Nonresident aliens, defined as individuals who have not passed the green card or substantial presence tests, must navigate specific IRS requirements.

Whether you're here on a temporary visa, conducting business, or studying, our seasoned experts are here to assist every step of the way.

Who must file?

1. Engaged or are considered engaged in a trade or business in the US during the year

Why they must file: To report income earned from US sources connected to their business activities.

Potential penalties: Failure to file can result in failure-to-file and failure-to-pay penalties. The penalty for not filing is 5% of the unpaid taxes for each month that the tax return is late, not exceeding 25% of the unpaid taxes.

2. Have US income on which the tax liability was not satisfied by withholding at the source

Why they must file: To fulfill tax obligations on US source income that was not adequately covered by withholding.

Potential penalties: Similar penalties as above apply, including interest on unpaid taxes.

3. Representatives or agents responsible for filing returns for nonresident aliens

Why they must file: To comply with US tax laws on behalf of nonresident aliens who might have tax obligations but cannot file themselves.

Potential penalties: Penalties for representatives can include those for failure to file or provide accurate information, which may extend to the nonresident alien's tax liabilities.

4. Serve as fiduciaries for nonresident alien estates or trusts

Why they must file: To report and pay taxes on income generated by the estate or trust.

Potential penalties: Fiduciaries failing to file or pay taxes might face penalties similar to those for individual noncompliance, including fines and interest charges.

5. Domestic fiduciaries responsible for a nonresident alien's property

Why they must file: To manage tax obligations related to the property and any income it generates, on behalf of the nonresident alien.

Potential penalties: Non-filing or incorrect filing can lead to penalties for both the fiduciary and potentially the nonresident alien, including financial penalties and accruing interest on unpaid taxes.

How TFX help

Our team of experts ensures compliance with all relevant tax treaties, helping you avoid double taxation and maximize any applicable credits.

We handle your case from start to finish, providing personalized support tailored to your specific income and country of origin.

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We manage everything from tax filing to planning and phone consultations.

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Frequently asked questions

1. Which income to report for nonresidents?

Nonresident aliens need to report two categories of income:

Effectively Connected Income (ECI): Income connected with a trade or business in the US, taxed at graduated rates similar to US citizens and residents.
Fixed, Determinable, Annual, or Periodical (FDAP) Income: US source income not connected with a trade or business, taxed at a flat 30% rate unless a lower treaty rate applies.

ECI should be reported on page one of Form 1040-NR, while FDAP income is reported on Schedule NEC (Form 1040-NR).

2. Which form to file?

Nonresident aliens required to file an income tax return must use Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

3. When and where to file?

Employees with US income tax withholding must file by April 15.
Non-employees or those without US business offices must file by June 15.

File Form 1040-NR at the address specified in the IRS instructions.

4. What are the extensions and penalties?

If you cannot file by the due date, request an extension using Form 4868.

Timely filing within 16 months of the due date is crucial to claim deductions and credits, as late filings may result in the denial of these benefits.

5. Who are departing aliens?

Before leaving the US, nonresident aliens must obtain a certificate of compliance (sailing or departure permit) by filing Form 1040-C or Form 2063.

Even after departure, an annual income tax return must be filed.

Nonresident tax return

Taxation of nonresident aliens: filing requirements