Form 1040-NR: U.S. Nonresident Alien Income Tax Return (2013)

What Form 1040-NR Is For

Form 1040-NR is the tax return that nonresident aliens use to report their U.S.-source income and pay U.S. income taxes. If you're not a U.S. citizen and don't meet either the ""green card test"" or the ""substantial presence test,"" you're generally considered a nonresident alien for tax purposes. Unlike U.S. citizens and resident aliens who must report worldwide income, nonresident aliens typically only report income from U.S. sources or income effectively connected with a U.S. trade or business.

The form captures two main categories of income: income effectively connected with a U.S. trade or business (which is taxed at graduated rates like those applied to U.S. residents) and income not effectively connected with a U.S. trade or business (typically taxed at flat rates of 10%, 15%, or 30% depending on the type of income and any applicable tax treaties). Common types of income reported include wages, salaries, tips, business income, capital gains, dividends, interest, royalties, pensions, annuities, scholarship grants, and rental income.

Form 1040-NR also allows you to claim various deductions, exemptions, and credits available to nonresident aliens, though the rules differ from those for resident aliens and U.S. citizens. Certain deductions—such as the standard deduction—are not available to nonresident aliens, and itemized deductions are limited to those directly connected with income effectively connected with a U.S. trade or business.

When You’d Use Form 1040-NR

Regular Filing Deadlines

Regular Filing Deadlines: Your filing deadline depends on whether you received wages subject to U.S. income tax withholding. If you were an employee with wages subject to withholding, Form 1040-NR for the 2013 calendar year was due by April 15, 2014 (the 15th day of the 4th month after the tax year ends). If you did not receive such wages, your deadline was June 16, 2014 (the 15th day of the 6th month after the tax year ends). For nonresident alien estates and trusts with a U.S. office, the deadline is the 15th day of the 4th month after the tax year ends; without a U.S. office, it's the 15th day of the 6th month.

Extensions

Extensions: If you cannot file by your deadline, you can request an automatic 6-month extension by filing Form 4868 by the regular due date. However, this extension only applies to filing the return—not to paying any taxes owed. Interest and penalties will accrue on unpaid taxes from the original due date.

Amended Returns

Amended Returns: If you need to correct a previously filed Form 1040-NR, use Form 1040X (Amended U.S. Individual Income Tax Return). You must generally file Form 1040X within three years of filing your original return or within two years after paying the tax, whichever is later. Form 1040X is also used if you filed Form 1040-NR but should have filed Form 1040, 1040A, or 1040EZ (or vice versa). Exceptions to these time limits exist for individuals in federally declared disaster areas or those physically or mentally unable to manage their financial affairs.

Key Rules or Details for 2013

Residency Tests

Residency Tests: Two tests determine whether you're a nonresident alien: the green card test (whether you're a lawful permanent resident) and the substantial presence test (whether you were physically present in the United States for at least 31 days during 2013 and 183 days during the three-year period 2011–2013, using a weighted formula). If you meet either test, you're generally a resident alien—unless you qualify for an exception such as the closer connection to a foreign country exception.

Filing Requirements

Filing Requirements: You must file Form 1040-NR if you were engaged in a U.S. trade or business during 2013, even if you had no income, no U.S.-source income, or income exempt from tax. You must also file if you were not engaged in a U.S. trade or business but received U.S.-source income reportable on Schedule NEC (such as dividends, interest, or royalties) where not all the tax owed was withheld. Exceptions exist for those with only minimal wages (under $3,900 with no other filing need) or certain students, teachers, and trainees with no taxable U.S. income.

Tax Rates

Tax Rates: For 2013, the highest tax rate on income effectively connected with a U.S. trade or business was 39.6%. The maximum tax rate on net capital gains and qualified dividends increased to 20% for higher earners. Income not effectively connected is generally taxed at flat rates: 30% is the default, but tax treaties may reduce rates to 15%, 10%, or 0% depending on the type of income and your country of residence.

Personal Exemptions and Deductions

Personal Exemptions and Deductions: For 2013, the personal exemption amount was $3,900, but it phases out for higher-income taxpayers (adjusted gross income above $250,000 for singles, $150,000 for married filing separately, and $300,000 for qualifying widows/widowers). Itemized deductions are also limited for taxpayers with AGI above these thresholds. Nonresident aliens cannot claim the standard deduction and face restrictions on deductions for personal exemptions and dependents.

Tax Treaties

Tax Treaties: If you're a resident of a country with which the United States has an income tax treaty, certain types of income may be partially or fully exempt from U.S. tax. You must report treaty-exempt income on Schedule OI and may need to file Form 8833 (Treaty-Based Return Position Disclosure) in certain situations.

Special Taxes for 2013

Special Taxes for 2013: New for 2013 was the Additional Medicare Tax, a 0.9% tax on Medicare wages, Railroad Retirement Tax Act compensation, and self-employment income exceeding $200,000 for singles or $125,000 for married individuals filing separately (or certain other filing statuses).

Step-by-Step (High Level)

Step 1—Gather Your Documents

Step 1—Gather Your Documents: Collect all Forms W-2 (wages), 1042-S (income subject to withholding), 1099 (interest, dividends, miscellaneous income), 8288-A (withholding on real property transactions), K-1 (partnership or trust income), and other relevant income statements. Also gather records of deductible expenses, such as state and local taxes, charitable contributions, and unreimbursed employee expenses.

Step 2—Determine Your Filing Status

Step 2—Determine Your Filing Status: On page 1 of Form 1040-NR, check the appropriate filing status box. Options include single, married (with distinctions for residents of Canada, Mexico, or South Korea, as well as U.S. nationals), or qualifying widow(er) with dependent child. Your filing status affects your tax rates, exemptions, and available deductions.

Step 3—Report Effectively Connected Income

Step 3—Report Income Effectively Connected with a U.S. Trade or Business: On page 1 (lines 8–23), report income effectively connected with a U.S. trade or business, such as wages, interest, dividends, business income, capital gains, pensions, rental income, and other income types. Attach applicable schedules (Schedule C for business income, Schedule D for capital gains, Schedule E for rental or pass-through income).

Step 4—Calculate Adjusted Gross Income

Step 4—Calculate Adjusted Gross Income: Report adjustments to income on lines 24–34 (such as educator expenses, moving expenses, self-employment tax deduction, IRA deduction, and student loan interest). Subtract total adjustments (line 35) from total income (line 23) to arrive at adjusted gross income (AGI) on line 36.

Step 5—Calculate Taxable Income

Step 5—Calculate Taxable Income: On page 2, start with AGI (line 37) and subtract itemized deductions from Schedule A (line 38). Then subtract your exemption amount (line 40) to reach taxable income (line 41). Remember that nonresident aliens cannot claim the standard deduction.

Step 6—Calculate Tax on Effectively Connected Income

Step 6—Calculate Tax on Effectively Connected Income: Using the tax tables or Tax Computation Worksheet, calculate your tax on line 42. Add any alternative minimum tax (line 43) and subtract credits (lines 45–50), such as the foreign tax credit, child tax credit, and retirement savings contributions credit.

Step 7—Report Income Not Effectively Connected

Step 7—Report Income Not Effectively Connected: On page 4 (Schedule NEC), report income not effectively connected with a U.S. trade or business, such as dividends, interest, royalties, and capital gains from property not used in a trade or business. Multiply each type by the applicable tax rate (10%, 15%, 30%, or other treaty rate) and carry the total to line 53 on page 2.

Step 8—Calculate Total Tax and Payments

Step 8—Calculate Total Tax and Payments: Add your tax on effectively connected income, tax on non-effectively connected income, and any other taxes (self-employment tax, Additional Medicare Tax, household employment taxes, etc.) to arrive at total tax (line 60). Then report all payments made, including federal income tax withheld (lines 61a–d), estimated tax payments (line 62), and any credits (lines 63–68).

Step 9—Determine Refund or Amount Owed

Step 9—Determine Refund or Amount Owed: Compare total payments (line 69) to total tax (line 60). If payments exceed tax, you're due a refund (line 70); if tax exceeds payments, you owe additional tax (line 73). Indicate whether you want your refund deposited directly or mailed as a check.

Step 10—Complete Schedule OI and Sign

Step 10—Complete Schedule OI and Sign: Answer all questions on Schedule OI (page 5), including your country of citizenship, residence for tax purposes, visa information, dates of U.S. presence, and treaty claims. Sign and date the return on page 2, entering your occupation in the United States and (if applicable) your Identity Protection PIN.

Common Mistakes and How to Avoid Them

Incorrect or Missing Identifying Numbers

Incorrect or Missing Identifying Numbers: One of the most common errors is entering the wrong Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN) for yourself or your dependents. Always double-check that each name matches the corresponding identification document exactly. For children under age 17 who qualify for the child tax credit, make sure to check the box in column (4) of line 7c.

Identity Protection PIN Omission

Identity Protection PIN Omission: If the IRS sent you a six-digit Identity Protection PIN (IP PIN), you must enter it in the designated space on page 1. Failure to include your IP PIN when required can delay processing. If you didn't receive an IP PIN, leave those spaces blank.

Using the Wrong Tax Computation Method

Using the Wrong Tax Computation Method: Carefully follow the instructions for line 42 to determine which method to use—whether the Tax Table, the Tax Computation Worksheet, or special calculations for qualified dividends and capital gains. Using an incorrect method can result in the wrong tax liability.

Math Errors

Math Errors: Simple calculation mistakes are surprisingly common. Double-check your arithmetic, especially for critical lines such as total income (line 23), adjusted gross income (line 36), taxable income (line 41), total tax (line 60), total payments (line 69), and your refund or amount owed (lines 70 or 73). Consider using tax software or a calculator to verify your work.

Incomplete or Incorrect Address Information

Incomplete or Incorrect Address Information: If you live in an apartment, include your apartment number. Omitting it can cause delivery problems for refunds and IRS correspondence. Also, if you want your refund check mailed to an address different from the one on page 1, make sure to complete line 71e on page 2.

Improper Assembly of Forms and Schedules

Improper Assembly of Forms and Schedules: Attach schedules and forms in the order of their ""Attachment Sequence No."" (found in the upper right corner of each form). Arrange supporting statements in the same order and attach them last. Do not attach unnecessary correspondence or documents unless specifically instructed to do so.

Filing Multiple Returns for the Same Year

Filing Multiple Returns for the Same Year: Never file more than one original return for the same tax year, even if you haven't received your refund or heard from the IRS. Multiple filings create confusion and can significantly delay your refund or result in penalties.

Not Claiming Treaty Benefits Correctly

Not Claiming Treaty Benefits Correctly: If you're claiming reduced withholding or exemption from tax under a tax treaty, you must properly document this on Schedule OI (item L) and may need to attach Form 8833. Failing to provide required documentation can result in the IRS disallowing the treaty benefit.

What Happens After You File

Processing and Refunds

Processing and Refunds: After you file Form 1040-NR, the IRS processes your return and verifies the information. If you're owed a refund, the IRS will issue it either by direct deposit or paper check, depending on your election on line 71. The IRS typically issues most refunds within 21 days of receipt, though refunds of tax withheld on Forms 1042-S or 8805 may take up to six months to process due to additional verification requirements. You can check your refund status online using the IRS ""Where's My Refund?"" tool, which shows whether your return has been received, your refund has been approved, and your refund has been sent.

Refund Offsets

Refund Offsets: If you owe past-due federal tax, state income tax, child support, spousal support, student loans, or other federal debts, the IRS or the Treasury Department's Financial Management Service may apply all or part of your refund to those debts. You'll receive a notice explaining any offset. If you believe an offset was made in error, contact the agency to which you owe the debt.

Payments and Payment Plans

Payments and Payment Plans: If you owe tax and cannot pay the full amount when you file, you have several options. You can request an installment agreement, allowing you to pay in monthly installments. However, you'll be charged interest and potentially a late payment penalty, plus a setup fee for the installment agreement. Alternatively, you can request an extension of time to pay by filing Form 1127 if paying the tax would cause undue hardship. Extensions are generally granted for up to six months, but interest accrues from the original due date, and penalties may apply if the tax isn't paid before the extension expires.

Interest and Penalties

Interest and Penalties: The IRS calculates any interest and penalties you owe, so you don't need to figure these amounts yourself. You'll receive a bill if any is due. Interest accrues on unpaid taxes from the original due date, and penalties are imposed for late filing (5% per month, up to 25% of the amount due, or 15% per month for fraudulent failure to file) and late payment (0.5% per month, up to 25% of unpaid tax).

Audits and Correspondence

Audits and Correspondence: The IRS may contact you if there are questions about your return or if additional information is needed. Respond promptly to any IRS notices, as failure to respond can result in additional penalties or loss of claimed benefits. Keep copies of your return, all supporting documents, and correspondence for at least three years (and longer in certain circumstances).

FAQs

Can I use a simpler form instead of Form 1040-NR?

Possibly. If your only U.S. income is from wages, salaries, tips, refunds of state and local income taxes, or scholarship and fellowship grants, and your income is under $100,000 with no dependents, you may be eligible to use Form 1040NR-EZ instead. Form 1040NR-EZ is shorter and easier to complete, but it has strict eligibility requirements. Review the Form 1040NR-EZ instructions carefully to determine if you qualify.

What if I'm married to a U.S. citizen or resident alien?

You have a special option. Even if you're a nonresident alien, you can elect to be treated as a U.S. resident for tax purposes for the entire year if you're married to a U.S. citizen or resident alien at the end of the tax year and you file a joint return (using Form 1040, 1040A, or 1040EZ instead of Form 1040-NR). This election requires you to report worldwide income for the entire year, but it may provide significant tax benefits, such as lower tax rates and additional deductions. However, making this election may forfeit certain tax treaty benefits, so consult a tax professional before deciding.

What is a dual-status tax year, and how does it affect my filing?

A dual-status tax year occurs when your residency status changes during the year—typically the year you arrive in or depart from the United States. For the part of the year you were a nonresident alien, you're generally taxed only on U.S.-source income and income effectively connected with a U.S. trade or business. For the part of the year you were a resident alien, you're taxed on worldwide income. If you were a U.S. resident on the last day of the tax year, file Form 1040 and attach a statement (you can use Form 1040NR as the statement) showing income for the nonresident period. If you were a nonresident on the last day, file Form 1040NR and attach a statement showing income for the resident period.

How do tax treaties affect my U.S. tax obligations?

Tax treaties between the United States and your country of residence can reduce or eliminate U.S. tax on certain types of income, such as dividends, interest, royalties, pensions, and scholarships. To claim treaty benefits, you must be a resident of the treaty country (as defined in the treaty), you cannot have a permanent establishment or fixed base in the United States, and you must properly document the treaty claim on Schedule OI. In some cases, you'll also need to file Form 8833. Review IRS Publication 901 (U.S. Tax Treaties) and the specific treaty between the United States and your country for details.

What if social security or Medicare taxes were withheld from my wages in error?

Foreign students on F-1, J-1, M, or Q visas and certain other nonresident aliens are generally exempt from social security and Medicare taxes on wages. If these taxes were withheld in error, you can request a refund by filing Form 843 (Claim for Refund and Request for Abatement). Attach documentation showing your visa status and the erroneous withholding. See Chapter 8 of IRS Publication 519 for detailed instructions.

Do I need to file Form 1040-NR if I had no income or my income was fully exempt under a tax treaty?

Generally, yes—if you were engaged in a U.S. trade or business during the year, you must file Form 1040-NR even if you had no income, no U.S.-source income, or income fully exempt by treaty or the Internal Revenue Code. If you have no gross income, you don't need to complete the income schedules; instead, attach a list of the types of exclusions you claim and the amount of each. However, there's a simplified procedure available if you were not engaged in a U.S. trade or business, your tax liability was fully satisfied through withholding, and you're filing solely to claim a refund. In that case, you can complete a condensed version of Form 1040-NR.

What records should I keep after filing Form 1040-NR?

Keep copies of your filed tax return, all Forms W-2, 1042-S, 1099, schedules, attachments, and supporting documents for at least three years from the date you filed the return or the date it was due (whichever is later). In some cases—such as if you underreported income by more than 25% or filed a fraudulent return—the IRS may examine returns for longer periods. Also retain records related to property, investments, and carryover items (such as capital losses) until at least three years after the year in which you dispose of the property or use the carryover.

Source: All information in this summary is derived from official IRS documents for the 2013 tax year: Form 1040-NR and Instructions for Form 1040-NR.

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