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We assist clients with specialized counsel to fix noncompliance with international tax reporting and penalties. FBAR, forms 8938, 8621, 3520, 926, 5471 and 5472 are among the most common forms that we solve through compliance programs such as streamlined procedures, Voluntary Disclosure Program or the Delinquent International Information Return Submission Procedures (DIIR).

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06. IRS Criminal Investigations

Our Firm provides representation before IRS Criminal Investigation Division, including Malta Pension Plans and summons.

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No matter how small the idea, we assist clients with the best tax planning and alternatives for their business.

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We assist business owners, CPA and tax preparation firms to file the Beneficial Ownership Information (BOI) report with the FinCEN.

Understanding the 1040-NR: Filing for Nonresident Aliens

International Tax

08.19.2025

The U.S. tax system requires individuals with income sourced in the United States to meet specific filing obligations, even if they are not U.S. citizens or residents. Nonresident aliens (NRAs) file Form 1040-NR, the U.S. Nonresident Alien Income Tax Return, to report income effectively and comply with federal tax laws. This article explores the 1040-NR filing requirements, eligibility criteria, common misconceptions, and best practices for compliance.

Who Files a 1040-NR?

 

Nonresident aliens file Form 1040-NR if they have U.S.-sourced income and meet certain criteria. Under IRC § 871, NRAs are subject to U.S. taxation on:

    • Income effectively connected with a U.S. trade or business (ECI).

    • Fixed, determinable, annual, or periodic (FDAP) income, such as dividends, rents, or royalties.

A key distinction exists between residents and NRAs, based on the substantial presence test outlined in IRC § 7701(b). If an individual spends fewer than 183 days in the U.S. over a three-year period (with specific calculations), they are considered a nonresident for tax purposes.

Filing Obligations and Deadlines

 

Nonresident aliens must file Form 1040-NR if they meet any of the following conditions:

    • They have U.S.-sourced income subject to withholding.
    • They engaged in a U.S. trade or business during the year.
    • They are claiming a refund of overpaid tax or withholding.

The filing deadline for Form 1040-NR is typically June 15 for NRAs who reside outside the United States. However, if the NRA earned wages subject to U.S. withholding, the deadline is April 15.

Key Elements of Form 1040-NR

 Personal Information: NRAs must include their individual taxpayer identification number (ITIN) or Social Security number (SSN) on the form. If the taxpayer does not already have an ITIN, they must apply using Form W-7 before filing.

Income Reporting:

    • Effectively Connected Income (ECI): Reported on Schedule NEC, ECI is taxed at graduated rates similar to U.S. residents.
    • FDAP Income: Typically subject to a flat 30% tax rate unless modified by a tax treaty.
    • Tax Treaties: Many NRAs can benefit from reduced withholding rates or exemptions under U.S. tax treaties. Treaty benefits must be claimed on Form 1040-NR and supported by a completed Form 8833 when required.
    • Deductions and Credits: NRAs can only claim deductions and credits directly connected to ECI. Common deductions include state income taxes and certain business expenses.

Common Misconceptions About Form 1040-NR

 

    • Misconception 1: NRAs Do Not Pay Taxes on U.S. Income: NRAs are often under the impression that their foreign residency exempts them from U.S. tax obligations. However, U.S.-sourced income remains taxable under IRC § 871 unless a treaty provides relief. 
    • Misconception 2: All Income Is Taxed the Same Way: The distinction between ECI and FDAP income is critical, as it affects both reporting and taxation. ECI is taxed at progressive rates, while FDAP is subject to a flat 30% withholding.
    • Misconception 3: Treaty Benefits Apply Automatically: Tax treaty benefits are not automatic. NRAs must claim treaty benefits on their 1040-NR and may need to submit Form 8833 to support their claim.

 Additionally, noncompliance can complicate future immigration or visa applications, as the IRS may flag unresolved tax issues.

Best Practices for Compliance

 

    • Determine Residency Status Early: Use the substantial presence test or green card criteria to establish whether the individual is an NRA or resident alien.
    • Claim Treaty Benefits Properly: Familiarize yourself with applicable tax treaties and file Form 8833 when required.
    • Keep Accurate Records: Maintain documentation for all U.S.-sourced income, deductions, and treaty benefits claimed.
    • Engage a Tax Professional: Given the complexities of NRA taxation, working with an experienced tax professional can help ensure compliance and maximize allowable benefits.

Relevance for Tax Professionals

 Understanding the intricacies of Form 1040-NR is essential for tax practitioners advising nonresident clients. Proper application of IRC provisions, tax treaties, and filing requirements helps mitigate client risks and ensures compliance with federal tax laws. For NRAs, timely and accurate filing of Form 1040-NR is not just a legal obligation—it’s a critical step in managing their.