligned, the more effectively clients can manage risk without slowing business.

Temporary Work-Authorized Travelers

Temporary work authorized travelers refer to individuals with an immigration status that is sponsored by their employer or agent, including L-1 Intracompany Transferee, H-1B/H-1B1/E-3 Specialty Occupation, TN Worker, E-1 Treaty Trader, E-2 Treaty Investor or O-1 Individual of Extraordinary Ability or Achievement. They may be coming to the United States for short or long periods of time, depending on the business need. It also refers to those who have work authorization as a dependent or a spouse, including L-2, H-4, E-1/E-2S or E-3D.

Depending on their immigration status, U.S. reporting and withholding requirements may apply to their payors in different ways. Travelers holding a temporary work-authorized status are more likely than business visitors to spend longer periods in the U.S., and thus to satisfy the substantial presence test, thereby triggering a broader U.S. tax liability as a result of establishing U.S. tax residency. Therefore, travelers and their employers need to carefully monitor the days that the traveler is physically present in the United States, their visa types, payors, etc.

Lawful Permanent Residents

U.S. lawful permanent residents (in the case of this blog post, “green card holders”) are generally subject to U.S. federal income taxation on their worldwide income under the Code’s green card test. The new Gold Card holders will also be considered lawful permanent residents. This critical tax consequence is often a deciding factor for many foreign nationals, particularly executives and other high net worth individuals, when deciding whether to remain in a temporary work-authorized status or to apply for a green card.

When deciding whether to apply for or renew a green card, applicants also must consider their U.S. tax history, including whether they have always timely filed and paid their taxes. If not, they should work to pay all taxes prior to filing for the application. Failure to do so could result in a denial of the application or be considered a negative factor in an immigration officer’s discretion of whether to allow the initial green card application to process from within the U.S. or require that it be processed through a U.S. consular post in the applicant’s home country. Further, applicants must consider other tax implications that may be directly related to their lawful permanent residence status. For example, a green card application may be considered evidence of U.S. domicile for estate and gift tax purposes, may prevent an individual from qualifying for the ‘closer connection’ exception to the substantial presence test, can impact qualification for certain treaty benefits and can impact future exposure to U.S. ‘exit taxes.’

The exit tax (Sec. 877A and related implications under Sec. 2801) generally impacts permanent residents only if they have held a green card in any part of at least eight years over a 15-year period that ends with the year of ‘expatriation.’ A delay in applying for green cards can help delay when the eight-year clock starts, particularly if other visa types remain available. Expatriation for a green card holder can occur by either filing Form I-407, Record of Abandonment of Lawful Permanent Resident Status, or by claiming foreign residence under a U.S. income tax treaty. While expiration of the green card may impact the individual from an immigration perspective, expiration without filing Form I-407 is irrelevant for U.S. income tax purposes, and ‘lawful permanent residence’ status remains until the form is filed.

U.S. Citizens

U.S. citizenship can be acquired in multiple ways: some automatic, some intentional. As recently affirmed by the U.S. Supreme Court, individuals born in the U.S. are U.S. citizens through birthright citizenship. Individuals born to a U.S. citizen parent may also acquire citizenship at birth, sometimes without realizing it. Others pursue citizenship deliberately through naturalization. Regardless of how citizenship is obtained, all U.S. citizens generally face the same U.S. tax obligations: they must pay U.S. federal income taxes on their worldwide income and are subject to U.S. estate and gift taxes on the transfer of worldwide assets (with certain exceptions).

When lawful permanent residents apply for U.S. citizenship through the naturalization process, applicants must meet U.S. continuous residence and physical presence requirements. In assessing the continuous residence requirement, the immigration service looks at the number of years that the applicant’s U.S. tax returns reflected continuous presence in the U.S. as a “resident.”  “Resident” for these purposes is not based solely on meeting qualifications under the Code as a tax resident or on the filing of Forms 1040, U.S. Individual Income Tax Return vs. 1040NR, U.S. Nonresident Alien Income Tax Return. For example, a green card holder living outside the U.S. may not qualify for the continuous U.S. residence/physical presence requirements applicable for naturalization.

Some U.S. citizens may decide to relinquish their U.S. citizenship, which involves processing through the nearest U.S. Embassy or Consulate. Relinquishment of citizenship can result in expatriation consequences similar to those for long-term permanent residents who expatriate, without regard to how long citizenship was held.

Additional Immigration + Tax Considerations

Remote Worker Considerations

A growing area of risk arises when an inbound traveler decides to work remotely from the United States for personal reasons, such as extending a vacation or staying with family, while continuing in a role for a foreign employer. The instinct is often that this is harmless because the work, the employer and the pay all sit outside the United States.

From an immigration perspective, productive work performed while physically in the United States generally requires work authorization such that admission as a tourist on B-2/ESTA does not permit it. At the same time, those days of physical presence count toward the substantial presence test and can create U.S. income tax exposure on compensation tied to U.S. workdays (even if tax residence is not established), along with potential state and local filings and withholding obligations. Depending on circumstances, such arrangements may also expose the foreign employer to permanent establishment risks in the U.S.

What feels like a personal arrangement can therefore carry both immigration and tax consequences for the individual and the foreign employer. Travelers should confirm that any work performed during a U.S. stay is permissible under their immigration status, and that employers authorize such performance in consideration of U.S. tax implications, before assuming a remote arrangement is risk-free or that the employer need not know about it.

State and Local Considerations

While the analysis above centers on federal immigration and taxation, both areas of law include state and local considerations. For example, H-1B, H-1B1 and E-3 immigration categories require the employers to pay beneficiaries state/local minimum wage, federal prevailing wage or the internal actual wage, whichever is higher. Moreover, the rise of state wage transparency laws in an increasing number of states requires disclosure of the offered wage in all aspects of the labor market test as part of the PERM-based green card processes. Certain states also mandate the use of E-Verify for immigration compliance.

State and local taxation operate under a separate set of rules that are easy to overlook. States and localities do not follow the Code’s residency tests and may not recognize exemptions available for federal purposes under the Code or income tax treaties. As a result, an individual who is a nonresident alien for federal income tax purposes may still be treated as a resident or a nonresident of a state based on domicile, a day-count test or other criteria. This is especially consequential for business travelers and temporary assignees regardless of citizenship or immigration status. Most states tax nonresidents on compensation earned for services performed within their borders, and the threshold for triggering an individual filing or employer withholding obligation varies widely from state to state. The same physical presence data that drives immigration compliance, including entries and exits, I-94 history and days spent in the United States, can also impact state residency and compensation sourcing. For that reason, immigration and tax advisors should coordinate day tracking from the outset. To minimize the impact of state and local taxation on a client with inbound taxpayers, it is important to review individual circumstances in advance.

Social Security

U.S. Social Security plays a role in both immigration and tax. Multiple immigration forms (e.g., Forms I-765, Application for Employment Authorization Document, and I-485, Application to Adjust Status) allow applicants to apply for a Social Security Number along with the requested immigration benefit.

Social Security also raises a separate set of cross-border tax issues. By default, an employee working in the United States (and their employer), whether a U.S. citizen or foreign national, may be subject to Social Security and Medicare taxes while also remaining liable for social insurance contributions in their home country, resulting in possible double Social Security coverage on the same earnings. The U.S. has entered into totalization agreements with more than 30 countries, in part to address the possibility of double taxation. These agreements assign coverage to one country when dual coverage would otherwise occur and may require the employer to obtain a certificate of coverage documenting where compensation is covered. As with income tax, the outcome often turns on the same core facts that drive the immigration analysis, which can include the worker’s status, the expected length of the assignment, which entity employs the individual, whether elections have been made, etc. Because determining social tax coverage and securing a certificate of coverage can be part of structuring a compliant assignment, this is another area where early coordination among immigration, tax and payroll advisors helps avoid unnecessary cost and exposure.

Personal vs. Employer Cost Obligations

A separate question is who ultimately bears the cost of a cross-border assignment or permanent hire. Many immigration benefits require that the sponsoring employer pay all legal and government fees, although in some cases the sponsoring employee may pay. Employees and their employers should work with immigration to understand the rules and risks, as passing certain immigration costs on to employees can result in immigration non-compliance and penalties for the employer.

In addition, employer coverage of immigration-related costs can result in taxable compensation to the employee in the home or host countries. For example, immigration-related costs related to family members or visa types that allow an individual to remain in a country even if not working for the employer (e.g., green cards) are generally considered a taxable fringe benefit for U.S. tax purposes.

Many employers operate under a tax equalization policy, which is intended to keep an assignee in roughly the same tax position they would have occupied had they remained in their home country. Under such a policy, the company typically covers incremental taxes arising from the assignment, including U.S. federal, state, local and Social Security obligations, while the employee remains responsible for a hypothetical home-country tax. Extended U.S. travel, a move or immigration status that triggers U.S. tax residency, for example, may have a limited personal financial impact on an equalized employee but a meaningful cost to the employer. For that reason, immigration timing, status changes and assignment structure should be evaluated with the equalization framework in view, so that the party bearing the cost understands the full picture before decisions are made.

Although beyond the scope of this blog post, the impact of immigration and assignment structures on business taxation should also be considered.

Bringing Immigration and Tax Together

Immigration and tax are distinct legal disciplines, each with its own complex rules, risks and strategic considerations. As global mobility becomes increasingly complex, organizations and individuals benefit from advice grounded in deep, specialized expertise in both fields.

Whether supporting an international student, exchange visitor, short-term business traveler, multinational workforce or an individual pursuing permanent residence or citizenship, the strongest outcomes come from early coordination between dedicated immigration counsel and experienced tax advisors. By bringing together specialists in each discipline, clients can better identify risks, align strategies, navigate compliance obligations and make informed decisions with confidence.

For tax professionals, partnering with experienced immigration counsel helps ensure clients receive comprehensive guidance that addresses both legal and tax considerations. Likewise, employers that engage specialized immigration and tax advisors from the outset are better positioned to support their workforce while reducing cross-border compliance risks.

About The Co-Author

This article was authored in conjunction with Adam Schwartz, Director in the Global Mobility practice at Andersen. Adam advises organizations on global mobility tax, payroll, and Social Security matters, helping clients develop and implement strategies to address the complex tax implications of cross-border workforce mobility.

Fragomen and Andersen bring complementary immigration and tax perspectives to help organizations and globally mobile individuals navigate the legal and compliance considerations associated with travel to and work in the United States.

Disclaimer

Unless expressly stated otherwise, this message is not intended to constitute written tax advice within the meaning of Treasury Department Circular 230 or immigration advice. It is intended as general information for discussion purposes only. Readers should not interpret these statements as written tax or immigration advice or rely on them exclusively for any purpose. Personal circumstances may generate different outcomes.

Need to Know More?

For questions about the intersection of immigration and tax law or anything outlined in this post, please contact Senior Associate Kyle Sommer at [email protected].

This blog was published on July 8, 2026 and reflects information available at that time. Updates may occur as policies evolve. To stay informed on the latest immigration news and analysis, please subscribe to our alerts and follow Fragomen on  LinkedIn, Facebook and Instagram.