Which Tax Form Would E.T. File with the IRS?

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Foreigners also referred to as aliens, present in the U.S. or with business interests in the U.S. will likely have an IRS filing requirement. The specific residence status of the alien is very impactful for purposes of U.S. income tax, so if you are a foreign individual spending time in the U.S., consideration should be given to your U.S. tax filing requirements.

If you have any questions about the below topics, or how U.S. taxation might apply to you as a foreigner in general, please reach out to Withum’s International Tax Group.

Who gets taxed in the U.S.?

The U.S. will tax an individual either as a (1) citizen, (2) resident alien, or (3) a nonresident alien.

  1. You are a U.S. citizen if you were born in the U.S.
  2. You are a resident alien if—
    • You have a Green Card, or
    • You meet the substantial presence test

Note: The substantial presence test is a fun calculation where you get to use fractions and count the number of days you’ve spent in the U.S. during the current calendar year, and two years prior.

  1. You are a nonresident if you don’t meet either of the above resident alien tests.

How are you taxed in the U.S.?

If you are a foreign individual classified as a resident alien for U.S. tax purposes, then you will be subject to U.S. federal income tax on your worldwide income. Regardless of whether it is employment-type income or income from investments, the U.S. will look to tax its fair share based on your status as a resident alien. While this income is subject to U.S. tax, you would get a credit for taxes paid to foreign jurisdictions, and applicable tax treaties may reduce or eliminate certain taxation.

As a nonresident alien, you will subject to U.S. federal income tax only on your U.S. sourced income.

So which form would E.T. file?

Form 1040, U.S. Individual Income Tax Return

A foreign individual classified as a resident alien who is subject to U.S. income tax for the taxable year (based on income, filing status, and other factors) will file Form 1040. Form 1040 is due the 15th day of the fourth month after the close of the individual’s taxable year (typically April 15).

Any tax due must be paid on or before the due date of the return. While returns can be extended, it is only an extension of time to file; thus, the individual must remit the tax payment that is owed either with the return, or with an extension of time to file, by the original due date of the return.

Form 1040NR, Nonresident Alien Income Tax Return

A nonresident alien subject to U.S. tax will file Form 1040NR if the nonresident alien is engaged in a U.S. trade or business, or receives U.S. source income.

You won’t need to file as a nonresident alien if (1) your only U.S. trade or business was the performance of personal services with wages of less than $3,650, and (2) you don’t need to file for purposes of claiming a refund of over-withheld taxes, satisfying additional withholding, or claiming partially exempt income.

If the nonresident alien has wages subject to withholding, the appropriate Form 1040NR is due the 15th day of the fourth month following the close of the taxable year. For other nonresident aliens, Form 1040NR is due on or before the 15th day of the sixth month after the close of the year.

All Forms 1040NR are filed with the IRS Service Center, Philadelphia, Pennsylvania.

Any tax due must be paid on or before the due date of the return. While returns can be extended, it is only an extension of time to file; thus, the individual must remit the tax payment that is owed either with the return, or with an extension of time to file, by the original due date of the return.

“Dual Status” Aliens

Taxpayers who were nonresident aliens at the beginning of the tax year, and resident aliens at the end of the tax year should file Form 1040 labeled “Dual Status Return,” with Form 1040NR attached as a schedule and labeled “Dual Status Statement.”

Taxpayers who were resident aliens at the beginning of the tax year, and nonresident aliens at the end of the tax year, should file Form 1040NR labeled “Dual Status Return,” with Form 1040 attached as a schedule and labeled “Dual Status Statement.”

So if you finish the year as a resident alien, Form 1040 is that tax return that is filed, with Form 1040NR attached as a statement. And if you finish the year as a nonresident alien, Form 1040NR is that tax return that is filed, with Form 1040 attached as a statement.

Back to E.T.

The answer to E.T.’s filing dilemma lies in how many days he spent in the U.S. and what type of income he derives in the U.S.

Ask the Experts

CJ Stroh, Esq.
T (609) 520 1188
cstroh@withum.com

kphelan@withum.com

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

Income tax

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