Form 1040-NR: U.S. Nonresident Alien Income Tax Return (2016)
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 taxes owed to the federal government. If you're not a U.S. citizen or green card holder and don't meet the "substantial presence test" for residency, but you earned income in the United States, this is likely your form. The IRS uses it to ensure that foreign nationals pay taxes on income connected to U.S. sources or U.S. business activities, just as American taxpayers do. Unlike the regular Form 1040 used by U.S. residents and citizens, Form 1040-NR is specifically designed for individuals who maintain their primary tax home in another country but have taxable connections to the United States.
The form captures two main categories of income: income "effectively connected" with a U.S. trade or business (which is taxed at graduated rates similar to U.S. residents), and income that is not effectively connected but comes from U.S. sources, such as dividends, interest, or royalties (typically taxed at flat rates, often 30%, unless reduced by tax treaty). Understanding your residency status is crucial—the IRS determines this through the Green Card Test (whether you're a lawful permanent resident) or the Substantial Presence Test (a mathematical calculation of days physically present in the United States over a three-year period). Getting this classification wrong can lead to using the incorrect form and facing penalties.
When You'd Use Form 1040-NR (Including Late and Amended Filing)
Who Must File
You must file Form 1040-NR if you were engaged in a U.S. trade or business during 2016, regardless of whether you actually earned income or your income was exempt by treaty. You also need to file if you had U.S. source income that wasn't fully taxed through withholding, owe special taxes (like alternative minimum tax or self-employment tax under a social security agreement), received certain retirement or health savings account distributions, or had advance premium tax credits for health insurance marketplace coverage. Even personal representatives of deceased nonresident aliens and administrators of nonresident alien estates or trusts must file this form.
Filing Deadlines
The filing deadline depends on your situation. If you received wages subject to U.S. income tax withholding as an employee, your return is due by the 15th day of the fourth month after your tax year ends—for calendar year 2016, this was April 18, 2017 (delayed from April 15 due to a District of Columbia holiday). If you didn't receive such wages, you have until the 15th day of the sixth month after your tax year ends—June 15, 2017 for calendar year 2016. Estates and trusts follow similar rules based on whether they maintain a U.S. office.
Extensions to File
If you cannot meet these deadlines, file Form 4868 by the original due date to receive an automatic six-month extension. You can also request an extension by making an electronic payment by the due date. However, remember that an extension to file is not an extension to pay—any taxes owed are still due by the original deadline, and you'll owe interest on late payments plus possible penalties.
Amended Returns
To correct errors after filing or to change from one form type to another, file Form 1040X (Amended U.S. Individual Income Tax Return). Generally, you have three years from the date you filed your original return or two years from when you paid the tax, whichever is later, to file an amended return.
Key Rules or Details for 2016
Several important rules govern Form 1040-NR filing. First, correctly determining your tax residency status is fundamental—using the wrong form can trigger audits and penalties. Nonresident aliens generally cannot claim the standard deduction that U.S. residents enjoy, and you can only claim itemized deductions on Schedule A if they're connected to income effectively connected with a U.S. trade or business. Your exemptions are also limited compared to resident aliens.
You must have a taxpayer identification number to file—either a Social Security Number (SSN) if you're authorized to work in the U.S., or an Individual Taxpayer Identification Number (ITIN), which you obtain by filing Form W-7 with the IRS. Starting in 2016, many ITINs required renewal, so verify your ITIN is current before filing. The IRS announced that taxpayers could electronically file Form 1040-NR beginning with the 2016 tax year, a significant change that speeds processing and reduces errors.
Tax treaties between the United States and your home country may reduce your tax liability or exempt certain income entirely. If you're claiming treaty benefits, you must complete Schedule OI (Other Information) and may need to attach Form 8833 (Treaty-Based Return Position Disclosure). Be aware that claiming treaty benefits while engaged in certain activities can disqualify you from exemptions. Additionally, if you're from a country with a social security agreement with the United States and have net self-employment earnings of at least $400, you must pay self-employment tax and file Schedule SE.
Step-by-Step (High Level)
Step 1: Gather Your Income Documents
Begin by gathering all your income documents: Forms W-2 for wages, Forms 1042-S for income subject to withholding, Forms 1099 for various types of income, and any other relevant documentation. Determine your correct filing status—options include single nonresident alien, married nonresident alien, or qualifying widow(er)—and note that your options are more limited than those for resident filers.
Step 2: Report Effectively Connected Income
Complete page one of Form 1040-NR by entering your personal information, filing status, and listing exemptions for yourself, your spouse (if applicable), and any qualifying dependents. Report all income effectively connected with a U.S. trade or business on lines 8 through 23, attaching the appropriate schedules (Schedule C for business income, Schedule D for capital gains, Schedule E for rental income, etc.). Calculate your adjusted gross income by subtracting allowable adjustments like educator expenses, moving expenses, or the deductible portion of self-employment tax.
Step 3: Calculate Tax and Itemized Deductions
Move to page two to calculate your tax. If you're claiming itemized deductions, complete Schedule A on page three—remember you can only itemize if the deductions relate to effectively connected income. Calculate your exemptions, determine your taxable income, and compute your tax using the tax table or tax rate schedules in the instructions. Add any alternative minimum tax or other special taxes that apply to your situation.
Step 4: Report Non-Effectively Connected Income and Treaty Information
Complete Schedule NEC (Tax on Income Not Effectively Connected) on page four for any U.S. source income not connected to a trade or business, such as dividends, interest, or royalties. These are typically taxed at flat rates (10%, 15%, or 30%) depending on the type of income and any applicable treaty rates. Fill out Schedule OI on page five, answering all questions about your visa status, countries of citizenship and residence, dates of U.S. entry and exit, and any treaty benefits claimed.
Step 5: Reconcile Payments and File
Calculate your total tax liability, then report all payments made through withholding, estimated tax payments, and any credits you're entitled to claim (such as the child tax credit, foreign tax credit, or premium tax credit). Determine whether you have a refund or owe additional tax. Sign and date your return, attach all required forms and schedules in the proper order, and either e-file or mail to the address specified in the instructions based on whether you're enclosing a payment.
Common Mistakes and How to Avoid Them
Incorrect Names or Identification Numbers
One of the most frequent errors is entering incorrect names or taxpayer identification numbers for yourself, your spouse, or your dependents. Always double-check that these match your official documents exactly—even small discrepancies can delay processing. For children under 17 who qualify for the child tax credit, don't forget to check the appropriate box in column four of line 7c.
Math and Computation Errors
Mathematical errors plague many returns, especially in calculating the child tax credit, total income, itemized deductions, exemptions, taxable income, and the final refund or amount owed. Take time to verify all calculations, use tax software if possible, and double-check that you're using the correct tax computation method for your income level and filing status. Make sure you're not using tax tables or methods meant for resident aliens.
Incomplete Addresses and Missing Details
Incomplete addresses cause delivery problems—if you live in an apartment, always include your apartment number. Don't forget procedural requirements: sign and date your return, enter your U.S. occupation in the designated field, and check the box on line 14 if you received capital gain distributions but weren't required to file Schedule D. Attach all required forms such as W-2s, 1099s, and schedules, arranging them in the proper order as specified in the assembly instructions.
Payment and Filing Issues
If you're paying by check or money order, include all required information such as your name, address, taxpayer identification number, daytime phone number, and tax year on your payment. Make the check payable to "United States Treasury" and write "2016 Form 1040-NR" and your ITIN or SSN on the payment. Never file multiple original returns for the same year, even if you haven't received your refund or heard from the IRS—this will only delay processing further.
What Happens After You File
Processing and Tracking
Once the IRS receives your return, processing begins. For e-filed returns, most refunds are issued within 21 days. Paper returns take longer—typically four weeks before your return even shows up in the system, and longer still for refund processing. You can check your refund status anytime at IRS.gov/refunds or by using the free IRS2Go mobile app, which provides 24/7 access to tracking information.
Refunds and Offsets
If you're entitled to a refund, you can choose to have it directly deposited into your bank account (the fastest option), receive a paper check, or split the refund among multiple accounts. However, if you owe debts to federal or state agencies—such as back taxes, student loans, child support, or unemployment compensation debts—the Treasury may offset all or part of your refund to pay those obligations. You'll receive a notice explaining any offsets.
Balances Due, Interest, and Penalties
If you owe additional tax and don't pay by the due date, the IRS will calculate interest and penalties and send you a bill. You don't need to calculate these amounts yourself—the IRS handles this computation. Interest accrues from the original due date until you pay in full, and various penalties may apply for late filing, late payment, or substantial understatement of tax. Penalties and interest can be significant, so paying as close to the deadline as possible minimizes additional charges.
IRS Notices, Amended Returns, and Recordkeeping
The IRS may contact you if they find errors on your return, need additional information, or have questions about items you reported. Always respond promptly to IRS correspondence and follow the instructions provided. If you filed an amended return on Form 1040X, you can track its status at IRS.gov/wmar (Where's My Amended Return), though it typically takes three weeks to appear in the system and up to 16 weeks to process. Keep copies of your return and all supporting documents for at least three years after filing or payment, whichever is later, as these are the years the IRS can generally audit.
FAQs
Do I need to file if I had no U.S. income but engaged in a U.S. trade or business?
Yes, nonresident aliens engaged in a U.S. trade or business during the tax year must file Form 1040-NR even if they had no income, no U.S. source income, or all income was treaty-exempt. However, if you had no gross income, you can attach a statement listing your exclusions instead of completing all the schedules.
What's the difference between income that is "effectively connected" and income that is not?
Effectively connected income (ECI) typically comes from the active conduct of a trade or business in the United States—things like wages from U.S. employment, business profits, or rental income from property management activities. This income is taxed at the same graduated rates that apply to U.S. residents. Income not effectively connected usually includes passive investment income like dividends, interest, and royalties from U.S. sources when you're not engaged in business activities. This is typically taxed at flat rates (often 30%) unless a tax treaty reduces the rate.
How do I know if I qualify for treaty benefits, and how do I claim them?
Review the tax treaty between the United States and your country of tax residence, available at IRS.gov. Treaties often reduce withholding rates or exempt certain types of income like student scholarships, teacher salaries, or specific investment income. To claim benefits, complete Schedule OI item L, identifying the treaty country, relevant article, and exempt income amount. You may also need to attach Form 8833 for certain treaty positions. Generally, you must be a resident of the treaty country for tax purposes and not have a permanent establishment in the United States.
What if I don't have a Social Security Number?
If you're not eligible for a Social Security Number but need to file a U.S. tax return, apply for an Individual Taxpayer Identification Number (ITIN) by filing Form W-7 with the IRS, along with documentation proving your identity and foreign status. You can submit this application when you file your tax return. If you're claiming a dependent in an adoption process who can't get an SSN, apply for an Adoption Taxpayer Identification Number (ATIN) using Form W-7A. Note that many ITINs issued before 2013 or unused for three consecutive years required renewal starting in 2016.
Can I claim my spouse and children as dependents?
You can claim your spouse as an exemption only if you use married filing jointly or separately filing status (boxes 3, 4, or 5) and your spouse had no U.S. gross income. For dependents, you can claim children and other qualifying relatives, but the rules are more restrictive than for U.S. residents. The dependent must have a U.S. taxpayer identification number, and special relationship and residency rules apply. Residents of Canada, Mexico, and South Korea have expanded dependent claiming options under tax treaties or agreements.
What should I do if I filed the wrong form or made a mistake?
File Form 1040X (Amended U.S. Individual Income Tax Return) to correct errors or change information on a return you already filed. This includes situations where you filed Form 1040-NR but should have filed Form 1040 (or vice versa). Generally, you have three years from the date you filed your original return or two years from the date you paid the tax to file an amendment. Include explanations of the changes and attach any new or corrected forms and schedules.
My visa status changed during the year—which form do I use?
If you changed status from nonresident to resident alien (or vice versa) during the year, you're considered a dual-status taxpayer. Most commonly, this happens in the year you arrive in or depart from the United States. You'll generally need to file Form 1040 as a resident for part of the year and attach a statement treating the other part as a nonresident, or vice versa. The rules are complex, so review chapter 6 of IRS Publication 519 (U.S. Tax Guide for Aliens) or consult a tax professional familiar with dual-status filing.
Source: All information in this summary comes directly from the IRS Form 1040-NR instructions for 2016 and the Form 1040-NR for 2016, available at IRS.gov.
