Form 1040-NR Guide for Non-Residents 

Form 1040-NR Guide for Non-Residents 
Updated on April 9, 2024

Form 1040NR is the standard tax form for Non-Resident Aliens (NRAs) to file their US taxes for income earned from the United States. NRAs are individuals who are not US citizens, are not Green Card holders, and do not live in the United States. So how does it work? Here’s what you need to know. 

Key Takeaways

  • Non-Resident Aliens use Form 1040NR to report US-source income. 
  • This form can also be used to claim various non-resident tax credits and deductions. 
  • If you are not a US citizen or Green Card holder, your residency status generally depends on how much time you spend in the US. 

Form 1040 vs. Form 1040-NR: Resident and Non-Resident Income Tax Returns 

When filing US taxes, residents and Non-Resident Aliens must use different tax forms. 

  • Residents use Form 1040 to report their annual income to the IRS, regardless of where in the world that income was earned. Form 1040 is also used for claiming certain deductions and credits available for US residents. 
  • Form 1040NR, on the other hand, is specifically tailored for Non-Resident Aliens who are required to file a US tax return. Because non-residents are not taxed on their worldwide income, Form 1040NR only requires you to report your US-source income. This form also allows you to claim tax benefits available for non-residents, including any tax treaty provisions

When Should I File Form 1040-NR? 

Non-Resident Aliens who engage in business in the US are considered to have effectively connected income (ECI). This ECI must be reported on a US tax return. NRAs that aren’t engaged in an active business but earn passive investment income, such as interest, dividends, and rental income, are considered to have Fixed, Determinable, Annual, or Periodic income, or FDAP (Pronounced fah-dap). The distinction is important as FDAP is generally taxed at a flat 30% while ECI is taxed at the normal tax brackets, which currently vary from 10% to 37%. As Non-Resident Aliens, you will use Form 1040-NR to do this. Failing to file this form when required could result in severe penalties. 

Additionally, you may want to file Form 1040NR to claim certain tax credits or deductions available to non-residents. Many non-residents live in countries that have tax treaties with the US, offering reduced tax rates or exemptions from US tax on certain types of income, especially FDAP income. By filing Form 1040NR, non-residents can claim these benefits, potentially resulting in a lower tax liability or even a refund. 

Filing Form 1040 and Form 1040-NR in the Same Year 

In most situations, individuals will file either Form 1040 or 1040NR based on their residency status. However, there are scenarios when you might need to file both within the same year. This typically occurs in a year of transition between residency statuses, such as when a Non-Resident Alien becomes a resident alien or vice versa. 

For example, if you were a resident of the US for only part of a year, you would need to file Form 1040 to report your income during that time while using Form 1040NR for the remaining months. This is known as being a dual-status alien

Tired of running from Uncle Sam?

If you’re behind on your US taxes, you may qualify for a special compliance program to get back on track without penalties. Download our Streamlined Filing Eligibility guide to understand if you qualify.

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Rules for Determining Residency 

Understanding your tax obligations in the United States can be complex, especially when it comes to determining whether to file Form 1040 or 1040NR. Here’s a simplified guide to help you understand your filing requirements.

US Citizens and Green Card Holders

If you’re a US citizen or hold a Green Card, you’re required to file a US tax return annually using Form 1040 if your income exceeds a certain threshold. This requirement holds true no matter where in the world you live.

Non-Resident Aliens

For Non-Resident Aliens earning income in the United States, filing a tax return using Form 1040NR is necessary.

Determining Your Filing Status

But what if you’re neither a US citizen, a Green Card holder, nor living outside the US? The type of form you’ll file largely depends on the amount of time you’ve spent in the US:

  • Form 1040 is used if you pass the Substantial Presence Test, indicating you’re a tax resident based on the amount of time you’ve spent in the US
  • Form 1040NR is for those who don’t meet the Substantial Presence Test criteria, focusing only on income earned from US sources.

Substantial Presence Test

The Substantial Presence Test involves a specific formula applied to the days you’ve spent in the US over the last three years:

  • Current Year: Every day spent in the US counts as one full day.
  • Previous Year: Each day counts as one-third of a day.
  • Two Years Ago: Each day is counted as one-sixth of a day.

To be considered a tax resident, the total of calculated days over these three years must be 183 days or more. Generally, spending less than 120 days a year in the US means you’re unlikely to meet the threshold for tax residency.

Electing to be Treated as a US Tax Resident

Another path to tax residency is making a specific election, known as the “6013 election” This option is often chosen during pre-immigration planning, especially by couples where one spouse is a US citizen, and the other is neither a citizen nor a Green Card holder. This election is typically made on a joint tax return.

Understanding these guidelines ensures you file the correct tax form based on your residency status, helping you navigate the complexities of US tax obligations more confidently.

File Form 1040-NR Easily with Greenback 

Filing your US tax returns as a non-resident can be a complex process. Fortunately, we’re here to help. 

At Greenback Expat Tax Services, we give taxpayers around the world the support they need to file their US taxes accurately and on time. Just reach out, and we’ll be happy to file Form 1040-NR on your behalf. If necessary, we can provide additional expat tax services, such as FATCA reporting or small business tax prep. 

Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.

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Whether you need tax advice to prepare for a move abroad, to buy property or even retire, Greenback can help. Consults upfront can help avoid costly mistakes and stress later.

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