For individuals who are not U.S. citizens or permanent residents but have income from U.S. sources, tax obligations can still apply. The IRS requires such individuals—known as nonresident aliens—to file a specific form: Form 1040-NR. Understanding when and how to use Form 1040-NR is critical to ensuring compliance with U.S. tax law and avoiding unnecessary penalties or double taxation.
This detailed guide will walk you through what Form 1040-NR is, who must file it, what income needs to be reported, and how to complete the form properly.
What is Form 1040-NR?
Form 1040-NR is the U.S. Individual Income Tax Return designated specifically for nonresident aliens. It is used to report income earned in the United States that is subject to U.S. tax. The form is structurally similar to Form 1040 used by citizens and resident aliens but is tailored to account for different tax rules applicable to nonresidents.
The IRS defines a nonresident alien as an individual who is not a U.S. citizen or does not meet either the green card test or the substantial presence test under IRS rules.
Who Must File Form 1040-NR?
You must file Form 1040-NR if you are a nonresident alien engaged in trade or business in the U.S. during the year. You must file even if:
- Your income is exempt under a tax treaty
- You did not receive income from a U.S. source
- You earned wages as a foreign student, trainee, teacher, or researcher
Other cases where you may need to file include:
- You received U.S. income not effectively connected with a trade or business (e.g., dividends, rents, or royalties)
- You want to claim a refund of taxes withheld in excess
- You are a representative of a deceased person who would have been required to file
Common filers include foreign students (on F, J, M, or Q visas), athletes, artists, business travelers, and individuals who own U.S. rental property.
Key Differences Between Form 1040-NR and Form 1040
While Form 1040-NR and Form 1040 serve similar purposes, the two have major differences in terms of filing eligibility, deductions, and residency rules:
- Filing status: Form 1040-NR does not allow “Married Filing Jointly” status. Only “Single,” “Married Filing Separately,” or “Qualifying Widow(er)” (in some cases) are available.
- Standard deduction: Not allowed for most nonresident aliens (except Indian students and business apprentices under U.S.-India tax treaty).
- Tax treaties: Special provisions apply for many countries to reduce or eliminate taxes on certain U.S. income.
- Dependent exemptions: Limited compared to U.S. citizens/residents.
- Income reporting: Only U.S.-sourced income is typically reported unless it’s effectively connected income.
Types of Income Reported on Form 1040-NR
Form 1040-NR is used to report two main types of income:
1. Effectively Connected Income (ECI)
Income that is connected to a trade or business in the United States. This includes:
- Wages and salaries
- Self-employment income
- Rental income (if electing to treat as ECI)
- Business profits
ECI is taxed at the same graduated rates applicable to U.S. citizens and residents.
2. Fixed, Determinable, Annual, or Periodical (FDAP) Income
This includes U.S.-source passive income such as:
- Dividends
- Interest (in some cases)
- Rents
- Royalties
- Pensions
FDAP income is generally taxed at a flat 30% rate unless reduced by a tax treaty.
How to Complete Form 1040-NR
Here’s a section-wise breakdown of how to complete Form 1040-NR:
1. Personal Information
Enter your name, address, and foreign tax identification number (if applicable). You’ll also need to indicate your residency status and visa type.
2. Filing Status
Select the appropriate status (usually “Single” or “Married Filing Separately”). Most nonresident aliens cannot file jointly.
3. Income Section
- Report all effectively connected income (e.g., wages from a U.S. employer)
- Include Schedule NEC (for FDAP income)
- Use Schedule OI to report treaty-based positions
4. Adjustments and Deductions
Nonresident aliens are eligible for limited adjustments (such as moving expenses for students or educators). Itemized deductions may include:
- State and local income taxes
- Charitable contributions to U.S. organizations
- Casualty and theft losses
5. Tax, Credits, and Other Taxes
Calculate the tax on your income and claim applicable credits. Most nonresident aliens cannot claim credits like Earned Income Tax Credit or American Opportunity Credit.
6. Payments and Refunds
Enter federal tax withheld (as shown on W-2 or 1042-S). If you overpaid, you may request a refund by direct deposit (if you have a U.S. bank account) or a paper check.
7. Signature and Declaration
Sign and date the form. If someone else prepared it for you, they must sign as well.
Filing Deadlines for Form 1040-NR
- April 15: If you received wages subject to U.S. income tax withholding.
- June 15: If you did not receive wages subject to withholding.
Extensions are available by filing Form 4868 before the deadline.
Common Forms Used with Form 1040-NR
- Form W-2: Reports wages earned from U.S. employment
- Form 1042-S: Reports U.S. source income paid to foreign persons
- Form 8843: Required for foreign students, teachers, and trainees to explain days of presence in the U.S.
- Schedule NEC: For reporting FDAP income
- Schedule OI: Other information including visa type and treaty benefits
Important Notes for Foreign Students and Scholars
If you’re in the U.S. on an F, J, M, or Q visa, you’re considered a nonresident alien for the first 5 calendar years (students) or 2 years (teachers/researchers) and must file Form 1040-NR. You must also file Form 8843 regardless of income.
Some countries have treaties that exempt wages or scholarships up to certain limits. Always check the IRS treaty database or consult a tax professional familiar with international tax.
Where to File Form 1040-NR
If you’re not filing electronically, mail your Form 1040-NR to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
Filers with payments should use the address indicated in the IRS instructions for Form 1040-NR.
Conclusion: Stay Compliant as a Nonresident Alien
Form 1040-NR plays a vital role in ensuring nonresident aliens fulfill their U.S. tax obligations. Whether you’re a student on a visa, a professional earning U.S. income, or a nonresident investor, proper filing is crucial to avoid penalties, claim treaty benefits, and potentially receive a refund of overpaid tax.
Nonresident tax rules can be complex, so when in doubt, seek help from a tax advisor experienced in international and nonresident returns. Proper compliance today will save you from complications in the future—especially if you ever apply for permanent residency, visas, or U.S. investment opportunities.
