US Taxes for Nonresidents | Determine What You Need to Do
Did you know that as a nonresident of the US, you may still need to pay US taxes or file US tax returns? This typically happens when you carry out activities that touch on the US in some way. For example:
- You live outside the US but travel to the US for work or business (including conferences and training)
- You sell a home in the US
- You have a rental property in the US (even if it generates losses)
- You have certain types of US investment income (e.g., dividends from US companies)
- You have other US business interests or have ownership in a US LLC
- You recently moved to the US but have not yet met the threshold to be a US tax resident
In some cases, these activities result in US income “effectively connected” to a US trade or business. This income is taxed at progressive tax rates, currently between 10% and 37%.
In other cases, these activities result in US-source investment income. This income is taxed at a flat 30% rate unless a tax treaty exists between the US and your country of residence.
Since 1983, we’ve worked with thousands of nonresidents to determine their filing requirements, get their taxes filed, and take advantage of tax benefits, such as tax treaty positions and special elections.
We can help you interpret, comply, plan, and file according to the tax rules and regulations that apply uniquely to you.
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Frequently Asked Tax Questions by Nonresidents
In many cases, yes! If you had US income during the year, then you usually need to file a US tax return. This is often true even if the amount of income was small. The most common types of US income include:
- Rental income from US real estate (even if you ultimately had a loss on the rental)
- US dividends and certain other types of investment income
- Wage or consulting income earned from workdays in the US
- Capital gains on the sale of US property
- Income from a US trade, business, LLC, or partnership
In a few cases, you do not need to file a US return even though you had US income. For example, if your only US income was investment income and US taxes were already withheld at a 30% rate (or different rate based on a tax treaty), then you often do not need to file.
If you’re a foreign national in the US and you do need to file, we can help you prepare your US tax return.
If you are an alien (not a US citizen), you are considered a nonresident alien unless you meet one of two tests:
- The green card test or
- The Substantial Presence Test for the calendar year (January 1-December 31).
For details on how these tests work, check out our video, “Who is Considered a US Tax Resident?”
US nonresident tax returns (Form 1040NR) do not allow you to file jointly. However, if your spouse is a US tax resident and you wish to file jointly, you can make a special election to be treated as a US tax resident. Then, you can file jointly.
But be careful! If you make this election (called a 6013(g) election), you become taxable on your worldwide income and subject to foreign asset reporting requirements going forward. It’s important to understand the benefits and implications before making the election.
I came to the US on business trips, but my salary was paid entirely by my employer in my home country. So, my income is not US income, right?
Actually, your salary from days worked in the US is considered US income!
It doesn’t matter where you were paid or where your employer is located. It only matters where you were when you conducted the work. Days in the US for work, training, work conferences, and consulting usually result in US “effectively connected income.”
This income usually needs to be reported on a US tax return. And on certain state tax returns, too! Fortunately, in cases where the income amounts are small, an exception is available. Also, some countries have tax treaties with the US that enable you to avoid US tax on this income.
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Our Tax Services
The US tax system is complex. And for nonresidents, it is often a challenge to figure out what tax rules apply to you and how to get the best results. We can help.
As international tax practitioners, we provide tax services daily to many types of nonresidents:
- Nonresidents selling US homes or real estate
- Nonresidents living outside the US who own US investments
- Business travelers to the US
- G-4 visa holders working for international organizations
- E-B5 visa holders investing in the US
- Other visa holders newly arrived in the US (or new to US tax filing requirements)
- Employees arriving on international assignment to the US
- Nonresidents who plan to move to the US or obtain green cards
Determining Your Tax Residency Status and Filing Requirements
For most nonresidents, the first US tax challenge is figuring out what you need to do. Do you need to file a return with the IRS? What about a state return? Should you file as a nonresident, resident, part-year resident, dual-status person? Can you claim benefits under a tax treaty with your home country? What are your options, and what will give you the best results? How do you make sure you are doing what’s required without overpaying taxes?
The answer to these questions depends on many different factors. And the answers are different for each person, based on your personal facts and circumstances. To make sure you get the best outcome, we ask you all the right questions so that we can help you understand your options and the implications. Then, we help you move forward with the best solution for you.
In many cases, we do this assessment at no additional charge when you engage us to prepare your tax returns. In other cases, we set up a separate paid consultation or tax engagement to evaluate your situation.
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Preparing Your Tax Returns
We can help you:
- Prepare your Form 1040NR or other US tax returns
- Amend prior tax returns
- Prepare prior-year returns if you’ve not filed before and need to catch up
- Calculate your US source income and prepare US tax estimates
- Take advantage of one-time elections, tax treaties, and other special benefits
Need tax return help?
Help with FIRPTA Tax Withholding on the Sale of US Real Estate
US law requires mandatory tax withholding on the sales price of US real estate property by nonresidents. This 10%-15% withholding can come as a shock if you are planning to sell your US personal home, vacation home, or rental property. Fortunately, you have options to reduce or eliminate the withholding. And we can help you do that. See our Sale of a Home page to learn more.
Planning for Immigration Changes and Other Transitions
If you are considering obtaining a green card or moving to the US, make sure you understand the tax implications! You can significantly reduce your future US taxes and asset reporting requirements by taking certain actions before you become a US tax resident.
We regularly advise nonresidents on:
- How the US will tax your non-US assets
- How to minimize annual informational filing requirements for foreign assets
- How to adjust the timing of your move to the US (or other change in immigration status) to minimize tax
- Elections to make in the first year of residency to minimize tax
- State tax considerations
- US tax filing requirements and deadlines
Smart planning can save you taxes and help you avoid surprises and pitfalls. Learn more.
Why The Wolf Group?
Since 1983, we’ve worked with clients in the United States and abroad on international tax matters. We have a long history of “cleaning up” complex tax returns, reporting foreign assets, and reconstructing financial records.
Check out our extensive team of CPAs, all with vast international tax experience.
Looking for a Nexia International Partner?
We’re an active member of Nexia International, a global network of independent accountancy, tax and business advisors with over 250 firms around the globe.
Meet Our Tax Professionals
Principal, Director of International Tax
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What our clients say
“This was the first time I had to file taxes in the US. There was some complexity to it because my wife’s pension is paid and taxed in another country. I was grateful for the expert help that I received from The Wolf Group.”
“The Wolf Group is very efficient in preparing returns, with amazing attention to detail and good suggestions. Everyone I worked with was pleasant and courteous.”
“Very good client support. Easy to communicate and upload documents. Thorough and timely delivery of the returns. Used them for last year and this year. I am very happy to work with The Wolf Group.”