Nonresident Aliens with US Source Income?

Nonresident aliens (“NRA”) who received income from U.S. sources in 2013 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 16 depending on sources of income. See Taxation of Nonresident Aliens.

Who is a Nonresident Alien for US tax Purposes?

An alien is any individual who is not a U.S. citizen or U.S. national.

A resident alien is an alien who has passed either the green card test or the substantial presence test.  A nonresident alien is everyone other alien.

Who Must File a US tax Return?

If an alien is covered under either of the following 2 categories , then the alien must file a US tax return:

1. A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during the year.
   • However, if U.S. source income is wages in an amount less than the personal exemption amount (see Publication 501, Exemptions, Standard Deduction, and Filing Information), then the alien is not required to file a tax return.
2. A nonresident alien individual who is not engaged in a trade or business in the United States and has U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.

Which Income to Report?

A nonresident alien’s income that is subject to U.S. income tax must generally be divided into 2 categories:

• Income that is Effectively Connected with a trade or business in the United States
• U.S. source income that is Fixed, Determinable, Annual, or Periodical (FDAP)

Effectively Connected Income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Effectively Connected Income should be reported on page one of Form 1040NR, U.S. Nonresident Alien Income Tax Return.

FDAP income generally consists of passive investment income; however, in theory, it could consist of almost any sort of income. FDAP income is taxed at a flat 30% (or lower treaty rate) and no deductions are allowed against such income. FDAP income should be reported on page four of Form 1040NR.

Which Form to File?

Nonresident aliens who are required to file an income tax return must use:

• Form 1040NR, U.S. Nonresident Alien Income Tax Return (PDF) or,
• Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents(PDF) if qualified. Refer to the Instructions for Form 1040NR-EZ to determine if you qualify.

What is US Source Income Subject to US tax?

A nonresident alien (NRA) usually is subject to U.S. income tax only on U.S. source income. The general rules for determining U.S. source income that apply to most nonresident aliens are shown below:

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