Form 1040NR: Nonresident Alien Income Tax Return for Tax Year 2015
Understanding Your Filing Status
Step 1: Determine if You Are a Nonresident Alien
You are a nonresident alien if you are not a U.S. citizen and fail to meet either the green card test or the substantial presence test. The green card test considers you a resident if you were a lawful permanent resident during 2015. The substantial presence test requires at least 31 days in the United States during 2015 and 183 days over three years (2013-2015), using weighted calculations: full days in 2015, one-third of 2014 days, and one-sixth of 2013 days.
Step 2: Identify Exempt Days and Individuals
Certain days are excluded from the substantial presence test, including days spent commuting from Canada or Mexico, days in transit of less than 24 hours, days serving as a foreign vessel crew, and days as an exempt individual. Exempt individuals include students on F, J, M, or Q visas (limited to five years), teachers or trainees on J or Q visas (limited to two of the six preceding years), foreign government officials, and professional athletes competing in charitable events.
Step 3: Consider the Closer Connection Exception
File Form 8840 if you spent fewer than 183 days in the United States during 2015, maintained a tax home in a foreign country, and had a closer connection to that country despite meeting the substantial presence test.
Determining Your Filing Requirement
Step 4: Assess Whether You Must File
You must file Form 1040NR if you engaged in a U.S. trade or business during 2015, received U.S.-source income without full withholding, claimed treaty exemptions, received HSA or MSA distributions, had self-employment earnings of at least $400 from a country with a social security agreement, or received advance premium tax credits for Marketplace health coverage.
Step 5: Understand Filing Exceptions
Students, teachers, or trainees on F, J, M, or Q visas with no taxable income are not required to file, but often do so to claim refunds. Partners receiving only Schedule NEC income with proper withholding do not need to file. Those with no gross income may attach an exclusions list instead of completing schedules.
Selecting the Correct Form
Step 6: Choose Form 1040NR or Form 1040NR-EZ
Use Form 1040NR-EZ only if you have no dependents, only wage and scholarship income, claim no credits, claim only state and local tax itemized deductions, and your personal exemption is not phased out. Otherwise, use the full Form 1040NR.
Reporting Income
Step 7: Report Effectively Connected Income
Enter wages on line 8 with Form W-2 attached. Report interest on line 9a, dividends on lines 10a-10b, and state tax refunds on line 11. Enter scholarships on line 12, business income on line 13 with Schedule C, capital gains on line 14 with Schedule D, IRA distributions on line 15b, and pensions on line 17b. Report rental income on line 18 with Schedule E, farm income on line 19 with Schedule F, unemployment on line 20, and other income on line 21. Total all effectively connected income on line 23.
Step 8: Complete Schedule NEC for Non-Effectively Connected Income
Report fixed, determinable, annual, or periodical income on Schedule NEC page 4. Enter dividends, interest, royalties, pensions, rents, and scholarships in the appropriate rate column: 10%, 15%, 30%, or treaty-reduced rate. Calculate tax by multiplying each column by its rate. Carry the total to Form 1040NR line 54.
Step 9: Claim Tax Treaty Benefits
Report treaty-exempt income on line 22. Complete Schedule OI Item L with country, treaty article, prior years claimed, and exempt income amount. Attach Form 8833 to disclose treaty positions or face a $1,000 penalty.
Calculating Deductions and Exemptions
Step 10: Apply Above-the-Line Deductions
Claim educator expenses up to $250 on line 24, HSA deductions (up to $3,500 single, $7,000 family) on line 25, and moving expenses on line 26. Enter one-half of self-employment tax on line 27, retirement plan contributions on line 28, and health insurance on line 29. Report IRA deductions on line 32, student loan interest (up to $2,500) on line 33, and domestic production activities deduction on line 34. Total adjustments on line 35 and subtract from line 23 to calculate adjusted gross income on line 36.
Step 11: Complete Schedule A for Itemized Deductions
Nonresidents, except for students and business apprentices from India, are not eligible to claim the standard deduction under treaty provisions. Itemize deductions on Schedule A for state and local income taxes, charitable contributions to U.S. organizations, casualty losses, and miscellaneous deductions. Deductions can only offset effectively connected income. If AGI exceeds $154,950 for married filing separately, deductions may be limited.
Step 12: Claim Personal Exemptions
Claim your personal exemption on line 7a if not claimed as a dependent. Claim spouse exemption on line 7b only if your spouse had no gross income and was a resident of Canada, Mexico, or a U.S. national. Claim dependent exemptions on line 7c only if you are a U.S. national or resident of Canada, Mexico, or South Korea, or a student or business apprentice from India. Each person must have an SSN or ITIN. Multiply total exemptions by $4,000 and enter on line 40.
Step 13: Apply Exemption Phase-Out
Personal exemptions phase out if AGI exceeds $258,250 for single filers or $154,950 for married filing separately. The exemption is reduced by 2% for each $2,500 above the threshold for single filers, or $1,250 for married filing separately.
Selecting Filing Status
Step 14: Choose Your Filing Status
Select from six options: Box 1 for single residents of Canada or Mexico or U.S. nationals, Box 2 for other single nonresidents, Box 3 for married residents of Canada or Mexico or U.S. nationals, Box 4 for married residents of South Korea, Box 5 for other married nonresidents, and Box 6 for qualifying widows or widowers. Married nonresidents cannot file jointly unless they elect to be residents for the entire year. Nonresidents cannot use head of household status.
Calculating Tax
Step 15: Determine Taxable Income and Tax
Enter AGI from line 36 on line 37. Enter itemized deductions on line 38 and subtract from line 37 for line 39. Enter exemptions from line 40. Subtract line 40 from line 39 to calculate taxable income on line 41. Use the tax table or rate schedule for your filing status. Married nonresidents use the married filing separately column. Enter tax on line 42, alternative minimum tax on line 43, and excess premium tax credit repayment on line 44. Total lines 42-44 on line 45.
Step 16: Apply Tax Credits
Claim foreign tax credit on line 46 using Form 1116 for income subject to both U.S. and foreign tax. Enter retirement savings credit on line 48 if eligible. Claim child tax credit on line 49 only if from Canada, Mexico, South Korea, or a U.S. national, and the child has an SSN issued before the filing deadline. Enter residential energy credits on line 50 and other credits on line 51. Total credits on line 52 and subtract from line 45 for line 53.
Step 17: Add Additional Taxes
Enter Schedule NEC tax on line 54. Report self-employment tax on line 55 if from a country with a social security agreement. Enter unreported Social Security and Medicare tax on line 56, additional IRA and retirement plan taxes on line 57, and other taxes on lines 58-60. Total all taxes on line 61.
Reporting Payments
Step 18: Report Withholding and Payments
Enter federal tax withheld from Forms W-2 on line 62a and from Forms 1042-S on line 62d. Report estimated tax payments on line 63, additional child tax credit on line 64, and net premium tax credit on line 65. Total all payments on line 69.
Step 19: Calculate Refund or Amount Owed
If line 69 exceeds line 61, enter overpayment on line 72. Request a refund on line 73a or apply to the 2016 estimated tax on line 74. If line 61 exceeds line 69, enter the amount owed on line 76 and include the payment.
Completing Required Schedules
Step 20: Complete Schedule OI
Answer all questions on Schedule OI page 5. List countries of citizenship (Item A) and tax residence (Item B). Report visa changes (Item C), visa status on December 31 (Item D), and immigration history (Item E). List all entry and exit dates for 2015 (Item F). Answer questions about U.S. presence, closer connection, income receipt, and treaty claims (Items G-J). Report foreign financial accounts that require a FinCEN 114 filing (Item K).
Step 21: Document Treaty Benefits
Complete Item L if claiming treaty exemptions. Enter country, treaty article, prior years claimed, and exempt income amount. Attach Form 8833 for treaty-based position disclosure. Failure to attach Form 8833 when required results in loss of treaty benefits and a $1,000 penalty.
Filing Your Return
Step 22: Assemble Required Attachments
Attach Forms W-2, 1042-S, and all required schedules: 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, and Form 8833 for treaty positions.
Step 23: Provide Identification Numbers
Enter your SSN or ITIN on page 1. If you do not have an ITIN, attach Form W-7. Children without an SSN, ITIN, or ATIN by the filing deadline cannot qualify for the child tax credit, even if the necessary numbers are obtained later.
Step 24: File by the Deadline
The 2015 return deadline was April 18, 2016, because Emancipation Day (April 16) fell on a Saturday and was observed on Friday, April 15, 2016, which moved the deadline to the next business day.
Special Situations
Dual-Status Aliens
Suppose you were both a resident and nonresident during 2015 and were a resident of. In this case, on December 31, file Form 1040 with “Dual-Status Return” written across the top. Attach a statement showing nonresident income. Dual-status filers cannot claim the standard deduction, use head of household status, or file jointly unless electing full-year resident treatment.
Departure Requirements
Nonresident aliens leaving the United States must file Form 1040-C before departure unless exempted as foreign government employees, teachers, students on qualifying visas, professional athletes, or diplomatic personnel. Tax paid with Form 1040-C is credited when Form 1040NR is filed.
Key Restrictions
Nonresidents cannot claim the standard deduction except for Indian students and business apprentices under treaty provisions. Spouse and dependent exemptions are limited to residents of Canada, Mexico, South Korea, or U.S. nationals. Credits are severely restricted; you generally cannot claim the Earned Income Tax Credit, American Opportunity Credit, or Lifetime Learning Credit. Deductions only offset effectively connected income, not Schedule NEC income.
By following these steps and providing complete documentation, you ensure accurate completion of Form 1040NR and full compliance with nonresident alien filing requirements for tax year 2015.
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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.
