Even if you are not a United States citizen, you might still be required to pay U.S. income tax if you have United States investments or have generated U.S. income. Nonresident aliens, or those persons legally present in the United States, but who are not permanent residents, are subject to different rules when it comes to income taxes. If you are a nonresident alien it is imperative that you understand how taxation works in the United States to ensure that you properly file and pay your United States income tax on the Form 1040-NR.
Who Should File a 1040-NR?
Generally, you should complete the 1040-NR if you are not a United States Citizen or Permanent Resident, but are required to a United States tax return. Some situations that might require you to file a U.S. tax return include:
- You were a nonresident alien that had a business in the United States during the year. You will be required to complete a 1040-NR even if your business did not generate income or if your income was exempt from tax under a United States tax treaty.
- You do not meet the substantial presence test that requires a United States tax return, but you have income from investments, rentals or part-year employment in the United States.
How Do I Know If I Am Considered to Be a Nonresident Alien for Tax Purposes?
The IRS uses two tests to determine if you are a resident alien. If you meet the requirements of either test, then you are considered to be a resident alien by the IRS. If not, then you are treated as a nonresident alien and are required to file the 1040-NR.
The first test is the green card test. If you were a lawful permanent resident or a green card holder during the calendar year, no matter how long, then you are considered to be a permanent resident and are treated as a resident alien for tax purposes. In this case, you would not file the 1040-NR but rather a Resident U.S. return, one of the Form 1040 series of forms.
The second test that the IRS uses to determine if you should file the 1040-NR is the substantial presence test. For the “substantial presence test” to apply, you must have actually been present in the United States for more than 30 days of the current tax year. You must also have been present for more than 182 days during the last three years, including the current tax year. The United States includes all 50 states, the territorial waters of the United States and the District of Columbia for the purposes of this test. If you meet this test, then you are treated as a resident alien for income tax purposes.
One thing to note is that you can still be considered to be a nonresident alien, even if you meet the substantial presence test, if you qualify under a variety of exceptions.
Do I Really Need to File a 1040-NR?
If you are a nonresident alien and you have income from United States investments or employment, you may be wondering if it is really necessary to file a 1040-NR.
Filing a 1040-NR is essential for nonresident aliens that have U.S. based income. Unlike, United States residents or citizens who are only subject to file a tax return if their income is above a certain threshold, nonresident aliens have to file if they receive any income from the United States. If you own a U.S. business, you are required to file a 1040-NR whether or not your business made a profit. Filing a 1040-NR is also beneficial as you may be entitled to a refund.
U.S. Visa terms require holders to comply completely with United States laws. Filing a tax return is one of those requirements. If you want to extend your U.S. Visa, regain entry into the United States after leaving or obtain permanent residency, you will likely be asked to show proof that you filed a 1040NR. Not filing a tax return may very well put your Visa at risk.
How Can I Get Help Completing a 1040-NR?
Even with these guidelines, it can be difficult to understand all of the rules regarding taxes for nonresident aliens. Therefore, it is important to seek the assistance of a professional tax preparation service to assist you.
Please click to learn more about non-resident tax returns.
At Tax Samaritan, we offer convenient and affordable professional tax preparation services for nonresident aliens. Our knowledgeable tax professionals prepare your refund and do all of the calculations. All that you have to do is answer a few simple questions. We prepare the 1040-NR and required state returns for you, finding all of the tax treaty benefits and deductions that you are entitled to. We help ensure that you have the smallest tax liability and that you get the maximum refund possible.
If you would like a quote, please click on the button below for a free, no-obligation Tax Preparation quote and/or free 30-minute consultation to discuss your situation regarding the Form 1040-NR further:
Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self-prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections, and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits, and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.