Questions and Answers
This section answers tax-related questions commonly asked by aliens.
What is the difference between a resident alien and a nonresident alien for tax purposes?
For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as resident aliens and nonresident aliens. Resident aliens are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their U.S. source income.
What is the difference between the taxation of income that is effectively connected with a trade or business in the United States and income that is not effectively connected with a trade or business in the United States?
The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate.
I am a student with an F-1 Visa. I was told that I was an exempt individual. Does this mean I am exempt from paying U.S. tax?
The term exempt individual does not refer to someone exempt from U.S. tax. You were referred to as an exempt individual because as a student temporarily in the United States on an F Visa, you do not have to count the days you were present in the United States as a student during the first 5 years in determining if you are a resident or alien under the substantial presence test. See chapter 1.
I am a resident alien. Can I claim any treaty benefits?
Generally, you cannot claim tax treaty benefits as a resident alien. However, there are exceptions. See Effect of Tax Treaties in chapter 1. See also Nonresident aliens who became resident aliens under Students, Apprentices, and Trainees in chapter 9.
I am a nonresident alien with no dependents. I am working temporarily for a U.S. company. What return do I file?
You must file Form 1040NR or Form 1040NR-EZ if you are engaged in a trade or business in the United States, or have any other U.S. source income on which tax was not fully paid by the amount withheld.
You can use Form 1040NR-EZ instead of Form 1040NR if you meet all nine conditions listed under Form 1040NR-EZ in chapter 7.
I came to the United States on June 30th of last year. I have an H-1B Visa. What is my tax status, resident alien or nonresident alien? What tax return do I file?
You were a dual-status alien last year. As a general rule, since you were in the United States for 183 days or more, you have met the substantial presence test and you are taxed as a resident. However, for the part of the year that you were not present in the United States you are a nonresident. File Form 1040. Print Dual-Status Return across the top. Attach a statement showing your U.S. source income for the part of the year you were a nonresident. You may use Form 1040NR as the statement. Print Dual-Status Statement across the top. See First Year of Residency in chapter 1 for rules on determining your residency starting date. An example of a dual-status return is in chapter 6.
When is my Form 1040NR due?
If you are an employee and you receive wages subject to U.S. income tax withholding, you must generally file by the 15th day of the 4th month after your tax year ends. If you file for the 2001 calendar year, your return is due April 15, 2002.
If you are not an employee who receives wages subject to U.S. income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. For the 2001 calendar year, file your return by June 17, 2002, because June 15, 2002, falls on a Saturday. For more information on when and where to file, see chapter 7.
My spouse is a nonresident alien. Does he need a social security number?
A social security number (SSN) must be furnished on returns, statements, and other tax-related documents. If your spouse does not have and is not eligible to get an SSN, the IRS will issue him or her an individual taxpayer identification number (ITIN).
If you are a U.S. citizen or resident and you choose to treat your nonresident spouse as a resident and file a joint tax return, your nonresident spouse needs an SSN or an ITIN. Alien spouses who are claimed as exemptions or dependents are also required to furnish an SSN or an ITIN.
See Identification Number in chapter 5 for more information.
I am a nonresident alien. Can I file a joint return with my spouse?
Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year.
However, nonresident aliens married to U.S. citizens or residents can choose to be treated as U.S. residents and file joint returns. For more information on this choice, see Nonresident Spouse Treated as a Resident in chapter 1.
I have an H-1B Visa and my husband has an F-1 Visa. We both lived in the United States all last year and had income. What kind of form should we file? Do we file our taxes separately or jointly?
Assuming both of you had these visas for all of last year, you are a resident alien. Your husband is a nonresident alien if he has not been in the United States as a student for more than 5 years. You and your husband can file a joint tax return on Form 1040, 1040A, or 1040EZ if he makes the choice to be treated as a resident for the entire year. See Nonresident Spouse Treated as a Resident in chapter 1. If your husband does not make this choice, you must file a separate return on Form 1040NR or 1040NR-EZ
Is a dual resident taxpayer the same as a dual-status taxpayer?
No. A dual resident taxpayer is one who is a resident of both the United States and another country under each country's tax laws. See Effect of Tax Treaties in chapter 1. You are a dual-status taxpayer when you are both a resident alien and a nonresident alien in the same year. See chapter 6.
I am a nonresident alien and invested money in the U.S. stock market through a U.S. brokerage company. Are the dividends and the capital gains taxable? If yes, how are they taxed?
The following rules apply if the dividends and capital gains are not effectively connected with a U.S. trade or business.
- Capital gains are generally not taxable if you were in the United States for less than 183 days during the year. See Sales or Exchanges of Capital Assets in chapter 4 for more information and exceptions.
- Dividends are taxed at a 30% (or lower treaty) rate. The brokerage company or payor of the dividends should withhold this tax at source. If tax is not withheld at the correct rate, you must file Form 1040NR to receive a refund or pay any additional tax due.
If the capital gains and dividends are effectively connected with a U.S. trade or business, they are taxed according to the same rules and at the same rates that apply to U.S. citizens and residents.
I am a nonresident alien. I receive U.S. social security benefits. Are my benefits taxable?
If you are a nonresident alien, 85% of any U.S. social security benefits (and the equivalent portion of tier 1 railroad retirement benefits) you receive is subject to the flat 30% tax, unless exempt, or subject to a lower treaty rate. See The 30% Tax in chapter 4.
Do I have to pay taxes on my scholarship?
If you are a nonresident alien and the scholarship is not from U.S. sources, it is not subject to U.S. tax. See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your scholarship is from U.S. sources.
If your scholarship is from U.S. sources or you are a resident alien, your scholarship is subject to U.S. tax according to the following rules.
- If you are a candidate for a degree, you may be able to exclude from your income the part of the scholarship you use to pay for tuition, fees, books, supplies, and equipment required by the educational institution. However, the part of the scholarship you use to pay for other expenses, such as room and board, is taxable. See Scholarships and Fellowships in chapter 3 for more information.
- If you are not a candidate for a degree, your scholarship is taxable.
I am a nonresident alien. Can I claim the standard deduction?
Nonresident aliens cannot claim the standard deduction. However, see Students and business apprentices from India, under Itemized Deductions in chapter 5 for an exception.
I am a dual-status taxpayer. Can I claim the standard deduction?
You cannot claim the standard deduction allowed on Form 1040. However, you can itemize any allowable deductions.
I am filing Form 1040NR. Can I claim itemized deductions?
Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U.S. trade or business. See Itemized Deductions in chapter 5.
I am not a U.S. citizen. What exemptions can I claim?
Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U.S. citizens. However, nonresident aliens generally can claim only a personal exemption for themselves on their U.S. tax return. There are special rules for residents of Mexico, Canada, Japan, South Korea; for U.S. nationals; and for students and business apprentices from India. See Exemptions in chapter 5.
What exemptions can I claim as a dual-status taxpayer?
As a dual-status taxpayer, you usually will be able to claim your own personal exemption. Subject to the general rules for qualification, you can claim exemptions for your spouse and dependents when you figure taxable income for the part of the year you are a resident alien. The amount you can claim for these exemptions is limited to your taxable income (figured before subtracting exemptions) for the part of the year you are a resident alien. You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period.
I am single with a dependent child. I was a dual-status alien in 2001. Can I claim the earned income credit on my 2001 tax return?
If you are a nonresident alien for any part of the year, you cannot claim the earned income credit. See chapter 6 for more information on dual-status aliens.
I am a nonresident alien student. Can I claim an education credit on my Form 1040NR?
If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse, you may be eligible for these credits. See Nonresident Spouse Treated as a Resident in chapter 1.
I am a nonresident alien, temporarily working in the U.S. under a J visa. Am I subject to social security and Medicare taxes?
Generally, services you perform as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of the Immigration and Nationality Act are not covered under the social security program if you perform the services to carry out the purpose for which you were admitted to the United States. See Social Security and Medicare Taxes in chapter 8.
I am a nonresident alien student. Social security taxes were withheld from my pay in error. How do I get a refund of these taxes?
If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. See Refund of Taxes Withheld in Error in chapter 8.
I am an alien who will be leaving the United States. What forms do I have to file before I leave?
Before leaving the United States, aliens generally must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. These forms are discussed in chapter 11.
I filed a Form 1040-C when I left the United States. Do I still have to file an annual U.S. tax return?
Form 1040-C is not an annual U.S. income tax return. If an income tax return is required by law, you must file that return even though you already filed a Form 1040-C. Chapters 5 and 7 discuss filing an annual U.S. income tax return.
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