Nonresident Individuals and Tax Returns

Form 1040-NR is a version of the IRS income tax return for nonresident individuals to file if they earned income from US sources throughout the year. As with 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 must make sure you are clear about who a nonresident alien is. Usually, if you’re not a US citizen, you are 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 are considered a nonresident if you were in the US less than 183 days determined based on the sum of:

  • 100 percent of your days in the current year
  • 33.33 percent of your days in the preceding year
  • 16.66 percent of your days for the second preceding year

For the green card test, you are considered a resident if you were a lawful permanent resident of the US at any time during the tax year.

You need to file Form 1040-NR if you:

  • Were a nonresident alien engaged in a trade or business in the US during the tax year. The form is required even if you had no income from that trade or business.
  • Were not engaged in a trade or business in the US but nevertheless generated income from US sources that appears on Schedule NEC, lines 1 through 12, and the required taxes were not withheld. Examples of income to be reported on Schedule NEC include interest, dividends, royalties, rental income, pensions and annuities, Social Security benefits, capital gains, and gambling winnings.
  • Owe special taxes—the alternative minimum tax or household employment taxes
  • 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 US has a Social Security agreement with
  • Are serving as the personal representative for a deceased person who, when alive, would have been required to file it
  • Represent an estate or trust for which Form 1040-NR is relevant

This is just a summary; there are many more provisions and issues that can arise. Keep records throughout the year and contact R&A with any questions.

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About this Author

Adam specializes in international tax planning and analysis. Since 2012 he has coordinated offshore compliance submissions, international tax training relating to foreign pension plans, foreign investment in US property, and general foreign compliance. In addition, in conjunction with legal counsel, he assists international families regarding planning, entity structure, and transaction analysis.