Generally, income from a trade or business operated within the U.S. by a nonresident
alien is NESE but it is not subject to Self-Employment Contributions Act (SECA) taxes
for social security coverage purposes. The individual is required to file a tax return
and pay the required federal income taxes. However, if the nonresident alien meets
the “substantial presence test” or has been lawfully admitted for permanent residence,
as shown by the issuance of an I-551 (“green card”), the individual is treated the
same as a “resident alien” and is required to pay SECA taxes for social security coverage
purposes unless exempt under a U.S. Totalization agreement. For additional information
regarding the “substantial presence test,” see GN05010.040C. For definitions on nonresident
alien vs. resident alien, see GN05010.030B.
NOTE: Residents of the Virgin Islands, Puerto Rico, Commonwealth of the Northern Mariana
Islands, Guam, or American Samoa are not considered nonresident aliens for social
security coverage purposes and are required to pay SECA taxes.