Form 1040-NR: the US nonresident alien tax return

Form 1040-NR is the US income tax return for a nonresident alien. It exists because the United States taxes non-residents on their US-connected income, and the way that income is taxed depends heavily on what kind of income it is. Getting the return right starts not with the form but with two prior questions: is the person actually a non-resident for tax purposes, and what is the character of each item of income? This guide works through both.

Residency comes first

Whether Form 1040-NR is even the right return turns on tax residency. An individual is a US resident for tax purposes if they hold a green card or meet the substantial presence test, which counts days of physical presence in the US across the current and two preceding years under a weighted formula. A resident files the ordinary Form 1040 and is taxed on worldwide income. A nonresident alien — neither a citizen nor a resident under those tests — files Form 1040-NR and is taxed only on US-connected income. Because the day-count can tip a person from one status to the other, the residency question is settled first, before any income is reported.

Two kinds of income, two regimes

US-source income of a nonresident falls into two broad buckets that are taxed very differently:

• Effectively connected income (ECI) — income connected with a US trade or business. It is reported on Form 1040-NR and taxed at the same graduated rates that apply to residents, after allowable deductions. This is the "net basis" regime: expenses reduce the taxable amount.
• FDAP income — fixed or determinable annual or periodical income, such as certain interest, dividends, rents, and royalties. It is generally taxed at a flat 30% rate on the gross amount, with no deductions, and is usually collected by withholding at source rather than through a return.

A tax treaty between the US and the person's home country can reduce or remove the 30% rate on particular categories, which is why the withholding forms in W-8BEN versus W-9 exist: they let the payer apply the correct rate at source.

Due date and identifying number

The filing deadline depends on the income. A nonresident alien who received wages subject to US withholding generally files by April 15 for a calendar year; one who did not receive such wages generally has until June 15. To file, the person needs a US taxpayer identifying number — a Social Security number if eligible, otherwise an ITIN, which is applied for on Form W-7, often alongside the first return.

Where this fits for non-residents in business

Non-residents doing business with or in the US often meet Form 1040-NR through an entity structure. A non-resident who owns a US LLC treated as a disregarded entity may have US-connected income to report personally; the formation side of that is covered in US LLC formation for non-residents. A non-resident operating through a foreign corporation is in different territory — the corporation files its own return, Form 1120-F, rather than the individual filing 1040-NR. The right return depends on who earns the income and through what structure, so the analysis is about the arrangement as a whole, not just the individual.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

• About Form 1040-NR, U.S. Nonresident Alien Income Tax Return (IRS)
• Individual Taxpayer Identification Number (IRS)
• Businesses (Internal Revenue Service)

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