File 1040NR for Non Resident tax payers, F, J visa students, researchers. First year H1, OPT visa workers file 1040NR

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Dual Status Tax Challenges: File 1040 or 1040 NR?

In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident. When you figure your U.S. tax for a dual-status year, you are subject to different rules for the part of the year you are a resident (1040) and the part of the year you are a nonresident (1040NR).

 

Resident Alien (1040)  vs. Nonresident Alien (1040NR)

The U.S. income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year.

 

Resident Alien at End of Year

You must file Form 1040, U.S. Individual Income Tax Return if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040NR, U.S. Nonresident Alien Income Tax Return (PDF) or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents (PDF) as the statement, but be sure to mark "Dual-Status Statement" across the top.

 

Nonresident at End of Year

You must file Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a resident. You can use Form 1040, U.S. Individual Income Tax Return as the statement, but be sure to mark "Dual-Status Statement" across the top.

Dual Status Tax Situation

You are considered a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year. Remember dual tax status does not refer to your citizenship or immigration status, only to your resident status for tax purposes in the United States as determined by the above tests.

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 US Resident Alien Test (1040 vs. 1040NR)

 

H1, L1 Visa Workers may be considered US Resident for Tax Purposes

Most H1, L1 consultants wait for years for their US resident card (Green Card), but IRS may already consider them as US Resident for tax purposes. The first tax distinction IRS makes is between a Non Resident Alien and a Resident Alien from a tax code perspective.

 

IRS has specific guidelines to determine Resident Status for tax purposes through the ‘Substantial Presence Test’. Once it is established that you are a US Resident (for tax purposes only, your immigration status may still be H1, L1 or other temporary work visa), you are subject to US taxes on your global income, including income in your home country and file 1040. However if you are considered a Non-Resident for tax purposes, you may have to file a 1040NR

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Determine your US Resident Alien Tax Status

You are considered US Resident for Tax purposes if you are a US Citizen or pass the below tests:

1. Green Card Test

If you are not a US Citizen, you will be considered  a Non Resident Alien, unless you possess an Alien Registration card (Green Card).

 

2. Substantial Presence Test

You pass the Substantial Presence test if you were physically present in the US at least 31 days during the current calendar year and 183 days over the past three years. 183 days are accounted on a weighted basis, with the immediately preceding year given full weight, 1/3 weight for the 2nd year prior to that and 1/6 weight for the 3rd previous year.

3. Exceptions to the Substantial Presence Test (1040NR)

A) Students on F, J, M or Q Visa

Students on F, J, M or Q visas are considered exempt individuals for the purpose of Substantial Presence Test. Therefore number of days spent in the US on student visa status need not be included in the above test. They must file a 1040NR is most situations.

 

B) Closer connection to another country

Even if you qualify under the Green Card or Substantial Presence test, if you are present in the US for  less than 183 days in the current year and maintain a ‘Tax Home’ in a foreign country during the year, and have a closer connection to that ‘Tax Home’ than to the US, you may qualify for Non-Resident Alien status and file a 1040NR.

 

C) First year election to be treated as a Resident (1040 vs. 1040NR)

If you moved to the US in the current year, you may be allowed to elect treatment as a Resident Alien, even if you do not pass the Green Card Test or Substantial Presence Test and avoid filing 1040NR. You must meet the following conditions

       1) Be present in the US for 31 consecutive days

2) Be Present in the for at least 75% of the days in the remainder of the year, counting from the first 31 qualifying consecutive days.

       3)  Pass the substantial presence test in the following year

As a Non-Resident Tax Payer, you must file a 1040NR form. Most tax software and tax consultants are not aware of 1040NR and may end up erroneously filing a standard 1040 instead of a 1040NR.

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Resident Status Test (File 1040NR vs. 1040)

Find out if you are eligible to file Form 1040 NR or form 1040. Please provide following information and we will assist you with determing your tax status and file your taxes.

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