US Tax Filing Obligations When You Stay on a B1/B2 Visa (or ESTA)

The Visa Waiver Program (ESTA) allows business and tourist trips of up to 90 days per entry without applying for a visa in advance. It works well for short visits such as:

• contract negotiations

• attending trade fairs

• meetings with business partners

• limited technical supervision

A B1/B2 visa, on the other hand, is the better choice if:

• your stay is meant to last more than 90 days,

• you're planning several entries in quick succession (ESTA allows this in principle, but it can cause problems at the border),

• you've already made earlier ESTA entries and suspicion of misuse could arise (e.g. de facto residence),

• you need more legal certainty for technical work or project supervision.

Important: stays on ESTA can trigger the same tax consequences, especially with repeated or longer assignments. How you enter changes nothing about your US tax obligations.

The USA taxes not only citizens and green card holders but also foreign persons who earn US-source income or stay there too long.

Two criteria are decisive:

1. Substantial Presence Test (SPT): physical presence

2. Source of income: where is the work performed?

In other words: even if you're formally "just visiting", the IRS may consider you tax resident and require you to file a US tax return.

You're considered tax resident ("resident alien") if you:

• were in the USA for at least 31 days in the current calendar year and

• reached a total of 183 weighted days of presence over the last three years:

Calculation:

• Days in the current year × 1

• Days in the previous year × ⅓

• Days in the year before that × ⅙

Example:
A German technician spends 120 days a year in the USA:

• 2025: 120 → 120

• 2024: 120 → 40

• 2023: 120 → 20
  = 180 days → Not tax resident
  From 123 days in the current year, the 183-day threshold is reached.

If you meet the test, you're a US tax resident with worldwide tax liability and must file Form 1040 (not 1040NR!).

The USA has concluded tax treaties with many countries, including most European countries. A treaty determines which country has the right to tax.

But watch out:

• A treaty's "183-day rule" is not the same as the Substantial Presence Test!

• Even if a treaty means you aren't taxed, you may still have to file a tax return to claim treaty protection.

Which form you use depends on your tax status:

Also required when claiming treaty benefits:

• Form 8833 ("Treaty-Based Return Position Disclosure Statement") to claim the benefits of the tax treaty.

Filing deadlines depend on your status:

An extension is available:

• For 1040: Form 4868 → extension to October 15

• For 1040NR: Form 4868 + "nonresident alien" noted on the envelope

Note: the extension only applies to filing, not to payment. Any tax due must be paid by the original deadline.

Worldwide income: reportable even with no US tax due

Even if, once the tax treaty is applied, you are unlikely to owe any US tax, you still have a duty to disclose your worldwide income. If the Substantial Presence Test makes you a US tax resident (Form 1040), you must report all your income, including income from your home country. That covers:

• Salary

• Investment income (e.g. interest, dividends)

• Rental income

• Business profits

• even foreign pension payments

In practice, this often creates a paradox: the tax itself is small or nothing at all, yet the paperwork (from preparing foreign income and converting exchange rates to reporting it correctly on the US form) is considerable. In many cases the tax advice costs more than the tax, which makes the US one of the most demanding countries for tax compliance.

Breaching your reporting obligations can have serious consequences:

• Back taxes plus interest

• Late-filing penalties

• Trouble with future visa applications or entries

• A record in the IRS system ("compliance history")

• Problems with a later green card application

Even if the tax treaty makes you exempt, you still have to file, otherwise the relief will not be recognized.

Companies and the employees concerned should both keep the following in mind:

• Track and document days spent in the US

• Check the Substantial Presence Test every year

• Find out whether a tax treaty applies

• File your tax return on time

• When claiming treaty benefits: attach Form 8833

Mount Bonnell Advisors helps you with every question about meeting your US tax obligations, whether you need Form 1040, 1040NR or 8833 prepared.

The tax obligations that come with a stay on a B1/B2 visa or ESTA are often underestimated. If you do business in the US (even without a US salary or work visa), you can quickly become liable for tax. What counts is how long you stay, what you do and where you are tax resident, not your visa.

With professional preparation, a clear understanding of the treaty rules and the right forms filed on time, you can avoid the risks and steer clear of tax disadvantages.

If you are unsure whether you or your employees need to file a US tax return, or you need help preparing Form 1040, 1040NR or Form 8833, we are happy to help. For an overview of how it all works, see our page on the US tax system and tax law, and find more articles under News:

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