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My second most requested service on Fiverr is preparing Form 1040NRs for nonresident aliens.
I figured I would write a simple eBook that explains when a 1040NR is required and how to file. In the future, I would like to have translated and I am working on a more detailed companion manual for more in-depth situations and explanations. This book is less than 8,000 words on 24 pages. It is designed to be simple with four chapters consisting of residence tests, what constitutes U.S. source income, withholding and the Form 1040NR. As of late-December, the 2018 1040NR has not been released.
This eBook is designed for those that want to prepare their own 1040NR or 1040NR-EZ and tax return preparers that have or would like to market to nonresident alien clients.
I am not a writer, so please email me if you find glaring grammar or other issues and I will correct. If you would like a proposal for me to prepare your 1040NR, please email me at contact@sidehustleretirement.com.
So you get an idea of how the book is formatted and what is included, I am providing 25% of chapter 1 below:
Chapter 1 Residence Tests
Any individual that is not a United States citizen is considered an alien. You could be a resident or nonresident alien. Generally, a resident alien is an individual who has been issued a lawful permanent residence card (i.e. Green Card) or satisfies the substantial presence test. Resident aliens are generally taxed by the U.S. on worldwide income. Nonresident aliens generally must complete IRS Form 1040NR and are taxed only on income from sources within the United States and on certain income from a trade or business within the United States.
Nonresident Aliens
U.S. taxable income of nonresident aliens is divided into one of two categories:
- S.-source income that is not effectively connected with the conduct of a trade or business within the United States, is taxable at a rate of 30% without the allowance of deductions.
- Income that is connected with a U.S. trade or business, is taxable at graduated rates on a net basis.
If an alien realizes U.S. source income subject to tax on a gross basis, payments related to that income are normally subject to withholding tax at 30% rate under IRC Section 1441, see chapter 3.
When a nonresident alien is taxed on net basis of income that is connected with a U.S. trade or business, they must file a federal income tax return on Form 1040NR, U.S. Nonresident Alien Income Tax Return. The calculation of taxable income and tax for a nonresident alien is similar to the rules for U.S. citizens, but with some differences. Some nonresident aliens who are present in the United States and who plan to depart from the United States are required to make a personal visit to an IRS office and apply for a tax clearance certificate (sailing permit). For more information on how to obtain a sailing permit and who needs to obtain a sailing permit, visit https://www.irs.gov/individuals/international-taxpayers/departing-alien-clearance-sailing-permit.
Resident Aliens
An individual is a nonresident alien unless he or she meets one of the two tests which qualify that individual as a resident alien. The two tests are:
- The green card test
- The substantial presence test
Basically, an alien is classified as a nonresident alien if they do not meet one of the requirements above.
Please check back for the companion manual if you need more details that provided in the eBook. I hope to have released by late-January 2019.
