Nonresident aliens who live within the United States have unique requirements when it comes to tax season. Depending on the status of the individual, they may be required to file a tax return and multiple forms to report the necessary income. Due to the complicated nature of these forms, it is recommended that these individuals seek guidance to properly comply with the IRS requirements when it comes to tax season. The expat tax attorneys at Evolution Tax and Legal is here to break down this information: nonresident alien status, special considerations, tax requirements, and how our team can help you prepare for tax season.
A nonresident alien is a foreign citizen who is living within the United States but has not passed either the Green Card or substantial presence test. Many visa holders who reside in the U.S. are considered nonresidents. This includes many students, teachers, trainees, and researchers on F, J, M, and Q visas. Employees of foreign governments and companies are also typically categorized as nonresident aliens.
Nonresident aliens are not required to pay taxes on all income earned throughout the year, as resident aliens are required to do. Instead, there are special circumstances in which a nonresident has to pay taxes. This is based on the type of income earned, and whether or not that income was tied to U.S. business or trade.
If any income was effectively connected to a U.S. business or trade, a nonresident is required to pay taxes on this income. This includes any wages, salaries, commission earned through personal service, as well as any interest income and certain business income earned. This income is taxed at the same U.S. citizen income is taxed at. Income that is not earned through connection to a U.S. business or trade is taxed at a flat rate of 30%, although nonresidents can also reap the benefits of certain tax exemption treaties that may be in place.
Before leaving the U.S., nonresidents must file Form 1040-C to indicate compliance with U.S. tax laws. This form indicates compliance, but does not remove the need for nonresidents to file the necessary forms and returns upon tax season if they are still classified as nonresidents.
Nonresident aliens must file Form 1040NR if they are filing with dependents or Form 1040NR-EZ if they are filing with no dependents.These forms are due on April 15 of each year, the same day U.S. citizens file their tax returns.
Filing the required forms and determining forms of income that are required to be reported and taxed can be a complicated process. The team at Evolution Tax and Legal can help. Contact our team of experts and make your tax season as seamless as possible.
July 13, 2021
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