(UNITED STATES) An H-1B extension can feel like a simple work move: your employer files, USCIS approves, and you keep your job and paycheck. But the extra time in the United States can also change how the Internal Revenue Service treats you for tax purposes. For many H-1B professionals with foreign property, investments, bank accounts, or family wealth abroad, the extension can turn into a tax liability and, in some cases, a true global tax event.
The key is that immigration status and tax status are not the same. Your visa can be valid while your tax position shifts underneath you. The shift usually happens when you stay in the country long enough to meet the IRS Substantial Presence Test (SPT), a day-count rule that can make a person a U.S. tax resident even if they are not a green card holder.
Below is a practical, step-by-step process to help you plan an H-1B extension with taxes in mind, before you sign forms or lock in travel and life plans.
Overview: why this matters
- The SPT can convert your reporting obligations from local-only to worldwide.
- Immigration adjudicators (USCIS) do not check your tax day counts; the IRS does.
- Many cross-border financial events—real estate sales, vested equity, foreign accounts—can trigger U.S. filing and reporting obligations once you are a U.S. tax resident.
Important: Treat this as planning guidance, not legal or tax advice. Consult qualified professionals for your specific situation.
Step 1: Map your likely tax status before the extension filing (1–2 weeks)
Your action: Start with your travel calendar, not your paystub. Under the SPT, you are generally treated as a U.S. tax resident for a year if you are physically present at least 31 days in the current year and 183 days under a three-year weighted formula (all days this year, plus 1/3 of last year’s days, plus 1/6 of the prior year). The IRS explains the test and its exceptions on its official page: Substantial Presence Test.
Create a simple day-count sheet for:
– the current calendar year,
– the prior year,
– two years back.
If you are close to the threshold, even a small change—an extension approval that keeps you employed and in the U.S. longer—can tip you into resident tax treatment.
Create a simple day-count sheet for this year, last year, and the year before. Track days in the U.S. now to predict tax residency, and plan any extension timing to avoid unintended worldwide filing.
What to expect from authorities: USCIS will not check your SPT day count when it decides your extension. Tax residency is an IRS issue. That is why people get surprised: immigration and tax offices act on different rules.
Step 2: List “foreign life events” that could move from local to worldwide tax (1 week)
Your action: Write down any non-U.S. income or asset event that could happen while you are in the United States as a tax resident. Common examples include:
- selling foreign real estate,
- earning rent from property outside the U.S.,
- capital gains from foreign stocks or funds,
- equity pay that vests while you work in the U.S.,
- large foreign gifts or inheritances that may be reportable.
This list matters because once you are treated as a resident for U.S. tax purposes, the IRS generally expects reporting of worldwide income on Form 1040 (Form 1040). If you are a nonresident, you may file Form 1040-NR instead (Form 1040-NR). Some people become dual-status in a transition year, which can affect deductions and filing choices.
What to expect from authorities: The IRS does not ask you to “register” as a tax resident. It comes out in your annual return. If you file the wrong form, you may need amended returns, and penalties can follow if foreign reporting was missed.
Step 3: Check whether your extension timing collides with a property sale (2–4 weeks)
Your action: If you plan to sell a home or land outside the U.S., timing can be everything. A common pattern is: the sale was planned, the extension is approved, the person stays for work, and the sale gets pushed back. The result: the sale happens after U.S. tax residency begins, and the capital gain becomes reportable in the U.S.
Even if you pay tax abroad, U.S. rules can still leave a gap:
- foreign tax credits can be limited and complex,
- exchange-rate conversion can make a gain look bigger in dollars,
- different countries tax gains differently, so credits may not match.
A simple “before versus after” model, done early, can show whether the extension changes the net outcome. According to analysis by VisaVerge.com, the tax cost surprises many workers because it shows up months after the immigration decision, when filing season arrives.
What to expect from authorities: USCIS timelines can shift. If you get a Request for Evidence (RFE), your stay may stretch, so watch your day count carefully.
Step 4: Review equity and deferred pay that could vest during the extended stay (2–3 weeks)
Your action: Many H-1B workers receive pay that does not land as cash every month, such as Restricted Stock Units (RSUs), stock options, or performance bonuses. The immigration benefit of an extension—continued employment—also means continued vesting.
The core risk: vesting while you are a U.S. tax resident can “lock” the income into U.S. ordinary income taxation and payroll withholding. That can be a bigger bill than vesting after a departure, depending on your facts.
Build a vesting calendar that covers:
– grant date,
– vesting dates,
– any planned exercises or sales,
– expected bonus payout dates.
Then ask your company payroll or stock plan team what withholding will look like if you are on U.S. payroll on those dates. If the equity relates to a non-U.S. entity, ask whether extra disclosures could apply.
What to expect from authorities: Employers often withhold based on payroll rules, not your personal tax picture. That means you can still owe more at filing, or be over-withheld and wait for a refund. Either way, your cash flow can change.
Step 5: Identify foreign account and asset reporting exposure (1–2 weeks)
Your action: Many people think “no U.S. tax due” means “no U.S. paperwork.” This is incorrect. After resident tax treatment begins, reporting duties can be compliance-driven.
Common filings include:
- FBAR, filed as FinCEN Form 114 when foreign financial accounts exceed $10,000 in total at any time in a year (FinCEN Form 114 (FBAR)).
- Form 8938 for specified foreign financial assets under FATCA (Form 8938).
- Form 3520 for certain foreign gifts or transfers (Form 3520).
- Form 8621 for some holdings treated as PFICs (Passive Foreign Investment Companies) (Form 8621).
- Form 5471 for certain ownership in foreign corporations (Form 5471).
- Form 8865 for certain interests in foreign partnerships (Form 8865).
Put bluntly: your tax liability may be small, but your penalty exposure can be large if you miss a required form.
What to expect from authorities: FBAR is filed electronically with FinCEN, not with your tax return. The IRS can still enforce penalties. Keep copies of foreign statements, translated summaries when needed, and the maximum balances for each account.
Step 6: Consider treaty claims and dual-status complexity (2–6 weeks; longer if facts are messy)
Your action: Some tax treaties have “tie-breaker” rules that matter if you are treated as resident in two countries at once. Treaties also have “saving clauses” that limit benefits for U.S. residents. If you plan to claim a treaty position that needs disclosure, Form 8833 may be required (Form 8833).
Do not assume a treaty wipes out the issue. Treaties can help in certain cases, but they do not erase the general rule that U.S. residents report worldwide income.
Step 7: Decide whether the extension still makes financial sense (1–2 weeks)
Your action: An H-1B extension can still be the right call. It often makes sense when:
- U.S. pay is much higher than foreign income,
- equity and bonuses outweigh added tax,
- permanent residence needs steady employment,
- foreign assets are minimal or already sold.
But it is worth a go/no-go review if you plan to:
– sell foreign property soon,
– receive a large gift or inheritance,
– exit the U.S. in the near term,
– keep major investments abroad,
– or if you have never done a worldwide tax projection.
This is where you turn the extension from a surprise global tax event into a planned choice.
What to expect from authorities: USCIS focuses on the job, the employer, and eligibility. Your tax outcome depends on timing, not on the I-129 decision itself.
Step 8: File the extension while keeping tax steps on a parallel track (typical 2–6 months for USCIS decision)
Your action: Immigration counsel will guide the petition package and deadlines. On the tax side, set reminders for:
- year-end day-count totals,
- March/April tax document collection,
- FBAR and other foreign reporting deadlines,
- any planned asset sales.
If you are changing employers or travel plans, update the tax projection. A new job with a different equity schedule can shift your exposure quickly.
What to expect from authorities: If USCIS issues an RFE, your work plan may extend longer than expected, which can also extend your days in the U.S. and deepen tax residency ties.
Getting help: the two-professional rule
Many H-1B workers talk only to an immigration lawyer. For cross-border facts, you often need two specialists:
- an immigration attorney to manage status and deadlines, and
- an international tax CPA or tax attorney to project worldwide income, credits, and forms.
Bring them the same timeline so the advice matches your travel and work plans.
Final note: This article is for informational purposes only and does not constitute legal, immigration, or tax advice. Individual circumstances vary; consult qualified professionals. State tax rules and foreign law can also change outcomes.
