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Nonresident Aliens and Tax Returns

 

Form 1040-NR is a version of the IRS income tax return for nonresident aliens to file if they engaged in business in the United States during the tax year or otherwise earned income from U.S. sources throughout the year. The form is also filled out by representatives of a deceased person who would have filed and for an estate or trust that needs to file the form. As with the regular Form 1040, those who fill out Form 1040-NR may either owe more money or be entitled to a refund.

Before considering whether you need to fill out the form, you have to make sure you're clear on who a nonresident alien is. Usually, if you're not a U.S. citizen, you're considered a nonresident alien if you do not meet either the "green card" test or the "substantial presence" test for the year in question. The substantial presence test bases your residency status on the length of your stay in the United States during the tax year in question and the preceding two years — you have to meet certain residency goals. You pass the green card test — and are thus a resident alien — if you were a lawful permanent resident of the United States at any time during the tax year.

Completing Form 1040-NR is key if you're a nonresident who plans to reenter the United States. To modify your visa terms, you'll likely have to show that you submitted any required tax forms.

You need Form 1040-NR if:

  • You were a nonresident alien engaged in a trade or business in the United States during the tax year. The form is required even if you had no income from that trade or business.
  • You were not engaged in a trade or business in the United States but nevertheless generated income from U.S. sources that appears on Schedule NEC, lines 1 through 12, and some of the U.S. tax you owe wasn't withheld from that income.
  • You owe special taxes — the alternative minimum tax or household employment taxes.
  • You received distributions from a health savings account, an Archer medical savings account or a Medicare Advantage medical savings account.
  • Your net earnings from self-employment totaled at least $400 and you live in a country that the United States has a Social Security agreement with.
  • You are serving as the personal representative for a deceased person who when alive would have been required to file it.
  • You represent an estate or trust for which Form 1040-NR is relevant.

You may be eligible to file the shorter Form 1040-NR-EZ if your only U.S. income comes from wages, salaries, tips, refunds of state and local taxes, scholarships or fellowship grants, and nontaxable interest or dividends. But you can't use the EZ version if you're claiming the qualified business deduction or received taxable interest or dividend income.

Finally, note that you may have to file both Form 1040 and Form 1040-NR if your status changes during the course of the year.

This is just a summary; there are many more provisions. And the rules are complex, so be sure to get professional advice, especially as laws and tax regulations can change with little notice. Keep records throughout the year, and consult your tax advisor with any questions.

 
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Davis & Graves CPA, LLP
Davis & Graves CPA, LLP
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Gresham, OR 97030
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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