Form 1040-NR for nonresidents, and why it comes with your W-7

What Form 1040-NR is

Form 1040-NR, U.S. Nonresident Alien Income Tax Return, is the federal return for nonresident aliens. Nonresident estates and trusts use it too. The IRS defines a nonresident alien as someone who isn’t a US citizen or national and hasn’t passed the green card test or the substantial presence test. If you’re not sure which you are, the IRS explains the tests on its tax residency page. This guide assumes you’re a nonresident for the whole year.

Nonresidents are taxed only on US-source income and on income connected with a US trade or business. The form follows Form 1040 closely and uses the same numbered schedules where they apply, plus schedules of its own, including Schedule OI (Other Information), which every filer completes, and Schedule NEC for income that isn’t connected with a US business. The filing statuses are narrower: a 1040-NR filer can’t use married filing jointly or head of household.

Who must file 1040-NR

Publication 519 and the 1040-NR instructions list who has to file. For individuals, the main cases are:

• You were engaged in a US trade or business at any time in the year. You must file even if you had no income from that business, no US-source income at all, or only income that a treaty exempts.
• You weren’t engaged in a US business, but you had US income and not all the tax you owed was withheld. This covers income such as royalties or dividends that went on Schedule NEC.
• You owe certain other taxes or had self-employment earnings in a covered country. Examples are household employment taxes, or self-employment earnings of $400 or more when you live in a country that has a social security agreement with the US.

Publication 519 gives examples of what counts as being engaged in a US trade or business. Performing personal services in the US at any time in the year usually does. So does owning and operating a business in the US that sells services, products or merchandise, with certain exceptions, and being a partner in a partnership that does business in the US. Students and trainees on F, J, M or Q visas are treated as engaged in a US business if they have taxable scholarship income. Trading stocks for your own account through a US broker, on its own, doesn’t count.

You don’t have to file if you were a student, teacher or trainee on an F, J, M or Q visa with no income that’s subject to tax, or in two narrower cases the instructions describe. But the instructions add that “even if you don’t otherwise have to file a return, you should file one if you can get money back,” for example a refund of tax withheld from your US income.

What goes on it: effectively connected income vs FDAP

The 1040-NR splits your US income into two kinds, taxed in different ways, plus income a treaty exempts.

Income that a treaty exempts goes on line 1k, and you explain the claim in item L of Schedule OI. Gains from selling US real property are taxed as effectively connected income automatically, and you can choose to treat rental income from US real property as effectively connected so you can deduct expenses against it; see our real estate investor guide.

Due dates: April 15 vs June 15

Your due date depends on whether you were paid wages as an employee with US income tax withheld.

The IRS’s page on the taxation of nonresident aliens also puts people who have an office or place of business in the US on the April date. If a due date falls on a Saturday, Sunday or legal holiday, it moves to the next business day.

If you can’t file on time, file Form 4868 by the regular due date. That extends the filing deadline to October 15 for April filers and December 15 for June filers. It doesn’t extend the time to pay, so tax paid late still costs interest and may bring penalties.

No ITIN yet? Attach Form W-7 to the return

A 1040-NR needs a taxpayer identification number. If you don’t have an SSN and can’t get one, you apply for an ITIN on Form W-7 with the return itself, not before it. The W-7 instructions say to file the application with the return “on or before the due date for the return,” and to file an extension by the due date if you can’t.

1. 1

   Complete Form 1040-NR

   Fill in the return as normal, but leave the SSN or ITIN space blank. The IRS fills it in when it assigns your number.

2. 2

   Complete Form W-7

   A nonresident filing a return checks reason box b, “Nonresident alien filing a U.S. federal tax return.” The IRS says that box also covers a nonresident filing only to get a refund. Box b requires a complete foreign address on line 3.

3. 3

   Add your identity documents

   Include your original passport, or a copy certified by the agency that issued it, or other documents from the IRS list. A passport is the only document that proves both identity and foreign status on its own.

4. 4

   Attach the W-7 to the front of the return

   Put Form W-7 on top of Form 1040-NR, with any Forms 1042-S or W-2 attached to the return as its instructions require.

5. 5

   Submit the package(7 weeks, or 9 to 11 weeks)

   Mail it to the IRS ITIN Operation in Austin, or submit it through a Certifying Acceptance Agent, or in person at an IRS Taxpayer Assistance Center in the US that offers ITIN services.

The IRS says to allow 7 weeks for the ITIN, or 9 to 11 weeks if you apply from outside the US or between January 15 and April 30. Once your Form W-7 is processed, the IRS assigns the ITIN to your return and processes the return. For the line-by-line detail, see our Form W-7 instructions guide.

Paper filing when you apply for an ITIN

A 1040-NR can normally be e-filed, but not when it goes in with a first W-7. The W-7 instructions say you “can’t electronically file (e-file) a return using an ITIN in the calendar year the ITIN is assigned,” and that applies to prior-year returns filed that year too. From the following year, you can e-file with your ITIN.

The mailing address changes as well. The 1040-NR instructions give an address in Austin (or in Charlotte if you’re sending a payment), but the W-7 instructions say not to use your return’s address when you mail an application:

Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

That P.O. box is for the US Postal Service. The W-7 instructions give a separate street address for private delivery services. If you need to file several years’ returns, you can attach them all to one W-7.

Treaty claims and refunds on 1040-NR

Treaty claims. If a treaty exempts some of your income, it goes on line 1k, and item L of Schedule OI asks for the country, the treaty article, the number of months you’ve claimed the benefit in earlier years, and the amount. If a treaty only reduces the rate, you report the income on Schedule NEC at the treaty rate. Some treaty positions also need Form 8833, the treaty disclosure form, attached. The IRS says you don’t need it for a reduced rate of withholding on dividends, interest, rents, royalties or similar income, for treaty benefits on pay as an employee, pensions, or the income of students, trainees or teachers, or when the amounts involved total $10,000 or less. When it is required, the penalty for leaving it off is $1,000. Our US tax treaty guide covers the treaties themselves.

Refunds of over-withheld tax. If a payer withheld more than you owed, the 1040-NR is how you get it back. You report the income, enter the tax withheld from box 10 of each Form 1042-S on line 25g, and attach the 1042-S forms to the front of the return. If your only reason to file is a refund of tax withheld at source, and you had no US business at any time in the year, the instructions have a simplified procedure that keeps the return short. They say to allow up to 6 months for refunds of tax reported on Form 1042-S.

Help with the return vs help with the ITIN

These are two different jobs. The 1040-NR is a tax return: working out your income, treaty position and tax. The W-7 is an identity application: getting the number that return needs.

TheITINapp handles only the second one. We prepare and submit your Form W-7; we don’t prepare Form 1040-NR or give advice on what goes in it. For the return, you’ll need to do it yourself from the IRS instructions or use a tax professional who works with nonresident returns. Applying for an ITIN directly with the IRS is free.