Form 1040-NR: 2017 U.S. Nonresident Alien Income Tax Return Filing Checklist
Overview
Form 1040-NR is the tax return for nonresident aliens who earned U.S. source income or conducted business in the United States during 2017. This was the final year nonresident aliens could claim the $4,050 personal exemption before its elimination by the Tax Cuts and Jobs Act, effective in 2018.
Step-by-Step Filing Process
Step 1: Confirm Nonresident Alien Status
Determine if you are a nonresident alien by verifying you do not meet the green card test or substantial presence test. You are a resident alien if you were a lawful permanent resident at any time during 2017, or if you were physically present in the United States for at least 31 days during 2017 and 183 days over three years using the formula 2017 days × 1.0 + 2016 days × 0.333 + 2015 days × 0.167.
Even if you meet the substantial presence test, you qualify as a nonresident alien if you were present fewer than 183 days in 2017, maintained a tax home in a foreign country, and demonstrated a closer connection to that country. File Form 8840 to claim this exception.
Step 2: Determine Filing Requirement
You must file Form 1040-NR if you were engaged in a U.S. trade or business during 2017 regardless of income, received U.S. source income reportable on Schedule NEC when not all tax was withheld, owe special taxes including alternative minimum tax or self-employment tax, received HSA or Archer MSA distributions, had net self-employment earnings of at least $400 under an international social security agreement, or received advance premium tax credit payments.
Even if not required to file, you should file if eligible for a refund of federal income tax withheld or eligible for the additional child tax credit, credit for federal tax on fuels, or premium tax credit.
Step 3: Select Filing Status
Choose from six filing status options: single resident of Canada or Mexico, or single U.S. national, other single nonresident alien, married resident of Canada or Mexico, or married U.S. national, married resident of South Korea, other married nonresident alien, or qualifying widow or widower—all married nonresident aliens who do not qualify for special status file as married filing separately. Nonresident aliens cannot be eligible to use married filing jointly or head of household status. Qualifying widow or widower status is available only to residents of Canada, Mexico, South Korea, or U.S. nationals whose spouse died in 2015 or 2016 and who have a dependent child.
Step 4: Gather Required Documentation
Collect all Forms W-2, Forms 1042-S, Forms 1099, Schedule K-1 forms, your 2016 Form 1040-NR, and documentation for deductible expenses, including state and local income tax payments, charitable contributions, and casualty losses. Gather treaty documentation if claiming treaty benefits.
Step 5: Report Effectively Connected Income
Report all income effectively connected with a U.S. trade or business on page one of Form 1040-NR, including wages from Forms W-2, business income from Schedule C, capital gains from Schedule D, rental income from Schedule E, farm income from Schedule F, partnership income from Schedule K-1, and unemployment compensation. This income is subject to graduated tax rates identical to those applied to U.S. citizens and residents.
Step 6: Report Income Not Effectively Connected
Complete Schedule NEC for income not effectively connected with a U.S. trade or business. Enter dividends from U.S. corporations in the 15% column, dividends from foreign corporations in the 10% column, and interest, royalties, real property income, pensions, annuities, social security benefits, capital gains, and gambling winnings in the 30% column unless treaty provisions provide lower rates.
Calculate tax by multiplying income by the applicable rate and transferring the total from Schedule NEC line 15 to Form 1040-NR line 54.
Step 7: Calculate Adjustments to Gross Income
Claim allowable adjustments, including educator expenses, health savings account deduction, moving expenses for Armed Forces members, one-half of self-employment tax, SEP and SIMPLE contributions, self-employed health insurance, penalty on early withdrawal of savings, scholarship exclusions, traditional IRA deduction, student loan interest deduction, and domestic production activities deduction.
The IRA deduction phases out for single filers with MAGI between $62,000 and $72,000 and for married couples filing jointly between $99,000 and $119,000. The student loan interest deduction phases out for single filers between $65,000 and $80,000 and for married couples filing jointly between $135,000 and $165,000.
Step 8: Claim Itemized Deductions
Itemize deductions using Schedule A (Form 1040-NR), as the standard deduction is not available except for Indian students and business apprentices under a treaty. Deduct state and local income taxes allocated to effectively connected income, charitable contributions to U.S. organizations, and casualty and theft losses from federally declared disasters.
If AGI exceeds $156,900 for married filing separately, $261,500 for single, or $313,800 for qualifying widow or widower, reduce itemized deductions by 3% of the excess amount, up to a maximum 80% reduction.
Step 9: Calculate Personal Exemption
Claim a personal exemption of $4,050 if you cannot be claimed as a dependent on another taxpayer’s return. This exemption phases out for married filing separately when AGI exceeds $156,900, for single filers when AGI exceeds $261,500, and for a qualifying widow or widower when AGI exceeds $313,800.
The exemption is reduced by 2% for each $2,500 of excess income. Nonresident aliens generally cannot claim exemptions for spouses or dependents except residents of Canada, Mexico, South Korea, U.S. nationals, and treaty-eligible Indian students.
Step 10: Determine Eligible Tax Credits
Calculate the foreign tax credit using Form 1116 if you paid income tax to a foreign country on effectively connected income. The Child Tax Credit provides $1,000 per qualifying child under the age of 17. It is available only to residents of Canada, Mexico, South Korea, U.S. nationals, and Indian students or business apprentices under a treaty.
The child must be a U.S. citizen, national, or resident alien with a valid Social Security number. The retirement savings contributions credit is available to low and moderate-income taxpayers. Nonresident aliens are not eligible to claim the earned income credit, American opportunity credit, lifetime learning credit, adoption credit, or credit for the elderly or disabled.
Step 11: Calculate Tax Liability
Calculate tax on effectively connected income using graduated tax rate schedules appropriate for your filing status. Add tax on non-effectively connected income from Schedule NEC line 15. Include alternative minimum tax from Form 6251, self-employment tax from Schedule SE, and any other special taxes. Subtract nonrefundable credits to arrive at the total tax liability after credits.
Step 12: Report Withholding and Estimated Tax Payments
Enter federal income tax withheld from Forms W-2, Forms 1099, Forms 1042-S, and Forms 8288-A. Include estimated tax payments made during 2017 using Form 1040-ES(NR) and any overpayment from 2016 applied to 2017. Calculate total payments and subtract from tax liability to determine overpayment or amount owed.
Step 13: Complete Schedule OI
Provide required information on Schedule OI, including countries of citizenship, country of claimed residence, green card and citizenship history, visa type on December 31, 2017, visa changes during 2017, and total days physically present in the United States during 2015, 2016, and 2017. For treaty-based income exclusions, identify the country, treaty article, months claimed in prior years, and exempt income amount. Attach Form 8833 if required.
Step 14: Attach Required Documentation
Attach all Forms W-2, Forms 1042-S, Forms SSA-1042S, Forms RRB-1042S, Forms 8288-A, and Forms 1099-R to the front of page 1. Attach Schedule A if claiming itemized deductions, Schedule NEC if reporting non-effectively connected income, Schedule OI (mandatory), Schedule C for business income, Schedule D for capital gains, Schedule E for rental income, Schedule F for farm income, Schedule SE for self-employment tax, Form 8843 for exempt individuals, Form 8833 for treaty positions, and Form 8962 for premium tax credit reconciliation.
Step 15: File by Deadline
File by April 17, 2018, if you received wages subject to U.S. withholding, or by June 15, 2018, if you did not receive wages subject to withholding. The April 17 deadline reflects that April 15 fell on Sunday and April 16 was Emancipation Day. Request an automatic six-month extension by filing Form 4868 by the original deadline, which moves the filing deadline to October 15, 2018. Extension to file is not an extension to pay any tax owed.
Step 16: Make Estimated Tax Payments for 2018
Make estimated tax payments if you expect to owe at least $1,000 in 2018 tax after subtracting withholding and credits. Pay the smaller of 90% of the 2018 tax or 100% of the 2017 tax to avoid penalties. If 2017 AGI exceeded $150,000, pay 110% of 2017 tax. Payment dates are April 17, 2018, June 15, 2018, September 17, 2018, and January 15, 2019. If you have wages subject to withholding, divide the required annual payment by four. If not, pay 50% on June 15, 25% on September 17, and the remaining 25% on January 15.
Key Reminders
Tax year 2017 was the last year for the $4,050 personal exemption, which was eliminated in 2018. The child tax credit remained at $1,000 per child for 2017. The $500 credit for other dependents was not available in 2017. Nonresident aliens cannot file a joint return or as heads of a household. All deductions, except charitable contributions and certain casualty losses, must be allocated to effectively connected income.
Standard deduction is prohibited, except for Indian students and business apprentices covered under a treaty. Suppose social security or Medicare taxes were withheld in error on F-1, J-1, M-1, or Q visa wages. File Form 843 for a refund. Retain all tax records for at least three years from the filing date.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
