TAX TALK THURSDAYS: Essential Guide to U.S. Tax Filing for Nonresident Aliens and Dual-Status Returns

Navigating the U.S. tax landscape as a nonresident alien or dual-status individual can be complex. Let's break down the essentials to help you stay compliant and avoid surprises.

Nonresident Aliens: Your U.S. Tax Obligations

If you're a nonresident alien—meaning you haven't passed the green card or substantial presence tests—you are generally taxed only on U.S.-source income. This includes wages, rental income, and certain investment earnings from U.S. sources.

Key Points:

• Form 1040-NR: Use this form to report your U.S.-source income.

  
  

• Tax Rates: Income effectively connected with a U.S. trade or business is taxed at graduated rates; other U.S.-source income may be subject to a flat 30% tax, unless reduced by a tax treaty.

  
  

• Exemptions: Some income may be exempt under tax treaties between the U.S. and your home country.

  
  

Dual-Status Returns: When Residency Status Changes Mid-Year

A dual-status taxpayer is someone who is both a nonresident and a resident alien in the same tax year—typically due to arriving in or departing from the U.S.

Filing Requirements:

• Two-Part Filing: You'll file a dual-status return, which includes:

  
  

  • Form 1040: For the resident part of the year.

    
    

  • Form 1040-NR: As a statement for the nonresident part.

    
    

• Labeling: Clearly label your return as "Dual-Status Return" and the statement as "Dual-Status Statement."

  
  

• Income Reporting:

  
  

  • Resident Period: Report worldwide income.

    
    

  • Nonresident Period: Report only U.S.-source income.

    
    

Restrictions:

• Standard Deduction: Not available; you must itemize deductions.

  
  

• Filing Status: Generally, you cannot file jointly unless married to a U.S. citizen or resident and elect to be treated as a resident for the entire year.

  
  

• Credits: Eligibility for certain tax credits is limited.

  
  

Important Deadlines

• April 15: If you're a resident at year-end or received wages subject to withholding.

  
  

• June 15: If you're a nonresident at year-end and did not receive wages subject to withholding.

  
  

Ensure timely filing to avoid penalties.

Understanding your tax status is crucial. Whether you're a nonresident alien or navigating a dual-status year, staying informed helps you meet your obligations and potentially minimize your tax liability. Need personalized assistance? Contact MKHS Tax Group at (626) 376-3324 or info@mkhstaxgroup.com