What Are the Tax Filing Requirements for U.S. Nonresident Aliens?

What Is a U.S. Nonresident Alien?

Aliens are foreign nationals living in the United States who are neither U.S. citizens nor U.S. nationals. Aliens may be residents or nonresidents. Resident aliens are those who legally work and live in the United States. As a resident alien, you may owe taxes on all of your U.S. income. Paying U.S. taxes also allows you to maintain good standing with the government and avoid legal trouble. If you’re a resident alien hoping to later apply for U.S. citizenship, you must be up to date on your taxes.

Nonresident aliens live outside the United States but earn income from U.S. sources. Typically, nonresident aliens are tourists or visitors with U.S. visas. Nonresident aliens will owe tax on any of their U.S. income. The U.S. government will classify you as a nonresident alien if you cannot pass either the green card test or the substantial presence test. We explain these tests in greater detail in the next two sections. You may also review the IRS U.S. Tax Guide for Aliens or IRS website for more information.

It's important to know your exact tax status. The U.S. government holds resident and nonresident aliens to different tax filing rules than U.S. citizens. In some cases, noncitizens may even be exempt from declaring certain types of income.

In some cases, you might have been both a resident and a nonresident alien within the same tax year. For example, this might include nonresident aliens who later obtained a green card. If you fall into this category, you’ll need to file a dual-status income tax return instead.

What Is the Green Card Test?

If you are a lawful permanent resident, you pass the green card test. Lawful permanent residents hold the permanent residence card, also known as Form I-551 or the green card. With this status, the U.S. government allows you to live and work freely in the United States. The government will classify you as a resident alien for U.S. federal tax purposes.

If you have a green card, the government will consider you a U.S. resident unless one of the following occurs:

• You write a formal letter to U.S. Citizenship and Immigration Services (USCIS) voluntarily renouncing and abandoning your status.

• USCIS administratively terminates your green card status.

• A U.S. federal court judicially terminates your immigrant status.

What Is the Substantial Presence Test?

The substantial presence test accounts for your physical presence in the United States. To pass this test, you must have been physically present in the United States for at least 31 days during the current calendar year. You must also prove you were present for at least 183 days over a three-year period. This three-year period includes the current year and the two years immediately before.

To calculate your presence over the three-year period, you should count the following:

• Each day you were present during the current year

• A third of the days you were present last year

• One-sixth of the days you were present during the first year of the period

You pass the test if your total days present are 183 or more. Being “present” on a day means that you were physically present in the United States at any time. Presence in a U.S. territory or U.S. airspace will not count toward your total days. Presence in one of the 50 U.S. states or the District of Columbia will count. Presence in U.S. territorial waters and the seabed or subsoil of submarine areas adjacent to U.S. territorial waters will also count.

There are a few cases where you shouldn’t count a particular day, including:

• Days on which you commuted to work in the United States from your actual residence in Mexico or Canada.

• Days on which you are present for less than 24 hours when traveling between two places outside the United States.

• Days on which you were in the United States as a crew member on a foreign vessel.

• Days on which you can’t leave the United States due to a medical condition that began in the United States.

• Days on which the U.S. government considers you an “exempt individual.” To formally claim that you were an exempt individual on a certain day, you must file Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition. You are an exempt individual if you are in one of the following categories:

• You are temporarily here under an A visa or G visa as a foreign government-related individual. This does not include A-3 or G-5 visa holders.

• You are temporarily here as a student on an F, J, M, or Q visa.

• You are temporarily here as a teacher or trainee on a J or Q visa.

• You are temporarily here as a professional athlete competing in a charitable sports event.

Some people can qualify as nonresidents even if they meet the substantial presence test. You may be able to do this if you can prove that you have closer connections to a foreign country than to the United States. The IRS has detailed guides on these exceptions, including:

• The closer connection exception and

• The closer connection exception for foreign students.

When Does a Nonresident Alien Have To File a Tax Return?

Most nonresident aliens will need to file an IRSincome tax return if either of the following situations applies to them:

• They were “engaged or considered to be engaged in a trade or business in the United States during the year.” 

• They were not engaged in the above but they have “U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.”

Nonresident aliens can also choose to file a U.S. tax return to claim certain refunds or benefits. For example, a nonresident alien might want to do the following:

• Claim a refund for overpaying their taxes.

• Claim a refund for withholding too much tax.

• Claim a tax benefit, like a certain credit or deduction.

For example, suppose you are a nonresident alien with no U.S. business activities but have income from real property. If you treat your real property income as effectively connected income, you can take the appropriate deductions when filing your return.

What Does It Mean To Be “Engaged In a Trade or Business”?

For tax preparation purposes, the IRS considers the following to be trade or business activities:

• Providing personal services

• Operating a business

• Being part of a business partnership

• Trading in securities

• Receiving benefits from a trust or estate engaged in a trade or business

• Engagement as a trainee or student

• The United States offers several visas for international students to study or train here, such as the F, J, M, and Q visas. While these visas are not explicitly business-related, you might still engage in a trade or business on one of these visas. For example, you may receive taxable income from a scholarship.

It's also possible that you weren’t engaged in a trade or business but still need to file a tax return. This may occur if you received a certain type of income but did not withhold the taxable portion of this income. Typically, this type of income is reportable on Schedule NEC, lines 1-12. If you think this might apply to you, you should review the IRS’s filing guide for more information.

Types of Taxable Income for Nonresident Aliens

Taxable income for nonresident aliens generally only covers income earned in the United States or U.S. source income. Common examples of potentially taxable income by the IRS include:

• Salary and wages

• Business income

• Interest

• Dividends

• Rental income

• Royalties

• Sale or real or personal property

How To File a Tax Return as a Nonresident Alien

Before filing your U.S. federal income tax return, you should double-check whether you’re filing as a dual-state taxpayer. If you’ve switched immigration statuses over the year, you’ll probably need to file two tax returns. From the time you gained U.S. residency onward, your taxable income will include income from all sources. In other words, the IRS will tax you in the same way as a U.S. citizen. Income earned before you switched to resident status is only taxable if it came from a U.S. source.

Dual-status taxpayers will need to decide which type of tax return to file. Your tax form type depends on whether you are a resident or a nonresident by the end of the tax year. Nonresident aliens at the end of the tax year must use Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Resident aliens at the end of the tax year must use Form 1040, U.S. Individual Income Tax Return.

If you remained a nonresident alien throughout the tax year, you aren’t a dual-status taxpayer. You’ll use Form 1040-NR to file taxes.

Tax Filing Deadline for Form 1040-NR

If you must or decide to file U.S. taxes, you’ll need to determine your filing deadline. Suppose you are an employee receiving wages subject to U.S. income tax withholding or you have an office in the United States. In this case, you must file by the 15th day of the fourth month after the end of your tax year. For most people filing based on the calendar year, the deadline will be April 15.

Suppose you are not an employee or are self-employed and receive wages subject to U.S. income tax withholding. Alternatively, perhaps you do not have an office in the United States. In either of these cases, you must file by the 15th day of the sixth month after the end of your tax year. For most people filing based on the calendar year, the deadline will be June 15.

You can request an extension if you need extra time to file Form 1040-NR. To request one, you must file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must file Form 4868 by the time your tax return is supposed to be due.

What Happens if a Nonresident Alien Fails To File?

Suppose you are a nonresident alien who should have filed a tax return but failed to. In this case, you might risk several potential problems:

• You may miss out on tax benefits, including tax credits or allowable deductions.

• You might not be able to leave the United States. Before a nonresident leaves the United States, they must obtain a certificate of compliance. This certificate is a departing alien clearance or sailing or departure permit. Without it, you cannot legally exit. To leave, you’ll first need to file a tax return. IRS Form 1040-C will outline what you need to report. Note that some people are exempt from this tax filing requirement when departing the United States.

Conclusion

Compliance with IRStax laws is important for both nonresidents and residents. Failing to pay U.S. taxes can result in legal troubles and difficulty returning to your home country or maintaining your status. If you are interested in eventual permanent residence in the United States, you must pay all necessary U.S. federal and state income taxes. If you don’t, you won’t be in good standing for a green card or U.S. citizenship down the line.