Although the United States operates within a citizen-based taxation system, some nonresidents may have to pay income taxes to the IRS by filing Form 1040NR. So, who specifically has to complete this form, and what is it?
Generally, nonresident aliens who work in the United States must complete Form 1040NR. If you’re not a citizen or resident of the U.S. but earn your income in America, you have to pay taxes to the IRS. There are certain exceptions to filing Form 1040NR and important things to know, like the due date and potential penalties for failure to file.
US Tax Help wants to simplify filing taxes, regardless of which forms you have to file. If you’re a nonresident alien who needs help navigating tax season in America, call the experienced CPAs at US Tax Help to learn how to file IRS Form 1040NR today at (541) 362-9127.
What Is IRS Form 1040NR?
IRS Form 1040NR is a tax filing form only for specific persons. Any non-U.S. citizen or resident who engages in business in the United States, or earns income from an American company, will have to file IRS Form 1040NR.
IRS Form 1040NR is a variation of Form 1040, which taxpayers use to file their Annual Tax Return. This variation is for individuals who are not American citizens and who do not pass the Substantial Presence Test.
IRS Form 1040NR is also known as the U.S. Nonresident Alien Income Tax Return. It’s essentially the same document as any American citizen would use to file their annual tax return, with a few differences. The individuals responsible for completing it may receive a greater tax return as they are liable to pay fewer taxes to the IRS.
Do Nonresident Aliens Have to File 1040NR?
Usually, IRS Form 1040NR applies to nonresident aliens who conduct business within the United States. You may also have to file this form on behalf of a deceased person, trust, or an estate required to file IRS Form 1040NR.
Individuals who are not citizens or residents of the United States, but conduct business there, may have to file IRS Form 1040NR. That’s because their income is earned in the U.S. or from an American source. That can be confusing to nonresident aliens because the United States operates within a citizen-based taxation system. While that’s true, nonresident aliens who earn income in America are liable for certain taxes. However, nonresident aliens are only taxed on their American-earned income and aren’t subject to some additional taxes U.S. citizens and residents must pay.
For example, say you are a Canadian citizen but periodically commute to New York to work for your American employer. In that case, IRS Form 1040NR may apply to you. Or perhaps, you work remotely from another country, and your employer is based in the United States. If you’re a nonresident alien and engage in trade or business in the United States, you may have to file IRS Form 1040NR.
Do Expats Have to File 1040NR?
When you relocate overseas, you suddenly have different filing requirements for your Annual Tax Return. So, as an American expatriate, do you have to file IRS Form 1040NR?
The only reason you would have to file IRS Form 1040NR as an American expatriate is if you have renounced your American citizenship and still conduct business in the United States. Some expats may renounce their citizenship in the U.S. to reduce their tax responsibilities.
If you’re an expat who is no longer an American citizen, you are still liable for certain taxes if you engage in business or trade in the United States. Because of this, it’s helpful to have a skilled accountant, like the CPAs at US Tax Help, by your side. Although the U.S. indeed operates within a citizenship-based taxation system, nonresident aliens must complete IRS Form 1040NR if they conduct business in America. While you still have to file taxes as an expat, you won’t do so using 1040NR because you’re not classified as a nonresident alien.
What Should You Know If You Have to File 1040NR?
Nonresident aliens required to file 1040NR need to be aware of a few more things in order to file correctly with the IRS. What’s the filing deadline? Are there exemptions? Will you be taxed on your worldwide income?
Certain exceptions make nonresident aliens exempt from filing IRS Form 1040NR. These exceptions are specific and usually relate to visas or lack of income. If you’re unsure whether or not you have to file IRS Form 1040NR as a nonresident alien, a CPA, like those at US Tax Help, can inform you.
As long as you earn an income in the United States, you have to pay taxes on that income. However, nonresident aliens will not be taxed on their worldwide income. So, let’s say you live in England and have two jobs, one in the U.S. and one in your country of residence. As long as you are a nonresident alien, the IRS can only impose taxes on your income earned in America. Any additional income from other countries cannot be taxed by the IRS.
You should also know that the filing deadline for nonresident aliens to complete IRS Form 1040NR is Tax Day. This is the standard filing deadline for Americans to complete their annual tax returns and applies to nonresident aliens who earn income in the United States.
What Happens If You Do Not File 1040NR?
The same penalties that apply to American citizens and residents who don’t file their Annual Tax Returns also apply to nonresident aliens that fail to file IRS Form 1040NR. These penalties can be severe, so it’s important to complete Form 1040NR on time if it applies to you.
There are two main types of penalties imposed by the IRS on nonresident aliens who do not complete Form 1040NR on time. The first is the failure to file penalty. If you don’t submit IRS Form 1040NR by the due date, you can receive a tax that’s 5% of your unpaid taxes for each month that you do not file the necessary form. This penalty maxes out at 25% of your unpaid taxes.
The second penalty is known as the failure to pay penalty. This penalty will also continue at 5% of your unpaid taxes each month until the penalty maxes out at 25%. The IRS charges interest on penalties to nonresident aliens, meaning your penalty gets costlier the longer you do not pay it.
Call US Tax Help to File 1040NR
Filing IRS Form 1040NR can be confusing for nonresident aliens new to paying taxes in the United States. For guidance and insight into filing Form 1040NR, visit our website or call the CPAs at US Tax Help today at (541) 362-9127.
