A non-U.S. citizen who doesn't pass the green card test or the substantial presence test. If a non-citizen currently has a green card or has had a green card in the past calender year, he or she would pass the green card test and would be classified as a resident alien. If the individual has resided in the U.S. for more than 31 days in the current year and has resided in the U.S. for more than 183 days over a three-year period, including the current year, he or she would pass the substantial presence test and also be classified as a resident alien.

Resident aliens are taxed on all earned income as if they were U.S. citizens, but a nonresident alien is not taxed in the same way. For a nonresident alien, only income that is generated from U.S. sources, excluding certain investments such as stocks, is subject to taxation. For example, if you live in England and own a company that operates in the U.S., but you have not been to the U.S. for five years and don't have a green card (a non-resident alien), the income generated by the business will be subject to U.S. tax. Dividends are taxed at 30% for every non-resident alien, while capital gains are not subject to U.S. tax.