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Individuals who are not U.S. citizens or green card holders but who have a "substantial presence" in the U.S. for the tax year and who have U.S. source income may need to file this form. Generally, that would include a foreign person resident in the U.S. for more than 31 days in the current year and more than 183 days during the current and two preceding years. Only 1/3 of the days in the previous year are counted and only 1/6 of the days in the second preceding year are counted. It is necessary to read the instructions to compute the number of days in the U.S. and to determine if exceptions are available for having to file the form.
The form basically requires disclosure of all U.S. source income for the year. For former citizens or residents, foreign source income may also have to be disclosed.
Nonresident alien employees who received wages in the U.S. should file the return or an extension by April 15th (or 4.5 months) following the tax year. Foreign persons with income other than wages subject to withholding are not required to file until June 15th -- or 6.5 months following the tax year. An extension may be requested on Form 4868.
File the return with the IRS Service Center in Philadelphia, PA, 19255, U.S.A.
The 1040-NR can take anywhere from an hour to a week or more -- depending on the complexity of the income and deductions of the taxpayer. According to the IRS instructions for this form, the average time required to prepare the form is about eight hours. A foreign person who tries to file the form without the help of a U.S. tax professional is likely to take much longer because of the need to study the instructions and the difficulty of understanding the language of the U.S. tax system.
The penalties are basically the same as for late filing and payment of taxes by U.S. persons in connection with Form 1040 . However, a failure to file will result in effective forfeiture of any excess withholding.
U.S. tax preparers should not assume that the rules for this form are the same as for the form 1040 and should study the 30 pages of instructions in detail.
Form 1040-NR is also the income tax form to be used by U.S. expatriates and is filed after the expatriate officially departs from the U.S. as a citizen or permanent resident. Taxpayers will not file this form during a period of time when they are a resident of another country (like Canada) but are still a citizen or permanent resident of the U.S. If a taxpayer is required to pay taxes on their U.S. source income for ten years after expatriating, this is the form that should be used.
Form 2063 is the short form option for expatriates who have had no U.S. taxable income for the tax year up to and including the date of departure from the U.S. This form can also be used by resident aliens who can demonstrate to the IRS that their departure will not hinder the collection of any tax.
Form 1040-C is the long form that is required by those who had U.S. taxable income in the previous and current year -- which would include most departing expatriates. This is a special version of the 1040 that is required to secure a "sailing or departure permit" which is the document that indicates that the taxpayer is no longer a U.S. citizen or permanent resident.
In the year a taxpayer officially leaves the U.S. he or she will be deemed to be a dual-status filer and will be required to file both a Form 1040-C and a Form 1040-NR. The same rule applies to nonresident aliens who move to the U.S. to establish permanent residency.