Form 1040-NR, also known as the US Nonresident Alien Income Tax Return", is a tax form used by nonresident aliens to report their income, deductions, and tax liability to the US Internal Revenue Service (IRS). Nonresident aliens are individuals who are not US citizens and do not meet the criteria to be considered US residents for tax purposes. Form 1040-NR is essential for individuals who are involved in business activities within the US during the specific tax year and earn income from state sources throughout that period.

The primary purpose of this tax return form is to accurately report the financial activities and income generated by nonresident aliens within the United States. This includes earnings from business operations, investments, employment, rents, and other sources of income subject to US taxation. The form's completion is not solely limited to individuals. It also requires submission by representatives of deceased individuals who would have been obligated to file Form 1040-NR and representatives of estates or trusts who are responsible for filing this form.

One notable feature of Form 1040-NR is that some nonresident aliens might find that they owe taxes based on the information submitted, but many discover they are eligible for tax refunds. This is sometimes because the tax amount deducted from their earnings exceeds their actual tax liability.

Filling out Form 1040-NR is very important for nonresidents planning to reenter the US, especially if they want to change the terms of their visa. When changing visa status or dealing with immigration matters, the submission of required tax regulations, such as the 1040-NR, may be required to establish compliance with tax obligations.

Who Needs to File Form 1040-NR

Form 1040-NR is mandatory if you meet the following criteria.

Engaged in US Trade or Business: If you are a nonresident alien who participated in any trade or business within the US during the relevant tax year, regardless of whether you earned money from it, you must file Form 1040-NR.

Income from US Sources: You are required to fill out this form if you are a nonresident alien who did not engage in US trade or business during the specific tax year but earned income from US sources specified on Schedule NEC (Form 1040-NR) through1 to 12 lines, and some of the US tax you owe wasn't deducted from this income.

Specific Taxes Owed: If you owe any special taxes like household employment taxes or alternative minimum tax (AMT), you must file Form 1040-NR.

Savings Accounts: Individuals who received contributions from a medical savings account (MSA), health savings account (HSA), a Medicare Advantage MSA, or an archer MSA must file this form.

Self-Employment Earnings and Social Security Agreement: Those who earned at least $400 in self-employment and lived in a state with an existing Social Security agreement with the United States must complete Form 1040-NR.

Deceased Individual's Personal Representative: If you serve as the representative for a dead individual who was obligated to file Form 1040-NR, you must file this form.

Estate or Trust Representative: Estate or trust representatives who have a filing duty for Form 1040-NR must complete and submit the form.

Who is a nonresident Alien

Individuals who don't have US citizenship are nonresident aliens when they don't meet the substantial presence test or green card test for the specific tax year in consideration.

Green Card Test

The green card test evaluates your eligibility as a resident alien. This category applies if you were a legal permanent citizen of the US at any time during the specific tax year. This is usually the case if you were awarded a green card, or alien registration card, by the USCIS (United States Citizenship and Immigration Services) or its precursor, the INS (Immigration and Naturalization Service). You must keep your resident status until it is officially canceled by the USCIS and relinquished through administrative or judicial measures.

Substantial Presence Test (SPT)

The SPT determines your residence status based on the duration of your stay in the US during the specific tax year in consideration and the two years immediately before it.

Individuals who are not citizens must meet the 183-day and 31-day criteria to get resident alien status to pass this test.

Being physically present in the US for 31 days during the relevant tax year is required to meet the 31-day criteria.

However, there are specific exceptions in which one can meet these requirements while still maintaining their nonresident alien status. Such situations arise, for example, when an individual qualifies as a citizen of a country with which the United States has an income tax agreement. In such cases, one could claim that the treaty has reduced one's tax liability in the United States.

Important Considerations

• Nonresident aliens should know any tax treaties between their home country and the United States that may affect their tax obligations.
• The Form 1040-NR filing date usually is April 15th unless an extension is requested.
• Some people with more straightforward tax situations may use Form 1040-NR-EZ, a shorter version of the form.
• You must keep complete records and supporting documentation for any income, deductions, and credits claimed on the form.
• Due to the complexity of tax laws and regulations, you must seek the advice of a tax professional or tax counselor, especially if you are unfamiliar with US tax regulations.