Tax Returns for Foreigners
Which is the Right Form for Me?
Tax season in the U.S. is here, and whether you are a citizen, resident, or nonresident for tax purposes, determining the correct form is crucial for accurately reporting your income and avoiding penalties. This guide will help you decide whether you need to file Form 1040 or 1040-NR, and it will offer tips to get started.
But first, what are Forms 1040 and 1040-NR?
Form 1040: This is the standard form used by U.S. citizens and tax residents to report their worldwide income. It is versatile and allows for various deductions and credits.
Form 1040-NR: Designed for nonresident aliens, this form is used to report income earned within the United States. Unlike Form 1040, it offers limited deductions and credits, and only U.S.-sourced income is reported.
How to Determine if You Qualify for Form 1040 or 1040-NR
The key to determining which form you need lies in your tax residency status. Here’s how to assess it:
Are you a U.S. citizen or do you have a Green Card?
If yes, you must file Form 1040, regardless of where you live or earn income.
Are you a Tax Resident?
If you are not a citizen or do not have a Green Card, but you meet the Substantial Presence Test, you are considered a resident and must file Form 1040. This test evaluates the number of days you were physically present in the U.S. during the last three years.
Are you a Nonresident Alien?
If you do not meet the Substantial Presence Test and you are not a citizen, you are a nonresident alien and must file Form 1040-NR to report your U.S.-sourced income.
How to Calculate Your Tax Residency Status
The Substantial Presence Test is essential for determining whether you should file as a resident or nonresident. Use this formula:
Count all the days (both arrivals and departures) you were present in the U.S. during the current year.
Add 1/3 of the days you were present in the U.S. in the previous year.
Add 1/6 of the days you were present in the U.S. two years ago.
If the total is 183 days or more, you are considered a tax resident.
Calculation Example:
If you spent 120 days in the U.S. in 2023, 120 days in 2022, and 120 days in 2021:
2023: 120 days × 1 = 120
2022: 120 days × 1/3 = 40
2021: 120 days × 1/6 = 20
Total: 180 days (You are a nonresident alien for 2023).
Special Considerations for Nonresident Aliens Filing Form 1040-NR
Income to Report:
Wages, salaries, tips, and taxable scholarships or grants from the U.S.
Income effectively connected with a trade or business in the U.S.
Common Deductions:
Nonresident aliens can only claim specific deductions, such as state and local income taxes or charitable contributions to U.S.-based organizations.
Treaty Benefits:
Some nonresident aliens may qualify for reduced tax rates or exemptions under tax treaties between their country and the U.S.
What Documents Do I Need to File This Form?
To prepare for filing taxes, gather these key documents:
Form W-2: Provided by your employer to report wages and withheld taxes.
Form 1099: For income from self-employment, investments, or other non-employment sources.
Other Types of Income: Sale of properties, rental income, asset sales (stocks, bonds, cryptocurrencies, or other goods), foreign earned income, income from compensation, benefits, or severance.
Passport and Travel Records: To calculate your days of presence under the Substantial Presence Test.
ITIN (Individual Taxpayer Identification Number): Required if you are not eligible for a Social Security Number.
Note: Key Deadlines to Remember for This Form
April 15, 2025: Deadline to file Form 1040 or 1040-NR and pay any taxes owed.
June 15, 2025: If you live outside the U.S., you may qualify for an automatic two-month extension to file without penalties.
Estimated Payments:
First Quarter: April 15, 2025
Second Quarter: June 16, 2025
Third Quarter: September 15, 2025
Fourth Quarter: January 15, 2026
Need Help? Contact Us!
Navigating U.S. tax laws can be overwhelming, especially when determining the correct form. At Jambrina CPA, we specialize in local and international tax services for individuals and businesses, ensuring compliance and maximizing benefits. Our team of bilingual CPAs is ready to assist you with your tax obligations in the language you prefer.
Contact us today for personalized assistance. Let’s make the 2024 tax season stress-free together!