International Business Law Advisor Insights on International Litigation & Transactions

U.S. Nonresident Aliens– Here’s Your Quick Tax Summary.

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international tax, international business attorney, international incomeWith the amount of international business transactions originating or otherwise taking place in the U.S.,  it’s no surprise that the U.S. hosts a great number of nonresident aliens who have a financial stake in these business transactions.

Of course, that means that taxes will be owed.

It can all get complicated if you’re unfamiliar with the filing requirements.

I mention this because there’s an excellent post over at Forbes that provides a nice summary of the most common forms that are used for U.S. non-resident aliens:

Federal form 1040NR, U.S. Nonresident Alien Income Tax Return. (downloads as a pdf) Like it or not, the U.S. imposes a tax on worldwide income for its citizens and residents. If you’re a nonresident alien (see this post for more information about residency), you pay federal income tax only on U.S. source income. In most cases, you must file a tax return if you are a nonresident alien even if you have no income from your trade or business in the U.S., you have no U.S. source income or if your income is exempt from U.S. tax under a tax treaty (hey, I don’t make the rules). There is an exception: you don’t need to file if, as a nonresident alien, your only U.S. trade or business was the performance of personal services with wages of less than $3,650 and you don’t need to file to claim a refund of over- withheld taxes, satisfy additional withholding or claim partially exempt income. Exceptions also apply if you’re a nonresident alien student, teacher or trainee in the U.S. temporarily on an “F,” “J,” “M,” or “Q” visa, and you have no taxable income.

Federal form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents (downloads as a pdf). You can pretty much guess the rules for filing this form. If the rules for filing a form 1040NR apply (see above) and you have no dependents, you can file a form 1040NR-EZ so long as your taxable income is less than $100,000 and your income from U.S. sources is from wages, salaries, tips, refunds of state and local income taxes, and scholarship or fellowship grants (that’s it). You can’t take any deductions or credits, though, to be fair, those are pretty limited even with the form 1040NR, too.

Federal form 1040-C, U.S. Departing Alien Income Tax Return. This is my favorite tax form just because it’s so wacky and complicated. The form 1040-C is sometimes called “your sailing papers” and is used by aliens (no, not those aliens, folks who are not citizens) who intend to leave the U.S. (or any of its possessions) for more than an incidental period of time. The purpose of the form is to report and pay federal income tax on income received or expected to be received for the entire tax year. And here’s the part that confuses people: despite what I just said, a form 1040-C isn’t a final return. You must still file a final income tax return (either a form 1040 or form 1040NR) after your tax year ends. The IRS warns you (again) on the form:

It’s a lot to take in. But if If, you have questions about which form to use, just give the IRS a call at 1.800.829.1040.