Article written by:
Tyler Gabalski, CPA
Tax Senior

Foreign individuals with U.S. sourced income may be required to file U.S. income tax returns. Depending on the situation, there are several filing options available. Having a good tax advisor to help guide you through these requirements is now more important than ever.

Form 1040NR

Nonresident aliens engaged in a trade or business in the United States or with other U.S. income should file Form 1040NR. Individuals are considered nonresidents if they are not a U.S. citizen or national, did not hold a green card at any point during the year and did not meet the substantial presence test. The substantial presence test is calculated using the number of days spent in the U.S. versus a foreign country over a three-year period. Individuals filing Form 1040NR only need to report income that is effectively connected with a trade or business in the United States or other U.S. sourced income.

Dual-Status Tax Returns

Individuals, who were resident aliens for part of the year, but nonresident aliens at either the beginning or end of the year, may file dual-status tax returns. This return includes components of both Form 1040 and Form 1040NR. Individuals filing dual-status tax returns only report income received when they were considered resident aliens and all other income from U.S. sources. Like individuals filing Form 1040NR, income from sources outside of the U.S. does not need to be reported if it is earned while the individual is a nonresident alien.

Form 1040

In some cases, it may be beneficial for dual-status aliens to file Form 1040. The individual would report income for the full year from all worldwide sources in this case. Form 1040 provides several flexible options over the dual-status tax return:

  • Ability to use the married filing joint status
  • Opportunity to use the standard tax deduction rather than itemized deductions
  • Potential utilization of foreign tax credits on income earned while the taxpayer was a nonresident

Navigating filing requirements for foreign individuals is complicated. Please consult a GBQ tax professional to see how we can help.

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