It’s crucial for nonresident aliens to understand U.S. tax obligations, which come along with “U.S.-sourced income”: investments or employment in the U.S.. As many nonresidents aren’t familiar with U.S. tax system, they fail to file a tax return. It may lead to a variety of consequences. But on a positive note, you could receive a refund if you file a tax return on time. What if you are a U.S. citizen or Green Card holder with U.S. investment but ready to give up your citizenship/green card? In cases you consider going this route, you need to be aware of your tax obligations changes.
Who Should File Form 1040NR And Who Is A Non-Resident Alien?
First, let’s determine who is a nonresident alien. The IRS considers anyone who is not a U.S. citizen, Green Card holder, or met the substantial presence test but has U.S. tax filing obligation to be a nonresident alien. For example, you have income from the US but you do not meet the substantial presence test. Or you are engaged in a trade or business in the US and you are a nonresident alien. It doesn’t matter if the business activities generated any income, or if it’s exempt under tax treaty from US tax.