Excitement fills the air as you imagine a journey to the United States or prepare to set off on one. The allure of visiting The Land of Opportunity is sure to ignite your sense of adventure. But what about filing Nonresident Alien Tax ?
Navigating through the intricacies of American culture can be a challenging experience, especially for newcomers, with one particular aspect causing confusion – taxes. Rapid Tax is your go-to resource for simplifying the tax process for nonresidents in the U.S. Delve into our comprehensive guide on how to file taxes as a nonresident in the U.S.
Am I a Nonresident Alien for Tax Filing in the U.S. ?
When someone is not a U.S. citizen or U.S. national, they are classified as an alien. Suppose a person arrives from a foreign country. In that case, they are categorized as a ‘nonresident alien’ for tax reasons unless they satisfy or pass the Green Card Test or the Substantial Presence Test criteria.
When it comes to individuals holding F-1, J-1, M-1, Q-1, or Q-2 visas, the requirement remains consistent. Being physically present in the U.S. is essential to satisfy the Substantial Presence test.
In calculating the total days of physical presence, the count includes all the days you spent in the current year. Additionally, 1/3 of the days from the year prior to the current one and 1/6 of the days from the second year preceding the current one are also taken into account.
Taxable Income for Nonresidents for Tax Filing
As a nonresident alien, only the income coming from within the United States (with exceptions for specific investments) is subject to taxation. Additional information on the types of income that are taxable for nonresidents can be found here.
When it comes to taxation, a resident alien is defined as an individual who is either a U.S. citizen or a foreign national that satisfies either the “green card” or “substantial presence” criteria. These resident aliens are required to pay taxes on their global income, just like U.S. citizens.
Do U.S. Nonresident Aliens Have to Pay Taxes?
Foreign individuals who are not permanent residents are typically taxed solely on income earned from U.S. sources. They are required to adhere to varying tax rates for effectively connected income (ECI) and fixed or determinable, annual, or periodic (FDAP) income.
ECI refers to income derived from activities related to a trade or business in the United States. Conversely, FDAP income is essentially passive income, encompassing all income sources not affiliated with an employer or contractor.
For those residing in the United States or planning to move there shortly, it is important to be aware of the tax obligations that come with living in the country. These obligations typically fall into two categories: federal and state tax filing responsibilities.
Federal Tax Return for Nonresident Tax Filing
To fulfill your tax obligations, submit Form 1040-NR, known as the U.S. Nonresident Alien Income Tax Return when you have taxable income like wages, tips, scholarship and fellowship grants, dividends, and other earnings.
In order to fulfill federal tax obligations, individuals falling into the categories listed below are required to submit a tax return:
– If a foreign individual who is not a resident has earned income or conducted business activities within the United States within a given year.
– If a nonresident individual earning income from U.S. sources that was not subjected to tax withholding at the source,
– Even if income was not received, it is still necessary to complete and submit Form 8843.
Should you fall under specific visa categories like F, M, J, or Q visas, or if you have a medical condition that hinders your timely departure from the U.S., you may be considered exempt from the Substantial Presence Test.
Nonresident Alien Tax Filing Necessary Documents
Navigating the nonresident alien tax filing process can be overwhelming for individuals unfamiliar with tax regulations. When preparing your tax return, it is common to be requested to provide various documents, including:
– Passport
– ITIN/SSN
– Income documents such as 1042-S, W2, 1099s
– Tax filing documents such as 8843 and 1040NR
The requirement to submit your federal tax return is universal. Still, the necessity of filing a state tax return varies depending on the state of residence and the specific regulations in place there.
