Form 1040-NR: U.S. Nonresident Alien Income Tax Return (2012)
What Form 1040-NR Is For
Form 1040-NR is the tax return that nonresident aliens use to report their U.S. income and calculate what they owe to the Internal Revenue Service. If you're not a U.S. citizen and don't meet the tests to be considered a U.S. resident for tax purposes, you're generally classified as a nonresident alien. Unlike U.S. citizens and residents who pay tax on their worldwide income, nonresident aliens only pay U.S. tax on income from U.S. sources and income that's connected to a U.S. trade or business.
The form serves several important purposes. First, it reports income you earned while engaged in business in the United States, such as wages, salaries, tips, and self-employment income. Second, it reports certain U.S.-source income that wasn't connected to a business but still requires reporting, like scholarships, prizes, and some investment income. Third, it allows you to claim refunds if too much tax was withheld from your income during the year. Finally, it's where you claim any benefits you're entitled to under tax treaties between the United States and your home country.
A nonresident alien is someone who hasn't passed either the "green card test" (having lawful permanent resident status) or the "substantial presence test" (being physically present in the United States for at least 31 days during the year and 183 days during a three-year period using a weighted formula). Even if you meet one of these tests, you might still file as a nonresident if you qualify as a resident of a treaty country and claim treaty benefits.
When You’d Use Form 1040-NR (Late/Amended Filing)
For the 2012 tax year, the standard filing deadline depends on your type of income. If you received wages as an employee that were subject to U.S. income tax withholding, your return was due by April 15, 2013—the same deadline most Americans face. However, if you didn't receive wages subject to withholding, you had until June 17, 2013, to file. This extended deadline recognizes that nonresidents without wage income may need additional time to gather documentation and understand their obligations.
If you missed these deadlines, you should still file as soon as possible. Filing late triggers penalties, but these penalties grow larger the longer you wait. The standard late-filing penalty is 5 percent of the unpaid tax for each month or part of a month your return is late, up to a maximum of 25 percent. If your return is more than 60 days late, there's a minimum penalty of $135 or the full amount of tax you owe, whichever is smaller. Fraudulent failure to file carries even steeper penalties of 15 percent per month, up to 75 percent. Additionally, the IRS charges interest on unpaid taxes from the original due date, and this interest compounds daily.
If you need to correct a return you already filed, you'll use Form 1040-X, the Amended U.S. Individual Income Tax Return. This applies whether you're fixing errors on your original Form 1040-NR or if you filed the wrong type of return entirely—for example, if you filed Form 1040 (the resident return) when you should have filed Form 1040-NR, or vice versa. You generally have three years from the date you filed your original return or two years from the date you paid the tax (whichever is later) to file an amended return and claim a refund. The IRS provides detailed guidance in Publications 519 and 556 for complex amendment situations.
Key Rules or Details for 2012
Understanding who must file Form 1040-NR is essential. You must file if you were a nonresident alien engaged in a trade or business in the United States during 2012, even if you had no income from that business, had no U.S. source income at all, or your income was completely exempt under a tax treaty. The filing requirement exists regardless of whether you owe any tax. You must also file if you were a nonresident alien not engaged in business but received U.S. source income that wasn't fully covered by withholding. Additionally, representatives of deceased persons, estates, or trusts that would need to file Form 1040-NR must submit the form on behalf of those entities.
Several important identification rules apply. You must have a valid taxpayer identification number: either a Social Security Number, an Individual Taxpayer Identification Number (ITIN), or an Adoption Taxpayer Identification Number (ATIN). This number must be entered correctly on your return and must match the number on file with the Social Security Administration or IRS. If you claim dependents, their names and identification numbers must also be accurate and match their official documents.
For 2012, the personal exemption amount was $3,800 per qualified exemption. Nonresident aliens face more restrictions than residents on filing status—you're generally limited to single or married filing separately. However, you might qualify for head of household status if you're a resident of Canada, Mexico, or South Korea, or you're a U.S. national. Married nonresident aliens can sometimes elect to be treated as U.S. residents and file jointly with a U.S. citizen or resident spouse, which can provide tax benefits but subjects worldwide income to U.S. tax.
Tax treaties play a crucial role for many nonresident aliens. If your home country has an income tax treaty with the United States, certain types of income might be partially or completely exempt from U.S. tax, or taxed at reduced rates. Common treaty benefits include exemptions for students on scholarships, teachers and researchers, and reduced withholding rates on dividends and interest. To claim these benefits, you must complete item L of Schedule OI (Other Information) on page 5 of Form 1040-NR, entering the treaty country, the applicable treaty article, the number of months you've claimed the benefit in prior years, and the amount of exempt income. For certain situations, you'll also need to attach Form 8833 to disclose your treaty-based position.
Step-by-Step (High Level)
Begin by gathering all your documentation before you start filling out the form. You'll need Forms W-2 showing wages and withholding, Forms 1042-S showing income and tax withheld at the source, Forms 1099 for various types of income like interest and dividends, and any other income statements. You'll also need records of deductible expenses if you're itemizing, and information about your home country and the dates you were present in the United States.
Start with the identification section at the top of page 1. Enter your full name exactly as it appears on your tax identification documents, your taxpayer identification number (SSN, ITIN, or ATIN), and your complete current address. If you moved during the year, provide your year-end address. Enter your country of citizenship and the code for that country using the IRS country code list. Select your filing status carefully, as this affects your standard deduction and tax calculation.
Next, report your income. If your income is exempt from tax under a treaty, you can leave most of page 1 blank and enter the exempt amount on line 22, but you must still complete Schedule OI. If you have taxable income, you'll report wages on line 8, taxable interest on line 9a, dividend income on line 10, capital gains on line 13, other gains or losses on line 14, IRA distributions on lines 15a and 15b, pensions and annuities on lines 16a and 16b, and business income or loss from Schedule C on line 18. Rental real estate and other income get reported further down the form. Add up all your income to reach your total income figure.
Calculate your adjusted gross income by subtracting eligible adjustments like certain business expenses, health savings account deductions, and IRA contributions if you qualify. Then determine your itemized deductions or standard deduction. For 2012, nonresident aliens had different deduction rules than residents—you could only claim itemized deductions, and these had special limitations. State and local income taxes paid were deductible, as were certain casualty and theft losses, and charitable contributions to U.S. organizations (subject to income percentage limits).
Subtract your deductions and exemptions from your adjusted gross income to calculate your taxable income. Use the tax tables or tax computation worksheet in the instructions to figure your tax. Then complete the sections for tax credits (like the child tax credit if eligible), other taxes you might owe, and payments you've already made through withholding or estimated tax payments. Calculate whether you're due a refund or owe additional tax.
Finally, don't forget the required schedules. Schedule OI is mandatory for all Form 1040-NR filers and asks questions about your visa type, dates of entry and exit from the United States, days present in the country, tax treaty claims, and whether you've filed previous U.S. tax returns. Schedule NEC (Tax on Income Not Effectively Connected With a U.S. Trade or Business) is required if you have certain types of passive income like dividends or royalties. Attach all wage statements, Forms 1042-S, and other documentation to the left margin of page 1.
Common Mistakes and How to Avoid Them
Identification errors top the list of problems that delay refunds and trigger IRS notices. Double-check that you've entered the correct name and taxpayer identification number for yourself and each dependent. These must match exactly with Social Security Administration or IRS records. A single transposed digit or misspelled name can hold up your entire return for months. Before you mail your return, verify each number digit-by-digit against the actual Social Security card or ITIN notice.
Mathematical errors plague many returns, particularly in the sections calculating tax credits, total income, itemized deductions, taxable income, total tax, and refund or amount owed. Use a calculator and double-check every computation. The child tax credit calculation is especially error-prone—make sure each qualifying child has the correct box checked in column 4 of line 7c. If you're using tax software, review the numbers it generates rather than assuming they're correct, as garbage in leads to garbage out.
Many filers forget to attach required documentation. If you're claiming a refund based on backup withholding, you must attach the Form 1099 showing the income and withholding amount. If you're claiming a refund of U.S. tax withheld at source, attach Form 1042-S. Attach these forms to the left margin of page 1, not stapled to the back where they might be overlooked. Missing documentation can result in your refund being delayed or denied entirely.
Filing status confusion causes problems for married nonresident aliens. Unlike U.S. residents, nonresident aliens generally can't file as married filing jointly unless they make a special election to be treated as residents. Filing with the wrong status can trigger correspondence from the IRS and require amending your return. Read the filing status instructions carefully and consult Publication 519 if you're unsure which status applies to you.
Treaty benefit claims require complete documentation. If you're claiming income is exempt or subject to a reduced tax rate under a treaty, you must complete item L of Schedule OI with all required information: the country name, specific treaty article number, months you've claimed this benefit in prior years, and the exact amount being claimed. Partial or missing information will likely result in the IRS rejecting your treaty claim and assessing tax on the income. If you received more than $100,000 in treaty-benefit income, you must also attach Form 8833.
Simple oversights cause unnecessary problems. Many people forget to sign and date their return, an error that makes the return invalid. Others forget to enter their occupation in the United States. If you received capital gain distributions but weren't required to file Schedule D, you must check the box on line 14 or the IRS will question why this income isn't reflected in your tax calculation. Create a prefiling checklist of these mechanical requirements so you don't overlook them in the complexity of the substantive tax issues.
What Happens After You File
Once you mail your return to the IRS Service Center (the address depends on whether you're enclosing payment), the agency begins processing it. For straightforward returns, processing typically takes several weeks, but you should allow more time for complex situations. If you're expecting a refund, you can check its status about four weeks after mailing your paper return using the "Where's My Refund?" tool at IRS.gov or through the IRS2Go mobile app. You'll need your Social Security Number or ITIN, your filing status, and the exact refund amount shown on your return.
Refunds involving Forms 1042-S or Form 8805 (withholding on partnership income) require special handling and take longer to process. The IRS specifically warns that these refunds may take up to six months because they require additional verification. The agency needs to confirm that the withholding actually occurred and that you're entitled to the refund. Be patient and avoid filing duplicate returns or making repeated inquiries, as these can actually slow down the process.
If you owe tax, you need to pay by the original due date to minimize interest and penalties. You can pay online through IRS.gov, by phone, by check or money order mailed with your return, or through same-day wire transfer. If you can't pay the full amount, pay as much as you can to reduce interest charges, and contact the IRS about payment plans or other options. Ignoring a balance due leads to escalating penalties, interest charges that compound daily, and potentially more serious collection actions like liens or levies.
The IRS may contact you after filing if they need additional information, find an error on your return, or have questions about your claims. They'll typically send a letter explaining what they need. Respond promptly and completely to avoid delays. Don't ignore IRS correspondence—even if you disagree with their position, you must respond within the timeframes specified in their letters or you could lose your right to appeal.
Keep copies of your complete return, all attachments, and documentation for at least three years from the date you filed or two years from the date you paid the tax, whichever is later. In some situations, you should keep records longer—for example, if you didn't report all required income, the IRS generally has six years to audit your return, and if the return was fraudulent or never filed, there's no statute of limitations. Your records should include not just the filed return but all the documents used to prepare it: wage statements, 1042-S forms, receipts for deductible expenses, and calculations supporting your figures.
FAQs
Can I file Form 1040-NR electronically, or must I mail a paper return?
For the 2012 tax year, most nonresident aliens had to file paper returns. Electronic filing options for Form 1040-NR were limited, and many nonresidents weren't eligible for e-filing at all. This has changed in more recent years, but for 2012, you should have prepared to mail your return to the appropriate IRS Service Center based on your location and whether you enclosed payment. Make copies of everything before mailing, and consider using certified mail with return receipt requested for important returns or those claiming large refunds.
What's the difference between income effectively connected with a U.S. trade or business and income that's not effectively connected?
Income effectively connected with a U.S. trade or business (ECI) is income from services you personally performed in the United States, from a business you operate in the United States, or that's otherwise directly related to your U.S. business activities. This income is taxed at graduated rates—the same rates that apply to U.S. citizens—and you can deduct related business expenses. Income not effectively connected includes passive income like dividends, interest, and royalties from U.S. sources where you're not materially participating in generating that income. This income is typically taxed at a flat 30 percent rate (or lower treaty rate) with no deductions allowed, and it's reported on Schedule NEC of Form 1040-NR rather than on page 1.
I'm a student on an F-1 visa with a part-time job on campus. Do I need to file Form 1040-NR even though I'm exempt under the substantial presence test?
Yes, if you had any U.S. source income during 2012, you need to file Form 1040-NR to report that income, even if you're exempt from counting days of presence under the substantial presence test. Students on F, J, M, or Q visas who substantially comply with their visa requirements are "exempt individuals" who don't count their days of U.S. presence for up to five calendar years (with some exceptions). However, being an exempt individual for residency purposes doesn't mean you're exempt from filing requirements or from paying tax on your income. Your on-campus wages are taxable income that must be reported, though you might be able to claim treaty benefits to exclude some or all of the income from tax if your home country has an applicable tax treaty with the United States.
How do I get an ITIN if I don't have a Social Security Number and need to file a tax return?
You can apply for an Individual Taxpayer Identification Number by filing Form W-7, Application for IRS Individual Taxpayer Identification Number, along with your completed tax return. You'll need to provide documentation proving your identity and foreign status, such as a passport or other identification documents specified in the Form W-7 instructions. You can mail Form W-7, your documentation, and your tax return together to the IRS address shown in the W-7 instructions, or you can work with an IRS-authorized Certifying Acceptance Agent who can verify your documents and help with the application. The ITIN application process can take several weeks, so start early if you need to file by a specific deadline.
What happens if I filed as a resident using Form 1040 but later realize I should have filed as a nonresident with Form 1040-NR?
You need to file Form 1040-X, Amended U.S. Individual Income Tax Return, to correct your filing status. Check the box indicating you're changing from Form 1040 to Form 1040-NR. Explain the reason for the change in Part III of Form 1040-X. Attach a completed Form 1040-NR showing how your tax should have been calculated, along with any required schedules. The tax outcome might be very different because residents and nonresidents have different deduction rules, filing status options, and income reporting requirements. File your amended return as soon as you discover the error to minimize interest charges. If the error results in you owing additional tax, include payment with your Form 1040-X to stop interest from accruing further.
Can I claim my spouse and children as dependents on Form 1040-NR if they don't live in the United States?
The rules are quite restrictive for nonresident aliens. You can only claim your spouse as an exemption if your spouse had no gross income for U.S. tax purposes and wasn't the dependent of another taxpayer. For children and other dependents, they must be U.S. citizens, U.S. nationals, or residents of the United States, Canada, or Mexico to qualify as your dependents. If your family members live in your home country (unless that country is Canada or Mexico), you generally cannot claim them as dependents on Form 1040-NR. However, if you elect to be treated as a resident alien for tax purposes, different rules apply and you might be able to claim them—but this election subjects your worldwide income to U.S. tax, so it only makes sense in specific circumstances.
I left the United States permanently in 2012. Do I still need to file Form 1040-NR, and what about the sailing permit?
Yes, you need to file Form 1040-NR to report any U.S. source income you received during 2012 or any income connected with a U.S. trade or business, even after departing. Additionally, before leaving the country, you should have obtained a sailing or departure permit (officially called a "certificate of compliance") by filing Form 1040-C or Form 2063. This certifies that you've met all your U.S. tax obligations. Not obtaining the proper departure documentation can cause problems with future U.S. travel or immigration matters. If you already departed without the certificate, file your annual Form 1040-NR as soon as possible and consult with a tax professional about whether you need to address the departure permit issue retroactively.
Source: All information in this guide comes from official IRS publications and forms, specifically the 2012 Form 1040-NR, 2012 Instructions for Form 1040-NR, and Publication 519 (2012), U.S. Tax Guide for Aliens.
