{"id":2950,"date":"2016-02-29T05:11:22","date_gmt":"2016-02-29T13:11:22","guid":{"rendered":"http:\/\/evergreensmallbusiness.com\/?p=2950"},"modified":"2019-07-01T15:38:53","modified_gmt":"2019-07-01T22:38:53","slug":"us-tax-rules-for-nonresident-aliens","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/us-tax-rules-for-nonresident-aliens\/","title":{"rendered":"U.S. Tax Rules for Nonresident Aliens"},"content":{"rendered":"

\"1040NR-EZ<\/a><\/p>\n

If you\u2019re new to the U.S. system of taxation, you\u2019ll find the situation pretty confusing.<\/p>\n

The U.S. system of taxation (and we say this as tax accountants) surely ranks as one of the most confusing and unnecessarily complicated systems in the developed world.<\/p>\n

Fortunately, if you get a handle on a handful of issues, you can usually get started right.<\/p>\n

Am I a resident alien or nonresident alien?<\/h2>\n

The first thing, for example, that you need to do is figure out whether you\u2019re a resident alien or a nonresident alien for tax law purposes.<\/p>\n

You are a resident alien if you meet one of two tests: the green card test<\/strong> or the substantial presence test<\/strong>.<\/p>\n

If you are not a resident alien under either of these tests, then you are generally considered a nonresident alien (though some taxpayers in this situation can elect to be taxed as resident aliens<\/a>).<\/p>\n

You meet the green card test if you were a lawful permanent resident (immigrant) of the United States at any time during 2014 and you took no steps to be treated as a resident of a foreign country under an income tax treaty. (This is referred to as the \u201cgreen card test\u201d because to be a lawful permanent resident, you usually need a green card.)<\/p>\n

The specifics of the substantial presence test vary a bit from year to year, so check the IRS\u2019s website<\/a> to see if you qualify. In 2014 you met the substantial presence test if you were physically present in the United States for at least 31 days in 2014, and 183 days during the period composed of 2014, 2013, and 2012. Days in previous years are calculated using the chart on the website referenced above.<\/p>\n

If you change between nonresident and resident alien midway through the tax year, you are considered a dual-status taxpayer<\/a>. Note that there are some special rules to know for how to file your tax return during your dual-status year.<\/p>\n

Why Residency Status Matters<\/h2>\n

Okay, once you know whether you\u2019re a resident alien or a nonresident alien, you can determine whether you need to worry about U.S. tax laws.<\/p>\n

If you\u2019re a resident alien, you get treated like a U.S. citizen for tax purposes, which means that the U.S. wants to tax you on your worldwide income. (Don\u2019t freak out yet if you\u2019re just learning about this for the first time. The U.S. tax laws provide plenty of ways to mitigate any double taxation of income earned outside the United States.)<\/p>\n

Resident aliens, by the way, file a Form 1040 with the Internal Revenue Service.<\/p>\n

If you\u2019re a nonresident alien, you don\u2019t owe taxes to the United States except in cases where you\u2019re actually earning income in the United States. For example, if you come to the United States to work briefly, you may owe income taxes on that income. Or if you invest in a business and the business earns money, you may owe income taxes on that income. (More on this in a few paragraphs.)<\/p>\n

If you are a nonresident alien, you file a Form 1040NR (more on this form in a minute).<\/p>\n

How do I apply for a tax ID number?<\/h2>\n

If you\u2019re a resident alien, you\u2019ll likely need a Social Security number<\/a> to file your tax return. (Probably you\u2019ll have received this number as part of obtaining residency.)<\/p>\n

If you\u2019re not eligible for a Social Security number, then you will need an ITIN (individual taxpayer identification number) if you do not already have one. To obtain an ITIN, you file Form W-7<\/a>.<\/p>\n

What income do I have to report on Form 1040-NR?<\/h2>\n

You must report three types of income on Form 1040NR<\/a>:<\/p>\n