Tax Form 1040-NR U.S. Nonresident Alien Income Tax Return

No matter who you are or where you’re from, taxes are an inevitability of life – and for nonresident aliens living in the United States, filing your annual tax return can be a complex and confusing process. But fear not! The Tax Form 1040-NR is here to make things easier than ever before. In this blog post, we’ll break down everything you need to know about completing your U.S. Nonresident Alien Income Tax Return for 2022, so that come tax season, you’ll be able to confidently file with ease. So let’s get started!

Essentially, the tax form 1040-NR is used by nonresident aliens to be able to file US tax returns. In this case, the taxpayer is categorized as a nonresident if they do not own a Green Card or have not qualified for the Substantial Presence test. One needs to file this form if they work in the United States, or have a source of income, like that from a rental property. Likewise one needs to file this form if one receives a steady income that is subjected to income tax, including the likes of a fellowship grant and taxable scholarship. One of the main reasons to ensure that you file for this tax is the VISA requirements and to ensure that you get the required funds. This is in case you need a refund for having overpaid the US taxes.

Nonresident Alien: Who is it?

One needs to file the form under the following cases:

• The individual is a non-resident Alien involved in business or trade during the tax year, even if there is no income from that trade or business.
• In case you are a nonresident alien who is not engaged in business or trade in the USA during the tax year and who still generates income from the US sources that are included in Schedule NEC, lines 1 through 12 and a few of the US taxes that you owe and is not withheld from that income.
• In the case of special taxes like the Alternative Minimum Tax, or the Household employment taxes.
• In case the individual has received distributions from a Health Savings Account-HSA or the Archer Medical Savings Account-MSA, or a Medicare Advantage MSA.
• The net earnings from self-employment amount to a minimum of $400 and you reside in a country that has a Social Security Agreement with the US.
• The individual is the only representative for a dead person who would have been required to otherwise file the form.
• The individual represents the trust or estate that requires to file Form 1040-NR.

Note: In case you are filing a tax form 1040-NR for a foreign trust, then, in this case, you will have to file Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner. This needs to be done on or before the 15th day of the 3rd month after the end of the trust’s tax year.

Read More : Tax Form 8938 Reporting Requirements Explained 2023

The Green Card Test

An individual will be considered a resident Alien if they qualify for the Green Card Test. This is applicable if the individual was a lawful permanent resident of the United States during any point for the tax year. One will be considered a lawful permanent resident if an ALien registration card has been issued by the US Citizenship and Immigration services-USCIS or other related organizations like the Immigration and Naturalization Services-INS. The individual can withhold their resident status till the designation has been revoked by the USCIS or has been abandoned through a Judicial or administrative process.

The Substantial Presence of Test

This is the test that is based on the individual’s residency status of the length of your stay in the United States for the tax year in consideration and the preceding two years. To qualify for the test, non-citizens need to qualify for both the 183-day and the 31-day test to be considered resident Aliens.

• In case you meet the 31-day test if you were present in the United States for a minimum of 31 days for the tax year.
• You are qualified for the 183-day test if the answer to the line 1, 2 and 3 given below add up to a minimum of 183 days:
  • Tax year days in the US X 1 = ___ Days.
  • The first preceding year days in the United States X ⅓ = ____ days
  • The Second preceding year’s days in the United States X ⅙ = ___ days.

However, there are a few exceptions under which one might need to meet one of these two tests and still be considered a nonresidential Alien. In this case, if the individual qualifies as a resident of the country that has an income tax treaty with the United States and can claim a lower US tax liability under that treaty.

Need Experts Help : How FICA Tax and Tax Withholding Work in 2021-2022

The Tax Form 1040-NR: Who Needs to File them?

One needs to file Form 1040-NR, US Nonresident Alien Income Tax returns in case you are a non-resident Alien and derive an income which is subjected to taxation. This also includes scholarships, tips, wages, fellowship grants, and dividends among others. 

Also one needs to bear in mind that the tax forms 1040 and 1040-NR are not mutually exclusive. Likewise, it is possible to enjoy the Dual-status taxpayer, if you fall under the category of a resident and a non-resident of the United States for Tax, during the same calendar year. The official filing of Tax Form 1040-NR is done by the June-15th of every year.

The Dual Status Alien

As mentioned earlier, an individual can qualify as both a resident and a non-resident for the same year. But how is this made possible? Firstly, one needs to understand that this is a special rule for this case. Also, take note that an individual’s immigrant status does not coincide with the tax-relevant status. This implies the fact that one might enjoy the status of an Alien and still earn and live in the US to be able to hold the resident status for tax purposes. 

For instance, in case you expatriate you need to file the dual status returns: Form 1040 and Form 1040-NR. Under the year of expiration, you will be considered a US citizen from Jan 1 till the date of expiration. Here, one needs to file a resident tax declaration Tax return form 1040 to cover the individual’s worldwide income between these dates. Likewise, one also needs to file a non-residential tax return Form 1040-NR to report the sourced income in the US between the date of expiration and December 31.

e-Filing Your Returns-Safer, Quicker and Easier

About 89% of Americans prefer to file their tax forms electronically. The reasons are because:

• These are Safe and Secure: With the application of the latest encryption technology the information of the individual is safeguarded, and the IRS uses the same to safeguard the individual’s information.
• Flexible Payments: One can easily file according to their requirements on or before the due date of the return. This does not include the extension which is April 18, 2023, for most individuals.
• Better Accuracy: One can expect fewer errors and mistakes along with quicker processing when e-filing the files.
• Swift Receipt: One will be able to acquire quick and spontaneous receipts under e-filing platforms. 
• Eco-Friendly: Online platforms help control paper wastage. This greatly contributes to helping the planet stay clean and green.
• Quicker Refunds: One can expect quicker refunds when e-filing the tax forms. This is of great help when you have overpaid your taxes for the year in question.
• Easy Access: Now, that you do not need to take care of a piece of paper, your filing information is stored online. This makes it all the easier for the individual to access the same anytime anywhere. This way you can easily transmit the taxes to the IRS as and when you wish to from the comfort of your home. This was bought into action in the year 1990, with the ‘IRS e-filings that can be accessed through www.irs.gov, which is a getaway for most electronic services for your taxation requirements.

The fun does not stop here, as one can easily make payments online through the phone or other mobile devices. One can easily determine their payment date and get the subsequent confirmation for all the online payments likewise. Visit www.IRS.gov/Payments to check out all the payment options you can use

Tax Form 1040-NR: The Exceptions

While we are on the topic of filing the tax form 1040-NR, we also need to take note of a few exceptions where you do not have to file the forms. Let us take a look:

• In case the individual is a nonresident Alien, teacher, student, or trainee, who has been in the United States temporarily under the F, J, M or Q visa. Also, the same applies if they do not have a source of income which is subjected to taxation under section 871. This can be found within the income items listed on Page 1 of the tax form 1040-NR, in lines 1a through 1h, 2b, 3b, 4b, 5b, 7 and 8, Schedule NEC (form 1040-NR) lines 1 through 12. 
• In case the individual is a student or a business apprentice who is qualified for the benefits of Article 21 (2) of the United States-India Income tax Treaty. This is applicable irrespective of whether you are single, married, or a qualifying surviving spouse and the gross income for the year 2022 was less than or equal to $12950 in the case of a single, $25900 in the case of a qualifying surviving spouse. One can look up Chapters 5 and 7 of Pub. 519 for further details on these treaties and their advantages. 
• In case the individual is a partner in the US partnership that is not engaged in a business or a trade in the United States of America for the year 2022 and the Schedule K-1 (form 1065) includes only that income from the US sources that are reportable on schedule NEC Form 1040-NR, as stated in lines 1 through 12.

NOTE: In case the partnership withholds the taxes on this income for the year 2023 and the taxes withheld and reported under box 10 of Form 1042-S is more or less than the taxes due on the income. In this case, you need to file Form 1040-NR for the year 2023, to pay the under-withheld taxes or request a refund of the over withheld taxes.

IMPORTANT TIP: One must consider filing a return if you can get some money back, despite not having to file the return otherwise. Some the examples of such a case include:

• The individual is eligible for any refund of any Federal income tax that is withheld.
• If the individual is engaged in a US business or trade and is qualified for any of the following credits:
  • Additional Child tax credits
  • Credit for Federal tax on Fuels
  • Premium tax credits 
  • Credit in case of sickness or family leave

The Refunds

One can claim refunds if they meet the following requirements:

• The individual is a non-resident Alien
• The individual is not engaged in a business or trade in the US for the said duration of their stay.
• The individual does not acquire any income which is connected to the conduct of the trade or business in the US.
• The US income tax liability has been fully satisfied through the withholding of the tax at the source. 
• In case the individual is filing Form 1040-NR solely to claim the refund of the US taxes withheld at the source under chapter 3 or the taxes held under chapter 4-FATCA.

Also Read : Tax Form 2555 for Foreign Earned Income Exclusion

Conclusion

So, there you have it people, these are some of the facts, features and cautions that one needs to take care of when dealing with the Tax form 1040-NR. In case you still have any doubts about the same, be free to reach out to our team of experts and we will be more than happy to help you out.

Frequently Asked Questions (FAQs)