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Publication 519

Cat. No. 15023T Contents

U.S. Tax Guide


Introduction . . . . . . . . . . . . . . . . . . 1
Department
of the What's New .................. 2

for Aliens
Treasury
Internal Reminders . . . . . . . . . . . . . . . . . . . 3
Revenue
Service Chapter 1. Nonresident Alien or
Resident Alien? . . . . . . . . . . . . . 3

For use in preparing Chapter 2. Source of Income . . . . . . 10

2014 Returns
Chapter 3. Exclusions From Gross
Income . . . . . . . . . . . . . . . . . 14

Chapter 4. How Income of Aliens Is


Taxed . . . . . . . . . . . . . . . . . . 17

Chapter 5. Figuring Your Tax . . . . . . 24

Chapter 6. Dual-Status Tax Year . . . . 32

Chapter 7. Filing Information . . . . . . 34

Chapter 8. Paying Tax Through


Withholding or Estimated
Tax . . . . . . . . . . . . . . . . . . . 38

Chapter 9. Tax Treaty Benefits . . . . . 46

Chapter 10. Employees of Foreign


Governments and International
Organizations . . . . . . . . . . . . . 50

Chapter 11. Departing Aliens and


the Sailing or Departure
Permit . . . . . . . . . . . . . . . . . . 50

Appendix ATax Treaty Exemption


Procedure for Students . . . . . . . 57

Appendix BTax Treaty Exemption


Procedure for Teachers and
Researchers . . . . . . . . . . . . . . 61

Index . . . . . . . . . . . . . . . . . . . . . 66

Future Developments
For the latest information about developments
related to Publication 519, such as legislation
enacted after it was published, go to
www.irs.gov/pub519.

Introduction
For tax purposes, an alien is an individual who
is not a U.S. citizen. Aliens are classified as
nonresident aliens and resident aliens. This
publication will help you determine your status
and give you information you will need to file
your U.S. tax return. Resident aliens generally
are taxed on their worldwide income, the same
as U.S. citizens. Nonresident aliens are taxed
only on their income from sources within the
Get forms and other information faster and easier at: United States and on certain income connected
IRS.gov (English) IRS.gov/Korean () with the conduct of a trade or business in the
IRS.gov/Spanish (Espaol) IRS.gov/Russian (P) United States.
IRS.gov/Chinese () IRS.gov/Vietnamese (TingVit) The information in this publication is not as
comprehensive for resident aliens as it is for

Jan 26, 2015


nonresident aliens. Resident aliens are gener- Table A, Where To Find What You Need To Answers to frequently asked questions are
ally treated the same as U.S. citizens and can Know About U.S. Taxes, provides a list of ques- presented in the back of the publication.
find more information in other IRS publications. tions and the chapter or chapters in this publi-
cation where you will find the related discus-
sion.

Table A. Where To Find What You Need To Know About U.S. Taxes
Commonly Asked Questions Where To Find The Answer

Am I a nonresident alien or resident alien? See chapter 1.

Can I be a nonresident alien and a resident alien in the same See Dual-Status Aliens in chapter 1.
year? See chapter 6.

I am a resident alien and my spouse is a nonresident alien. Are See Nonresident Spouse Treated as a Resident
there special rules for us? in chapter 1.
See Community Income in chapter 2.

Is all my income subject to U.S. tax? See chapter 2.


See chapter 3.

Is my scholarship subject to U.S. tax? See Scholarship Grants, Prizes, and Awards in chapter 2.
See Scholarship and Fellowship Grants in chapter 3.
See chapter 9.

What is the tax rate on my income subject to U.S. tax? See chapter 4.

I moved to the United States this year. Can I deduct my moving See Deductions in chapter 5.
expenses on my U.S. return?

Can I claim exemptions for my spouse and children? See Exemptions in chapter 5.

I pay income taxes to my home country. Can I get credit for these See Tax Credits and Payments in chapter 5.
taxes on my U.S. tax return?

What forms must I file and when and where do I file them? See chapter 7.

How should I pay my U.S. income taxes? See chapter 8.

Am I eligible for any benefits under a tax treaty? See Income Entitled to Tax Treaty Benefits in chapter 8.
See chapter 9.

Are employees of foreign governments and international See chapter 10.


organizations exempt from U.S. tax?

Is there anything special I have to do before leaving the United See chapter 11.
States? See Expatriation Tax in chapter 4.

Comments and suggestions. We welcome Although we cannot respond individually to


your comments about this publication and your
suggestions for future editions.
each comment received, we do appreciate your
feedback and will consider your comments as
What's New
You can send us comments from we revise our tax products. Premium tax credit. You may be eligible to
www.irs.gov/formspubs. Click on More Infor- claim the premium tax credit if you, your
Ordering forms and publications. Visit
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www.irs.gov/formspubs to download forms and
Or you can write to: ance through the Health Insurance Market-
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www.irs.gov/orderforms to order forms or call
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1-800-829-3676 to order current and prior-year
Tax Forms and Publications forms and instructions. Your order should arrive Advance payments of the premium tax
1111 Constitution Ave. NW, IR-6526 within 10 business days. credit. Advance payments of the premium tax
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Tax questions. If you have a tax question, surer to help pay for the insurance coverage of
We respond to many letters by telephone. check the information available on IRS.gov or you, your spouse, or your dependent. If ad-
Therefore, it would be helpful if you would in- call 1-800-829-1040. We cannot answer tax vance payments of the premium tax credit were
clude your daytime phone number, including questions sent to the above address. made, you must file a 2014 tax return and Form
the area code, in your correspondence. 8962. If you enrolled someone who is not

Page 2 Publication 519 (2014)


claimed as a dependent on your tax return or for your return to authorize the IRS to discuss your 8833 Treaty-Based Return Position
more information, see the Instructions for Form return with a friend, family member, or any other Disclosure Under Section 6114 or
8962. person you choose. This allows the IRS to call 7701(b)
Form 1095-A. If you, your spouse, or a de- the person you identified as your designee to
8840 Closer Connection Exception
pendent enrolled in health insurance through answer any questions that may arise during the
Statement for Aliens
the Marketplace, you should have received processing of your return. It also allows your
Form(s) 1095-A. If you receive Form(s) 1095-A designee to perform certain actions such as 8843 Statement for Exempt Individuals
for 2014, save it. It will help you figure your pre- asking the IRS for copies of notices or tran- and Individuals With a Medical
mium tax credit. If you did not receive a Form scripts related to your return. Also, the authori- Condition
1095-A, contact the Marketplace. zation can be revoked. See your income tax re-
turn instructions for details. See chapter 12 for information about getting
Personal exemption increased. For tax these forms.
years beginning in 2014, the personal exemp- Change of address. If you change your mail-
tion amount is increased to $3,950. ing address, be sure to notify the Internal Reve-
U.S. real property interest. Generally, the
nue Service using Form 8822, Change of Ad-
dress.
Nonresident Aliens
treatment of a regulated investment company
(RIC) as a qualified investment entity (QIE) was Photographs of missing children. The Inter- If you are an alien (not a U.S. citizen), you are
scheduled to expire at the end of 2013. The nal Revenue Service is a proud partner with the considered a nonresident alien unless you meet
provision has been extended through 2014. National Center for Missing and Exploited Chil- one of the two tests described next under Resi-
The special rules that apply to distributions from dren. Photographs of missing children selected dent Aliens.
a QIE attributable to the gain from the sale or by the Center may appear in this publication on
exchange of a U.S. real property interest will pages that would otherwise be blank. You can
continue to apply to any distribution from a RIC help bring these children home by looking at the Resident Aliens
in 2014. Beginning in 2015 (unless extended by photographs and calling 1-800-THE-LOST
legislation), a RIC will only be treated as a QIE (1-800-843-5678) if you recognize a child. You are a resident alien of the United States for
for certain distributions from the RIC that are di- tax purposes if you meet either the green card
rectly or indirectly attributable to distributions re- test or the substantial presence test for calen-
ceived by the RIC from a REIT. See Qualified dar year 2014 (January 1December 31). Even
investment entities under U.S. Real Property In- if you do not meet either of these tests, you may
terest. be able to choose to be treated as a U.S. resi-
dent for part of the year. See First-Year Choice
Interest-related dividends and short-term
capital gain dividends received from mutual 1. under Dual-Status Aliens, later.
funds. The exemption of tax on certain inter-
est-related dividends and short-term capital Green Card Test
gain dividends paid by a mutual fund or other
regulated investment company was scheduled Nonresident You are a resident for tax purposes if you are a
to expire at the end of 2013. These provisions lawful permanent resident of the United States
have been extended through 2014. The exemp-
tion expires for amounts paid in tax years begin-
Alien or at any time during calendar year 2014. (How-
ever, see Dual-Status Aliens, later.) This is
ning after December 31, 2014 (unless extended
by legislation). Resident Alien? known as the green card test. You are a lawful
permanent resident of the United States at any
time if you have been given the privilege, ac-
cording to the immigration laws, of residing per-
Reminders Introduction manently in the United States as an immigrant.
You generally have this status if the U.S. Citi-
Multi-level marketing. Clarification regarding You should first determine whether, for income zenship and Immigration Services (USCIS) (or
the characterization and source of income re- tax purposes, you are a nonresident alien or a its predecessor organization) has issued you an
ceived from multi-level marketing companies by resident alien. alien registration card, also known as a green
distributors (upper-tier distributors) that are If you are both a nonresident and resident in card. You continue to have resident status un-
based on the sales or purchases of persons the same year, you have a dual status. Dual der this test unless the status is taken away
whom they have recruited and sponsored status is explained later. Also explained later from you or is administratively or judicially de-
(lower-tier distributors) is provided. See are a choice to treat your nonresident spouse termined to have been abandoned.
Multi-level marketing under Personal Services as a resident and some other special situations.
in chapter 2. Resident status taken away. Resident status
is considered to have been taken away from
Additional Medicare Tax. You may be re- Topics
This chapter discusses: you if the U.S. government issues you a final
quired to pay Additional Medicare Tax. Also, administrative or judicial order of exclusion or
you may need to report Additional Medicare deportation. A final judicial order is an order that
Tax withheld by your employer. For more infor- How to determine if you are a nonresident, you may no longer appeal to a higher court of
mation, see Additional Medicare Tax under So- resident, or dual-status alien, and competent jurisdiction.
cial Security and Medicare Taxes and Self-Em- How to treat a nonresident spouse as a
ployment Tax in chapter 8. For more resident alien. Resident status abandoned. An administra-
information on Additional Medicare Tax, go to tive or judicial determination of abandonment of
IRS.gov and enter Additional Medicare Tax in Useful Items resident status may be initiated by you, the US-
the search box. You may want to see: CIS, or a U.S. consular officer.
Refunds of certain withholding tax delayed. If you initiate the determination, your resi-
Refund requests for tax withheld and reported Form (and Instructions) dent status is considered to be abandoned
on Form 1042-S, Form 8288-A, or Form 8805 when you file either of the following with the US-
may require additional time for processing. Al- 1040 U.S. Individual Income Tax Return CIS or U.S. consular officer.
low up to 6 months for these refunds to be is- Your application for abandonment.
sued. 1040A U.S. Individual Income Tax Return
Your Alien Registration Receipt Card at-
Third party designee. You can check the 1040NR U.S. Nonresident Alien Income tached to a letter stating your intent to
Yes box in the Third Party Designee area of Tax Return abandon your resident status.

Chapter 1 Nonresident Alien or Resident Alien? Page 3


You must file the letter by certified mail, return 3-year period is 180 days, you are not consid- Example. Maria Perez lives in Mexico and
receipt requested. You must keep a copy of the ered a resident under the substantial presence works for Compaa ABC in its office in Mexico.
letter and proof that it was mailed and received. test for 2014. She was assigned to her firm's office in the Uni-
ted States from February 1 through June 1. On
Until you have proof your letter was re- The term United States includes the follow- June 2, she resumed her employment in Mex-
! ceived, you remain a resident alien for ing areas. ico. On 69 days, Maria commuted each morn-
CAUTION tax purposes even if the USCIS would All 50 states and the District of Columbia. ing from her home in Mexico to work in Compa-
not recognize the validity of your green card be- a ABC's U.S. office. She returned to her home
The territorial waters of the United States.
cause it is more than ten years old or because in Mexico on each of those evenings. On 7
you have been absent from the United States The seabed and subsoil of those submar-
ine areas that are adjacent to U.S. territo- days, she worked in her firm's Mexico office.
for a period of time. For purposes of the substantial presence test,
rial waters and over which the United
States has exclusive rights under interna- Maria does not count the days she commuted
If the USCIS or U.S. consular officer initiates to work in the United States because those
this determination, your resident status will be tional law to explore and exploit natural re-
sources. days equal more than 75% of the workdays dur-
considered to be abandoned when the final ad- ing the working period (69 workdays in the Uni-
ministrative order of abandonment is issued. If The term does not include U.S. possessions ted States divided by 76 workdays in the work-
you are granted an appeal to a federal court of and territories or U.S. airspace. ing period equals 90.8%).
competent jurisdiction, a final judicial order is
required.
Days of Presence Days in transit. Do not count the days you are
Under U.S. immigration law, a lawful perma- in the United States for less than 24 hours and
in the United States
nent resident who is required to file a tax return you are in transit between two places outside
as a resident and fails to do so may be regar- You are treated as present in the United States the United States. You are considered to be in
ded as having abandoned status and may lose on any day you are physically present in the transit if you engage in activities that are sub-
permanent resident status. country at any time during the day. However, stantially related to completing travel to your for-
there are exceptions to this rule. Do not count eign destination. For example, if you travel be-
A long-term resident who ceases to be
the following as days of presence in the United tween airports in the United States to change
! a lawful permanent resident may be
States for the substantial presence test. planes en route to your foreign destination, you
subject to special reporting require-
are considered to be in transit. However, you
CAUTION

ments and tax provisions. See Expatriation Tax Days you commute to work in the United
States from a residence in Canada or Mex- are not considered to be in transit if you attend
in chapter 4.
ico if you regularly commute from Canada a business meeting while in the United States.
or Mexico. This is true even if the meeting is held at the air-
Termination of residency after June 3,
Days you are in the United States for less port.
2004, and before June 17, 2008. If you termi-
nated your residency after June 3, 2004, and than 24 hours when you are in transit be-
tween two places outside the United Crew members. Do not count the days you
before June 17, 2008, you will still be consid-
States. are temporarily present in the United States as
ered a U.S. resident for tax purposes until you
Days you are in the United States as a a regular crew member of a foreign vessel (boat
notify the Secretary of Homeland Security and
crew member of a foreign vessel. or ship) engaged in transportation between the
file Form 8854, Initial and Annual Expatriation
Days you are unable to leave the United United States and a foreign country or a U.S.
Statement.
States because of a medical condition that possession. However, this exception does not
Termination of residency after June 16, arose while you are in the United States. apply if you otherwise engage in any trade or
2008. For information on your residency termi- Days you are an exempt individual. business in the United States on those days.
nation date, see Former long-term resident un-
der Expatriation After June 16, 2008, in chap- The specific rules that apply to each of these Medical condition. Do not count the days you
ter 4. categories are discussed next. intended to leave, but could not leave the Uni-
ted States because of a medical condition or
Regular commuters from Canada or Mex- problem that arose while you were in the United
Substantial Presence Test ico. Do not count the days on which you com- States. Whether you intended to leave the Uni-
mute to work in the United States from your res- ted States on a particular day is determined
You will be considered a U.S. resident for tax idence in Canada or Mexico if you regularly based on all the facts and circumstances. For
purposes if you meet the substantial presence commute from Canada or Mexico. You are con- example, you may be able to establish that you
test for calendar year 2014. To meet this test, sidered to commute regularly if you commute to intended to leave if your purpose for visiting the
you must be physically present in the United work in the United States on more than 75% of United States could be accomplished during a
States on at least: the workdays during your working period. period that is not long enough to qualify you for
1. 31 days during 2014, and For this purpose, commute means to travel the substantial presence test. However, if you
to work and return to your residence within a need an extended period of time to accomplish
2. 183 days during the 3-year period that in- the purpose of your visit and that period would
24-hour period. Workdays are the days on
cludes 2014, 2013, and 2012, counting: qualify you for the substantial presence test,
which you work in the United States or Canada
a. All the days you were present in 2014, or Mexico. Working period means the period you would not be able to establish an intent to
and beginning with the first day in the current year leave the United States before the end of that
on which you are physically present in the Uni- extended period.
b. 1
3 of the days you were present in
In the case of an individual who is judged
ted States to work and ending on the last day in
2013, and mentally incompetent, proof of intent to leave
the current year on which you are physically
c. 1
6 of the days you were present in present in the United States to work. If your the United States can be determined by analyz-
2012. work requires you to be present in the United ing the individual's pattern of behavior before he
States only on a seasonal or cyclical basis, your or she was judged mentally incompetent.
Example. You were physically present in working period begins on the first day of the If you qualify to exclude days of presence
the United States on 120 days in each of the season or cycle on which you are present in the because of a medical condition, you must file a
years 2012, 2013, and 2014. To determine if United States to work and ends on the last day fully completed Form 8843 with the IRS. See
you meet the substantial presence test for of the season or cycle on which you are present Form 8843, later.
2014, count the full 120 days of presence in in the United States to work. You can have
2014, 40 days in 2013 (1 3 of 120), and 20 days more than one working period in a calendar
in 2012 (1 6 of 120). Because the total for the year, and your working period can begin in one
calendar year and end in the following calendar
year.

Page 4 Chapter 1 Nonresident Alien or Resident Alien?


You cannot exclude any days of presence in An individual is considered to have full-time If you qualify to exclude days of presence as
the United States under the following circum- diplomatic or consular status if he or she: a teacher or trainee, you must file a fully com-
stances. Has been accredited by a foreign govern- pleted Form 8843 with the IRS. See Form 8843,
You were initially prevented from leaving, ment that is recognized by the United later.
were then able to leave, but remained in States,
the United States beyond a reasonable pe- Intends to engage primarily in official activi- Example. Carla was temporarily in the Uni-
riod for making arrangements to leave. ties for that foreign government while in the ted States during the year as a teacher on a J
You returned to the United States for treat- United States, and visa. Her compensation for the year was paid
ment of a medical condition that arose dur- Has been recognized by the President, by a foreign employer. Carla was treated as an
ing a prior stay. Secretary of State, or a consular officer as exempt teacher for the previous 2 years but her
The condition existed before your arrival in being entitled to that status. compensation was not paid by a foreign em-
the United States and you were aware of ployer. She will not be considered an exempt
Members of the immediate family include
the condition. It does not matter whether individual for the current year because she was
the individual's spouse and unmarried children
you needed treatment for the condition exempt as a teacher for at least 2 of the past 6
(whether by blood or adoption) but only if the
when you entered the United States. years.
spouse's or unmarried children's visa statuses
If her compensation for the past 2 years had
Exempt individual. Do not count days for are derived from and dependent on the exempt
been paid by a foreign employer, she would be
which you are an exempt individual. The term individual's visa classification. Unmarried chil-
an exempt individual for the current year.
exempt individual does not refer to someone dren are included only if they:
exempt from U.S. tax, but to anyone in the fol- Are under 21 years of age, Students. A student is any individual who
lowing categories. Reside regularly in the exempt individual's is temporarily in the United States on an F, J,
An individual temporarily present in the household, and M, or Q visa and who substantially complies
United States as a foreign government-re- Are not members of another household. with the requirements of that visa. You are con-
lated individual under an A or G visa, sidered to have substantially complied with the
other than individuals holding A-3 or visa requirements if you have not engaged in
Note. Generally, if you are present in the
G-5 class visas. activities that are prohibited by U.S. immigration
United States under an A or G class visa you
A teacher or trainee temporarily present in laws and could result in the loss of your visa
are considered a foreign government-related in-
the United States under a J or Q visa, status.
dividual (with full-time diplomatic or consular
who substantially complies with the re- Also included are immediate family mem-
status). None of your days count for purposes
quirements of the visa. bers of exempt students. See the definition of
of the substantial presence test.
A student temporarily present in the United immediate family, earlier, under Foreign gov-
States under an F, J, M, or Q visa, Household staff exception. If you are ernment-related individuals.
who substantially complies with the re- present in the United States under an A-3 or You will not be an exempt individual as a
quirements of the visa. G-5 visa as a personal employee, attendant, student in 2014 if you have been exempt as a
A professional athlete temporarily in the or domestic worker for either a foreign govern- teacher, trainee, or student for any part of more
United States to compete in a charitable ment or international organization official you than 5 calendar years unless you meet both of
sports event. are not considered a foreign government-rela- the following requirements.
ted individual and must count all your days of You establish that you do not intend to re-
The specific rules for each of these four cat- side permanently in the United States.
egories (including any rules on the length of presence in the United States for purposes of
the substantial presence test. You have substantially complied with the
time you will be an exempt individual) are dis- requirements of your visa.
cussed next. Teachers and trainees. A teacher or
The facts and circumstances to be considered
Foreign government-related individuals. trainee is an individual, other than a student,
in determining if you have demonstrated an in-
A foreign government-related individual is an in- who is temporarily in the United States under a
tent to reside permanently in the United States
dividual (or a member of the individual's imme- J or Q visa and substantially complies with
include, but are not limited to, the following.
diate family) who is temporarily present in the the requirements of that visa. You are consid-
Whether you have maintained a closer
United States: ered to have substantially complied with the
connection to a foreign country (discussed
As a full-time employee of an international visa requirements if you have not engaged in
later).
organization, activities that are prohibited by U.S. immigration
Whether you have taken affirmative steps
By reason of diplomatic status, or laws and could result in the loss of your visa
to change your status from nonimmigrant
status.
By reason of a visa (other than a visa that to lawful permanent resident as discussed
Also included are immediate family mem-
grants lawful permanent residence) that later under Closer Connection to a Foreign
bers of exempt teachers and trainees. See the
the Secretary of the Treasury determines Country.
definition of immediate family, earlier, under
represents full-time diplomatic or consular If you qualify to exclude days of presence as
Foreign government-related individuals.
status. a student, you must file a fully completed Form
You will not be an exempt individual as a
teacher or trainee in 2014 if you were exempt 8843 with the IRS. See Form 8843, later.
Note. You are considered temporarily
as a teacher, trainee, or student for any part of 2
present in the United States regardless of the Professional athletes. A professional ath-
of the 6 preceding calendar years. However,
actual amount of time you are present in the lete who is temporarily in the United States to
you will be an exempt individual if all of the fol-
United States. compete in a charitable sports event is an ex-
An international organization is any public lowing conditions are met.
empt individual. A charitable sports event is one
international organization that the President of You were exempt as a teacher, trainee, or
that meets the following conditions.
the United States has designated by Executive student for any part of 3 (or fewer) of the 6
The main purpose is to benefit a qualified
Order as being entitled to the privileges, ex- preceding calendar years,
charitable organization.
emptions, and immunities provided for in the In- A foreign employer paid all of your com-
The entire net proceeds go to charity.
ternational Organizations Act. An individual is a pensation during 2014, and
A foreign employer paid all of your com- Volunteers perform substantially all the
full-time employee if his or her work schedule work.
meets the organization's standard full-time work pensation during each of the preceding 6
schedule. years you were present in the United In figuring the days of presence in the Uni-
States as a teacher or trainee. ted States, you can exclude only the days on
A foreign employer includes an office or place which you actually competed in a sports event.
of business of an American entity in a foreign You cannot exclude the days on which you
country or a U.S. possession. were in the United States to practice for the
event, to perform promotional or other activities

Chapter 1 Nonresident Alien or Resident Alien? Page 5


related to the event, or to travel between entire year or subject to tax as a resident in h. Charitable organizations to which you
events. both foreign countries for the period during contribute.
If you qualify to exclude days of presence as which you maintained a tax home in each
a professional athlete, you must file a fully com- foreign country. It does not matter whether your permanent
pleted Form 8843 with the IRS. See Form 8843, home is a house, an apartment, or a furnished
next. Tax home. Your tax home is the general area room. It also does not matter whether you rent
of your main place of business, employment, or or own it. It is important, however, that your
Form 8843. If you exclude days of presence in post of duty, regardless of where you maintain home be available at all times, continuously,
the United States because you fall into any of your family home. Your tax home is the place and not solely for short stays.
the following categories, you must file a fully where you permanently or indefinitely work as
completed Form 8843. an employee or a self-employed individual. If When you cannot have a closer connection.
You were unable to leave the United you do not have a regular or main place of busi- You cannot claim you have a closer connection
States as planned because of a medical ness because of the nature of your work, then to a foreign country if either of the following ap-
condition or problem. your tax home is the place where you regularly plies:
You were temporarily in the United States live. If you do not fit either of these categories, You personally applied, or took other steps
as a teacher or trainee on a J or Q visa. you are considered an itinerant and your tax during the year, to change your status to
You were temporarily in the United States home is wherever you work. that of a permanent resident, or
as a student on an F, J, M, or Q visa. For determining whether you have a closer You had an application pending for adjust-
You were a professional athlete competing connection to a foreign country, your tax home ment of status during the current year.
in a charitable sports event. must also be in existence for the entire current Steps to change your status to that of a perma-
year, and must be located in the same foreign nent resident include, but are not limited to, the
Attach Form 8843 to your 2014 income tax country to which you are claiming to have a filing of the following forms.
return. If you do not have to file a return, send closer connection.
Form 8843 to the Department of the Treasury, Form I-508, Waiver of Rights, Privileges,
Internal Revenue Service Center, Austin, TX Exemptions and Immunities
Foreign country. In determining whether you
73301-0215, by the due date for filing Form Form I-485, Application to Register Perma-
have a closer connection to a foreign country,
1040NR or Form 1040NR-EZ. The due date for nent Residence or Adjust Status
the term foreign country means:
filing is discussed in chapter 7. Form I-130, Petition for Alien Relative, on
Any territory under the sovereignty of the
your behalf
United Nations or a government other than
If you do not timely file Form 8843, you can- Form I-140, Immigrant Petition for Alien
that of the United States,
not exclude the days you were present in the Worker, on your behalf
The territorial waters of the foreign country
United States as a professional athlete or be- Form ETA-750, Application for Alien Em-
(determined under U.S. law),
cause of a medical condition that arose while ployment Certification, on your behalf
The seabed and subsoil of those submar-
you were in the United States. This does not ap- ine areas which are adjacent to the territo- Form DS-230, Application for Immigrant
ply if you can show by clear and convincing evi- rial waters of the foreign country and over Visa and Alien Registration
dence that you took reasonable actions to be- which the foreign country has exclusive
come aware of the filing requirements and Form 8840. You must attach a fully completed
rights under international law to explore
significant steps to comply with those require- Form 8840 to your income tax return to claim
and exploit natural resources, and
ments. you have a closer connection to a foreign coun-
Possessions and territories of the United
try or countries.
States.
If you do not have to file a return, send the
Closer Connection
form to the Department of the Treasury, Internal
to a Foreign Country Establishing a closer connection. You will
be considered to have a closer connection to a Revenue Service Center, Austin, TX
Even if you meet the substantial presence test, foreign country than the United States if you or 73301-0215, by the due date for filing Form
you can be treated as a nonresident alien if you: the IRS establishes that you have maintained 1040NR or Form 1040NR-EZ. The due date for
Are present in the United States for less more significant contacts with the foreign coun- filing is discussed later in chapter 7.
than 183 days during the year, try than with the United States. In determining If you do not timely file Form 8840, you can-
Maintain a tax home in a foreign country whether you have maintained more significant not claim a closer connection to a foreign coun-
during the year, and contacts with the foreign country than with the try or countries. This does not apply if you can
Have a closer connection during the year United States, the facts and circumstances to show by clear and convincing evidence that you
to one foreign country in which you have a be considered include, but are not limited to, took reasonable actions to become aware of
tax home than to the United States (unless the following. the filing requirements and significant steps to
you have a closer connection to two for- comply with those requirements.
1. The country of residence you designate on
eign countries, discussed next). forms and documents.
Closer connection to two foreign countries. 2. The types of official forms and documents
Effect of Tax Treaties
You can demonstrate that you have a closer you file, such as Form W-9, Form
connection to two foreign countries (but not W-8BEN, or Form W-8ECI. The rules given here to determine if you are a
more than two) if you meet all of the following U.S. resident do not override tax treaty defini-
3. The location of: tions of residency. If you are a dual-resident
conditions.
You maintained a tax home beginning on a. Your permanent home, taxpayer, you can still claim the benefits under
the first day of the year in one foreign an income tax treaty. A dual-resident taxpayer
b. Your family, is one who is a resident of both the United
country.
You changed your tax home during the c. Your personal belongings, such as States and another country under each coun-
year to a second foreign country. cars, furniture, clothing, and jewelry, try's tax laws. The income tax treaty between
You continued to maintain your tax home the two countries must contain a provision that
d. Your current social, political, cultural, provides for resolution of conflicting claims of
in the second foreign country for the rest of
professional, or religious affiliations, residence (tie-breaker rule). If you are treated
the year.
You had a closer connection to each for- e. Your business activities (other than as a resident of a foreign country under a tax
eign country than to the United States for those that constitute your tax home), treaty, you are treated as a nonresident alien in
the period during which you maintained a figuring your U.S. income tax. For purposes
f. The jurisdiction in which you hold a other than figuring your tax, you will be treated
tax home in that foreign country.
driver's license, as a U.S. resident. For example, the rules dis-
You are subject to tax as a resident under
the tax laws of either foreign country for the g. The jurisdiction in which you vote, and cussed here do not affect your residency time

Page 6 Chapter 1 Nonresident Alien or Resident Alien?


periods as discussed later under Dual-Status for the period January 610. Thus, his resi- United States on March 5, 2014, as a lawful
Aliens. dency starting date is March 1. permanent resident and still resides here. In
calendar year 2014, Robert's U.S. residency is
Information to be reported. If you are a Statement required to exclude up to 10 deemed to begin on January 1, 2014, because
dual-resident taxpayer and you claim treaty days of presence. You must file a statement he qualified as a resident in calendar year 2013.
benefits, you must file a return by the due date with the IRS if you are excluding up to 10 days
(including extensions) using Form 1040NR or of presence in the United States for purposes of
your residency starting date. You must sign and First-Year Choice
Form 1040NR-EZ, and compute your tax as a
nonresident alien. You must also attach a fully date this statement and include a declaration
that it is made under penalties of perjury. The If you do not meet either the green card test or
completed Form 8833 if you determine your the substantial presence test for 2013 or 2014
residency under a tax treaty and receive pay- statement must contain the following informa-
tion (as applicable). and you did not choose to be treated as a resi-
ments or income items totaling more than dent for part of 2013, but you meet the substan-
$100,000. You may also have to attach Form Your name, address, U.S. taxpayer identi-
fication number (if any), and U.S. visa tial presence test for 2013, you can choose to
8938 (discussed in chapter 7). See Reporting be treated as a U.S. resident for part of 2014.
Treaty Benefits Claimed in chapter 9 for more number (if any).
Your passport number and the name of the To make this choice, you must:
information on reporting treaty benefits.
country that issued your passport. 1. Be present in the United States for at least
The tax year for which the statement ap- 31 days in a row in 2014, and
Dual-Status Aliens plies.
The first day that you were present in the 2. Be present in the United States for at least
United States during the year. 75% of the number of days beginning with
You can be both a nonresident alien and a resi- The dates of the days you are excluding in the first day of the 31-day period and end-
dent alien during the same tax year. This usu- figuring your first day of residency. ing with the last day of 2014. For purposes
ally occurs in the year you arrive in or depart Sufficient facts to establish that you have of this 75% requirement, you can treat up
from the United States. Aliens who have dual maintained your tax home in and a closer to 5 days of absence from the United
status should see chapter 6 for information on connection to a foreign country during the States as days of presence in the United
filing a return for a dual-status tax year. period you are excluding. States.
Attach the required statement to your in-
First Year of Residency come tax return. If you are not required to file a When counting the days of presence in (1)
return, send the statement to the Department of and (2) above, do not count the days you were
If you are a U.S. resident for the calendar year, the Treasury, Internal Revenue Service Center, in the United States under any of the exceptions
but you were not a U.S. resident at any time Austin, TX 73301-0215, on or before the due discussed earlier under Days of Presence in the
during the preceding calendar year, you are a date for filing Form 1040NR or Form United States.
U.S. resident only for the part of the calendar 1040NR-EZ. The due date for filing is dis-
year that begins on the residency starting date. cussed in chapter 7. If you make the first-year choice, your resi-
You are a nonresident alien for the part of the If you do not file the required statement as dency starting date for 2014 is the first day of
year before that date. explained above, you cannot claim that you the earliest 31-day period (described in (1)
have a closer connection to a foreign country or above) that you use to qualify for the choice.
Residency starting date under substantial countries. Therefore, your first day of residency You are treated as a U.S. resident for the rest of
presence test. If you meet the substantial will be the first day you are present in the United the year. If you are present for more than one
presence test for a calendar year, your resi- States. This does not apply if you can show by 31-day period and you satisfy condition (2)
dency starting date is generally the first day you clear and convincing evidence that you took above for each of those periods, your residency
are present in the United States during that cal- reasonable actions to become aware of the re- starting date is the first day of the first 31-day
endar year. However, you do not have to count quirements for filing the statement and signifi- period. If you are present for more than one
up to 10 days of actual presence in the United cant steps to comply with those requirements. 31-day period but you satisfy condition (2)
States if on those days you establish that: above only for a later 31-day period, your resi-
You had a closer connection to a foreign Residency starting date under green card dency starting date is the first day of the later
country than to the United States, and test. If you meet the green card test at any time 31-day period.
Your tax home was in that foreign country. during a calendar year, but do not meet the
substantial presence test for that year, your res- Note. You do not have to be married to
See Closer Connection to a Foreign Country, idency starting date is the first day in the calen- make this choice.
earlier. dar year on which you are present in the United
In determining whether you can exclude up States as a lawful permanent resident. Example 1. Juan DaSilva is a citizen of the
to 10 days, the following rules apply. If you meet both the substantial presence Philippines. He came to the United States for
You can exclude days from more than one test and the green card test, your residency the first time on November 1, 2014, and was
period of presence as long as the total starting date is the earlier of the first day during here on 31 consecutive days (from November 1
days in all periods are not more than 10. the year you are present in the United States through December 1, 2014). Juan returned to
You cannot exclude any days in a period of under the substantial presence test or as a law- the Philippines on December 1 and came back
consecutive days of presence if all the ful permanent resident. to the United States on December 17, 2014. He
days in that period cannot be excluded. stayed in the United States for the rest of the
Although you can exclude up to 10 days of Residency during the preceding year. If you year. During 2015, Juan was a resident of the
presence in determining your residency were a U.S. resident during any part of the pre- United States under the substantial presence
starting date, you must include those days ceding calendar year and you are a U.S. resi- test. Juan can make the first-year choice for
when determining whether you meet the dent for any part of the current year, you will be 2014 because he was in the United States in
substantial presence test. considered a U.S. resident at the beginning of 2014 for a period of 31 days in a row (Novem-
the current year. This applies whether you are a ber 1 through December 1) and for at least 75%
Example. Ivan Ivanovich is a citizen of Rus- resident under the substantial presence test or of the days following (and including) the first
sia. He came to the United States for the first green card test. day of his 31-day period (46 total days of pres-
time on January 6, 2014, to attend a business ence in the United States divided by 61 days in
meeting and returned to Russia on January 10, Example. Robert Bach is a citizen of Swit- the period from November 1 through December
2014. His tax home remained in Russia. On zerland. He came to the United States as a U.S. 31 equals 75.4%). If Juan makes the first-year
March 1, 2014, he moved to the United States resident for the first time on May 1, 2013, and choice, his residency starting date will be No-
and resided here for the rest of the year. Ivan is remained until November 5, 2013, when he re- vember 1, 2014.
able to establish a closer connection to Russia turned to Switzerland. Robert came back to the

Chapter 1 Nonresident Alien or Resident Alien? Page 7


Example 2. The facts are the same as in Your spouse joins you in making the Earlier residency termination date. You may
Example 1, except that Juan was also absent choice. qualify for a residency termination date that is
from the United States on December 24, 25, 29, earlier than December 31. This date is:
This includes situations in which both you and
30, and 31. He can make the first-year choice your spouse were nonresident aliens at the be- 1. The last day in 2014 that you are physi-
for 2014 because up to 5 days of absence are ginning of the tax year and both of you are resi- cally present in the United States, if you
considered days of presence for purposes of dent aliens at the end of the tax year. met the substantial presence test,
the 75% requirement.
Note. If you are single at the end of the 2. The first day in 2014 that you are no lon-
Statement required to make the ger a lawful permanent resident of the Uni-
first-year choice for 2014. You must attach a year, you cannot make this choice.
ted States, if you met the green card test,
statement to Form 1040 to make the first-year or
choice for 2014. The statement must contain If you make this choice, the following rules
your name and address and specify the follow- apply. 3. The later of (1) or (2), if you met both tests.
ing. You and your spouse are treated as U.S.
residents for the entire year for income tax You can use this date only if, for the remainder
That you are making the first-year choice
purposes. of 2014, your tax home was in a foreign country
for 2014.
You and your spouse are taxed on world- and you had a closer connection to that foreign
That you were not a resident in 2013.
wide income. country. See Closer Connection to a Foreign
That you are a resident under the substan- You and your spouse must file a joint re- Country, earlier.
tial presence test in 2015. turn for the year of the choice.
The number of days of presence in the A long-term resident who ceases to be
Neither you nor your spouse can make this
United States during 2015. ! a lawful permanent resident may be
choice for any later tax year, even if you
The date or dates of your 31-day period of subject to special reporting require-
are separated, divorced, or remarried.
CAUTION

presence and the period of continuous ments and tax provisions. See Expatriation Tax
The special instructions and restrictions for
presence in the United States during 2014. in chapter 4.
dual-status taxpayers in chapter 6 do not
The date or dates of absence from the Uni- apply to you.
ted States during 2014 that you are treat- Termination of residency. For information
ing as days of presence. on your residency termination date, see Former
Note. A similar choice is available if, at the
long-term resident under Expatriation After
You cannot file Form 1040 or the statement until end of the tax year, one spouse is a nonresident
June 16, 2008, in chapter 4.
you meet the substantial presence test for alien and the other spouse is a U.S. citizen or
2015. If you have not met the test for 2015 as of resident. See Nonresident Spouse Treated as a
De minimis presence. If you are a U.S. resi-
April 15, 2015, you can request an extension of Resident, later. If you previously made that
dent because of the substantial presence test
time for filing your 2014 Form 1040 until a rea- choice and it is still in effect, you do not need to
and you qualify to use the earlier residency ter-
sonable period after you have met that test. To make the choice explained here.
mination date, you can exclude up to 10 days of
request an extension to file until October 15, actual presence in the United States in deter-
2015, use Form 4868, Application for Automatic Making the choice. You should attach a state-
mining your residency termination date. In de-
Extension of Time To File U.S. Individual In- ment signed by both spouses to your joint re-
termining whether you can exclude up to 10
come Tax Return. You can file the paper form turn for the year of the choice. The statement
days, the following rules apply.
or use one of the electronic filing options ex- must contain the following information.
You can exclude days from more than one
plained in the Form 4868 instructions. You A declaration that you both qualify to make
period of presence as long as the total
should pay with this extension the amount of tax the choice and that you choose to be
days in all periods are not more than 10.
you expect to owe for 2014 figured as if you treated as U.S. residents for the entire tax
You cannot exclude any days in a period of
were a nonresident alien the entire year. You year.
consecutive days of presence if all the
can use Form 1040NR or Form 1040NR-EZ to The name, address, and taxpayer identifi-
days in that period cannot be excluded.
figure the tax. Enter the tax on Form 4868. If cation number (SSN or ITIN) of each
Although you can exclude up to 10 days of
you do not pay the tax due, you will be charged spouse. (If one spouse died, include the
presence in determining your residency
interest on any tax not paid by the regular due name and address of the person who
termination date, you must include those
date of your return, and you may be charged a makes the choice for the deceased
days when determining whether you meet
penalty on the late payment. spouse.)
the substantial presence test.
Once you make the first-year choice, you You generally make this choice when you
may not revoke it without the approval of the In- file your joint return. However, you also can Example. Lola Bovary is a citizen of Malta.
ternal Revenue Service. make the choice by filing Form 1040X, Amen- She came to the United States for the first time
If you do not follow the procedures dis- ded U.S. Individual Income Tax Return. Attach on March 1, 2014, and resided here until Au-
cussed here for making the first-year choice, Form 1040, Form 1040A, or Form 1040EZ and gust 25, 2014. On December 12, 2014, Lola
you will be treated as a nonresident alien for all print Amended across the top of the corrected came to the United States for vacation and
of 2014. However, this does not apply if you can return. If you make the choice with an amended stayed here until December 16, 2014, when she
show by clear and convincing evidence that you return, you and your spouse must also amend returned to Malta. She is able to establish a
took reasonable actions to become aware of any returns that you may have filed after the closer connection to Malta for the period De-
the filing procedures and significant steps to year for which you made the choice. cember 1216. Lola is not a U.S. resident for
comply with the procedures. You generally must file the amended joint tax purposes during 2015 and can establish a
return within 3 years from the date you filed closer connection to Malta for the rest of calen-
Choosing Resident your original U.S. income tax return or 2 years dar year 2014. Lola is a U.S. resident under the
substantial presence test for 2013 because she
Alien Status from the date you paid your income tax for that
year, whichever is later. was present in the United States for 183 days
(178 days for the period March 1 to August 25
If you are a dual-status alien, you can choose to plus 5 days in December). Lola's residency ter-
be treated as a U.S. resident for the entire year Last Year of Residency mination date is August 25, 2014.
if all of the following apply.
You were a nonresident alien at the begin- If you were a U.S. resident in 2014 but are not a Residency during the next year. If you are a
ning of the year. U.S. resident during any part of 2015, you U.S. resident during any part of 2015 and you
You are a resident alien or U.S. citizen at cease to be a U.S. resident on your residency are a resident during any part of 2014, you will
the end of the year. termination date. Your residency termination be treated as a resident through the end of
You are married to a U.S. citizen or resi- date is December 31, 2014, unless you qualify 2014. This applies whether you have a closer
dent alien at the end of the year. for an earlier date as discussed next. connection to a foreign country than the United

Page 8 Chapter 1 Nonresident Alien or Resident Alien?


States during 2014, and whether you are a resi- alien at the end of the year, and the other Example. Dick Brown was a resident alien
dent under the substantial presence test or spouse is a nonresident alien at the end of the on December 31, 2011, and married to Judy, a
green card test. year. nonresident alien. They chose to treat Judy as a
If you make this choice, you and your resident alien and filed joint 2011 and 2012 in-
Statement required to establish your resi- spouse are treated for income tax purposes as come tax returns. On January 10, 2013, Dick
dency termination date. You must file a residents for your entire tax year. Neither you became a nonresident alien. Judy had re-
statement with the IRS to establish your resi- nor your spouse can claim under any tax treaty mained a nonresident alien throughout the pe-
dency termination date. You must sign and date not to be a U.S. resident. You are both taxed on riod. Dick and Judy could have filed joint or sep-
this statement and include a declaration that it worldwide income. You must file a joint income arate returns for 2013 because Dick was a
is made under penalties of perjury. The state- tax return for the year you make the choice, but resident alien for part of that year. However, be-
ment must contain the following information (as you and your spouse can file joint or separate cause neither Dick nor Judy is a resident alien
applicable). returns in later years. at any time during 2014, their choice is suspen-
Your name, address, U.S. taxpayer identi- ded for that year. If either meets the filing re-
fication number (if any), and U.S. visa If you file a joint return under this provi- quirements for nonresident aliens discussed in
number (if any). ! sion, the special instructions and re- chapter 7, they must file separate returns as
Your passport number and the name of the CAUTION strictions for dual-status taxpayers in nonresident aliens for 2014. If Dick becomes a
country that issued your passport. chapter 6 do not apply to you. resident alien again in 2015, their choice is no
The tax year for which the statement ap- longer suspended.
plies. Example. Bob and Sharon Williams are
The last day that you were present in the married and both are nonresident aliens at the Ending the Choice
United States during the year. beginning of the year. In June, Bob became a
Sufficient facts to establish that you have resident alien and remained a resident for the Once made, the choice to be treated as a resi-
maintained your tax home in, and that you rest of the year. Bob and Sharon both choose to dent applies to all later years unless suspended
have a closer connection to, a foreign be treated as resident aliens by attaching a (as explained earlier under Suspending the
country following your last day of presence statement to their joint return. Bob and Sharon Choice) or ended in one of the following ways.
in the United States during the year or fol- must file a joint return for the year they make the
lowing the abandonment or rescission of choice, but they can file either joint or separate If the choice is ended in one of the following
your status as a lawful permanent resident returns for later years. ways, neither spouse can make this choice in
during the year. any later tax year.
The date that your status as a lawful per-
manent resident was abandoned or rescin-
How To Make the Choice 1. Revocation. Either spouse can revoke
ded. the choice for any tax year, provided he or
Attach a statement, signed by both spouses, to she makes the revocation by the due date
Sufficient facts (including copies of rele-
your joint return for the first tax year for which for filing the tax return for that tax year.
vant documents) to establish that your sta-
the choice applies. It should contain the follow- The spouse who revokes the choice must
tus as a lawful permanent resident has
ing information. attach a signed statement declaring that
been abandoned or rescinded.
A declaration that one spouse was a non- the choice is being revoked. The state-
If you can exclude days under the de mini-
resident alien and the other spouse a U.S. ment must include the name, address, and
mis presence rule, discussed earlier, in-
citizen or resident alien on the last day of identification number of each spouse. (If
clude the dates of the days you are exclud-
your tax year, and that you choose to be one spouse dies, include the name and
ing and sufficient facts to establish that you
treated as U.S. residents for the entire tax address of the person who is revoking the
have maintained your tax home in and that
year. choice for the deceased spouse.) The
you have a closer connection to a foreign
The name, address, and identification statement also must include a list of any
country during the period you are exclud- number of each spouse. (If one spouse
ing. states, foreign countries, and possessions
died, include the name and address of the that have community property laws in
Attach the required statement to your in- person making the choice for the de- which either spouse is domiciled or where
come tax return. If you are not required to file a ceased spouse.) real property is located from which either
return, send the statement to the Department of spouse receives income. File the state-
the Treasury, Internal Revenue Service Center, Amended return. You generally make this ment as follows.
Austin, TX 73301-0215, on or before the due choice when you file your joint return. However,
date for filing Form 1040NR or Form you can also make the choice by filing a joint a. If the spouse revoking the choice
1040NR-EZ. The due date for filing is dis- amended return on Form 1040X. Attach Form must file a return, attach the state-
cussed in chapter 7. 1040, Form 1040A, or Form 1040EZ and print ment to the return for the first year the
Amended across the top of the corrected re- revocation applies.
If you do not file the required statement as
explained above, you cannot claim that you turn. If you make the choice with an amended b. If the spouse revoking the choice
have a closer connection to a foreign country or return, you and your spouse must also amend does not have to file a return, but
countries. This does not apply if you can show any returns that you may have filed after the does file a return (for example, to ob-
by clear and convincing evidence that you took year for which you made the choice. tain a refund), attach the statement to
reasonable actions to become aware of the re- You generally must file the amended joint the return.
quirements for filing the statement and signifi- return within 3 years from the date you filed
your original U.S. income tax return or 2 years c. If the spouse revoking the choice
cant steps to comply with those requirements.
from the date you paid your income tax for that does not have to file a return and
year, whichever is later. does not file a claim for refund, send
Nonresident Spouse the statement to the Internal Revenue
Service Center where you filed the
Suspending the Choice
Treated as a Resident last joint return.
The choice to be treated as a resident alien is 2. Death. The death of either spouse ends
If, at the end of your tax year, you are married suspended for any tax year (after the tax year the choice, beginning with the first tax year
and one spouse is a U.S. citizen or a resident you made the choice) if neither spouse is a U.S. following the year the spouse died. How-
alien and the other spouse is a nonresident citizen or resident alien at any time during the ever, if the surviving spouse is a U.S. citi-
alien, you can choose to treat the nonresident tax year. This means each spouse must file a zen or resident and is entitled to the joint
spouse as a U.S. resident. This includes situa- separate return as a nonresident alien for that tax rates as a surviving spouse, the choice
tions in which one spouse is a nonresident alien year if either meets the filing requirements for will not end until the close of the last year
at the beginning of the tax year, but a resident nonresident aliens discussed in chapter 7. for which these joint rates may be used. If

Chapter 1 Nonresident Alien or Resident Alien? Page 9


both spouses die in the same tax year, the However, the interest will be consid-
choice ends on the first day after the close
of the tax year in which the spouses died. Resident Aliens ered U.S. source interest income if either
of the following apply.
3. Legal separation. A legal separation un- A resident alien's income is generally subject to a. The recipient of the interest is related
der a decree of divorce or separate main- tax in the same manner as a U.S. citizen. If you to the resident alien or domestic cor-
tenance ends the choice as of the begin- are a resident alien, you must report all interest, poration. See section 954(d)(3) for the
ning of the tax year in which the legal dividends, wages, or other compensation for definition of related person.
separation occurs. services, income from rental property or royal- b. The terms of the obligation are signifi-
4. Inadequate records. The Internal Reve- ties, and other types of income on your U.S. tax cantly modified after August 9, 2010.
nue Service can end the choice for any tax return. You must report these amounts from Any extension of the term of the obli-
year that either spouse has failed to keep sources within and outside the United States. gation is considered a significant
adequate books, records, and other infor- modification.
mation necessary to determine the correct
income tax liability, or to provide adequate Nonresident Aliens 2. Interest paid by a foreign branch of a do-
mestic corporation or a domestic partner-
access to those records. ship on deposits or withdrawable accounts
A nonresident alien usually is subject to U.S. in- with mutual savings banks, cooperative
come tax only on U.S. source income. Under banks, credit unions, domestic building
Aliens From American limited circumstances, certain foreign source in- and loan associations, and other savings
come is subject to U.S. tax. See Foreign In-
Samoa or Puerto Rico come in chapter 4.
institutions chartered and supervised as
savings and loan or similar associations
under federal or state law if the interest
If you are a nonresident alien in the United The general rules for determining U.S. paid or credited can be deducted by the
States and a bona fide resident of American Sa- source income that apply to most nonresident association.
moa or Puerto Rico during the entire tax year, aliens are shown in Table 2-1. The following
you are taxed, with certain exceptions, accord- discussions cover the general rules as well as 3. Interest on deposits with a foreign branch
ing to the rules for resident aliens of the United the exceptions to these rules. of a domestic corporation or domestic
States. For more information, see Bona Fide partnership, but only if the branch is in the
Not all items of U.S. source income commercial banking business.
Residents of American Samoa or Puerto Rico in
TIP are taxable. See chapter 3.
chapter 5.
Dividends
If you are a nonresident alien from American
Samoa or Puerto Rico who does not qualify as Interest Income In most cases, dividend income received from
a bona fide resident of American Samoa or Pu- domestic corporations is U.S. source income.
erto Rico for the entire tax year, you are taxed Dividend income from foreign corporations is
Generally, U.S. source interest income includes
as a nonresident alien. usually foreign source income. Exceptions to
the following items.
Interest on bonds, notes, or other inter- both of these rules are discussed below.
Resident aliens who formerly were bona fide
residents of American Samoa or Puerto Rico est-bearing obligations of U.S. residents or A substitute dividend payment made to the
are taxed according to the rules for resident ali- domestic corporations. transferor of a security in a securities lending
ens. Interest paid by a domestic or foreign part- transaction or a sale-repurchase transaction is
nership or foreign corporation engaged in sourced in the same manner as a distribution
a U.S. trade or business at any time during on the transferred security.
the tax year.
Original issue discount. Dividend equivalent payments. U.S. source
Interest from a state, the District of Colum- dividends also include all dividend equivalent
bia, or the U.S. Government. payments. Currently, dividend equivalent pay-
2. The place or manner of payment is immate-
ments include (1) substitute dividends, and (2)
payments made pursuant to a specified no-
rial in determining the source of the income. tional principal contract that, directly or indi-
rectly, are contingent on, or determined by ref-
Source of A substitute interest payment made to the erence to, the payment of a dividend from U.S.
sources. However, the IRS may determine that
transferor of a security in a securities lending
Income transaction or a sale-repurchase transaction is
sourced in the same manner as the interest on
other payments are substantially similar to pay-
ments described in (1) and (2) above.
the transferred security.
The Internal Revenue Service has is-
sued final regulations that would affect
Introduction Exceptions. U.S. source interest income does
not include the following items.
!
CAUTION the treatment of dividend equivalent
payments and specified notional principal con-
After you have determined your alien status,
1. Interest paid by a resident alien or a do- tracts. You can view this regulation at
you must determine the source of your income.
mestic corporation on obligations issued www.irs.gov/irb/2013-52_IRB/ar08.html.
This chapter will help you determine the source
before August 10, 2010, if for the 3-year
of different types of income you may receive
period ending with the close of the payer's First exception. Dividends received from a
during the tax year. This chapter also discusses
tax year preceding the interest payment, domestic corporation are not U.S. source in-
special rules for married individuals who are do-
at least 80% of the payer's total gross in- come if the corporation elects to take the Ameri-
miciled in a country with community property
come: can Samoa economic development credit.
laws.
a. Is from sources outside the United Second exception. Part of the dividends
Topics States, and received from a foreign corporation is U.S.
This chapter discusses: b. Is attributable to the active conduct of source income if 25% or more of its total gross
a trade or business by the individual income for the 3-year period ending with the
Income source rules, and or corporation in a foreign country or a close of its tax year preceding the declaration of
U.S. possession. dividends was effectively connected with a
Community income. trade or business in the United States. If the

Page 10 Chapter 2 Source of Income


corporation was formed less than 3 years be- Self-employed individuals. If you are utable to a period that includes two or more tax
fore the declaration, use its total gross income self-employed, you determine the source of years.
from the time it was formed. Determine the part compensation for labor or personal services You determine the period to which the com-
that is U.S. source income by multiplying the from self-employment on the basis that most pensation is attributable based on the facts and
dividend by the following fraction. correctly reflects the proper source of that in- circumstances of your case. For example, an
come under the facts and circumstances of amount of compensation that specifically re-
Foreign corporation's gross income your particular case. In many cases, the facts lates to a period of time that includes several
connected with a U.S. trade or business and circumstances will call for an apportion- calendar years is attributable to the entire
for the 3-year period ment on a time basis as explained next. multi-year period.
Foreign corporation's gross income from The amount of compensation treated as
all sources for that period Time Basis from U.S. sources is figured by multiplying the
total multi-year compensation by a fraction. The
Use a time basis to figure your U.S. source numerator of the fraction is the number of days
Guarantee of Indebtedness compensation (other than the fringe benefits (or unit of time less than a day, if appropriate)
discussed later). Do this by multiplying your to- that you performed labor or personal services in
Amounts received directly or indirectly, for the tal compensation (other than the fringe benefits the United States in connection with the project.
provision of a guarantee of indebtedness is- discussed later) by the following fraction: The denominator of the fraction is the total num-
sued after September 27, 2010, are U.S. ber of days (or unit of time less than a day, if ap-
source income if they are paid by: Number of days you performed services propriate) that you performed labor or personal
in the United States during the year services in connection with the project.
1. A noncorporate resident or U.S. corpora-
tion, or Total number of days you performed
services during the year Geographical Basis
2. Any foreign person if the amounts are ef-
fectively connected with the conduct of a Compensation you receive as an employee in
U.S. trade or business. You can use a unit of time less than a day in
the form of the following fringe benefits is
the above fraction, if appropriate. The time pe-
sourced on a geographical basis.
For more information, see Internal Revenue riod for which the compensation is made does
Housing.
Code section 861(a)(9). not have to be a year. Instead, you can use an-
other distinct, separate, and continuous time Education.
period if you can establish to the satisfaction of
Personal Services the IRS that this other period is more appropri-
Local transportation.
Tax reimbursement.
ate.
All wages and any other compensation for serv- Hazardous or hardship duty pay as defined
ices performed in the United States are consid- Example 1. Christina Brooks, a resident of in Regulations section 1.861-4(b)(2)(ii)(D)
ered to be from sources in the United States. the Netherlands, worked 240 days for a U.S. (5).
The only exceptions to this rule are discussed in company during the tax year. She received Moving expense reimbursement.
Employees of foreign persons, organizations, or $80,000 in compensation. None of it was for
The amount of fringe benefits must be reasona-
offices, and under Crew members. fringe benefits. Christina performed services in
ble and you must substantiate them by ade-
the United States for 60 days and performed
If you are an employee and receive com- quate records or by sufficient evidence.
services in the Netherlands for 180 days. Using
pensation for labor or personal services per- the time basis for determining the source of Principal place of work. The above fringe
formed both inside and outside the United compensation, $20,000 ($80,000 60 240) is her benefits, except for tax reimbursement and haz-
States, special rules apply in determining the U.S. source income. ardous or hardship duty pay, are sourced based
source of the compensation. Compensation
on your principal place of work. Your principal
(other than certain fringe benefits) is sourced on Example 2. Rob Waters, a resident of
place of work is usually the place where you
a time basis. Certain fringe benefits (such as South Africa, is employed by a corporation. His
spend most of your working time. This could be
housing and education) are sourced on a geo- annual salary is $100,000. None of it is for
your office, plant, store, shop, or other location.
graphical basis. fringe benefits. During the first quarter of the
If there is no one place where you spend most
year he worked entirely within the United
of your working time, your main job location is
Or, you may be permitted to use an alterna- States. On April 1, Rob was transferred to Sin-
the place where your work is centered, such as
tive basis to determine the source of compen- gapore for the remainder of the year. Rob is
where you report for work or are otherwise re-
sation. See Alternative Basis, later. able to establish that the first quarter of the year
quired to base your work.
and the last 3 quarters of the year are two sepa-
Multi-level marketing. Certain companies sell If you have more than one job at any time,
rate, distinct, and continuous periods of time.
products through a multi-level marketing ar- your main job location depends on the facts in
Accordingly, $25,000 of Rob's annual salary is
rangement, such that an upper-tier distributor, each case. The more important factors to be
attributable to the first quarter of the year (.25
who has sponsored a lower-tier distributor, is considered are:
$100,000). All of it is U.S. source income be-
entitled to a payment from the company based The total time you spend at each place,
cause he worked entirely within the United
on certain activities of that lower-tier distributor. States during that quarter. The remaining The amount of work you do at each place,
Generally, depending on the facts, payments $75,000 is attributable to the last three quarters and
from such multi-level marketing companies to of the year. During those quarters, he worked How much money you earn at each place.
independent (non-employee) distributors (up- 150 days in Singapore and 30 days in the Uni-
per-tier distributors) that are based on the sales ted States. His periodic performance of serv- Housing. The source of a housing fringe bene-
or purchases of persons whom they have spon- ices in the United States did not result in dis- fit is determined based on the location of your
sored (lower-tier distributors) constitute income tinct, separate, and continuous periods of time. principal place of work. A housing fringe benefit
for the performance of personal services in re- Of this $75,000, $12,500 ($75,000 30 180) is includes payments to you or on your behalf
cruiting, training, and supporting the lower-tier U.S. source income. (and your family's if your family resides with
distributors. The source of such income is gen- you) only for the following.
erally based on where the services of the up- Multi-year compensation. The source of Rent.
per-tier distributor are performed, and may, de- multi-year compensation is generally deter- Utilities (except telephone charges).
pending on the facts, be considered multi-year mined on a time basis over the period to which
compensation, with the source of income deter- the compensation is attributable. Multi-year Real and personal property insurance.
mined over the period to which such compen- compensation is compensation that is included Occupancy taxes not deductible under
sation is attributable. in your income in one tax year but that is attrib- section 164 or 216(a).

Chapter 2 Source of Income Page 11


Nonrefundable fees for securing a lease- source is more appropriate under the facts and treated as derived from sources in the United
hold. circumstances of your case. Sufficient evidence States.
Rental of furniture and accessories. generally requires an agreement between you
and your employer, or a written statement of For transportation income from personal
Household repairs.
company policy, which is reduced to writing be- services, 50% of the income is U.S. source in-
Residential parking. come if the transportation is between the United
fore the move and which is entered into or es-
Fair rental value of housing provided in tablished to induce you or other employees to States and a U.S. possession. For nonresident
kind by your employer. move to another country. The written statement aliens, this only applies to income derived from,
or agreement must state that your employer will or in connection with, an aircraft.
A housing fringe benefit does not include:
Deductible interest and taxes (including reimburse you for moving expenses that you in-
cur to return to your former principal place of For information on how U.S. source trans-
deductible interest and taxes of a ten- portation income is taxed, see chapter 4.
ant-stockholder in a cooperative housing work regardless of whether you continue to
corporation), work for your employer after returning to that lo-
The cost of buying property, including prin- cation. It may contain certain conditions upon Scholarships, Grants,
cipal payments on a mortgage, which the right to reimbursement is determined Prizes, and Awards
The cost of domestic labor (maids, garden- as long as those conditions set forth standards
ers, etc.), that are definitely ascertainable and can only be
Generally, the source of scholarships, fellow-
Pay television subscriptions, fulfilled prior to, or through completion of, your
ship grants, grants, prizes, and awards is the
return move to your former principal place of
Improvements and other expenses that in- residence of the payer regardless of who ac-
work.
crease the value or appreciably prolong tually disburses the funds. However, see Activi-
the life of property, ties to be performed outside the United States,
Purchased furniture or accessories, Alternative Basis later.
Depreciation or amortization of property or If you are an employee, you can determine the For example, payments for research or
improvements, source of your compensation under an alterna- study in the United States made by the United
The value of meals or lodging that you ex- tive basis if you establish to the satisfaction of States, a noncorporate U.S. resident, or a do-
clude from gross income, or
the IRS that, under the facts and circumstances mestic corporation, are from U.S. sources. Sim-
The value of meals or lodging that you de-
of your case, the alternative basis more prop- ilar payments from a foreign government or for-
duct as moving expenses.
erly determines the source of your compensa- eign corporation are foreign source payments
tion than the time or geographical basis. If you even though the funds may be disbursed
Education. The source of an education fringe
use an alternative basis, you must keep (and through a U.S. agent.
benefit for the education expenses of your de-
have available for inspection) records to docu-
pendents is determined based on the location Payments made by an entity designated as
ment why the alternative basis more properly
of your principal place of work. An education a public international organization under the In-
determines the source of your compensation.
fringe benefit includes payments only for the fol- ternational Organizations Immunities Act are
Also, if your total compensation from all sources
lowing expenses for education at an elementary from foreign sources.
is $250,000 or more, check Yes to both ques-
or secondary school.
tions on line K on page 5 of Form 1040NR, and
Tuition, fees, academic tutoring, special Activities to be performed outside the Uni-
attach a written statement to your tax return that
needs services for a special needs stu- ted States. Scholarships, fellowship grants,
sets forth all of the following.
dent, books, supplies, and other equip- targeted grants, and achievement awards re-
ment. 1. Your name and social security number ceived by nonresident aliens for activities per-
Room and board and uniforms that are re- (written across the top of the statement). formed, or to be performed, outside the United
quired or provided by the school in con- States are not U.S. source income.
2. The specific compensation income, or the
nection with enrollment or attendance.
specific fringe benefit, for which you are These rules do not apply to amounts
Local transportation. The source of a local using the alternative basis. paid as salary or other compensation
transportation fringe benefit is determined 3. For each item in (2), the alternative basis
!
CAUTION for services. See Personal Services,
based on the location of your principal place of of allocation of source used. earlier, for the source rules that apply.
work. Your local transportation fringe benefit is
the amount that you receive as compensation 4. For each item in (2), a computation show-
for local transportation for you or your spouse or ing how the alternative allocation was Pensions and Annuities
dependents at the location of your principal computed.
place of work. The amount treated as a local 5. A comparison of the dollar amount of the If you receive a pension from a domestic trust
transportation fringe benefit is limited to actual U.S. compensation and foreign compen- for services performed both in and outside the
expenses incurred for local transportation and sation sourced under both the alternative United States, part of the pension payment is
the fair rental value of any employer-provided basis and the time or geographical basis from U.S. sources. That part is the amount at-
vehicle used predominantly by you, your discussed earlier. tributable to earnings of the pension plan and
spouse, or your dependents for local transpor- the employer contributions made for services
tation. Actual expenses do not include the cost performed in the United States. This applies
(including interest) of any vehicle purchased by Transportation Income whether the distribution is made under a quali-
you or on your behalf. fied or nonqualified stock bonus, pension,
Transportation income is income from the use profit-sharing, or annuity plan (whether or not
Tax reimbursement. The source of a tax reim- of a vessel or aircraft or for the performance of funded).
bursement fringe benefit is determined based services directly related to the use of any vessel
on the location of the jurisdiction that imposed or aircraft. This is true whether the vessel or air- If you performed services as an employee of
the tax for which you are reimbursed. craft is owned, hired, or leased. The term ves- the United States, you may receive a distribu-
sel or aircraft includes any container used in tion from the U.S. Government under a plan,
Moving expense reimbursement. The connection with a vessel or aircraft. such as the Civil Service Retirement System,
source of a moving expense reimbursement is that is treated as a qualified pension plan. Your
generally based on the location of your new All income from transportation that begins U.S. source income is the otherwise taxable
principal place of work. However, the source is and ends in the United States is treated as de- amount of the distribution that is attributable to
determined based on the location of your for- rived from sources in the United States. If the your total U.S. Government basic pay other
mer principal place of work if you provide suffi- transportation begins or ends in the United than tax-exempt pay for services performed
cient evidence that such determination of States, 50% of the transportation income is outside the United States.

Page 12 Chapter 2 Source of Income


Table 2-1. Summary of Source Rules for Income of Nonresident Aliens this is where title to the property passes to the
buyer. For example, income from the sale of in-
Item of income Factor determining source ventory in the United States is U.S. source in-
come, whether you purchased it in the United
Salaries, wages, other compensation Where services performed States or in a foreign country.
Business income: Income from the sale of inventory property
Personal services Where services performed that you produced in the United States and sold
outside the United States (or vice versa) is
Sale of inventorypurchased Where sold
partly from sources in the United States and
Sale of inventoryproduced Allocation partly from sources outside the United States.
Interest Residence of payer For information on making this allocation, see
section 1.863-3 of the regulations.
Dividends Whether a U.S. or foreign corporation* These rules apply even if your tax home is
Rents Location of property not in the United States.

Royalties: Depreciable property. To determine the


Natural resources Location of property source of any gain from the sale of depreciable
Patents, copyrights, etc. Where property is used personal property, you must first figure the part
of the gain that is not more than the total depre-
Sale of real property Location of property ciation adjustments on the property. You allo-
Sale of personal property Seller's tax home (but see Personal Property, cate this part of the gain to sources in the Uni-
later, for exceptions) ted States based on the ratio of U.S.
depreciation adjustments to total depreciation
Pension distributions attributable to Where services were performed that earned adjustments. The rest of this part of the gain is
contributions the pension considered to be from sources outside the Uni-
ted States.
Investment earnings on pension Location of pension trust
For this purpose, U.S. depreciation adjust-
contributions ments are the depreciation adjustments to the
Sale of natural resources Allocation based on fair market value of basis of the property that are allowable in figur-
product at export terminal. For more ing taxable income from U.S. sources. How-
ever, if the property is used predominantly in
information, see section 1.863-1(b) of the
the United States during a tax year, all depreci-
regulations. ation deductions allowable for that year are
*Exceptions include: treated as U.S. depreciation adjustments. But
a) Dividends paid by a U.S. corporation are foreign source if the corporation elects the there are some exceptions for certain transpor-
tation, communications, and other property
American Samoa economic development credit.
used internationally.
b) Part of a dividend paid by a foreign corporation is U.S. source if at least 25% of the
Gain from the sale of depreciable property
corporation's gross income is effectively connected with a U.S. trade or business for the that is more than the total depreciation adjust-
3 tax years before the year in which the dividends are declared. ments on the property is sourced as if the prop-
erty were inventory property, as discussed
Rents or Royalties Personal Property above.
A loss is sourced in the same way as the de-
Your U.S. source income includes rent and roy- Personal property is property, such as machi- preciation deductions were sourced. However,
alty income received during the tax year from nery, equipment, or furniture, that is not real if the property was used predominantly in the
property located in the United States or from property. United States, the entire loss reduces U.S.
any interest in that property. Gain or loss from the sale or exchange of source income.
U.S. source income also includes rents or personal property generally has its source in the The basis of property usually means the
royalties for the use of, or for the privilege of us- United States if you have a tax home in the Uni- cost (money plus the fair market value of other
ing, in the United States, intangible property ted States. If you do not have a tax home in the property or services) of property you acquire.
such as patents, copyrights, secret processes United States, the gain or loss generally is con- Depreciation is an amount deducted to recover
and formulas, goodwill, trademarks, franchises, sidered to be from sources outside the United the cost or other basis of a trade or business
and similar property. States. asset. The amount you can deduct depends on
the property's cost, when you began using the
Tax home. Your tax home is the general area property, how long it will take to recover your
Real Property of your main place of business, employment, or cost, and which depreciation method you use.
post of duty, regardless of where you maintain A depreciation deduction is any deduction for
Real property is land and buildings and gener- depreciation or amortization or any other allow-
your family home. Your tax home is the place
ally anything built on, growing on, or attached to able deduction that treats a capital expenditure
where you permanently or indefinitely work as
land. as a deductible expense.
an employee or a self-employed individual. If
Gross income from sources in the United you do not have a regular or main place of busi-
States includes gains, profits, and income from ness because of the nature of your work, then Intangible property. Intangible property in-
the sale or other disposition of real property lo- your tax home is the place where you regularly cludes patents, copyrights, secret processes or
cated in the United States. live. If you do not fit either of these categories, formulas, goodwill, trademarks, trade names, or
you are considered an itinerant and your tax other like property. The gain from the sale of
Natural resources. The income from the sale home is wherever you work. amortizable or depreciable intangible property,
of products of any farm, mine, oil or gas well, up to the previously allowable amortization or
other natural deposit, or timber located in the Inventory property. Inventory property is per- depreciation deductions, is sourced in the same
United States and sold in a foreign country, or sonal property that is stock in trade or that is way as the original deductions were sourced.
located in a foreign country and sold in the Uni- held primarily for sale to customers in the ordi- This is the same as the source rule for gain from
ted States, is partly from sources in the United nary course of your trade or business. Income the sale of depreciable property. See Deprecia-
States. For information on determining that part, from the sale of inventory that you purchased is ble property, earlier, for details on how to apply
see section 1.863-1(b) of the regulations. sourced where the property is sold. Generally, this rule.

Chapter 2 Source of Income Page 13


Gain in excess of the amortization or depre- Partnership income (or loss). A partner's
ciation deductions is sourced in the country
where the property is used if the income from
distributive share of partnership income (or
loss) is treated as the income (or loss) of the Resident Aliens
the sale is contingent on the productivity, use, partner. The partner must report all of it on his
or disposition of that property. If the income is or her separate return. Resident aliens may be able to exclude the fol-
not contingent on the productivity, use, or dis- lowing items from their gross income.
position of the property, the income is sourced Separate property income. Income derived
according to your tax home as discussed ear- from the separate property of one spouse (and
which is not earned income, trade or business
Foreign Earned Income
lier. If payments for goodwill do not depend on
its productivity, use, or disposition, their source income, or partnership distributive share in- and Housing Amount
is the country in which the goodwill was gener- come) is treated as the income of that spouse.
That spouse must report all of it on his or her If you are physically present in a foreign country
ated.
separate return. Use the appropriate community or countries for at least 330 full days during any
property law to determine what is separate period of 12 consecutive months, you may qual-
Sales through offices or fixed places of
property. ify for the foreign earned income exclusion. The
business. Despite any of the earlier rules, if
exclusion is $99,200 in 2014. In addition, you
you do not have a tax home in the United
Other community income. All other commun- may be able to exclude or deduct certain for-
States, but you maintain an office or other fixed
ity income is treated as provided by the applica- eign housing amounts. You may also qualify if
place of business in the United States, treat the
ble community property laws. you are a bona fide resident of a foreign country
income from any sale of personal property (in-
and you are a citizen or national of a country
cluding inventory property) that is attributable to
with which the United States has an income tax
that office or place of business as U.S. source
treaty. For more information, see Publication
income. However, this rule does not apply to
54.
sales of inventory property for use, disposition,
or consumption outside the United States if Foreign country. A foreign country is any terri-
your office or other fixed place of business out-
side the United States materially participated in 3. tory under the sovereignty of a government
other than that of the United States.
the sale.
The term foreign country includes the
If you have a tax home in the United States country's territorial waters and airspace, but not
but maintain an office or other fixed place of
business outside the United States, income Exclusions From international waters and the airspace above
them. It also includes the seabed and subsoil of
from sales of personal property, other than in-
ventory, depreciable property, or intangibles,
that is attributable to that foreign office or place
Gross Income those submarine areas adjacent to the country's
territorial waters over which it has exclusive
rights under international law to explore and ex-
of business may be treated as U.S. source in- ploit the natural resources.
come. The income is treated as U.S. source in-
come if an income tax of less than 10% of the Introduction The term foreign country does not include
U.S. possessions or territories. It does not in-
income from the sale is paid to a foreign coun-
Resident and nonresident aliens are allowed clude the Antarctic region.
try. This rule also applies to losses if the foreign
exclusions from gross income if they meet cer-
country would have imposed an income tax of
tain conditions. An exclusion from gross income
less than 10% had the sale resulted in a gain.
is generally income you receive that is not inclu- Nonresident Aliens
ded in your U.S. income and is not subject to
Community Income U.S. tax. This chapter covers some of the more
common exclusions allowed to resident and
Nonresident aliens can exclude the following
items from their gross income.
nonresident aliens.
If you are married and you or your spouse is
subject to the community property laws of a for- Interest Income
eign country, a U.S. state, or a U.S. possession, Topics
you generally must follow those laws to deter- This chapter discusses: Interest income that is not connected with a
mine the income of yourself and your spouse U.S. trade or business is excluded from income
for U.S. tax purposes. But you must disregard Nontaxable interest, if it is from:
certain community property laws if: Nontaxable dividends, Deposits (including certificates of deposit)
Both you and your spouse are nonresident with persons in the banking business,
Certain compensation paid by a foreign Deposits or withdrawable accounts with
aliens, or
employer, mutual savings banks, cooperative banks,
One of you is a nonresident alien and the Gain from sale of home, and
other is a U.S. citizen or resident and you credit unions, domestic building and loan
do not both choose to be treated as U.S. Scholarships and fellowship grants. associations, and other savings institutions
residents as explained in chapter 1. chartered and supervised as savings and
loan or similar associations under federal
In these cases, you and your spouse must re- Useful Items or state law (if the interest paid or credited
port community income as explained later. You may want to see:
can be deducted by the association), and
Amounts held by an insurance company
Earned income. Earned income of a spouse, Publication under an agreement to pay interest on
other than trade or business income and a part- them.
ner's distributive share of partnership income, is 54 Tax Guide for U.S. Citizens and
treated as the income of the spouse whose Resident Aliens Abroad
State and local government obligations. In-
services produced the income. That spouse 523 Selling Your Home terest on obligations of a state or political subdi-
must report all of it on his or her separate return. vision, the District of Columbia, or a U.S. pos-
See chapter 12 for information about getting
session, generally is not included in income.
Trade or business income. Trade or busi- these publications.
However, interest on certain private activity
ness income, other than a partner's distributive bonds, arbitrage bonds, and certain bonds not
share of partnership income, is treated as the in registered form is included in income.
income of the spouse carrying on the trade or
business. That spouse must report all of it on
his or her separate return.

Page 14 Chapter 3 Exclusions From Gross Income


Portfolio interest. Interest and original issue Contingent interest. Portfolio interest dends. This tax relief will not apply to you if you
discount that qualifies as portfolio interest is not does not include contingent interest. Contingent are present in the United States for 183 days or
subject to withholding. To qualify as portfolio in- interest is either of the following: more during your tax year.
terest, the interest must be paid on obligations
1. Interest that is determined by reference to:
issued after July 18, 1984, and otherwise sub-
ject to withholding. a. Any receipts, sales, or other cash flow
Services Performed
of the debtor or related person, for Foreign Employer
Note. For obligations issued after March
b. Income or profits of the debtor or rela- If you were paid by a foreign employer, your
18, 2012, portfolio interest does not include in-
ted person, U.S. source income may be exempt from U.S.
terest paid on debt that is not in registered form.
Before March 19, 2012, portfolio interest inclu- c. Any change in value of any property tax, but only if you meet one of the situations
ded interest on certain registered and nonregis- of the debtor or a related person, or discussed next.
tered (bearer) bonds if the obligations meet the
d. Any dividend, partnership distribu- Employees of foreign persons, organiza-
requirements described below.
tions, or similar payments made by tions, or offices. Income for personal services
Obligations in registered form. Portfolio the debtor or a related person. performed in the United States as a nonresident
interest includes interest paid on an obligation alien is not considered to be from U.S. sources
For exceptions, see Internal Revenue
that is in registered form, and for which you and is tax exempt if you meet all three of the fol-
Code section 871(h)(4)(C).
have received documentation that the beneficial lowing conditions.
owner of the obligation is not a United States 2. Any other type of contingent interest that is
1. You perform personal services as an em-
person. identified by the Secretary of the Treasury
ployee of or under a contract with a non-
Generally, an obligation is in registered form in regulations.
resident alien individual, foreign partner-
if: (i) the obligation is registered as to both prin-
Related persons. Related persons in- ship, or foreign corporation, not engaged
cipal and any stated interest with the issuer (or
clude the following. in a trade or business in the United States;
its agent) and any transfer of the obligation may
Members of a family, including only broth- or you work for an office or place of busi-
be effected only by surrender of the old obliga-
ers, sisters, half-brothers, half-sisters, ness maintained in a foreign country or
tion and reissuance to the new holder; (ii) the
spouse, ancestors (parents, grandparents, possession of the United States by a U.S.
right to principal and stated interest with respect
etc.), and lineal descendants (children, corporation, a U.S. partnership, or a U.S.
to the obligation may be transferred only
grandchildren, etc.). citizen or resident.
through a book entry system maintained by the
issuer or its agent; or (iii) the obligation is regis- Any person who is a party to any arrange- 2. You perform these services while you are
tered as to both principal and stated interest ment undertaken for the purpose of avoid- a nonresident alien temporarily present in
with the issuer or its agent and can be transfer- ing the contingent interest rules. the United States for a period or periods of
red both by surrender and reissuance and Certain corporations, partnerships, and not more than a total of 90 days during the
through a book entry system. other entities. For details, see Nondeducti- tax year.
An obligation that would otherwise be con- ble Loss in chapter 2 of Publication 544.
3. Your pay for these services is not more
sidered to be in registered form is not consid- Exception for existing debt. Contingent than $3,000.
ered to be in registered form as of a particular interest does not include interest paid or ac-
time if it can be converted at any time in the fu- crued on any debt with a fixed term that was is- If you do not meet all three conditions, your in-
ture into an obligation that is not in registered sued: come from personal services performed in the
form. For more information on whether obliga- On or before April 7, 1993, or United States is U.S. source income and is
tions are considered to be in registered form, taxed according to the rules in chapter 4.
After April 7, 1993, pursuant to a written
see Portfolio interest in Publication 515. If your pay for these services is more than
binding contract in effect on that date and
at all times thereafter before that debt was $3,000, the entire amount is income from a
Obligations not in registered form. For
issued. trade or business within the United States. To
obligations issued before March 19, 2012, inter-
find if your pay is more than $3,000, do not in-
est on an obligation that is not in registered form
clude any amounts you get from your employer
(bearer obligation) is portfolio interest if the obli-
gation is foreign-targeted. A bearer obligation is
Dividend Income for advances or reimbursements of business
travel expenses, if you were required to and did
foreign-targeted if:
The following dividend income is exempt from account to your employer for those expenses. If
There are arrangements to ensure that the
the 30% tax. the advances or reimbursements are more than
obligation will be sold, or resold in connec-
your expenses, include the excess in your pay
tion with the original issue, only to a person
Certain dividends paid by foreign corpora- for these services.
who is not a United States person,
tions. There is no 30% tax on U.S. source divi- A day means a calendar day during any part
Interest on the obligation is payable only
dends you receive from a foreign corporation. of which you are physically present in the Uni-
outside the United States and its posses-
See Second exception under Dividends in ted States.
sions, and
chapter 2 for how to figure the amount of U.S.
The face of the obligation contains a state-
source dividends. Example 1. During 2014, Henry Smythe, a
ment that any United States person who
nonresident alien from a nontreaty country,
holds the obligation will be subject to limits
Certain interest-related dividends. There is worked for an overseas office of a U.S. partner-
under the United States income tax laws.
no 30% tax on interest-related dividends from ship. Henry, who uses the calendar year as his
Documentation is not required for interest on sources within the United States that you re- tax year, was temporarily present in the United
bearer obligations to qualify as portfolio interest. ceive from a mutual fund or other regulated in- States for 60 days during 2014 performing per-
In some cases, however, you may need docu- vestment company in 2014. The mutual fund sonal services for the overseas office of the
mentation for purposes of Form 1099 reporting will designate in writing which dividends are in- partnership. That office paid him a total gross
and backup withholding. terest-related dividends. salary of $2,800 for those services. During
2014, he was not engaged in a trade or busi-
Interest that does not qualify as portfolio Certain short-term capital gain dividends. ness in the United States. The salary is not con-
interest. Payments to certain persons and There may not be any 30% tax on certain sidered U.S. source income and is exempt from
payments of contingent interest do not qualify short-term capital gain dividends from sources U.S. tax.
as portfolio interest. You must withhold at the within the United States that you receive from a
statutory rate on such payments unless some mutual fund or other regulated investment com- Example 2. The facts are the same as in
other exception, such as a treaty provision, ap- pany. The mutual fund will designate in writing Example 1, except that Henry's total gross sal-
plies. which dividends are short-term capital gain divi- ary for the services performed in the United

Chapter 3 Exclusions From Gross Income Page 15


States during 2014 was $4,500. He received which the trust is a part) are U.S. citizens Candidate for a degree. You are a candidate
$2,875 in 2014, and $1,625 in 2015. During or residents. for a degree if you:
2014, he was engaged in a trade or business in
If the annuity qualifies under condition (1) 1. Attend a primary or secondary school or
the United States because the compensation
but not condition (2) above, you do not have to are pursuing a degree at a college or uni-
for his personal services in the United States
include the amount in income if: versity, or
was more than $3,000. Henry's salary is U.S.
source income and is taxed under the rules in You are a resident of a country that gives a 2. Attend an accredited educational institu-
chapter 4. substantially equal exclusion to U.S. citi- tion that is authorized to provide:
zens and residents, or
Crew members. Compensation for services You are a resident of a beneficiary devel- a. A program that is acceptable for full
performed by a nonresident alien in connection oping country under Title V of the Trade credit toward a bachelor's or higher
with the individual's temporary presence in the Act of 1974. degree, or
United States as a regular crew member of a If you are not sure whether the annuity is b. A program of training to prepare stu-
foreign vessel (for example, a boat or ship) en- from a qualified annuity plan or qualified trust, dents for gainful employment in a rec-
gaged in transportation between the United ask the person who made the payment. ognized occupation.
States and a foreign country or U.S. possession
is not U.S. source income and is exempt from Income affected by treaties. Income of any Eligible educational institution. An eligible
U.S. tax. This exemption does not apply to kind that is exempt from U.S. tax under a treaty educational institution is one that maintains a
compensation for services performed on foreign to which the United States is a party is excluded regular faculty and curriculum and normally has
aircraft. from your gross income. Income on which the a regularly enrolled body of students in attend-
tax is only limited by treaty, however, is inclu- ance at the place where it carries on its educa-
Students and exchange visitors. Nonresi- ded in gross income. See chapter 9. tional activities.
dent alien students and exchange visitors
present in the United States under F, J, or Qualified education expenses. These are
Q visas can exclude from gross income pay Gambling Winnings From expenses for:
received from a foreign employer. Dog or Horse Racing Tuition and fees required to enroll at or at-
This group includes bona fide students, tend an eligible educational institution, and
scholars, trainees, teachers, professors, re- You can exclude from your gross income win- Course-related expenses, such as fees,
search assistants, specialists, or leaders in a nings from legal wagers initiated outside the books, supplies, and equipment that are
field of specialized knowledge or skill, or per- United States in a parimutuel pool with respect required for the courses at the eligible edu-
sons of similar description. It also includes the to a live horse or dog race in the United States. cational institution. These items must be
alien's spouse and minor children if they come required of all students in your course of in-
with the alien or come later to join the alien. struction.
A nonresident alien temporarily present in Gain From the Sale However, in order for these to be qualified edu-
the United States under a J visa includes an
alien individual entering the United States as an of Your Main Home cation expenses, the terms of the scholarship or
fellowship cannot require that it be used for
exchange visitor under the Mutual Educational
If you sold your main home, you may be able to other purposes, such as room and board, or
and Cultural Exchange Act of 1961.
exclude up to $250,000 of the gain on the sale specify that it cannot be used for tuition or
Foreign employer. A foreign employer is: of your home. If you are married and file a joint course-related expenses.
A nonresident alien individual, foreign part- return, you may be able to exclude up to
nership, or foreign corporation, or Expenses that do not qualify. Qualified
$500,000. For information on the requirements education expenses do not include the cost of:
An office or place of business maintained for this exclusion, see Publication 523.
in a foreign country or in a U.S. possession Room and board,
by a U.S. corporation, a U.S. partnership, This exclusion does not apply to non- Travel,
or an individual who is a U.S. citizen or res- ! resident aliens who are subject to the Research,
ident. expatriation tax rules discussed in
Clerical help, or
CAUTION

chapter 4.
The term foreign employer does not in-
Equipment and other expenses that are
clude a foreign government. Pay from a foreign
not required for enrollment in or attend-
government that is exempt from U.S. income
ance at an eligible educational institution.
tax is discussed in chapter 10. Scholarships and This is true even if the fee must be paid to the
Income from certain annuities. Do not in- Fellowship Grants institution as a condition of enrollment or at-
clude in income any annuity received under a tendance. Scholarship or fellowship amounts
qualified annuity plan or from a qualified trust If you are a candidate for a degree, you may be used to pay these costs are taxable.
exempt from U.S. income tax if you meet both able to exclude from your income part or all of
of the following conditions. the amounts you receive as a qualified scholar- Amounts used to pay expenses that do not
ship. The rules discussed here apply to both qualify. A scholarship amount used to pay any
1. You receive the annuity only because:
resident and nonresident aliens. expense that does not qualify is taxable, even if
a. You performed personal services out- the expense is a fee that must be paid to the in-
side the United States while you were If a nonresident alien receives a grant stitution as a condition of enrollment or attend-
a nonresident alien, or TIP that is not from U.S. sources, it is not ance.
subject to U.S. tax. See Scholarships,
b. You performed personal services in- Grants, Prizes, and Awards in chapter 2 to de- Payment for services. You cannot exclude
side the United States while you were termine whether your grant is from U.S. sour- from income the portion of any scholarship, fel-
a nonresident alien and you met the ces. lowship, or tuition reduction that represents
three conditions, described earlier,
payment for past, present, or future teaching,
under Employees of foreign persons,
A scholarship or fellowship is excludable research, or other services. This is true even if
organizations, or offices.
from income only if: all candidates for a degree are required to per-
2. At the time the first amount is paid as an form the services as a condition for receiving
1. You are a candidate for a degree at an eli-
annuity under the plan (or by the trust), the degree.
gible educational institution, and
90% or more of the employees for whom
contributions or benefits are provided un- 2. You use the scholarship or fellowship to Example. On January 7, Maria Gomez is
der the annuity plan (or under the plan of pay qualified education expenses. notified of a scholarship of $2,500 for the spring

Page 16 Chapter 3 Exclusions From Gross Income


semester. As a condition for receiving the must be reported on their U.S. tax return. In- to the United States as an exchange visitor un-
scholarship, Maria must serve as a part-time come of resident aliens is subject to the gradu- der the Mutual Educational and Cultural Ex-
teaching assistant. Of the $2,500 scholarship, ated tax rates that apply to U.S. citizens. Resi- change Act of 1961. The taxable part of any
$1,000 represents payment for her services. dent aliens use the Tax Table or Tax scholarship or fellowship grant that is U.S.
Assuming that Maria meets all other conditions, Computation Worksheets located in the Form source income is treated as effectively connec-
she can exclude no more than $1,500 from in- 1040 instructions, which apply to U.S. citizens. ted with a trade or business in the United
come as a qualified scholarship. States.

Nonresident Aliens Business operations. If you own and operate


a business in the United States selling services,
A nonresident alien's income that is subject to products, or merchandise, you are, with certain
U.S. income tax must be divided into two cate- exceptions, engaged in a trade or business in
the United States.
4. gories:
1. Income that is effectively connected with a Partnerships. If you are a member of a part-
trade or business in the United States, and nership that at any time during the tax year is
engaged in a trade or business in the United
How Income of 2. Income that is not effectively connected
with a trade or business in the United States, you are considered to be engaged in a
States (discussed under The 30% Tax, trade or business in the United States.
Aliens Is Taxed later).
Beneficiary of an estate or trust. If you are
The difference between these two catego- the beneficiary of an estate or trust that is en-
ries is that effectively connected income, after gaged in a trade or business in the United
Introduction allowable deductions, is taxed at graduated
rates. These are the same rates that apply to
States, you are treated as being engaged in the
same trade or business.
Resident and nonresident aliens are taxed in U.S. citizens and residents. Income that is not
different ways. Resident aliens are generally effectively connected is taxed at a flat 30% (or Trading in stocks, securities, and commodi-
taxed in the same way as U.S. citizens. Nonres- lower treaty) rate. ties. If your only U.S. business activity is trad-
ident aliens are taxed based on the source of ing in stocks, securities, or commodities (includ-
their income and whether or not their income is If you were formerly a U.S. citizen or ing hedging transactions) through a U.S.
effectively connected with a U.S. trade or busi- ! resident alien, these rules may not ap- resident broker or other agent, you are not en-
ness. The following discussions will help you CAUTION ply. See Expatriation Tax, later, in this gaged in a trade or business in the United
determine if income you receive during the tax chapter. States.
year is effectively connected with a U.S. trade For transactions in stocks or securities, this
or business and how it is taxed. applies to any nonresident alien, including a
Trade or Business dealer or broker in stocks and securities.
Topics in the United States For transactions in commodities, this applies
This chapter discusses: to commodities that are usually traded on an or-
Generally, you must be engaged in a trade or ganized commodity exchange and to transac-
Income that is effectively connected with a business during the tax year to be able to treat tions that are usually carried out at such an ex-
U.S. trade or business. income received in that year as effectively con- change.
Income that is not effectively connected nected with that trade or business. Whether you This discussion does not apply if you have a
with a U.S. trade or business. are engaged in a trade or business in the United U.S. office or other fixed place of business at
Interrupted period of residence. States depends on the nature of your activities. any time during the tax year through which, or
The discussions that follow will help you deter- by the direction of which, you carry out your
Expatriation tax.
mine whether you are engaged in a trade or transactions in stocks, securities, or commodi-
business in the United States. ties.
Useful Items Trading for a nonresident alien's own
You may want to see: Personal Services account. You are not engaged in a trade or
business in the United States if trading for your
Publication If you perform personal services in the United own account in stocks, securities, or commodi-
States at any time during the tax year, you usu- ties is your only U.S. business activity. This ap-
544 Sales and Other Dispositions of ally are considered engaged in a trade or busi-
Assets plies even if the trading takes place while you
ness in the United States. are present in the United States or is done by
1212 List of Original Issue Discount Certain compensation paid to a non- your employee or your broker or other agent.
Instruments resident alien by a foreign employer is This does not apply to trading for your own
TIP
not included in gross income. For account if you are a dealer in stocks, securities,
Form (and Instructions) more information, see Services Performed for or commodities. This does not necessarily
Foreign Employer in chapter 3. mean, however, that as a dealer you are con-
6251 Alternative Minimum
sidered to be engaged in a trade or business in
TaxIndividuals
the United States. Determine that based on the
Schedule D (Form 1040) Capital Gains Other Trade or Business Activities facts and circumstances in each case or under
and Losses the rules given above in Trading in stocks, se-
Other examples of being engaged in a trade or curities, and commodities.
See chapter 12 for information about getting business in the United States follow.
these publications and forms.
Students and trainees. You are considered Effectively
engaged in a trade or business in the United Connected Income
Resident Aliens States if you are temporarily present in the Uni-
ted States as a nonimmigrant under an F, J, If you are engaged in a U.S. trade or business,
Resident aliens are generally taxed in the same M, or Q visa. A nonresident alien temporarily all income, gain, or loss for the tax year that you
way as U.S. citizens. This means that their present in the United States under a J visa in- get from sources within the United States (other
worldwide income is subject to U.S. tax and cludes a nonresident alien individual admitted than certain investment income) is treated as

Chapter 4 How Income of Aliens Is Taxed Page 17


effectively connected income. This applies Generally, stock of a corporation is not treated 2. At least 90% of your U.S. source transpor-
whether or not there is any connection between as an asset used in, or held for use in, a trade or tation income is attributable to regularly
the income and the trade or business being car- business in the United States. scheduled transportation.
ried on in the United States during the tax year.
Business-activities test. This test usually ap- Fixed place of business generally means a
Two tests, described next under Investment place, site, structure, or other similar facility
Income, determine whether certain items of in- plies when income, gain, or loss comes directly
from the active conduct of the trade or busi- through which you engage in a trade or busi-
vestment income (such as interest, dividends, ness. Regularly scheduled transportation
and royalties) are treated as effectively connec- ness. The business-activities test is most impor-
tant when: means that a ship or aircraft follows a published
ted with that business. schedule with repeated sailings or flights at reg-
Dividends or interest are received by a
In limited circumstances, some kinds of for- dealer in stocks or securities, ular intervals between the same points for voy-
eign source income may be treated as effec- Royalties are received in the trade or busi- ages or flights that begin or end in the United
tively connected with a trade or business in the ness of licensing patents or similar prop- States. This definition applies to both scheduled
United States. For a discussion of these rules, erty, or and chartered air transportation.
see Foreign Income, later. Service fees are earned by a servicing
business. If you do not meet the two conditions above,
Investment Income Under this test, if the conduct of the U.S. trade the income is not effectively connected and is
or business was a material factor in producing taxed at a 4% rate. See Transportation Tax,
Investment income from U.S. sources that may later, in this chapter.
the income, the income is considered effec-
or may not be treated as effectively connected
tively connected.
with a U.S. trade or business generally falls into
the following three categories.
Business Profits and Losses
Personal Service Income and Sales Transactions
1. Fixed or determinable income (interest,
dividends, rents, royalties, premiums, an- You usually are engaged in a U.S. trade or busi- All profits or losses from U.S. sources that are
nuities, etc.). ness when you perform personal services in the from the operation of a business in the United
2. Gains (some of which are considered cap- United States. Personal service income you re- States are effectively connected with a trade or
ital gains) from the sale or exchange of the ceive in a tax year in which you are engaged in business in the United States. For example,
following types of property. a U.S. trade or business is effectively connec- profit from the sale in the United States of in-
ted with a U.S. trade or business. Income re- ventory property purchased either in this coun-
a. Timber, coal, or domestic iron ore with ceived in a year other than the year you per- try or in a foreign country is effectively connec-
a retained economic interest. formed the services is also effectively ted trade or business income. A share of U.S.
b. Patents, copyrights, and similar prop- connected if it would have been effectively con- source profits or losses of a partnership that is
erty on which you receive contingent nected if received in the year you performed the engaged in a trade or business in the United
payments after October 4, 1966. services. Personal service income includes wa- States is also effectively connected with a trade
ges, salaries, commissions, fees, per diem al- or business in the United States.
c. Patents transferred before October 5,
lowances, and employee allowances and bo-
1966.
nuses. The income may be paid to you in the Real Property Gain or Loss
d. Original issue discount obligations. form of cash, services, or property.
3. Capital gains (and losses). Gains and losses from the sale or exchange of
If you are engaged in a U.S. trade or busi- U.S. real property interests (whether or not they
ness only because you perform personal serv- are capital assets) are taxed as if you are en-
Use the two tests, described next, to deter-
ices in the United States during the tax year, in- gaged in a trade or business in the United
mine whether an item of U.S. source income
come and gains from assets, and gains and States. You must treat the gain or loss as effec-
falling in one of the three categories above and
losses from the sale or exchange of capital as- tively connected with that trade or business.
received during the tax year is effectively con-
sets are generally not effectively connected with
nected with your U.S. trade or business. If the
your trade or business. However, if there is a di- U.S. real property interest. This is any inter-
tests indicate that the item of income is effec-
rect economic relationship between your hold- est in real property located in the United States
tively connected, you must include it with your
ing of the asset and your trade or business of or the U.S. Virgin Islands or any interest (other
other effectively connected income. If the item
performing personal services, the income, gain, than as a creditor) in a domestic corporation
of income is not effectively connected, include it
or loss is effectively connected. that is a U.S. real property holding corporation.
with all other income discussed under The 30%
Tax, later, in this chapter. Real property includes the following.
Pensions. If you were a nonresident alien en-
gaged in a U.S. trade or business after 1986 1. Land and unsevered natural products of
Asset-use test. This test usually applies to in- the land, such as growing crops and tim-
because you performed personal services in
come that is not directly produced by trade or ber, and mines, wells, and other natural
the United States, and you later receive a pen-
business activities. Under this test, if an item of deposits.
sion or retirement pay attributable to these serv-
income is from assets (property) used in, or
ices, such payments are effectively connected 2. Improvements on land, including build-
held for use in, the trade or business in the Uni-
income in each year you receive them. This is ings, other permanent structures, and their
ted States, it is considered effectively connec-
true whether or not you are engaged in a U.S. structural components.
ted.
trade or business in the year you receive the re-
An asset is used in, or held for use in, the 3. Personal property associated with the use
tirement pay.
trade or business in the United States if the as- of real property, such as equipment used
set is: in farming, mining, forestry, or construction
Held for the principal purpose of promoting Transportation Income
or property used in lodging facilities or ren-
the conduct of a trade or business in the ted office space, unless the personal prop-
United States, Transportation income (defined in chapter 2) is
effectively connected if you meet both of the fol- erty is:
Acquired and held in the ordinary course of
the trade or business conducted in the Uni- lowing conditions. a. Disposed of more than one year be-
ted States (for example, an account receiv- 1. You had a fixed place of business in the fore or after the disposition of the real
able or note receivable arising from that United States involved in earning the in- property, or
trade or business), or come. b. Separately sold to persons unrelated
Otherwise held to meet the present needs
either to the seller or to the buyer of
of the trade or business in the United
the real property.
States and not its anticipated future needs.

Page 18 Chapter 4 How Income of Aliens Is Taxed


U.S. real property holding corporation. 1. Dispose of an interest in the domestically for the privilege of using, outside the Uni-
A corporation is a U.S. real property holding controlled QIE during the 30-day period ted States, patents, copyrights, secret pro-
corporation if the fair market value of the corpo- before the ex-dividend date of a distribu- cesses and formulas, goodwill, trade-
ration's U.S. real property interests are at least tion that you would (but for the disposition) marks, trade brands, franchises, and
50% of the total fair market value of: have treated as gain from the sale or ex- similar properties if the rents or royalties
The corporation's U.S. real property inter- change of a U.S. real property interest, are from the active conduct of a trade or
ests, plus and business in the United States.
The corporation's interests in real property
2. Acquire, or enter into a contract or option 2. Dividends, interest, or amounts received
located outside the United States, plus
to acquire, a substantially identical interest for the provision of a guarantee of indebt-
The corporation's other assets that are
in that entity during the 61-day period that edness issued after September 27, 2010,
used in, or held for use in, a trade or busi-
began on the first day of the 30-day pe- from the active conduct of a banking, fi-
ness.
riod. nancing, or similar business in the United
Gain or loss on the sale of the stock in any States. A substitute dividend or interest
domestic corporation is taxed as if you are en- If this occurs, you are treated as having gain
payment received under a securities lend-
gaged in a U.S. trade or business unless you from the sale or exchange of a U.S. real prop-
ing transaction or a sale-repurchase trans-
establish that the corporation is not a U.S. real erty interest in an amount equal to the distribu-
action is treated the same as the amounts
property holding corporation. tion made after June 15, 2006, that would have
received on the transferred security.
A U.S. real property interest does not in- been treated as such gain. This also applies to
clude a class of stock of a corporation that is any substitute dividend payment. 3. Income, gain, or loss from the sale outside
regularly traded on an established securities A transaction is not treated as an applicable the United States, through the U.S. office
market, unless you hold more than 5% of the wash sale transaction if: or other fixed place of business, of:
fair market value of that class of stock. An inter- You actually receive the distribution from
a. Stock in trade,
est in a foreign corporation owning U.S. real the domestically controlled QIE related to
property generally is not a U.S. real property in- the interest disposed of, or acquired, in the b. Property that would be included in in-
terest unless the corporation chooses to be transaction, or ventory if on hand at the end of the tax
treated as a domestic corporation. You dispose of any class of stock in a QIE year, or
that is regularly traded on an established
c. Property held primarily for sale to cus-
Qualified investment entities. Special rules securities market in the United States but
tomers in the ordinary course of busi-
apply to qualified investment entities (QIEs). A only if you did not own more than 5% of
ness.
QIE is any real estate investment trust (REIT) or that class of stock at any time during the
any regulated investment company (RIC) that is 1-year period ending on the date of the dis- Item (3) will not apply if you sold the
a U.S. real property holding corporation. tribution. property for use, consumption, or disposi-
Generally, any distribution from a QIE to a tion outside the United States and an of-
shareholder that is attributable to gain from the Alternative minimum tax. There may be a fice or other fixed place of business in a
sale or exchange of a U.S. real property interest minimum tax on your net gain from the disposi- foreign country was a material factor in the
is treated as a U.S. real property gain by the tion of U.S. real property interests. Figure the sale.
shareholder receiving the distribution. A distri- amount of this tax, if any, on Form 6251.
bution by a QIE on stock regularly traded on an Any foreign source income that is equivalent
Withholding of tax. If you dispose of a U.S.
established securities market in the United to any item of income described above is
real property interest, the buyer may have to
States is not treated as gain from the sale or ex- treated as effectively connected with a U.S.
withhold tax. See the discussion of Tax With-
change of a U.S. real property interest if you did trade or business. For example, foreign source
held on Real Property Sales in chapter 8.
not own more than 5% of that stock at any time interest and dividend equivalents are treated as
during the 1-year period ending on the date of U.S. effectively connected income if the income
the distribution. A distribution that you do not Foreign Income is derived by a foreign person in the active con-
treat as gain from the sale or exchange of a duct of a banking, financing, or similar business
U.S. real property interest is included in your You must treat three kinds of foreign source in- within the United States.
gross income as a regular dividend. come as effectively connected with a trade or
business in the United States if:
Note. Beginning January 1, 2015 (unless You have an office or other fixed place of Tax on Effectively
extended by legislation), a RIC that is a U.S. business in the United States to which the Connected Income
real property holding corporation will only be income can be attributed,
That office or place of business is a mate- Income you receive during the tax year that is
treated as a QIE for certain distributions from
rial factor in producing the income, and effectively connected with your trade or busi-
the RIC that are directly or indirectly attributable
The income is produced in the ordinary ness in the United States is, after allowable de-
to distributions received by the RIC from a
course of the trade or business carried on ductions, taxed at the rates that apply to U.S.
REIT.
through that office or other fixed place of citizens and residents.
Domestically controlled QIE. The sale of business.
an interest in a domestically controlled QIE is Generally, you can receive effectively con-
not the sale of a U.S. real property interest. The An office or other fixed place of business is nected income only if you are a nonresident
entity is domestically controlled if at all times a material factor if it significantly contributes to, alien engaged in trade or business in the United
during the testing period less than 50% in value and is an essential economic element in, the States during the tax year. However, income
of its stock was held, directly or indirectly, by earning of the income. you receive from the sale or exchange of prop-
foreign persons. The testing period is the erty, the performance of services, or any other
shorter of (a) the 5-year period ending on the The three kinds of foreign source income transaction in another tax year is treated as ef-
date of disposition, or (b) the period during are listed below. fectively connected in that year if it would have
which the entity was in existence. been effectively connected in the year the
1. Rents and royalties for the use of, or for
transaction took place or you performed the
Wash sale. If you dispose of an interest in the privilege of using, intangible personal
services.
a domestically controlled QIE in an applicable property located outside the United States
wash sale transaction, special rules apply. An or from any interest in such property. In- Example. Ted Richards, a nonresident
applicable wash sale transaction is one in which cluded are rents or royalties for the use, or alien, entered the United States in August 2013,
you: to perform personal services in the U.S. office
of his overseas employer. He worked in the
U.S. office until December 25, 2013, but did not

Chapter 4 How Income of Aliens Is Taxed Page 19


leave this country until January 11, 2014. On at maturity and the issue price of the debt in- that are not effectively connected with a trade or
January 8, 2014, he received his final paycheck strument. The 30% tax applies in the following business in the United States. They apply even
for services performed in the United States dur- circumstances. if you are engaged in a trade or business in the
ing 2013. All of Ted's income during his stay United States. These rules do not apply to the
1. You received a payment on a debt instru-
here is U.S. source income. sale or exchange of a U.S. real property interest
ment. In this case, the amount of OID sub-
During 2013, Ted was engaged in the trade or to the sale of any property that is effectively
ject to tax is the OID that accrued while
or business of performing personal services in connected with a trade or business in the Uni-
you held the debt instrument minus the
the United States. Therefore, all amounts paid ted States. See Real Property Gain or Loss,
OID previously taken into account. But the
to him in 2013 for services performed in the Uni- earlier, under Effectively Connected Income.
tax on the OID cannot be more than the
ted States during 2013 are effectively connec-
payment minus the tax on the interest pay- A capital asset is everything you own ex-
ted with that trade or business during 2013.
ment on the debt instrument. cept:
The salary payment Ted received in January
2014 is U.S. source income to him in 2014. It is 2. You sold or exchanged the debt instru- Inventory.
effectively connected with a trade or business in ment. The amount of OID subject to tax is Business accounts or notes receivable.
the United States because he was engaged in a the OID that accrued while you held the
Depreciable property used in a trade or
trade or business in the United States during debt instrument minus the amount already
business.
2013 when he performed the services that taxed in (1) above.
Real property used in a trade or business.
earned the income.
Report on your return the amount of OID Supplies regularly used in a trade or busi-
Real property income. You may be able to shown on Form 1042-S, Foreign Person's U.S. ness.
choose to treat all income from real property as Source Income Subject to Withholding, if you Certain copyrights, literary or musical or ar-
effectively connected. See Income From Real bought the debt instrument at original issue. tistic compositions, letters or memoranda,
Property, later, in this chapter. However, you must recompute your proper or similar property.
share of OID shown on Form 1042-S if any of Certain U.S. government publications.
the following apply.
The 30% Tax You bought the debt instrument at a pre-
Certain commodities derivative financial in-
struments held by a commodities deriva-
mium or paid an acquisition premium.
tives dealer.
Tax at a 30% (or lower treaty) rate applies to The debt instrument is a stripped bond or a
Hedging transactions.
certain items of income or gains from U.S. sour- stripped coupon (including zero coupon in-
ces but only if the items are not effectively con- struments backed by U.S. Treasury securi-
nected with your U.S. trade or business. ties). A capital gain is a gain on the sale or ex-
The debt instrument is a contingent pay- change of a capital asset. A capital loss is a
loss on the sale or exchange of a capital asset.
Fixed or Determinable Income ment or inflation-indexed debt instrument.
For the definition of premium and acquisition If the sale is in foreign currency, for the pur-
The 30% (or lower treaty) rate applies to the premium and instructions on how to recompute pose of determining gain, the cost and selling
gross amount of U.S. source fixed or determi- OID, get Publication 1212. price of the property should be expressed in
nable annual or periodic gains, profits, or in-
U.S. currency at the rate of exchange prevailing
come.
Gambling Winnings as of the date of the purchase and date of the
sale, respectively.
Income is fixed when it is paid in amounts
In general, nonresident aliens are subject to the
known ahead of time. Income is determinable You may want to read Publication 544. How-
30% tax on the gross proceeds from gambling
whenever there is a basis for figuring the ever, use Publication 544 only to determine
won in the United States if that income is not ef-
amount to be paid. Income can be periodic if it what is a sale or exchange of a capital asset, or
fectively connected with a U.S. trade or busi-
is paid from time to time. It does not have to be what is treated as such. Specific tax treatment
ness and is not exempted by treaty. However,
paid annually or at regular intervals. Income can that applies to U.S. citizens or residents gener-
no tax is imposed on nonbusiness gambling in-
be determinable or periodic even if the length of ally does not apply to you.
come a nonresident alien wins playing black-
time during which the payments are made is in-
jack, baccarat, craps, roulette, or big-6 wheel in
creased or decreased. The following gains are subject to the 30%
the United States.
(or lower treaty) rate without regard to the
Items specifically included as fixed or deter- 183-day rule, discussed later.
Nonresident aliens are taxed at graduated
minable income are interest (other than original
rates on net gambling income won in the United 1. Gains on the disposal of timber, coal, or
issue discount), dividends, dividend equivalent
States that is effectively connected with a U.S. domestic iron ore with a retained eco-
payments (defined in chapter 2), rents, premi-
trade or business. nomic interest.
ums, annuities, salaries, wages, and other com-
pensation. A substitute dividend or interest pay- 2. Gains on contingent payments received
ment received under a securities lending Social Security Benefits from the sale or exchange of patents,
transaction or a sale-repurchase transaction is copyrights, and similar property after Oc-
treated the same as the amounts received on A nonresident alien must include 85% of any
tober 4, 1966.
the transferred security. Other items of income, U.S. social security benefit (and the social se-
such as royalties, also may be subject to the curity equivalent part of a tier 1 railroad retire- 3. Gains on certain transfers of all substantial
30% tax. ment benefit) in U.S. source fixed or determina- rights to, or an undivided interest in, pat-
ble annual or periodic income. Social security ents if the transfers were made before Oc-
Some fixed or determinable income benefits include monthly retirement, survivor, tober 5, 1966.
TIP may be exempt from U.S. tax. See and disability benefits. This income is exempt
4. Gains on the sale or exchange of original
chapter 3 if you are not sure whether under some tax treaties. See Table 1 in Publica-
issue discount obligations.
the income is taxable. tion 901, U.S. Tax Treaties, for a list of tax trea-
ties that exempt U.S. social security benefits Gains in (1) are not subject to the 30% (or
Original issue discount (OID). If you sold, from U.S. tax. lower treaty) rate if you choose to treat the
exchanged, or received a payment on a bond or gains as effectively connected with a U.S. trade
other debt instrument that was issued at a dis- Sales or Exchanges or business. See Income From Real Property,
count, all or part of the original issue discount of Capital Assets later.
(OID) (other than portfolio interest) may be sub-
ject to the 30% tax. The amount of OID is the These rules apply only to those capital gains 183-day rule. If you were in the United States
difference between the stated redemption price and losses from sources in the United States for 183 days or more during the tax year, your

Page 20 Chapter 4 How Income of Aliens Is Taxed


net gain from sales or exchanges of capital as- You can make this choice only for real prop- voke the choice for later tax years only if you
sets is taxed at a 30% (or lower treaty) rate. For erty income that is not otherwise effectively have IRS approval. For information on how to
purposes of the 30% (or lower treaty) rate, net connected with your U.S. trade or business. get IRS approval, see Regulation section
gain is the excess of your capital gains from 1.871-10(d)(2).
U.S. sources over your capital losses from U.S. If you make the choice, you can claim de-
ductions attributable to the real property income
sources. This rule applies even if any of the
transactions occurred while you were not in the and only your net income from real property is Transportation Tax
United States. taxed.
A 4% tax rate applies to transportation income
To determine your net gain, consider the This choice does not treat a nonresident that is not effectively connected because it
amount of your gains and losses that would be alien, who is not otherwise engaged in a U.S. does not meet the two conditions listed earlier
recognized and taken into account only if, and trade or business, as being engaged in a trade under Transportation Income. If you receive
to the extent that, they would be recognized or business in the United States during the year. transportation income subject to the 4% tax,
and taken into account if you were in a U.S. you should figure the tax and show it on line 58
trade or business during the year and the gains Example. You are a nonresident alien and of Form 1040NR. Attach a statement to your re-
and losses were effectively connected with that are not engaged in a U.S. trade or business. turn that includes the following information (if
trade or business during the tax year. You own a single-family house in the United applicable).
In arriving at your net gain, do not take the States that you rent out. Your rental income for Your name, taxpayer identification number,
following into consideration. the year is $10,000. This is your only U.S. and tax year.
The four types of gains listed earlier. source income. As discussed earlier under The A description of the types of services per-
The deduction for a capital loss carryover. 30% Tax, the rental income is subject to a tax at formed (whether on or off board).
a 30% (or lower treaty) rate. You received a Names of vessels or registration numbers
Capital losses in excess of capital gains. Form 1042-S showing that your tenants prop- of aircraft on which you performed the
Exclusion for gain from the sale or ex- erly withheld this tax from the rental income. services.
change of qualified small business stock You do not have to file a U.S. tax return (Form Amount of U.S. source transportation in-
(section 1202 exclusion). 1040NR) because your U.S. tax liability is satis- come derived from each type of service for
Losses from the sale or exchange of prop- fied by the withholding of tax. each vessel or aircraft for the calendar
erty held for personal use. However, los- If you make the choice discussed earlier, year.
ses resulting from casualties or thefts may you can offset the $10,000 income by certain Total amount of U.S. source transportation
be deductible on Schedule A (Form rental expenses. (See Publication 527, Resi- income derived from all types of services
1040NR). See Itemized Deductions in dential Rental Property, for information on rental for the calendar year.
chapter 5. expenses.) Any resulting net income is taxed at
graduated rates. If you make this choice, report This 4% tax applies to your U.S. source
If you are not engaged in a trade or business
the rental income and expenses on Schedule E gross transportation income. This only includes
in the United States and have not established a
(Form 1040) and attach the schedule to Form transportation income that is treated as derived
tax year for a prior period, your tax year will be
1040NR. For the first year you make the choice, from sources in the United States if the trans-
the calendar year for purposes of the 183-day
also attach the statement discussed next. portation begins or ends in the United States.
rule. Also, you must file your tax return on a cal-
For transportation income from personal serv-
endar-year basis.
Making the choice. Make the initial choice by ices, the transportation must be between the
If you were in the United States for less than attaching a statement to your return, or amen- United States and a U.S. possession. For per-
183 days during the tax year, capital gains ded return, for the year of the choice. Include sonal services of a nonresident alien, this only
(other than gains listed earlier) are tax exempt the following in your statement. applies to income derived from, or in connec-
unless they are effectively connected with a That you are making the choice. tion with, an aircraft.
trade or business in the United States during
your tax year. Whether the choice is under Internal Reve-
nue Code section 871(d) (explained ear-
Reporting. Report your gains and losses from lier) or a tax treaty. Interrupted Period
the sales or exchanges of capital assets that A complete list of all your real property, or
any interest in real property, located in the
of Residence
are not effectively connected with a trade or
business in the United States on page 4 of United States. Give the legal identification
of U.S. timber, coal, or iron ore in which You are subject to tax under a special rule if you
Form 1040NR. Report gains and losses from interrupt your period of U.S. residence with a
sales or exchanges of capital assets (including you have an interest.
The extent of your ownership in the prop- period of nonresidence. The special rule ap-
real property) that are effectively connected plies if you meet all of the following conditions.
with a trade or business in the United States on erty.
a separate Schedule D (Form 1040), Form The location of the property. 1. You were a U.S. resident for a period that
4797, or both. Attach them to Form 1040NR. A description of any major improvements includes at least 3 consecutive calendar
to the property. years.
The dates you owned the property.
Income From Real Property 2. You were a U.S. resident for at least 183
Your income from the property. days in each of those years.
If you have income from real property located in Details of any previous choices and revo- 3. You ceased to be treated as a U.S. resi-
the United States that you own or have an inter- cations of the real property income choice. dent.
est in and hold for the production of income, This choice stays in effect for all later tax 4. You then again became a U.S. resident
you can choose to treat all income from that years unless you revoke it. before the end of the third calendar year
property as income effectively connected with a
after the end of the period described in (1)
trade or business in the United States. The Revoking the choice. You can revoke the above.
choice applies to all income from real property choice without IRS approval by filing Form
located in the United States and held for the 1040X, Amended U.S. Individual Income Tax Under this special rule, you are subject to
production of income and to all income from Return, for the year you made the choice and tax on your U.S. source gross income and gains
any interest in such property. This includes in- for later tax years. You must file Form 1040X on a net basis at the graduated rates applicable
come from rents, royalties from mines, oil or within 3 years from the date your return was to individuals (with allowable deductions) for the
gas wells, or other natural resources. It also in- filed or 2 years from the time the tax was paid, period you were a nonresident alien, unless you
cludes gains from the sale or exchange of tim- whichever is later. If this time period has ex- would be subject to a higher tax under the 30%
ber, coal, or domestic iron ore with a retained pired for the year of choice, you cannot revoke tax (discussed earlier) on income not connec-
economic interest. the choice for that year. However, you may re- ted with a U.S. trade or business. For

Chapter 4 How Income of Aliens Is Taxed Page 21


information on how to figure the special tax, see or terminate your residency was more than Expatriation After
Expatriation Tax, below. $100,000, or
June 3, 2004, and
Example. John Willow, a citizen of New
2. Your net worth on the date of your action Before June 17, 2008
was $500,000 or more.
Zealand, entered the United States on April 1,
2009, as a lawful permanent resident. On Au- The amounts above are adjusted for inflation if If you expatriated after June 3, 2004, and be-
gust 1, 2011, John ceased to be a lawful per- your expatriation action is after 1997 (see Ta- fore June 17, 2008, the expatriation rules apply
manent resident and returned to New Zealand. ble 4-1). to you if any of the following statements apply.
During his period of residence, he was present
in the United States for at least 183 days in 1. Your average annual net income tax for
Table 4-1. Inflation-Adjusted Amounts for the 5 tax years ending before the date of
each of three consecutive years (2009, 2010, Expatriation Actions Before June 4, 2004
and 2011). He returned to the United States on expatriation or termination of residency is
October 5, 2014, as a lawful permanent resi- IF you THEN the rules outlined more than:
dent. He became a resident before the close of expatriated on this page apply if . . . a. $124,000 if you expatriated or termi-
the third calendar year (2014) beginning after during . . . nated residency in 2004.
the end of his first period of residence (August Your
1, 2011). Therefore, he is subject to tax under b. $127,000 if you expatriated or termi-
5-year Your net
the special rule for the period of nonresidence nated residency in 2005.
average worth
(August 2, 2011, through October 4, 2014) if it annual net OR equaled or c. $131,000 if you expatriated or termi-
is more than the tax that would normally apply income tax exceeded nated residency in 2006.
to him as a nonresident alien. was more ... d. $136,000 if you expatriated or termi-
than ... nated residency in 2007.
Reporting requirements. If you are subject to
this tax for any year in the period you were a 1999 110,000 552,000
e. $139,000 if you expatriated or termi-
nonresident alien, you must file Form 1040NR 2000 112,000 562,000 nated residency in 2008.
for that year. The return is due by the due date 2001 116,000 580,000
(including extensions) for filing your U.S. in- 2002 120,000 599,000 2. Your net worth is $2 million or more on the
come tax return for the year that you again be- 2003 122,000 608,000 date of your expatriation or termination of
come a U.S. resident. If you already filed re- residency.
2004 124,000 622,000
turns for that period, you must file amended (before 3. You fail to certify on Form 8854 that you
returns. You must attach a statement to your re- June 4)* have complied with all U.S. federal tax ob-
turn that identifies the source of all of your U.S. ligations for the 5 tax years preceding the
and foreign gross income and the items of in- *If you expatriated after June 3, 2004, see
date of your expatriation or termination of
come subject to this special rule. Expatriation After June 3, 2004, and Before June
residency.
17, 2008 or Expatriation After June 16, 2008.
Exception for dual-citizens and certain mi-
Expatriation Tax nors. Certain dual-citizens and certain minors
Reporting requirements. If you lost your U.S. (defined next) are not subject to the expatriation
The expatriation tax provisions apply to U.S. citizenship, you should have filed Form 8854 tax even if they meet (1) or (2) earlier. However,
citizens who have renounced their citizenship with a consular office or a federal court at the they still must provide the certification required
and long-term residents who have ended their time of loss of citizenship. If you ended your in (3).
residency. The rules that apply are based on long-term residency, you should have filed
the dates of expatriation, which are described in Form 8854 with the Internal Revenue Service Certain dual-citizens. You may qualify for
the following sections. when you filed your dual-status tax return for the exception described above if all of the fol-
Expatriation Before June 4, 2004. the year your residency ended. lowing apply.
Your U.S. residency is considered to have You became at birth a U.S. citizen and a
Expatriation After June 3, 2004, and Be-
ended when you ceased to be a lawful perma- citizen of another country and you continue
fore June 17, 2008.
nent resident or you began to be treated as a to be a citizen of that other country.
Expatriation After June 16, 2008.
resident of another country under a tax treaty You were never a resident alien of the Uni-
and do not waive treaty benefits. ted States (as defined in chapter 1).
Long-term resident defined. You are a You never held a U. S. passport.
long-term resident if you were a lawful perma- Penalties. If you failed to file Form 8854,
nent resident of the United States in at least 8 of you may have to pay a penalty equal to the You were present in the United States for
the last 15 tax years ending with the year your greater of 5% of the expatriation tax or $1,000. no more than 30 days during any calendar
residency ends. In determining if you meet the The penalty will be assessed for each year of year that is 1 of the 10 calendar years pre-
8-year requirement, do not count any year that the 10-year period beginning on the date of ex- ceding your loss of U. S. citizenship.
you are treated as a resident of a foreign coun- patriation during which your failure to file contin- Certain minors. You may qualify for the
try under a tax treaty and do not waive treaty ues. The penalty will not be imposed if you can exception described above if you meet all of the
benefits. show that the failure is due to reasonable cause following requirements.
and not willful neglect.
You became a U.S. citizen at birth.
Expatriation Before Expatriation tax. The expatriation tax applies Neither of your parents was a U.S. citizen
June 4, 2004 to the 10-year period following the date of expa- at the time of your birth.
triation or termination of residency. It is figured You expatriated before you were 181 2.
If you expatriated before June 4, 2004, the ex- in the same way as for those expatriating after You were present in the United States for
patriation rules apply if one of the principal pur- June 3, 2004, and before June 17, 2008. See not more than 30 days during any calendar
poses of the action is the avoidance of U.S. How To Figure the Expatriation Tax (If You Ex- year that is 1 of the 10 calendar years pre-
taxes. Unless you received a ruling from the patriated Before June 17, 2008) in the next sec- ceding your expatriation.
IRS that you did not expatriate to avoid U.S. tion.
taxes, you are presumed to have tax avoidance Tax consequences of presence in the Uni-
as a principal purpose if: ted States. The following rules apply if you do
1. Your average annual net income tax for not meet the exception above for dual-citizens
the last 5 tax years ending before the date and certain minors and the expatriation rules
of your action to relinquish your citizenship would otherwise apply to you.

Page 22 Chapter 4 How Income of Aliens Is Taxed


The expatriation tax does not apply to any termination of residency is the later of the dates tions to the tax and special U.S. source rules,
tax year during the 10-year period if you are on which you perform the following actions. see section 877 of the Internal Revenue Code.
physically present in the United States for more You notify either the Department of State
than 30 days during the calendar year ending in or the Department of Homeland Security Expatriation Tax Return
that year. Instead, you are treated as a U.S. citi- (whichever is appropriate) of your expatri-
zen or resident and taxed on your worldwide in- ating act or termination of residency. If you expatriated or terminated your U.S. resi-
come for that tax year. You must file Form 1040, You file Form 8854 in accordance with the dency, or you are subject to the expatriation tax,
1040A, or 1040EZ and figure your tax as pre- form instructions. you must file Form 8854, Initial and Annual Ex-
scribed in the instructions for those forms. patriation Statement. Attach it to Form 1040NR
When counting the number of days of pres- Annual return. If the expatriation tax ap-
plies to you, you must file Form 8854 each year if you are required to file that form. If you are
ence during a calendar year, count any day you present in the United States following your ex-
were physically present in the United States at during the 10-year period following the date of
expatriation. You must file this form even if you patriation and are subject to tax as a U.S. citi-
any time during the day. However, do not count zen or resident, file Form 8854 with Form 1040.
any days (up to a limit of 30 days) on which you owe no U.S. tax.
performed personal services in the United
States for an employer who is not related to you
Penalty. If you fail to file Form 8854 for any
tax year, fail to include all information required
Expatriation After
if either of the following apply. to be shown on the form, or include incorrect in- June 16, 2008
1. You have ties with other countries. You formation, you may have to pay a penalty of
have ties with other countries if: $10,000. You will not have to pay a penalty if If you expatriated after June 16, 2008, the expa-
you show that the failure is due to reasonable triation rules apply to you if you meet any of the
a. You became (within a reasonable pe- cause and not to willful neglect. following conditions.
riod after your expatriation or termina-
tion of residency) a citizen or resident 1. Your average annual net income tax for
of the country in which you, your How To Figure the Expatriation the 5 years ending before the date of ex-
spouse, or either of your parents were Tax (If You Expatriated Before patriation or termination of residency is
born, and June 17, 2008) more than:
b. You became fully liable for income tax If the expatriation tax applies to you, you are a. $139,000 if you expatriated or termi-
in that country. generally subject to tax on your U.S. source nated residency in 2008.
2. You were physically present in the United gross income and gains on a net basis at the b. $145,000 if you expatriated or termi-
States for 30 days or less during each graduated rates applicable to individuals (with nated residency in 2009 or 2010.
year in the 10-year period ending on the allowable deductions) unless you would be sub-
ject to a higher tax under the 30% tax (dis- c. $147,000 if you expatriated or termi-
date of expatriation or termination of resi-
cussed earlier) on income not connected with a nated residency in 2011.
dency. Do not count any day you were an
exempt individual or were unable to leave U.S. trade or business. d. $151,000 if you expatriated or termi-
the United States because of a medical nated residency in 2012.
condition that arose while you were in the For this purpose, U.S. source gross income e. $155,000 if you expatriated or termi-
United States. See Exempt individual and (defined in chapter 2) includes gains from the nated residency in 2013.
Medical condition in chapter 1 under Sub- sale or exchange of:
stantial Presence Test, but disregard the Property (other than stock or debt obliga- f. $157,000 if you expatriated or termi-
information about Form 8843. tions) located in the United States, nated residency in 2014.
Stock issued by a U.S. domestic corpora- 2. Your net worth is $2 million or more on the
Related employer. If your employer in the
tion, and date of your expatriation or termination of
United States is any of the following, then your
Debt obligations of U.S. persons or of the residency.
employer is related to you. You must count any
United States, a state or political subdivi-
days you performed services in the United
sion thereof, or the District of Columbia. 3. You fail to certify on Form 8854 that you
States for that employer as days of presence in
have complied with all U.S. federal tax ob-
the United States.
U.S. source income also includes any in- ligations for the 5 years preceding the date
Members of your family. This includes only
come or gain derived from stock in certain con- of your expatriation or termination of resi-
your brothers and sisters, half-brothers
trolled foreign corporations if you owned, or dency.
and half-sisters, spouse, ancestors (pa-
rents, grandparents, etc.), and lineal de- were considered to own, at any time during the 4. You expatriated before 2014 and you:
scendants (children, grandchildren, etc.). 2-year period ending on the date of expatria-
tion, more than 50% of: a. Deferred the payment of tax,
A partnership in which you directly or indi-
rectly own more than 50% of the capital in- The total combined voting power of all b. Have an item of eligible deferred com-
terest or the profits interest. classes of that corporation's stock, or pensation, or
A corporation in which you directly or indi- The total value of the stock.
c. Have an interest in a nongrantor trust.
rectly own more than 50% in value of the
outstanding stock. (See Publication 550, The income or gain is considered U.S. source
income only to the extent of your share of earn- Exception for dual-citizens and certain mi-
chapter 4, Constructive ownership of
ings and profits earned or accumulated before nors. Certain dual-citizens and certain minors
stock, for how to determine whether you di-
the date of expatriation and during the periods (defined next) are not subject to the expatriation
rectly or indirectly own outstanding stock.)
you met the ownership requirements discussed tax even if they meet (1) or (2) above. However,
A tax-exempt charitable or educational or-
above. they still must provide the certification required
ganization that is directly or indirectly con-
in (3) above.
trolled, in any manner or by any method,
by you or by a member of your family, Any exchange of property is treated as a Certain dual-citizens. You may qualify for
whether or not this control is legally en- sale of the property at its fair market value on the exception described above if both of the fol-
forceable. the date of the exchange and any gain is lowing apply.
treated as U.S. source gross income in the tax You became at birth a U.S. citizen and a
Date of tax expatriation. For purposes of year of the exchange unless you enter into a citizen of another country and you continue
U.S. tax rules, the date of your expatriation or gain recognition agreement under Notice 97-19. to be a citizen of, and are taxed as a resi-
dent of, that other country.
Other information. For more information on You have been a resident of the United
the expatriation tax provisions, including excep- States for not more than 10 years during

Chapter 4 How Income of Aliens Is Taxed Page 23


the 15-year tax period ending with the tax How To Figure the payment of the mark-to-market tax imposed on
year during which the expatriation occurs. Expatriation Tax (If You the deemed sale of property. If you make this
For the purpose of determining U.S. resi- Expatriate After June 16, 2008) election, the following rules apply.
dency, use the substantial presence test
1. You can make the election on a prop-
described in chapter 1. In the year you expatriate, you are subject to in- erty-by-property basis.
come tax on the net unrealized gain (or loss) in
Certain minors. You may qualify for the 2. The deferred tax attributable to a particular
your property as if the property had been sold
exception described earlier if you meet both of property is due on the return for the tax
for its fair market value on the day before your
the following requirements. year in which you dispose of the property.
expatriation date (mark-to-market tax). This
You expatriated before you were 181 2.
applies to most types of property interests you 3. Interest is charged for the period the tax is
You have been a resident of the United held on the date of relinquishment of citizenship
States for not more than 10 tax years be- deferred.
or termination of residency. But see Exceptions,
fore the expatriation occurs. For the pur- later. 4. The due date for the payment of the defer-
pose of determining U.S. residency, use red tax cannot be extended beyond the
the substantial presence test described in Gains arising from deemed sales must be earlier of the following dates.
chapter 1. taken into account for the tax year of the
a. The due date of the return required for
deemed sale without regard to other U.S. inter-
Expatriation date. Your expatriation date is the year of death.
nal revenue laws. Losses from deemed sales
the date you relinquish U.S. citizenship (in the must be taken into account to the extent other- b. The time that the security provided for
case of a former citizen) or terminate your wise provided under U.S. internal revenue laws. the property fails to be adequate. See
long-term residency (in the case of a former However, Internal Revenue Code section 1091 item (6) below.
U.S. resident). (relating to the disallowance of losses on wash
5. You make the election on Form 8854.
sales of stock and securities) does not apply.
Former U.S. citizen. You are considered
The net gain that you otherwise must include in 6. You must provide adequate security (such
to have relinquished your U.S. citizenship on
your income is reduced (but not below zero) by: as a bond).
the earliest of the following dates.
1. $600,000 if you expatriated or terminated 7. You must make an irrevocable waiver of
1. The date you renounced U.S. citizenship
residency before January 1, 2009. any right under any treaty of the United
before a diplomatic or consular officer of
States which would preclude assessment
the United States (provided that the volun- 2. $626,000 if you expatriated or terminated
or collection of the mark-to-market tax.
tary renouncement was later confirmed by residency in 2009.
the issuance of a certificate of loss of na- For more information about the deferral of
3. $627,000 if you expatriated or terminated
tionality). payment, see the Instructions for Form 8854.
residency in 2010.
2. The date you furnished to the State De-
4. $636,000 if you expatriated or terminated
partment a signed statement of voluntary
residency in 2011.
relinquishment of U.S. nationality confirm-
ing the performance of an expatriating act 5. $651,000 if you expatriated or terminated
(provided that the voluntary relinquish- residency in 2012.
ment was later confirmed by the issuance
of a certificate of loss of nationality).
6. $668,000 if you expatriated or terminated
residency in 2013.
5.
3. The date the State Department issued a 7. $680,000 if you expatriated or terminated
certificate of loss of nationality.
4. The date that a U.S. court canceled your
residency in 2014.
Figuring
certificate of naturalization. Exceptions. The mark-to-market tax does not

Former long-term resident. You are con-


apply to the following.
Your Tax
sidered to have terminated your long-term resi- 1. Eligible deferred compensation items.
dency on the earliest of the following dates. 2. Ineligible deferred compensation items.
1. The date you voluntarily relinquished your 3. Interests in nongrantor trusts. Introduction
lawful permanent resident status by filing
4. Specified tax deferred accounts. After you have determined your alien status, the
Department of Homeland Security Form
source of your income, and if and how that in-
I-407 with a U.S. consular or immigration Instead, items (1) and (3) may be subject to come is taxed in the United States, your next
officer, and the Department of Homeland withholding at source. In the case of item (2), step is to figure your tax. The information in this
Security determined that you have, in fact, you are treated as receiving the present value chapter is not as comprehensive for resident
abandoned your lawful permanent resi- of your accrued benefit as of the day before the aliens as it is for nonresident aliens. Resident
dent status. expatriation date. In the case of item (4), you aliens should get publications, forms, and in-
2. The date you became subject to a final ad- are treated as receiving a distribution of your structions for U.S. citizens, because the infor-
ministrative order for your removal from entire interest in the account on the day before mation for filing returns for resident aliens is
the United States under the Immigration your expatriation date. See paragraphs (d), (e), generally the same as for U.S. citizens.
and Nationality Act and you actually left and (f) of section 877A for more information. If you are both a nonresident alien and a
the United States as a result of that order. resident alien in the same tax year, see chap-
3. If you were a dual resident of the United
Expatriation Tax Return ter 6 for a discussion of dual-status aliens.
States and a country with which the United
If you expatriated or terminated your U.S. resi- Topics
States has an income tax treaty, the date
dency, or you are subject to the expatriation This chapter discusses:
you began to be treated as a resident of
rules (as discussed earlier in the first paragraph
that country and you determined that, for
under Expatriation After June 16, 2008), you
purposes of the treaty, you are a resident Identification numbers,
must file Form 8854. Attach it to Form 1040 or
of the treaty country and notify the IRS of Filing status,
Form 1040NR if you are required to file either of
that treatment on Forms 8833 and 8854.
those forms. Deductions,
See Effect of Tax Treaties in chapter 1 for
more information about dual residents. Exemptions,
Deferral of payment of mark-to-market tax.
You can make an irrevocable election to defer

Page 24 Chapter 5 Figuring Your Tax


Tax credits and payments, and (EIN) is required if you are engaged in a trade ply for an EIN, file Form SS-4, Application for
Special rules for bona fide residents of or business as a sole proprietor and have em- Employer Identification Number, with the IRS.
American Samoa and Puerto Rico. ployees or a qualified retirement plan.

Useful Items
You must furnish a taxpayer identification
number if you are:
Filing Status
You may want to see: An alien who has income effectively con-
nected with the conduct of a U.S. trade or The amount of your tax depends on your filing
business at any time during the year, status. Your filing status is important in deter-
Publication mining whether you can take certain deductions
An alien who has a U.S. office or place of
463 Travel, Entertainment, Gift, and Car business at any time during the year, and credits. The rules for determining your filing
Expenses A nonresident alien spouse treated as a status are different for resident aliens and non-
resident, as discussed in chapter 1, or resident aliens.
501 Exemptions, Standard Deduction,
and Filing Information Any other alien who files a tax return, an
amended return, or a refund claim (but not Resident Aliens
521 Moving Expenses information returns).
526 Charitable Contributions Resident aliens can use the same filing sta-
Social security number (SSN). Generally, tuses available to U.S. citizens. See your form
535 Business Expenses you can get an SSN if you have been lawfully instructions or Publication 501 for more infor-
admitted to the United States for permanent mation on filing status.
597 Information on the United States
residence or under other immigration catego-
Canada Income Tax Treaty
ries that authorize U.S. employment. Married filing jointly. Generally, you can file
Form (and Instructions) To apply for this number, get Form SS-5, as married filing jointly only if both you and your
Application for a Social Security Card, from spouse were resident aliens for the entire tax
W-7 Application for IRS Individual your local Social Security Administration (SSA) year, or if you make one of the choices dis-
Taxpayer Identification Number office or call the SSA at 1-800-772-1213. You cussed in chapter 1 to treat your spouse as a
can also download Form SS-5 from the SSA's resident alien for the entire tax year.
1040 U.S. Individual Income Tax Return
website at www.socialsecurity.gov/ssnumber/
1040NR U.S. Nonresident Alien Income ss5.htm. You must visit an SSA office in person Qualifying widow(er). If your spouse died in
Tax Return and submit your Form SS-5 along with original 2012 or 2013, you did not remarry before the
documentation showing your age, identity, im- end of 2014, and you have a dependent child
1040NR-EZ U.S. Income Tax Return for
migration status, and authority to work in the living with you, you may qualify to file as a quali-
Certain Nonresident Aliens With No
United States. Generally, you will receive your fying widow(er) and use the joint return tax
Dependents
card about 2 weeks after the SSA has all of the rates. This applies only if you could have filed a
2106 Employee Business Expenses necessary information. joint return with your spouse for the year your
spouse died.
2106-EZ Unreimbursed Employee F-1 and M-1 visa holders. If you are an
Business Expenses F-1 or M-1 student, you must also show your Head of household. You can qualify as head
Form I-20. For more information, see SSA Pub- of household if you are unmarried or considered
3903 Moving Expenses
lication 05-10181, International Students and unmarried on the last day of the year and you
4563 Exclusion of Income for Bona Fide Social Security Numbers, available online at pay more than half the cost of keeping up a
Residents of American Samoa www.socialsecurity.gov/pubs/10181.html. home for you and a qualifying person. You must
8959 Additional Medicare Tax J-1 visa holders. If you are a J-1 ex- be a resident alien for the entire tax year.
change visitor, you will also need to show your You are considered unmarried for this pur-
See chapter 12 for information about getting Form DS-2019. For more information, see SSA pose if your spouse was a nonresident alien at
these publications and forms. Publication 05-10107, Foreign Workers and So- any time during the year and you do not make
cial Security Numbers, available online at one of the choices discussed in chapter 1 to
treat your spouse as a resident alien for the en-
Tax Year www.socialsecurity.gov/pubs/10107.html.
tire tax year.
Individual taxpayer identification number
You must figure your income and file a tax re- (ITIN). If you do not have and are not eligible to Note. Even if you are considered unmarried
turn on the basis of an annual accounting pe- get an SSN, you must apply for an ITIN. For de- for head of household purposes because you
riod called a tax year. If you have not previously tails on how to do so, see Form W-7 and its in- are married to a nonresident alien, you may still
established a fiscal tax year, your tax year is the structions. Allow 6 to 10 weeks for the IRS to be considered married for purposes of the
calendar year. A calendar year is 12 consecu- notify you of your ITIN. If you already have an earned income credit. In that case, you will not
tive months ending on December 31. If you ITIN, enter it wherever an SSN is required on be entitled to the credit. See Publication 596 for
have previously established a regular fiscal year your tax return. more information.
(12 consecutive months ending on the last day An ITIN is for tax use only. It does not entitle
of a month other than December or a 5253 you to social security benefits or change your Nonresident Aliens
week year) and are considered to be a U.S. res- employment or immigration status under U.S.
ident for any calendar year, you will be treated law. If you are a nonresident alien filing Form
as a U.S. resident for any part of your fiscal year In addition to those aliens who are required 1040NR, you may be able to use one of the fil-
that falls within that calendar year. to furnish a taxpayer identification number and ing statuses discussed later. If you are filing
are not eligible for an SSN, a Form W-7 must be Form 1040NR-EZ, you can only claim Single
filed for: nonresident alien or Married nonresident
Identification Number Alien individuals who are claimed as de- alien as your filing status.
pendents and are not eligible for an SSN,
A taxpayer identification number must be fur- and Married nonresident alien. Married nonresi-
nished on returns, statements, and other tax-re- Alien spouses who are claimed as exemp- dent aliens who are not married to U.S. citizens
lated documents. For an individual, this is a so- tions and are not eligible for an SSN. or residents generally must use the Tax Table
cial security number (SSN). If you do not have column or the Tax Computation Worksheet for
and are not eligible to get an SSN, you must ap- Employer identification number (EIN). An married filing separate returns when determin-
ply for an individual taxpayer identification num- individual may use an SSN (or ITIN) for individ- ing the tax on income effectively connected with
ber (ITIN). An employer identification number ual taxes and an EIN for business taxes. To ap- a U.S. trade or business.

Chapter 5 Figuring Your Tax Page 25


Exceptions. Married nonresident aliens Special rules for aliens from certain U.S. etc. to the extent that they relate to income that
normally cannot use the Tax Table column or possessions. A nonresident alien who is a is effectively connected with a trade or business
the Tax Computation Worksheet for single indi- bona fide resident of American Samoa or Pu- in the United States.
viduals. However, you may be able to file as erto Rico for the entire tax year and who is tem-
single if you lived apart from your spouse during porarily working in the United States should Educator expenses. If you were an eligible
the last 6 months of the year and you are a mar- read Bona Fide Residents of American Samoa educator in 2014, you can deduct as an adjust-
ried resident of Canada, Mexico, South Korea, or Puerto Rico, at the end of this chapter, for in- ment to income up to $250 in unreimbursed
or are a married U.S. national. See the instruc- formation about special rules. qualified expenses you paid or incurred during
tions for Form 1040NR or Form 1040NR-EZ to 2014 for books, supplies (other than nonathletic
see if you qualify. U.S. national is defined later supplies for courses of instruction in health or
in this section under Qualifying widow(er). Reporting Your Income physical education), computer equipment, and
A nonresident alien generally cannot file as other equipment and materials used in the
married filing jointly. However, a nonresident You must report each item of income that is tax- classroom. For more information, see your tax
alien who is married to a U.S. citizen or resident able according to the rules in chapters 2, 3, and form instructions.
can choose to be treated as a resident and file a 4. For resident aliens, this includes income from
joint return on Form 1040, Form 1040A, or Form Individual retirement arrangement (IRA). If
sources both within and outside the United
1040EZ. For information on these choices, see you made contributions to a traditional IRA for
States. For nonresident aliens, this includes
chapter 1. If you do not make the choice to file 2014, you may be able to take an IRA deduc-
both income that is effectively connected with a
jointly, file Form 1040NR or Form 1040NR-EZ tion. But you must have taxable compensation
trade or business in the United States (subject
and use the Tax Table column or the Tax Com- effectively connected with a U.S. trade or busi-
to graduated tax rates) and income from U.S.
putation Worksheet for married individuals filing ness to do so. A Form 5498 should be sent to
sources that is not effectively connected (sub-
separately. you by June 1, 2015, that shows all contribu-
ject to a flat 30% tax rate or lower tax treaty
tions to your traditional IRA for 2014. If you were
rate).
Qualifying widow(er). You may be eligible to covered by a retirement plan (qualified pension,
file as a qualifying widow(er) and use the joint profit-sharing (including 401(k)), annuity, SEP,
return tax rates if all of the following conditions
apply.
Deductions SIMPLE, etc.) at work or through self-employ-
ment, your IRA deduction may be reduced or
eliminated. But you can still make contributions
1. You were a resident of Canada, Mexico, Resident and nonresident aliens can claim simi- to a traditional IRA even if you cannot deduct
or South Korea, or a U.S. national (defined lar deductions on their U.S. tax returns. How- them. If you made nondeductible contributions
later). ever, nonresident aliens generally can claim to a traditional IRA for 2014, you must report
2. Your spouse died in 2012 or 2013 and you only deductions related to income that is effec- them on Form 8606, Nondeductible IRAs.
did not remarry before the end of 2014. tively connected with their U.S. trade or busi- For more information, see Publication 590,
ness. Individual Retirement Arrangements (IRAs).
3. You have a dependent child living with
you.
Resident Aliens Moving expenses. If you are a nonresident
See the instructions for Form 1040NR for the alien temporarily in the United States earning
rules for filing as a qualifying widow(er) with a You can claim the same deductions allowed to taxable income for performing personal serv-
dependent child. U.S. citizens if you are a resident alien for the ices, you can deduct moving expenses to the
A U.S. national is an individual who, al- entire tax year. While the discussion that follows United States if you meet both of the following
though not a U.S. citizen, owes his or her alle- tests.
contains some of the same general rules and
giance to the United States. U.S. nationals in- You are a full-time employee for at least 39
guidelines that apply to you, it is specifically di-
clude American Samoans and Northern weeks during the 12 months right after you
rected toward nonresident aliens. You should
Mariana Islanders who chose to become U.S. move, or if you are self-employed, you
get Form 1040 and instructions for more infor-
nationals instead of U.S. citizens. work full time for at least 39 weeks during
mation on how to claim your allowable deduc-
the first 12 months and 78 weeks during
tions.
Head of household. You cannot file as head the first 24 months right after you move.
of household if you are a nonresident alien at Your new job location is at least 50 miles
any time during the tax year. However, if you Nonresident Aliens farther (by the shortest commonly traveled
are married, your spouse can qualify as a head route) from your former home than your
of household if: You can claim deductions to figure your effec- former job location was. If you had no for-
Your spouse is a resident alien or U.S. citi- tively connected taxable income. You generally mer job location, the new job location must
zen for the entire tax year, cannot claim deductions related to income that be at least 50 miles from your former
You do not choose to be treated as a resi- is not connected with your U.S. business activi- home.
dent alien, and ties. Except for personal exemptions, and cer- You cannot deduct the moving expense you
Your spouse meets the other requirements tain itemized deductions, discussed later, you have when returning to your home abroad or
for this filing status, as discussed earlier can claim deductions only to the extent they are moving to a foreign job site.
under Resident Aliens. connected with your effectively connected in- Figure your deductible moving expenses to
come. the United States on Form 3903, and deduct
Note. Even if your spouse is considered un-
married for head of household purposes be- them on line 26 of Form 1040NR.
Ordinary and necessary business expen-
cause you are a nonresident alien, your spouse For more information on the moving ex-
ses. You can deduct all ordinary and neces-
may still be considered married for purposes of pense deduction, see Publication 521.
sary expenses in the operation of your U.S.
the earned income credit. In that case, your trade or business to the extent they relate to in- Reimbursements. If your employer reim-
spouse will not be entitled to the credit. See come effectively connected with that trade or bursed you for allowable moving expenses un-
Publication 596 for more information. business. The deduction for travel expenses der an accountable plan, your employer should
while in the United States is discussed under have excluded these reimbursements from your
Estates and trusts. A nonresident alien estate Itemized Deductions, later. For information income. You can only deduct allowable moving
or trust using Form 1040NR must use Tax Rate about other business expenses, see Publication expenses that were not reimbursed by your em-
Schedule W in the Form 1040NR instructions 535. ployer or that were reimbursed but the reim-
when determining the tax on income effectively
bursement was included in your income. For
connected with a U.S. trade or business. Losses. You can deduct losses resulting from more information, see Publication 521.
transactions that you entered into for profit and
that you were not reimbursed for by insurance,

Page 26 Chapter 5 Figuring Your Tax


Moving expense or travel expense. If 7. The person for whom the expenses were rules. For purposes of these rules, dependents
you deduct moving expenses to the United paid or incurred was an eligible student. who are U.S. nationals meet the citizenship test
States, you cannot also deduct travel expenses discussed in Publication 501.
(discussed later under Itemized Deductions) Use the worksheet in the Form 1040NR or Form
while temporarily away from your tax home in a 1040NR-EZ instructions to figure the deduction. Residents of South Korea. Nonresident ali-
foreign country. Moving expenses are based on For more information, see Publication 970, Tax ens who are residents of South Korea may be
a change in your principal place of business Benefits for Education. able to claim exemptions for a spouse and chil-
while travel expenses are based on your tem- dren. The income tax treaty with South Korea
porary absence from your principal place of imposes two additional requirements on South
business. Exemptions Korean residents:
1. The spouse and all children claimed must
Self-employed SEP, SIMPLE, and qualified Resident aliens can claim personal exemptions
live with the alien in the United States at
retirement plans. If you are self-employed, and exemptions for dependents in the same
some time during the tax year, and
you may be able to deduct contributions to a way as U.S. citizens. However, nonresident ali-
SEP, SIMPLE, or qualified retirement plan that ens generally can claim only a personal exemp- 2. The additional deduction for the exemp-
provides retirement benefits for yourself and tion for themselves on their U.S. tax return. tions must be prorated based on the ratio
your common-law employees, if any. To make of the alien's U.S. source gross income ef-
fectively connected with a U.S. trade or
deductible contributions for yourself, you must
have net earnings from self-employment that
Resident Aliens business for the tax year to the alien's en-
are effectively connected with your U.S. trade tire income from all sources during the tax
or business. You can claim personal exemptions and ex- year.
emptions for dependents according to the de-
Get Publication 560, Retirement Plans for
pendency rules for U.S. citizens. You can claim Example. Mr. Park, a nonresident alien
Small Business (SEP, SIMPLE, and Qualified
an exemption for your spouse on a separate re- who is a resident of South Korea, lives tempora-
Plans), for further information.
turn if your spouse had no gross income for rily in the United States with his wife and two
U.S. tax purposes and was not the dependent children. During the tax year he receives U.S.
Penalty on early withdrawal of savings. You
of another taxpayer. You can claim this exemp- compensation of $24,000. He also receives
must include in income all effectively connected
tion even if your spouse has not been a resident $8,000 of income from sources outside the Uni-
interest income you receive or that is credited to
alien for a full tax year or is an alien who has not ted States that is not effectively connected with
your account during the year. Do not reduce it
come to the United States. his U.S. trade or business. Thus, his total in-
by any penalty you must pay on an early with-
drawal from a time savings account. However, if come for the year is $32,000. Mr. Park meets all
You can claim an exemption for each per-
the interest income is effectively connected with requirements for claiming exemptions for his
son who qualifies as a dependent according to
your U.S. trade or business during the year, you spouse and two children. The additional deduc-
the rules for U.S. citizens. The dependent must
can deduct on line 30 of Form 1040NR the tion for 2014 is $8,888 figured as follows:
be a citizen or national (defined earlier) of the
amount of the early withdrawal penalty that the United States or be a resident of the United
banking institution charged. States, Canada, or Mexico for some part of the $24,000
$11,850* = $8,888
$32,000
calendar year in which your tax year begins.
Student loan interest expense. If you paid Get Publication 501 for more information.
interest on a student loan in 2014, you may be *3 $3,950 = $11,850
able to deduct up to $2,500 of the interest you Your spouse and each dependent for
paid. Generally, you can claim the deduction if ! whom you claim an exemption must Students and business apprentices from In-
all the following requirements are met. CAUTION have either an SSN or an ITIN. See dia. Students and business apprentices who
1. Your filing status is any filing status except Identification Number, earlier. are eligible for the benefits of Article 21(2) of the
married filing separately. United StatesIndia Income Tax Treaty may be
able to claim exemptions for their spouse and
2. Your modified adjusted gross income is Nonresident Aliens dependents.
less than $80,000. You can claim an exemption for your spouse
3. No one else is claiming an exemption for Generally, if you are a nonresident alien en- if he or she had no gross income during the
you on his or her 2014 tax return. gaged in a trade or business in the United year and cannot be claimed as a dependent on
States, you can claim only one personal ex- another U.S. taxpayer's return.
4. You paid interest on a loan taken out only emption ($3,950 for 2014). You may be able to You can claim exemptions for each of your
to pay tuition and other qualified higher claim an exemption for a spouse and a depend- dependents not admitted to the United States
education expenses for yourself, your ent if you are described in any of the following on F-2, J-2, or M-2 visas if they meet the
spouse, someone who was your depend- discussions. same rules that apply to U.S. citizens. See Pub-
ent when the loan was taken out, or some-
Your spouse and each dependent for lication 501 for these rules.
one you could have claimed as a depend-
whom you claim an exemption must List your spouse and dependents on line 7c
ent for the year the loan was taken out ! have either an SSN or an ITIN. See of Form 1040NR. Enter the total on the appro-
except that: CAUTION

Identification Number, earlier. priate line to the right of line 7c.


a. The person filed a joint return,
b. The person had gross income that
was equal to or more than the exemp-
Residents of Mexico or Canada or U.S. na-
tionals. If you are a resident of Mexico or Can-
Itemized Deductions
tion amount for that year ($3,950 for ada or a national of the United States (defined
2014), or Nonresident aliens can claim some of the same
earlier), you can also claim a personal exemp-
itemized deductions that resident aliens can
c. You could be claimed as a dependent tion for your spouse if your spouse had no gross
claim. However, nonresident aliens can claim
on someone else's return. income for U.S. tax purposes and cannot be
itemized deductions only if they have income
claimed as the dependent on another U.S. tax-
5. The loan is not from a related person or a effectively connected with their U.S. trade or
payer's return. In addition, you can claim ex-
person who borrowed the proceeds under business.
emptions for your dependents who meet certain
a qualified employer plan or a contract
tests. Residents of Mexico, Canada, or nation-
purchased under such a plan.
als of the United States must use the same Resident Aliens
6. The education expenses were paid or in- rules as U.S. citizens to determine who is a de-
curred within a reasonable period of time pendent and for which dependents exemptions You can claim the same itemized deductions as
before or after the loan was taken out. can be claimed. See Publication 501 for these U.S. citizens, using Schedule A of Form 1040.

Chapter 5 Figuring Your Tax Page 27


Worksheet 5-1. 2014 Standard Deduction Worksheet for
Students and Business Apprentices From India Keep for Your Records
Caution. If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. You cannot take the
standard deduction even if you were born before January 2, 1950, or are blind.

1 Enter the amount shown below for your filing status.


Single or married filing separately$6,200
Qualifying widow(er)$12,400 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2 Can you be claimed as a dependent on someone else's U.S. income tax


return?
No. Enter the amount from line 1 on line 4. Skip line 3 and go to line 5.
Yes. Go to line 3.
3 Is your earned income* more than $650?
Yes. Add $350 to your earned income. Enter the total.
No. Enter $1,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4 Enter the smaller of line 1 or line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
5 If born before January 2, 1950, OR blind, enter $1,200 ($1,550 if single). If born before January 2,
1950, AND blind, enter $2,400 ($3,100 if single). Otherwise, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . 5.
6 Add lines 4 and 5. Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11).
Print Standard Deduction Allowed Under U.S.India Income Tax Treaty in the space to the left of
these lines. This is your standard deduction for 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
*Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also
includes any amount received as a scholarship that you must include in your income. Generally, your earned income is the total of the amount(s)
you reported on Form 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount
on line 8).

These deductions include certain medical and standard deduction provided you do not claim the foreign organization is only an administra-
dental expenses, state and local income taxes, itemized deductions. tive arm of the U.S. organization.
real estate taxes, interest you paid on a home Use Worksheet 5-1 to figure your standard For more information about organizations
mortgage, charitable contributions, casualty deduction. If you are married and your spouse that qualify to receive charitable contributions,
and theft losses, and miscellaneous deduc- files a return and itemizes deductions, you can- see Publication 526, Charitable Contributions.
tions. not take the standard deduction.
Contributions from which you benefit. If
If you do not itemize your deductions, you State and local income taxes. You can de- you receive a benefit as a result of making a
can claim the standard deduction for your par- duct state and local income taxes you paid on contribution to a qualified organization, you can
ticular filing status. For further information, see income that is effectively connected with a trade deduct only the amount of your contribution that
Form 1040 and instructions. or business in the United States. If you received is more than the value of the benefit you re-
a refund or rebate in 2014 of taxes you paid in ceive.
an earlier year, do not reduce your deduction by If you pay more than the fair market value to
Nonresident Aliens that amount. Instead, you must include the re- a qualified organization for merchandise,
fund or rebate in income if you deducted the goods, or services, the amount you pay that is
You can deduct certain itemized deductions if taxes in the earlier year and the deduction re- more than the value of the item can be a chari-
you receive income effectively connected with duced your tax. See Recoveries in Publication table contribution. For the excess amount to
your U.S. trade or business. These deductions 525 for details on how to figure the amount to qualify, you must pay it with the intent to make a
include state and local income taxes, charitable include in income. charitable contribution.
contributions to U.S. organizations, casualty
Cash contributions. You cannot deduct a
and theft losses, and miscellaneous deduc- Charitable contributions. You can deduct cash contribution, regardless of the amount, un-
tions. Use Schedule A of Form 1040NR to claim your charitable contributions or gifts to qualified less you keep as a record of the contribution a
itemized deductions. organizations subject to certain limits. Qualified bank record (such as a canceled check, a bank
organizations include organizations that are reli- copy of a canceled check, or a bank statement
If you are filing Form 1040NR-EZ, you can gious, charitable, educational, scientific, or liter- containing the name of the charity, the date,
only claim a deduction for state or local income ary in nature, or that work to prevent cruelty to and the amount) or a written record from the
taxes. If you are claiming any other itemized de- children or animals. Certain organizations that charity. The written record must include the
duction, you must file Form 1040NR. promote national or international amateur name of the charity, date of the contribution,
sports competition are also qualified organiza- and the amount of the contribution.
Standard deduction. Nonresident aliens can- tions. You may deduct a cash contribution of $250
not claim the standard deduction. However, see
Foreign organizations. Contributions or more only if you have a written statement
Students and business apprentices from India,
made directly to a foreign organization are not from the charitable organization showing:
next.
deductible. However, you can deduct contribu- 1. The amount of any money contributed,
Students and business apprentices from tions to a U.S. organization that transfers funds
India. A special rule applies to students and to a charitable foreign organization if the U.S. 2. Whether the organization gave you any
business apprentices who are eligible for the organization controls the use of the funds or if goods or services in return for your contri-
benefits of Article 21(2) of the United StatesIn- bution, and
dia Income Tax Treaty. You can claim the

Page 28 Chapter 5 Figuring Your Tax


3. A description and estimate of the value of If your property is covered by insurance, you allowance amount depending on the date
any goods or services described in (2). should file a timely insurance claim for reim- and area of your travel. You generally can
bursement. If you do not, you cannot deduct deduct only 50% of unreimbursed meal ex-
If you received only intangible religious benefits, this loss as a casualty or theft loss. penses. The standard meal allowance
the organization must state this, but it does not rates for high-cost areas are available at
Figure your deductible casualty and theft
have to describe or value the benefit. www.gsa.gov/perdiem. The rates for other
losses on Form 4684, Casualties and Thefts.
Noncash contributions. For contributions areas are in Publication 463.
Losses from personal use property. You
not made in cash, the records you must keep Use Form 2106 or 2106-EZ to figure your al-
cannot deduct the first $100 of each casualty or
depend on the amount of your deduction. See lowable expenses that you claim on line 7 of
theft loss to property held for personal use. You
Publication 526 for details. For example, if you Schedule A (Form 1040NR).
can deduct only the total of these losses for the
make a noncash contribution and the amount of
year (reduced by the $100 limit) that is more Expenses allocable to U.S. tax-exempt
your deduction is more than $500, you must
than 10% of your adjusted gross income income. You cannot deduct an expense, or
complete and attach to your tax return Form
(line 37, Form 1040NR) for the year. part of an expense, that is allocable to U.S.
8283, Noncash Charitable Contributions. If you
deduct more than $500 for a contribution of a Losses from income-producing prop- tax-exempt income, including income exempt
motor vehicle, boat, or airplane, you must also erty. These losses are not subject to the limita- by tax treaty.
attach a statement from the charitable organiza- tions that apply to personal use property. Use
tion to your return. If your total deduction is over Section B of Form 4684 to figure your deduction Example. Irina Oak, a citizen of Poland, re-
$5,000, you also may have to get appraisals of for these losses. sided in the United States for part of the year to
the values of the property. If the donated prop- acquire business experience from a U.S. com-
erty is valued at more than $5,000, you must Job expenses and other miscellaneous de- pany. During her stay in the United States, she
obtain a qualified appraisal. You generally must ductions. You can deduct job expenses, such received a salary of $8,000 from her Polish em-
attach to your tax return an appraisal of any as allowable unreimbursed travel expenses ployer. She received no other U.S. source in-
property if your deduction for the property is (discussed next), and other miscellaneous de- come. She spent $3,000 on travel expenses, of
more than $500,000. See Form 8283 and its in- ductions. Generally, the allowable deductions which $1,000 were for meals. None of these ex-
structions for details. must be related to effectively connected in- penses were reimbursed. Under the tax treaty
come. Deductible expenses include: with Poland, $5,000 of her salary is exempt
Contributions of appreciated property. If Union dues, from U.S. income tax. In filling out Form
you contribute property to a qualified organiza- 2106-EZ, she must reduce her deductible meal
tion, the amount of your charitable contribution Safety equipment and small tools needed
expenses by half ($500). She must reduce the
is generally the fair market value of the property for your job,
remaining $2,500 of travel expenses by 62.5%
at the time of the contribution. However, if you Dues to professional organizations,
($1,563) because 62.5% ($5,000 $8,000) of
contribute property with a fair market value that Subscriptions to professional journals, her salary is exempt from tax. She enters the re-
is more than your basis in it, you may have to Tax return preparation fees, and maining total of $937 on line 7 of Schedule A
reduce the fair market value by the amount of (Form 1040NR). She completes the remaining
appreciation (increase in value) when you figure Casualty and theft losses of property used
in performing services as an employee lines according to the instructions for Sched-
your deduction. Your basis in the property is ule A.
generally what you paid for it. If you need more (employee property).
information about basis, get Publication 551, Most miscellaneous itemized deductions are More information. For more information
Basis of Assets. deductible only if they are more than 2% of your about deductible expenses, reimbursements,
Different rules apply to figuring your deduc- adjusted gross income (line 37, Form 1040NR). and recordkeeping, get Publication 463.
tion, depending on whether the property is: For more information on miscellaneous deduc-
Ordinary income property, or tions, see the instructions for Form 1040NR.
Capital gain property. Tax Credits
For information about these rules, see Publica-
Travel expenses. You may be able to deduct
your ordinary and necessary travel expenses and Payments
tion 526. while you are temporarily performing personal
services in the United States. Generally, a tem- This discussion covers tax credits and pay-
Limit. The amount you can deduct in a tax porary assignment in a single location is one ments for resident aliens, followed by a discus-
year is limited in the same way it is for a citizen that is realistically expected to last (and does in sion of the credits and payments for nonresi-
or resident of the United States. For a discus- fact last) for one year or less. You must be able dent aliens.
sion of limits on charitable contributions and to show you were present in the United States
other information, get Publication 526. on an activity that required your temporary ab- Resident Aliens
sence from your regular place of work.
Casualty and theft losses. You can deduct
For example, if you have established a tax
your loss from fire, storm, shipwreck, or other Resident aliens generally claim tax credits and
home through regular employment in a foreign
casualty, or theft of property even though your report tax payments, including withholding, us-
country, and intend to return to similar employ-
property is not connected with a U.S. trade or ing the same rules that apply to U.S. citizens.
ment in the same country at the end of your
business. The property can be personal use
temporary stay in the United States, you can
property or income-producing property not con- The following items are some of the credits
deduct reasonable travel expenses you paid.
nected with a U.S. trade or business. The prop- you may be able to claim.
You cannot deduct travel expenses for other
erty must be located in the United States at the
members of your family or party. Foreign tax credit. You can claim a credit,
time of the casualty or theft. You can deduct
theft losses only in the year in which you dis- Deductible travel expenses. If you qual- subject to certain limits, for income tax you paid
cover the loss. ify, you can deduct your expenses for: or accrued to a foreign country on foreign
The amount of the loss is the fair market Transportationairfare, local transporta- source income. You cannot claim a credit for
value of the property immediately before the tion, including train, bus, etc., taxes paid or accrued on excluded foreign
casualty or theft less its fair market value imme- Lodgingrent paid, utilities (do not include earned income. To claim a credit for income
diately after the casualty or theft (but not more telephone), hotel or motel room expenses, taxes paid or accrued to a foreign country, you
than its cost or adjusted basis) less any insur- and generally will file Form 1116, Foreign Tax Credit
ance or other reimbursement. The fair market Meal expensesactual expenses allowed (Individual, Estate, or Trust), with your Form
value of property immediately after a theft is if you keep records of the amounts, or, if 1040.
considered zero, because you no longer have you do not wish to keep detailed records, For more information, get Publication 514,
the property. you are generally allowed a standard meal Foreign Tax Credit for Individuals.

Chapter 5 Figuring Your Tax Page 29


Child and dependent care credit. You may vacation, or medical care, count as time Credits
be able to take this credit if you pay someone to lived in the home.
care for your qualifying child who is under age Is claimed as a dependent on your return. Credits are allowed only if you receive effec-
13, or your disabled dependent or disabled tively connected income. You may be able to
spouse, so that you can work or look for work. An adopted child is always treated as your own claim some of the following credits.
Generally, you must be able to claim an exemp- child. An adopted child includes a child lawfully
tion for your dependent. placed with you for legal adoption. Foreign tax credit. If you receive foreign
For more information, get Publication 503, See your form instructions for additional de- source income that is effectively connected with
Child and Dependent Care Expenses, and tails. a trade or business in the United States, you
Form 2441, Child and Dependent Care Expen- can claim a credit for any income taxes paid or
ses. Adoption credit. You may qualify to take a tax accrued to any foreign country or U.S. posses-
credit of up to $13,190 for qualifying expenses sion on that income.
Credit for the elderly or the disabled. You paid to adopt an eligible child. This amount may If you do not have foreign source income ef-
may qualify for this credit if you are 65 or older be allowed for the adoption of a child with spe- fectively connected with a U.S. trade or busi-
or if you retired on permanent and total disabil- cial needs regardless of whether you have qual- ness, you cannot claim credits against your
ity. For more information on this credit, get Pub- ifying expenses. To claim the adoption credit, U.S. tax for taxes paid or accrued to a foreign
lication 524, Credit for the Elderly or the Disa- file Form 8839, Qualified Adoption Expenses, country or U.S. possession.
bled, and Schedule R (Form 1040A or 1040). with your Form 1040.
You cannot take any credit for taxes im-
Earned income credit. You may qualify for an posed by a foreign country or U.S. possession
Education credits. You may qualify for these on your U.S. source income if those taxes were
credits if you paid qualified education expenses earned income credit of up to $3,305 if a child
lived with you in the United States and your imposed only because you are a citizen or resi-
for yourself, your spouse, or your dependent. dent of the foreign country or possession.
There are two education credits: the American earned income and adjusted gross income
were each less than $38,511 ($43,941 if mar- If you claim a foreign tax credit, you gener-
Opportunity Credit and the lifetime learning
ried filing jointly). If two children lived with you in ally will have to attach to your return a Form
credit. You cannot claim these credits if you are
the United States and your earned income and 1116. See Publication 514 for more information.
married filing separately. Use Form 8863, Edu-
cation Credits (American Opportunity and Life- adjusted gross income were each less than
$43,756 ($49,186 if married filing jointly), your Child and dependent care credit. You may
time Learning Credits), to figure the credit. For
credit could be as much as $5,460. If three or qualify for this credit if you pay someone to care
more information, see Publication 970.
more children lived with you in the United for your qualifying child who is under age 13, or
States and your earned income and adjusted your disabled dependent or disabled spouse,
Retirement savings contributions credit.
gross income were each less than $46,997 so that you can work or look for work. Gener-
You may qualify for this credit (also known as
($52,427 if married filing jointly), your credit ally, you must be able to claim an exemption for
the saver's credit) if you made eligible contribu-
could be as much as $6,143. If you do not have your dependent.
tions to an employer-sponsored retirement plan
or to an individual retirement arrangement (IRA) a qualifying child and your earned income and Married nonresident aliens can claim the
in 2014. You cannot claim this credit if: adjusted gross income were each less than credit only if they choose to file a joint return
$14,590 ($20,020 if married filing jointly), your with a U.S. citizen or resident spouse as dis-
1. You were born after January 1, 1997, credit could be as much as $496. You cannot cussed in chapter 1, or if they qualify as certain
2. You were a full-time student, claim the earned income credit if your filing sta- married individuals living apart (see Joint Re-
tus is married filing separately. turn Test in Publication 503).
3. Your exemption is claimed by someone The amount of your child and dependent
else on his or her 2014 tax return, or You and your spouse (if filing a joint
care expense that qualifies for the credit in any
! return) and any qualifying child must
4. Your adjusted gross income is more than: tax year cannot be more than your earned in-
have valid SSNs to claim this credit.
come from the United States for that tax year.
CAUTION

a. $60,000, if your filing status is married You cannot claim the credit using an ITIN. If a
Earned income generally means wages, salar-
filing jointly, social security card has a legend that says Not
ies, and professional fees for personal services
Valid for Employment and the number was is-
b. $45,000, if your filing status is head of performed.
sued so that you (or your spouse or your quali-
household, or fying child) could receive a federally funded For more information, get Publication 503.
c. $30,000, if your filing status is single, benefit, you cannot claim the earned income
Education credits. If you are a nonresident
married filing separately, or qualifying credit. An example of a federally funded benefit
is Medicaid. If a card has this legend and the in- alien for any part of the year, you generally can-
widow(er).
dividual's immigration status has changed so not claim the education credits. However, if you
Use Form 8880, Credit for Qualified Retirement that the individual is now a U.S. citizen or lawful are married and choose to file a joint return with
Savings Contributions, to figure the credit. For permanent resident, ask the SSA to issue a new a U.S. citizen or resident spouse as discussed
more information, see Publication 590. social security card without the legend. in chapter 1, you may be eligible for these cred-
its.
Child tax credit. You may be able to take this Other information. There are other eligibil-
credit if you have a qualifying child. Retirement savings contributions credit.
ity rules that are not discussed here. For more
A qualifying child for purposes of the child You may qualify for this credit (also known as
information, get Publication 596, Earned In-
tax credit is a child who: the saver's credit) if you made eligible contribu-
come Credit.
Was under age 17 at the end of 2014. tions to an employer-sponsored retirement plan
or to an individual retirement arrangement (IRA)
Is your son, daughter, stepchild, foster
child, brother, sister, stepbrother, stepsis-
Nonresident Aliens in 2014. You cannot claim this credit if:
You were born after January 1, 1997,
ter, half brother, half sister, or a descend- You can claim some of the same credits that
ant of any of them (for example, your You were a full-time student,
resident aliens can claim. You can also report
grandchild, niece, or nephew). certain taxes you paid, are considered to have Your exemption is claimed by someone
Is a U.S. citizen, a U.S. national, or a resi- paid, or that were withheld from your income. else on his or her 2014 tax return, or
dent alien. Your adjusted gross income is more than
Did not provide over half of his or her own $30,000.
support for 2014.
Lived with you more than half of 2014. Use Form 8880 to figure the credit. For more in-
Temporary absences, such as for school, formation, see Publication 590.

Page 30 Chapter 5 Figuring Your Tax


Child tax credit. You may be able to take this Tax Withheld withheld as a payment on line 62b or 62d of
credit if you have a qualifying child. Form 1040NR, as appropriate.
A qualifying child for purposes of the child You can claim the tax withheld during the year
tax credit is a child who: as a payment against your U.S. tax. You claim it Claiming tax withheld on your return. When
Was under age 17 at the end of 2014. on line 62 of Form 1040NR or on line 18 of you fill out your tax return, take extra care to en-
Form 1040NR-EZ. The tax withheld reduces ter the correct amount of any tax withheld
Is your son, daughter, stepchild, foster
any tax you owe with Form 1040NR or Form shown on your information documents. The fol-
child, brother, sister, stepbrother, stepsis-
1040NR-EZ. lowing table lists some of the more common in-
ter, half brother, half sister, or a descend-
formation documents and shows where to find
ant of any of them (for example, your
Withholding from wages. Any federal income the amount of tax withheld.
grandchild, niece, or nephew).
tax withheld from your wages during the tax
Is a U.S. citizen, a U.S. national, or a resi-
year while you were a nonresident alien is al-
dent alien.
lowed as a payment against your U.S. income Location
Did not provide over half of his or her own
tax liability for the same year. You can claim the of tax
support for 2014.
income tax withheld whether or not you were Form number withheld
Lived with you more than half of 2014.
engaged in a trade or business in the United RRB-1042S . . . . . . . . . . . . . . . . . . . Box 12
Temporary absences, such as for school,
States during the year, and whether or not the SSA-1042S . . . . . . . . . . . . . . . . . . . . Box 9
vacation, or medical care, count as time
wages (or any other income) were connected W-2 . . . . . . . . . . . . . . . . . . . . . . . . . Box 2
lived in the home. W-2c . . . . . . . . . . . . . . . . . . . . . . . . Box 2
with a trade or business in the United States.
Is claimed as a dependent on your return. 1042-S . . . . . . . . . . . . . . . . . . . . . . . Box 10
8805 . . . . . . . . . . . . . . . . . . . . . . . . Line 10
An adopted child is always treated as your own Excess social security tax withheld. If you 8288-A . . . . . . . . . . . . . . . . . . . . . . . Box 2
child. An adopted child includes a child lawfully have two or more employers, you may be able
placed with you for legal adoption. to claim a credit against your U.S. income tax li-
ability for social security tax withheld in excess
See your form instructions for additional de-
tails. of the maximum required. See Social Security Bona Fide Residents
Adoption credit. You may qualify to take a tax
and Medicare Taxes in chapter 8 for more infor-
mation. of American Samoa
credit of up to $13,190 for qualifying expenses
Additional Medicare Tax. Your employer is
or Puerto Rico
paid to adopt an eligible child. This amount may
be allowed for the adoption of a child with spe- responsible for withholding the 0.9% Additional
If you are a nonresident alien who is a bona fide
cial needs regardless of whether you have qual- Medicare Tax on Medicare wages or RRTA
resident of American Samoa or Puerto Rico for
ifying expenses. To claim the adoption credit, compensation it pays to you in excess of
the entire tax year, you generally are taxed the
file Form 8839 with your Form 1040NR. $200,000 in 2014. If you do not owe Additional
same as resident aliens. You should file Form
Medicare Tax, you can claim a credit for any
Married nonresident aliens can claim the 1040 and report all income from sources both in
withheld Additional Medicare Tax against the
credit only if they choose to file a joint return and outside the United States. However, you
total tax liability shown on your tax return by fil-
with a U.S. citizen or resident spouse as dis- can exclude the income discussed in the follow-
ing Form 8959.
cussed in chapter 1, or if they qualify as certain ing paragraphs.
married individuals living apart (see Married
Tax paid on undistributed long-term capital
Persons Not Filing Jointly in the Form 8839 in- For tax purposes other than reporting in-
gains. If you are a shareholder in a mutual fund
structions). come, however, you will be treated as a nonres-
(or other regulated investment company) or real
ident alien. For example, you are not allowed
estate investment trust, you can claim a credit
Credit for prior year minimum tax. If you the standard deduction, you cannot file a joint
for your share of any taxes paid by the company
paid alternative minimum tax in a prior year, get return, and you are not allowed a deduction for
on its undistributed long-term capital gains. You
Form 8801, Credit for Prior Year Minimum a dependent unless that person is a citizen or
will receive information on Form 2439, Notice to
TaxIndividuals, Estates, and Trusts, to see if national of the United States. There are also
Shareholder of Undistributed Long-Term Capi-
you qualify for this credit. limits on what deductions and credits are al-
tal Gains, which you must attach to your return.
lowed. See Nonresident Aliens under Deduc-
Earned income credit. If you are a nonresi- tions, Itemized Deductions, and Tax Credits
Tax withheld at the source. You can claim as
dent alien for any part of the tax year, you gen- and Payments in this chapter.
a payment any tax withheld at the source on in-
erally cannot get the earned income credit.
vestment and other fixed or determinable an-
However, if you are married and choose to file a Residents of Puerto Rico. If you are a bona
nual or periodic income paid to you. Fixed or
joint return with a U.S. citizen or resident fide resident of Puerto Rico for the entire year,
determinable income includes interest, divi-
spouse as discussed in chapter 1, you may be you can exclude from gross income all income
dend, rental, and royalty income that you do not
eligible for the credit. from sources in Puerto Rico (other than
claim to be effectively connected income. Wage
amounts for services performed as an em-
You, your spouse, and any qualifying or salary payments can be fixed or determina-
ployee of the United States or any of its agen-
child must have valid SSNs to claim ble income to you, but usually are subject to
! this credit. You cannot claim the credit withholding as discussed above. Taxes on fixed
cies).
If you report income on a calendar year ba-
CAUTION

using an ITIN. If a social security card has a leg- or determinable income are withheld at a 30%
sis and you do not have wages subject to with-
end that says Not Valid for Employment and the rate or at a lower treaty rate.
holding for 2014, file your return and pay your
number was issued so that you (or your spouse
Tax withheld on partnership income. If you tax by June 15, 2015. You must also make your
or your qualifying child) could receive a feder-
are a foreign partner in a partnership, the part- first payment of estimated tax for 2015 by June
ally funded benefit, you cannot claim the earned
nership will withhold tax on your share of effec- 15, 2015. You cannot file a joint income tax re-
income credit. An example of a federally funded
tively connected taxable income from the part- turn or make joint payments of estimated tax.
benefit is Medicaid. If a card has this legend
nership. The partnership will give you a However, if you are married to a U.S. citizen or
and the individual's immigration status has
statement on Form 8805, Foreign Partner's In- resident, see Nonresident Spouse Treated as a
changed so that the individual is now a U.S. citi-
formation Statement of Section 1446 Withhold- Resident in chapter 1.
zen or lawful permanent resident, ask the SSA
ing Tax, showing the tax withheld. A partnership If you earn wages subject to withholding,
to issue a new social security card without the
that is publicly traded may withhold on your ac- your U.S. income tax return is due by April 15.
legend.
tual distributions of effectively connected in- Your first payment of estimated tax is also due
come. In this case, the partnership will give you by April 15. For information on withholding and
See Publication 596 for more information on
a statement on Form 1042-S. Claim the tax estimated tax, see chapter 8.
the credit.

Chapter 5 Figuring Your Tax Page 31


Residents of American Samoa. If you are a Form (and Instructions) exemptions under U.S. tax law as well as the
bona fide resident of American Samoa for the reduced tax rates and exemptions provided by
1040 U.S. Individual Income Tax Return
entire year, you can exclude from gross income tax treaties between the United States and cer-
all income from sources in American Samoa 1040-C U.S. Departing Alien Income Tax tain foreign countries. For a further discussion
(other than amounts for services performed as Return of tax treaties, see chapter 9.
an employee of the U.S. government or any of
its agencies). An employee of the American Sa- 1040-ES Estimated Tax for Individuals
moan government is not considered an em- 1040-ES (NR) U.S. Estimated Tax for Restrictions for
ployee of the U.S. government or any of its
agencies for purposes of the exclusion. For
Nonresident Alien Individuals
Dual-Status Taxpayers
more information about this exclusion, get Form 1040NR U.S. Nonresident Alien Income
4563 and Publication 570, Tax Guide for Indi- Tax Return The following restrictions apply if you are filing a
viduals With Income From U.S. Possessions. 1116 Foreign Tax Credit tax return for a dual-status tax year.

See chapter 12 for information about getting 1) Standard deduction. You cannot use the
these publications and forms. standard deduction allowed on Form 1040.
However, you can itemize any allowable deduc-
tions.
Tax Year
6. 2) Exemptions. Your total deduction for the
exemptions for your spouse and allowable de-
You must file your tax return on the basis of an
annual accounting period called a tax year. If pendents cannot be more than your taxable in-
come (figured without deducting personal ex-
Dual-Status you have not previously established a fiscal tax
year, your tax year is the calendar year. A cal- emptions) for the period you are a resident
alien.
endar year is 12 consecutive months ending on
Tax Year December 31. If you have previously estab-
lished a regular fiscal year (12 consecutive 3) Head of household. You cannot use the
months ending on the last day of a month other head of household Tax Table column or Tax
than December, or a 5253 week year) and are Computation Worksheet.
Introduction considered to be a U.S. resident for any calen-
4) Joint return. You cannot file a joint return.
dar year, you will be treated as a U.S. resident
You have a dual-status tax year when you have However, see Choosing Resident Alien Status
for any part of your fiscal year that falls within
been both a resident alien and a nonresident under Dual-Status Aliens in chapter 1.
that calendar year.
alien in the same year. Dual status does not re-
fer to your citizenship; it refers only to your resi- 5) Tax rates. If you are married and a nonresi-
dent status in the United States. In determining
your U.S. income tax liability for a dual-status
Income Subject to Tax dent of the United States for all or part of the tax
year and you do not choose to file jointly as dis-
tax year, different rules apply for the part of the cussed in chapter 1, you must use the Tax Ta-
For the part of the year you are a resident alien, ble column or Tax Computation Worksheet for
year you are a resident of the United States and
you are taxed on income from all sources. In- married filing separately to figure your tax on in-
the part of the year you are a nonresident.
come from sources outside the United States is come effectively connected with a U.S. trade or
The most common dual-status tax years are
taxable if you receive it while you are a resident business. You cannot use the Tax Table col-
the years of arrival and departure. See
alien. The income is taxable even if you earned umn or Tax Computation Worksheet for married
Dual-Status Aliens in chapter 1.
it while you were a nonresident alien or if you filing jointly or single. However, you may be
If you are married and choose to be treated
became a nonresident alien after receiving it able to file as single if you lived apart from your
as a U.S. resident for the entire year, as ex-
and before the end of the year. spouse during the last 6 months of the year and
plained in chapter 1, the rules of this chapter do
not apply to you for that year. For the part of the year you are a nonresi- you are a:
dent alien, you are taxed on income from U.S. Married resident of Canada, Mexico, or
South Korea, or
Topics sources and on certain foreign source income
Married U.S. national.
This chapter discusses: treated as effectively connected with a U.S.
trade or business. (The rules for treating foreign See the instructions for Form 1040NR to see if
source income as effectively connected are dis- you qualify.
Income subject to tax,
cussed in chapter 4 under Foreign Income.)
Restrictions for dual-status taxpayers, A U.S. national is an individual who, al-
Income from sources outside the United though not a U.S. citizen, owes his or her alle-
Exemptions, giance to the United States. U.S. nationals in-
States that is not effectively connected with a
How to figure the tax, trade or business in the United States is not tax- clude American Samoans and Northern
Forms to file, able if you receive it while you are a nonresident Mariana Islanders who chose to become U.S.
alien. The income is not taxable even if you nationals instead of U.S. citizens.
When and where to file, and
earned it while you were a resident alien or if
How to fill out a dual-status return. you became a resident alien or a U.S. citizen af- 6) Tax credits. You cannot claim the educa-
ter receiving it and before the end of the year. tion credits, the earned income credit, or the
credit for the elderly or the disabled unless:
Useful Items Income from U.S. sources is taxable You are married, and
You may want to see:
whether you receive it while a nonresident alien You choose to be treated as a resident for
or a resident alien unless specifically exempt all of 2014 by filing a joint return with your
Publication under the Internal Revenue Code or a tax treaty spouse who is a U.S. citizen or resident, as
503 Child and Dependent Care Expenses provision. Generally, tax treaty provisions apply discussed in chapter 1.
only to the part of the year you were a nonresi-
514 Foreign Tax Credit for Individuals dent. In certain cases, however, treaty provi-
575 Pension and Annuity Income sions may apply while you were a resident
alien. See chapter 9 for more information.
Exemptions
When determining what income is taxed in As a dual-status taxpayer, you usually will be
the United States, you must consider able to claim your own personal exemption.

Page 32 Chapter 6 Dual-Status Tax Year


Subject to the general rules for qualification, is important for you to keep careful records of Child tax credit. You may be able to take this
you can claim exemptions for your spouse and these amounts. You will need this information to credit if you have a qualifying child.
dependents when you figure taxable income for properly complete your return and determine A qualifying child for purposes of the child
the part of the year you are a resident alien. The your tax liability. tax credit is a child who:
amount you can claim for these exemptions is Was under age 17 at the end of 2014.
limited to your taxable income (figured before If you received railroad retirement benefits
while you were a nonresident alien, the U.S. Is your son, daughter, stepchild, foster
subtracting exemptions) for the part of the year
Railroad Retirement Board (RRB) will send you child, brother, sister, stepbrother, stepsis-
you are a resident alien. You cannot use ex-
Form RRB-1042S, Statement for Nonresident ter, half brother, half sister, or a descend-
emptions (other than your own) to reduce taxa-
Alien Recipients of Payments by the Railroad ant of any of them (for example, your
ble income to less than zero for that period.
Retirement Board, and/or Form RRB-1099-R, grandchild, niece, or nephew).
Special rules apply to exemptions for the Annuities or Pensions by the Railroad Retire- Is a U.S. citizen, a U.S. national, or a resi-
part of the tax year you are a nonresident alien ment Board. If your country of legal residence dent alien.
if you are a: changed or your rate of tax changed during the Did not provide over half of his or her own
tax year, you may receive more than one form. support for 2014.
1. Resident of Canada, Mexico, or South Ko- Lived with you more than half of 2014.
rea, Temporary absences, such as for school,
2. U.S. national, or
Tax Credits and Payments vacation, or medical care, count as time
lived in the home.
3. Student or business apprentice from India. This discussion covers tax credits and pay- Is claimed as a dependent on your return.
ments for dual-status aliens.
For more information, see Exemptions in chap- An adopted child is always treated as your own
ter 5. child. An adopted child includes a child lawfully
Credits placed with you for legal adoption.

How To Figure Tax As a dual-status alien, you generally can claim


tax credits using the same rules that apply to
See your form instructions for additional de-
tails.
resident aliens. There are certain restrictions
When you figure your U.S. tax for a dual-status Adoption credit. You may qualify to take a tax
that may apply. These restrictions are dis-
year, you are subject to different rules for the credit of up to $13,190 for qualifying expenses
cussed here, along with a brief explanation of
part of the year you are a resident and the part paid to adopt an eligible child. This amount may
credits often claimed by individuals.
of the year you are a nonresident. be allowed for the adoption of a child with spe-
Foreign tax credit. If you have paid or are lia- cial needs regardless of whether you have qual-
Income ble for the payment of income tax to a foreign ifying expenses. To claim the adoption credit,
country on income from foreign sources, you file Form 8839 with the U.S. income tax return
All income for your period of residence and all may be able to claim a credit for the foreign that you file.
income that is effectively connected with a trade taxes. Married dual-status aliens can claim the
or business in the United States for your period If you claim the foreign tax credit, you gener- credit only if they choose to file a joint return
of nonresidence, after allowable deductions, is ally must file Form 1116 with your income tax with a U.S. citizen or resident spouse as dis-
added and taxed at the rates that apply to U.S. return. For more information, see the Instruc- cussed in chapter 1, or if they qualify as certain
citizens and residents. Income that is not con- tions for Form 1116 and Publication 514. married individuals living apart (see Married
nected with a trade or business in the United Persons Not Filing Jointly in the Form 8839 in-
States for your period of nonresidence is sub- Child and dependent care credit. You may structions).
ject to the flat 30% rate or lower treaty rate. You qualify for this credit if you pay someone to care
cannot take any deductions against this in- for your qualifying child who is under age 13, or Payments
come. your disabled dependent or disabled spouse so
that you can work or look for work. Generally, You can report as payments against your U.S.
Social security and railroad retirement ben- you must be able to claim an exemption for your income tax liability certain taxes you paid, are
efits. During the part of the year you are a non- dependent. considered to have paid, or that were withheld
resident alien, 85% of any U.S. social security Married dual-status aliens can claim the from your income. These include:
benefits (and the equivalent portion of tier 1 rail- credit only if they choose to file a joint return as Tax withheld from wages earned in the
road retirement benefits) you receive is subject discussed in chapter 1, or if they qualify as cer- United States,
to the flat 30% tax, unless exempt, or subject to tain married individuals living apart. Taxes withheld at the source from various
a lower treaty rate. (See The 30% Tax in chap- The amount of your child and dependent items of income from U.S. sources other
ter 4.) care expense that qualifies for the credit in any than wages,
During the part of the year you are a resident tax year cannot be more than your earned in- Estimated tax paid with Form 1040-ES or
alien, part of the social security and the equiva- come for that tax year. Form 1040-ES (NR), and
lent portion of tier 1 railroad retirement benefits For more information, get Publication 503 Tax paid with Form 1040-C, at the time of
will be taxed at graduated rates if your modified and Form 2441. departure from the United States.
adjusted gross income plus half of these bene-
fits is more than a certain base amount. Retirement savings contributions credit.
Use the Social Security Benefits Worksheet You may qualify for this credit (also known as Forms To File
in the Form 1040 instructions to help you figure the saver's credit) if you made eligible contribu-
the taxable part of your social security and tions to an employer-sponsored retirement plan The U.S. income tax return you must file as a
equivalent tier 1 railroad retirement benefits for or to an individual retirement arrangement (IRA) dual-status alien depends on whether you are a
the part of the year you were a resident alien. in 2014. You cannot claim this credit if: resident alien or a nonresident alien at the end
You were born after January 1, 1997, of the tax year.
If you received U.S. social security benefits You were a full-time student,
while you were a nonresident alien, the Social Resident at end of year. You must file Form
Your exemption is claimed by someone 1040 if you are a dual-status taxpayer who be-
Security Administration will send you Form
else on his or her 2014 tax return, or comes a resident during the year and who is a
SSA-1042S showing your combined benefits
Your adjusted gross income is more than U.S. resident on the last day of the tax year.
for the entire year and the amount of tax with-
$30,000. Write Dual-Status Return across the top of the
held. You will not receive separate statements
for the benefits received during your periods of Use Form 8880 to figure the credit. For more in- return. Attach a statement to your return to
U.S. residence and nonresidence. Therefore, it formation, see Publication 590. show the income for the part of the year you are

Chapter 6 Dual-Status Tax Year Page 33


a nonresident. You can use Form 1040NR or If the regular due date for filing falls on Under U.S. immigration law, a lawful perma-
Form 1040NR-EZ as the statement, but be sure TIP a Saturday, Sunday, or legal holiday, nent resident who is required to file a tax return
to mark Dual-Status Statement across the top. the due date is the next day that is not as a resident and fails to do so may be regar-
a Saturday, Sunday, or legal holiday. ded as having abandoned status and may lose
Nonresident at end of year. You must file permanent resident status.
Form 1040NR or Form 1040NR-EZ if you are a
dual-status taxpayer who gives up residence in Extensions of time to file. You are allowed
the United States during the year and who is not an automatic extension to June 15 to file if your
a U.S. resident on the last day of the tax year. main place of business and the home you live in
Write Dual-Status Return across the top of the are outside the United States and Puerto Rico
return. Attach a statement to your return to
show the income for the part of the year you are 7. on April 15. You can get an extension of time to
October 15 to file your return if you get an ex-
a resident. You can use Form 1040 as the tension by April 15 (June 15 if you qualify for the
statement, but be sure to mark Dual-Status June 15 extension). Use Form 4868 to get the
Statement across the top.
If you expatriated or terminated your resi-
Filing extension to October 15. In addition to this
6-month extension, taxpayers who are out of
dency in 2014, you may be required to file an the country (as defined in the Form 4868 in-
expatriation statement (Form 8854) with your Information structions) can request a discretionary 2-month
additional extension of time to file their returns
tax return. For more information, see Expatria-
tion Tax in chapter 4. (to December 15 for calendar year taxpayers).
To request this extension, you must send the
Statement. Any statement must have your Introduction IRS a letter explaining the reasons why you
name, address, and taxpayer identification need the additional 2 months. Send the letter by
This chapter provides the basic filing informa-
number on it. You do not need to sign a sepa- the extended due date (October 15 for calendar
tion that you may need.
rate statement or schedule accompanying your year taxpayers) to the following address:
return, because your signature on the return
also applies to the supporting statements and Topics Department of the Treasury
schedules. This chapter discusses: Internal Revenue Service Center
Austin, TX 73301-0215
Forms aliens must file,
When and When and where to file, You will not receive any notification from the
Where To File Penalties, and
IRS unless your request is denied for being un-
timely.
Amended returns and claims for refund. The discretionary 2-month additional exten-
If you are a resident alien on the last day of your sion is not available to taxpayers who have an
tax year and report your income on a calendar approved extension of time to file on Form 2350
year basis, you must file no later than April 15 of Useful Items
You may want to see: (for U.S. citizens and resident aliens abroad
the year following the close of your tax year. If who expect to qualify for special tax treatment).
you report your income on other than a calen-
dar year basis, file your return no later than the Forms (and Instructions) If the due date for filing falls on a Sat-
15th day of the 4th month following the close of TIP urday, Sunday, or legal holiday, the
1040 U.S. Individual Income Tax Return
your tax year. In either case, file your return with due date is the next day which is not a
the address for dual-status aliens shown on the 1040A U.S. Individual Income Tax Return Saturday, Sunday, or legal holiday.
back page of the Form 1040 instructions.
1040EZ Income Tax Return for Single and You may be able to file your
If you are a nonresident alien on the last day Joint Filers With No Dependents return electronically. See IRS
of your tax year and you report your income on e-file in your form instructions.
a calendar year basis, you must file no later 1040NR U.S. Nonresident Alien Income
than April 15 of the year following the close of Tax Return
your tax year if you receive wages subject to 1040NR-EZ U.S. Income Tax Return for Nonresident Aliens
withholding. If you report your income on other Certain Nonresident Aliens With No
than a calendar year basis, file your return no Dependents Nonresident aliens who are required to file an
later than the 15th day of the 4th month follow- income tax return should use Form 1040NR or,
ing the close of your tax year. If you did not re- See chapter 12 for information about getting if qualified, Form 1040NR-EZ.
ceive wages subject to withholding and you re- these forms.
port your income on a calendar year basis, you If you are any of the following, you must file
must file no later than June 15 of the year fol- a return.
lowing the close of your tax year. If you report What, When, and 1. A nonresident alien individual engaged or
your income on other than a calendar year ba-
sis, file your return no later than the 15th day of Where To File considered to be engaged in a trade or
business in the United States during 2014.
the 6th month following the close of your tax
(But see Exceptions, later.)
year. In any case, mail your return to: What return you must file as well as when and
You must file even if:
where you file that return, depends on your sta-
Department of the Treasury tus at the end of the tax year as a resident or a a. Your income did not come from a
Internal Revenue Service nonresident alien. trade or business conducted in the
Austin, TX 73301-0215 United States,
Resident Aliens b. You have no income from U.S. sour-
If enclosing a payment, mail your return to: ces, or
Resident aliens should file Form 1040EZ,
Internal Revenue Service c. Your income is exempt from income
1040A, or 1040 at the address shown in the in-
P.O. Box 1303 tax.
structions for that form. The due date for filing
Charlotte, NC 28201-1303 the return and paying any tax due is April 15 of 2. A nonresident alien individual not engaged
the year following the year for which you are fil- in a trade or business in the United States
ing a return (but see the Tip, later). with U.S. income on which the tax liability

Page 34 Chapter 7 Filing Information


was not satisfied by the withholding of tax 6. Your only U.S. source income is from wa- You will not receive any notification from the
at the source. ges, salaries, tips, taxable refunds of state IRS unless your request is denied for being un-
and local income taxes, scholarship or fel- timely.
3. A representative or agent responsible for
lowship grants, and nontaxable interest or
filing the return of an individual described
dividends. (If you had taxable interest or When to file for deductions and credits. To
in (1) or (2).
dividend income, you cannot use this get the benefit of any allowable deductions or
4. A fiduciary for a nonresident alien estate form.) credits, you must timely file a true and accurate
or trust. return. For this purpose, a return is timely if it is
7. You are not claiming any adjustments to filed within 16 months of the due date just dis-
You must also file if you want to: income other than the student loan inter- cussed. However, if you did not file a 2013 tax
Claim a refund of overwithheld or overpaid est deduction or scholarship and fellow- return and 2014 is not the first year for which
tax, or ship grants excluded. you are required to file one, your 2014 return is
Claim the benefit of any deductions or timely for this purpose if it is filed by the earlier
8. You are not claiming any tax credits.
credits. For example, if you have no U.S. of:
business activities but have income from 9. This is not an expatriation return. See The date that is 16 months after the due
real property that you choose to treat as ef- Expatriation Tax in chapter 4. date for filing your 2014 return, or
fectively connected income (discussed in The date the IRS notifies you that your
10. The only taxes you owe are:
chapter 4), you must timely file a true and 2014 return has not been filed and that you
accurate return to take any allowable de- a. The income tax from the Tax Table. cannot claim certain deductions and cred-
ductions against that income. For informa- its.
b. The social security and Medicare tax
tion on what is timely, see When to file for
deductions and credits under When To from Form 4137 or Form 8919. The allowance of the following credits is not af-
File, later. 11. You are not claiming a credit for excess fected by this time requirement.
social security and tier 1 RRTA tax with- Credit for withheld taxes.
Exceptions. You do not need to file Form held. Credit for excise tax on certain uses of
1040NR or Form 1040NR-EZ if you meet either gasoline and special fuels.
of the following conditions. 12. You are not filing Form 8959, to figure the
Credit for tax paid by a mutual fund (or
amount of Additional Medicare Tax you
1. Your only U.S. trade or business was the other regulated investment company) or a
owe and/or the amount of Additional Medi-
performance of personal services, and real estate investment trust on undistrib-
care Tax withheld by your employer, if
uted long-term capital gains.
a. Your wages were less than $3,950, any.
and Protective return. If your activities in the
If you do not meet all of the above condi- United States were limited and you do not be-
b. You have no other need to file a return lieve that you had any gross income effectively
tions, you must file Form 1040NR.
to claim a refund of overwithheld connected with a U.S. trade or business during
taxes, to satisfy additional withholding the year, you can file a protective return (Form
at source, or to claim income exempt When To File
1040NR) by the deadline explained above. By
or partly exempt by treaty. filing a protective return, you protect your right
If you are an employee and you receive wages
2. You were a nonresident alien student, subject to U.S. income tax withholding, you will to receive the benefit of deductions and credits
teacher, or trainee who was temporarily generally file by the 15th day of the 4th month in the event it is later determined that some or
present in the United States under an F, after your tax year ends. For the 2014 calendar all of your income is effectively connected. You
J, M, or Q visa and you have no in- year, file your return by April 15, 2015. are not required to report any effectively con-
come that is subject to tax, such as wa- nected income or any deductions on the protec-
ges, tips, scholarship and fellowship tive return, but you must give the reason the re-
If you are not an employee who receives turn is being filed.
grants, dividends, etc.
wages subject to U.S. income tax withholding, If you believe some of your activities resul-
Even if you have left the United States you must file by the 15th day of the 6th month ted in effectively connected income, file your re-
and filed a Form 1040-C, U.S. Depart- after your tax year ends. For the 2014 calendar
! ing Alien Income Tax Return, on de- year, file your return by June 15, 2015.
turn reporting that income and related deduc-
CAUTION
tions by the regular due date. To protect your
parture, you still must file an annual U.S. in- right to claim deductions or credits resulting
come tax return. If you are married and both you Extensions of time to file. If you cannot file
from other activities, attach a statement to that
and your spouse are required to file, you must your return by the due date, file Form 4868 or return explaining that you wish to protect your
each file a separate return. use one of the electronic filing options ex- right to claim deductions and credits if it is later
plained in the Form 4868 instructions. For the determined that the other activities produced ef-
2014 calendar year, this will extend the due fectively connected income.
Form 1040NR-EZ date to October 15, 2015 (December 15, 2015, You can follow the same procedure if you
if the regular due date of your return is June 15, believe you have no U.S. tax liability because of
You can use Form 1040NR-EZ if all of the fol- 2015). You must file the extension by the regu- a U.S. tax treaty. Be sure to also complete item
lowing conditions are met. lar due date of your return. L on page 5 of Form 1040NR.
1. You do not claim any dependents. In addition to the 6-month extension to Octo-
ber 15, taxpayers whose main place of busi- Waiver of filing deadline. The IRS may
2. You cannot be claimed as a dependent on ness is outside the United States and Puerto waive the filing deadline if you establish that,
someone else's U.S. tax return. Rico and who live outside those jurisdictions based on the facts and circumstances, you ac-
3. If you were married, you do not claim an can request a discretionary 2-month extension ted reasonably and in good faith in failing to file
exemption for your spouse. of time to file their returns (to December 15 for a U.S. income tax return (including a protective
calendar year taxpayers). To request this exten- return) and you cooperate with the IRS in deter-
4. Your taxable income is less than mining your U.S. income tax liability for the tax
sion, you must send the IRS a letter explaining
$100,000. year for which you did not file a return.
the reasons why you need the additional 2
5. The only itemized deduction you can claim months. Send the letter by the extended due
is for state and local income taxes. Note. date (October 15 for calendar year taxpayers)
Residents of India who were students or to the following address:
business apprentices may be able to take
the standard deduction instead of the Department of the Treasury
itemized deduction for state and local Internal Revenue Service Center
income taxes. See chapter 5. Austin, TX 73301-0215

Chapter 7 Filing Information Page 35


Where To File If you are not a bona fide resident of Guam not been endorsed or which contain re-
or the CNMI, see Pub. 570, Tax Guide for Indi- strictive endorsements,
If you are not enclosing a payment, file viduals With Income From U.S. Possessions, Warehouse receipts, or
Form 1040NR-EZ and Form 1040NR for information on where to file your return.
at the following address. Bills of lading.

Department of the Treasury Amended Returns A transfer of funds through normal banking
Internal Revenue Service Center and Claims for Refund procedures (wire transfer) that does not involve
Austin, TX 73301-0215 the physical transportation of currency or mone-
If you find changes in your income, deductions, tary instruments is not required to be reported
or credits after you mail your return, file Form on FinCEN Form 105.
If enclosing a payment, mail your return to:
1040X, Amended U.S. Individual Income Tax
Return. Also use Form 1040X if you should Filing requirements. FinCEN Form 105 filing
Internal Revenue Service
have filed Form 1040, 1040A, or 1040EZ in- requirements follow.
P.O. Box 1303
Charlotte, NC 28201-1303 stead of Form 1040NR or 1040NR-EZ, or vice Recipients. Each person who receives cur-
versa. If you amend Form 1040NR or Form rency or other monetary instruments in the Uni-
1040NR-EZ or file the correct return, attach the ted States must file FinCEN Form 105 within 15
Aliens from the U.S. Virgin Islands.
corrected return (Form 1040, Form 1040NR, days after receipt, with the Customs officer in
If you are a bona fide resident of the etc.) to Form 1040X. Print Amended across charge at any port of entry or departure, or by
U.S. Virgin Islands during your entire the top. Ordinarily, an amended return claiming mail at the following address.
tax year and work temporarily in the a refund must be filed within 3 years from the
United States, you must pay your income taxes date your return was filed or within 2 years from Commissioner of Customs
to the U.S. Virgin Islands and file your income the time the tax was paid, whichever is later. A Attention: Currency Transportation
tax returns at the following address. return filed before the final due date is consid- Reports
ered to have been filed on the due date. Washington, DC 20229
Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay
Suite 225
Other Forms You Shippers or mailers. If the currency or
St. Thomas, VI 00802 May Have To File other monetary instrument does not accompany
the person entering or departing the United
You may be required to file information returns States, FinCEN Form 105 can be filed by mail
Report all income from U.S. sources, as well to report certain foreign income or assets, or at the above address on or before the date of
as income from other sources, on your return. monetary transactions. entry, departure, mailing, or shipping.
For information on filing U.S. Virgin Islands re- Travelers. Travelers must file FinCEN
turns, contact the U.S. Virgin Islands Bureau of
Internal Revenue.
FinCEN Form 105 Form 105 with the Customs officer in charge at
any Customs port of entry or departure, when
Chapter 8 discusses withholding from U.S. FinCEN Form 105, Report of International entering or departing the United States.
wages of U.S. Virgin Islanders. Transportation of Currency or Monetary Instru-
ments, must be filed by each person who physi- Penalties. Civil and criminal penalties are pro-
Aliens from Guam or the Commonwealth of cally transports, mails, or ships, or causes to be vided for failing to file a report, filing a report
the Northern Mariana Islands. If you are a physically transported, mailed, or shipped, cur- containing material omissions or misstate-
bona fide resident of Guam or the Common- rency or other monetary instruments in a total ments, or filing a false or fraudulent report. Also,
wealth of the Northern Mariana Islands (CNMI) amount of more than $10,000 at one time from the entire amount of the currency or monetary
during your entire tax year, you must file your instrument may be subject to seizure and forfei-
the United States to any place outside the Uni-
return with, and pay any tax due to, Guam or ture.
ted States, or into the United States from any
the CNMI. Report all income, including income
place outside the United States. The filing re-
from U.S. sources, on your return. It is not nec- More information. More information regard-
quirement also applies to each person who re-
essary to file a separate U.S. income tax return. ing the filing of FinCEN Form 105 can be found
ceives in the United States currency or mone-
Bona fide residents of Guam should tary instruments totaling more than $10,000 at in the instructions on the back of the form.
file their Guam returns at the following one time from any place outside of the United
address. States. Form 8938
The term monetary instruments means the You may have to file Form 8938, Statement of
Department of Revenue and Taxation following: Specified Foreign Financial Assets, to report
Government of Guam Coin and currency of the United States or the ownership of specified foreign financial as-
P.O. Box 23607 of any other country, set(s) if you are one of the following individuals.
GMF, GU 96921 Travelers' checks in any form, A resident alien of the United States for
any part of the tax year.
Investment securities or stock in bearer
A resident alien of the United States who
Bona fide residents of the CNMI form or otherwise in such form that title to
elects to be treated as a resident of a for-
should file their CNMI income tax re- them passes upon delivery,
eign country under the provisions of a U.S.
turns at the following address. Negotiable instruments (including checks,
income tax treaty. See Effect of Tax Trea-
promissory notes, and money orders) in
ties in chapter 1.
bearer form, endorsed without restriction,
A nonresident alien who makes an election
Department of Finance made out to a fictitious payee, or otherwise
to be treated as a resident alien for purpo-
Division of Revenue and Taxation in such form that title to them passes upon
ses of filing a joint income tax return. See
Commonwealth of the Northern Mariana delivery, and
chapter 1 for information about this elec-
Islands Checks, promissory notes, and money or-
tion.
P.O. Box 5234 CHRB ders which are signed but on which the
A nonresident alien who is a bona fide resi-
Saipan, MP 96950 name of the payee has been omitted.
dent of American Samoa or Puerto Rico.
However, the term does not include: See Publication 570, Tax Guide for Individ-
Checks or money orders made payable to uals With Income From U.S. Possessions,
the order of a named person which have for a definition of bona fide resident.

Page 36 Chapter 7 Filing Information


You must file Form 8938 if the total value of or before the due date of your return and pay Substantial understatement of income
those assets exceeds an applicable threshold the balance when you file the return. tax. You understate your tax if the tax shown
(the reporting threshold). The reporting The monthly rate of the failure-to-pay pen- on your return is less than the correct tax. The
threshold varies depending on whether you live alty is half the usual rate (.25% instead of .50%) understatement is substantial if it is more than
in the United States, are married, or file a joint if an installment agreement is in effect for that the larger of 10% of the correct tax or $5,000.
income tax return with your spouse. Specified month. You must have filed your return by the However, the amount of the understatement is
foreign financial assets include any financial ac- due date (including extensions) to qualify for reduced to the extent the understatement is due
count maintained by a foreign financial institu- this reduced penalty. to:
tion and, to the extent held for investment, any If a notice of intent to levy is issued, the rate 1. Substantial authority, or
stock, securities, or any other interest in a for- will increase to 1% at the start of the first month
eign entity and any financial instrument or con- beginning at least 10 days after the day that the 2. Adequate disclosure and a reasonable ba-
tract with an issuer or counterparty that is not a notice is issued. If a notice and demand for im- sis.
U.S. person. mediate payment is issued, the rate will in-
If an item on your return is attributable to a
crease to 1% at the start of the first month be-
tax shelter, there is no reduction for an ade-
You may have to pay penalties if you are re- ginning after the day that the notice and
quate disclosure. However, there is a reduction
quired to file Form 8938 and fail to do so, or if demand is issued.
for a position with substantial authority, but only
you have an understatement of tax due to any This penalty cannot be more than 25% of if you reasonably believed that your tax treat-
transaction involving an undisclosed foreign fi- your unpaid tax. You will not have to pay the ment was more likely than not the proper treat-
nancial asset. penalty if you can show that you had a good ment.
reason for not paying your tax on time.
More information about the filing of Form Substantial authority. Whether there is or
Combined penalties. If both the failure-to-file was substantial authority for the tax treatment of
8938 can be found in the separate instructions
penalty and the failure-to-pay penalty (dis- an item depends on the facts and circumstan-
for Form 8938.
cussed earlier) apply in any month, the 5% (or ces. Consideration will be given to court opin-
15%) failure-to-file penalty is reduced by the ions, Treasury regulations, revenue rulings, rev-
Penalties failure-to-pay penalty. However, if you file your
return more than 60 days after the due date or
enue procedures, and notices
announcements issued by the IRS and pub-
and

extended due date, the minimum penalty is the lished in the Internal Revenue Bulletin that in-
The law provides penalties for failure to file re- smaller of $135 (adjusted for inflation for returns volve the same or similar circumstances as
turns or pay taxes as required. required to be filed in a calendar year beginning yours.
after 2014) or 100% of the unpaid tax.
Civil Penalties Disclosure statement. To adequately dis-
close the relevant facts about your tax treat-
Accuracy-related penalty. You may have to
pay an accuracy-related penalty if you under- ment of an item, use Form 8275, Disclosure
If you do not file your return and pay your tax by pay your tax because: Statement. You must also have a reasonable
the due date, you may have to pay a penalty. You show negligence or disregard of rules basis for treating the item the way you did.
You may also have to pay a penalty if you sub- or regulations, In cases of substantial understatement only,
stantially understate your tax, file a frivolous tax You substantially understate your income items that meet the requirements of Revenue
submission, or fail to supply your taxpayer iden- tax, Procedure 2014-15 available at www.irs.gov/
tification number. If you provide fraudulent infor- You claim tax benefits for a transaction that irb/2014-5_IRB/ar09.html (or later update) are
mation on your return, you may have to pay a lacks economic substance, or considered adequately disclosed on your return
civil fraud penalty. You fail to disclose a foreign financial as- without filing Form 8275.
set. Use Form 8275-R, Regulation Disclosure
Filing late. If you do not file your return by the Statement, to disclose items or positions con-
due date (including extensions), you may have The penalty is equal to 20% of the underpay-
trary to regulations.
to pay a failure-to-file penalty. The penalty is ment. The penalty is 40% of any portion of the
based on the tax not paid by the due date (with- underpayment that is attributable to an undis- Transaction lacking economic sub-
out regard to extensions). The penalty is usually closed noneconomic substance transaction or stance. For more information on economic
5% for each month or part of a month that a re- an undisclosed foreign financial asset transac- substance, see section 7701(o).
turn is late, but not more than 25%. tion. The penalty will not be figured on any part
of an underpayment on which the fraud penalty Foreign financial asset. For more infor-
Fraud. If your failure to file is due to fraud, (discussed later) is charged. mation on undisclosed foreign financial assets,
the penalty is 15% for each month or part of a see section 6662(j) or the Instructions for Form
month that your return is late, up to a maximum Negligence or disregard. The term negli- 8938.
of 75%. gence includes a failure to make a reasonable
attempt to comply with the tax law or to exercise Reasonable cause. You will not have to
Return over 60 days late. If you file your ordinary and reasonable care in preparing a re- pay a penalty if you show a good reason (rea-
return more than 60 days after the due date or turn. Negligence also includes failure to keep sonable cause) for the way you treated an item.
extended due date, the minimum penalty is the adequate books and records. You will not have You must also show that you acted in good
smaller of $135 (adjusted for inflation for returns to pay a negligence penalty if you have a rea- faith. This does not apply to a transaction that
required to be filed in a calendar year beginning sonable basis for a position you took. lacks economic substance.
after 2014) or 100% of the unpaid tax. The term disregard includes any careless,
reckless, or intentional disregard. Filing erroneous claim for refund or credit.
Exception. You will not have to pay the You may have to pay a penalty if you file an er-
penalty if you show that you failed to file on time Adequate disclosure. You can avoid the roneous claim for refund or credit. The penalty
because of reasonable cause and not because penalty for disregard of rules or regulations if is equal to 20% of the disallowed amount of the
of willful neglect. you adequately disclose on your return a posi- claim, unless you can show a reasonable basis
tion that has at least a reasonable basis. See for the way you treated an item. However, any
Paying tax late. You will have to pay a fail- Disclosure statement, later. disallowed amount due to a transaction that
ure-to-pay penalty of 1 2 of 1% (.50%) of your un- This exception will not apply to an item that lacks economic substance will not be treated as
paid taxes for each month, or part of a month, is attributable to a tax shelter. In addition, it will having a reasonable basis. The penalty will not
after the due date that the tax is not paid. This not apply if you fail to keep adequate books and be figured on any part of the disallowed amount
penalty does not apply during the automatic records, or substantiate items properly. of the claim that relates to the earned income
6-month extension of time to file period, if you credit or on which the accuracy-related or fraud
paid at least 90% of your actual tax liability on penalties are charged.

Chapter 7 Filing Information Page 37


Frivolous tax submission. You may have to Tax Withholding and Reporting
pay a penalty of $5,000 if you file a frivolous tax (Individuals)
return or other frivolous submissions. A frivo-
lous tax return is one that does not include 8. W-8ECI Certificate of Foreign Person's
Claim That Income Is Effectively
enough information to figure the correct tax or
Connected With the Conduct of a
that contains information clearly showing that
the tax you reported is substantially incorrect.
For more information on frivolous returns, frivo-
Paying Tax Trade or Business in the United
States
lous submissions, and a list of positions that are W-9 Request for Taxpayer Identification
identified as frivolous, see Notice 2010-33, Through Number and Certification
2010-17 IRB 609 available at www.irs.gov/irb/
1040-ES (NR) U.S. Estimated Tax for
2010-17_irb/ar13.html.
You will have to pay the penalty if you filed
Withholding or Nonresident Alien Individuals
this kind of return or submission based on a friv- 8233 Exemption From Withholding on
olous position or a desire to delay or interfere
with the administration of federal tax laws. This
Estimated Tax Compensation for Independent (and
Certain Dependent) Personal
includes altering or striking out the preprinted Services of a Nonresident Alien
language above the space provided for your Individual
signature. Introduction 8288-B Application for Withholding
This penalty is added to any other penalty Certificate for Dispositions by Foreign
This chapter discusses how to pay your U.S. in-
provided by law. Persons of U.S. Real Property
come tax as you earn or receive income during
the year. In general, the federal income tax is a Interests
Fraud. If there is any underpayment of tax on
pay as you go tax. There are two ways to pay 13930 Application for Central Withholding
your return due to fraud, a penalty of 75% of the
as you go. Agreement
underpayment due to fraud will be added to
your tax. 1. Withholding. If you are an employee, See chapter 12 for information about getting
your employer probably withholds income these publications and forms.
Failure to supply taxpayer identification tax from your pay. Tax may also be with-
number. If you do not include your social se- held from certain other incomeincluding
curity number (SSN) or individual taxpayer
identification number (ITIN) or the SSN or ITIN
pensions, bonuses, commissions, and
gambling winnings. In each case, the
Notification of
of another person where required on a return, amount withheld is paid to the U.S. Treas- Alien Status
statement, or other document, you will be sub- ury in your name.
ject to a penalty of $50 for each failure. You will You must let your employer know whether you
also be subject to a penalty of $50 if you do not 2. Estimated tax. If you do not pay your tax
through withholding, or do not pay enough are a resident or a nonresident alien so your
give your SSN or ITIN to another person when it employer can withhold the correct amount of
is required on a return, statement, or other tax that way, you might have to pay esti-
mated tax. People who are in business for tax from your wages.
document.
themselves generally will have to pay their If you are a resident alien under the rules
For example, if you have a bank account
tax this way. You may have to pay estima- discussed in chapter 1, you must file Form W-9
that earns interest, you must give your SSN or
ted tax if you receive income such as divi- or a similar statement with your employer. If you
ITIN to the bank. The number must be shown
dends, interest, rent, and royalties. Esti- are a nonresident alien under those rules, you
on the Form 1099-INT or other statement the
mated tax is used to pay not only income must furnish to your employer Form 8233 or
bank sends you. If you do not give the bank
tax, but self-employment tax and alterna- Form W-8BEN, establishing that you are a for-
your SSN or ITIN, you will be subject to the $50
tive minimum tax as well. eign person, or Form W-4, establishing that
penalty. (You also may be subject to backup
withholding of income tax.) your compensation is subject to graduated with-
You will not have to pay the penalty if you Topics holding at the same rates as resident aliens or
are able to show that the failure was due to rea- This chapter discusses: U.S. citizens.
sonable cause and not willful neglect. If you are a resident alien and you receive
How to notify your employer of your alien income other than wages (such as dividends
Criminal Penalties status,
Income subject to withholding of income
and royalties) from sources within the United
States, file Form W-9 or similar statement with
tax, the withholding agent (generally, the payer of
You may be subject to criminal prosecution
Exemptions from withholding, the income) so the agent will not withhold tax on
(brought to trial) for actions such as:
Social security and Medicare taxes, and the income at the 30% (or lower treaty) rate. If
1. Tax evasion, you receive this type of income as a nonresi-
Estimated tax rules.
2. Willful failure to file a return, supply infor- dent alien, file Form W-8BEN with the withhold-
mation, or pay any tax due, ing agent so that the agent will withhold tax at
Useful Items the 30% (or lower treaty) rate. However, if the
3. Fraud and false statements, or You may want to see: income is effectively connected with a U.S.
4. Preparing and filing a fraudulent return. trade or business, file Form W-8ECI instead.
Publication
515 Withholding of Tax on Nonresident
Aliens and Foreign Entities
Withholding From
901 U.S. Tax Treaties
Compensation
Form (and Instructions) The following discussion generally applies only
to nonresident aliens. Tax is withheld from resi-
W-4 Employee's Withholding Allowance dent aliens in the same manner as U.S. citi-
Certificate zens.
W-8BEN Certificate of Foreign Status of Wages and other compensation paid to a
Beneficial Owner for United States nonresident alien for services performed as an

Page 38 Chapter 8 Paying Tax Through Withholding or Estimated Tax


employee are usually subject to graduated with- Household employees. If you work as a who is a resident of American Samoa or Puerto
holding at the same rates as resident aliens and household employee, your employer does not Rico, wages for services performed in Ameri-
U.S. citizens. Therefore, your compensation, have to withhold income tax. However, you may can Samoa or Puerto Rico are generally not
unless it is specifically excluded from the term agree to voluntary income tax withholding by fil- subject to withholding unless you are an em-
wages by law, or is exempt from tax by treaty, ing a Form W-4 with your employer. The agree- ployee of the United States or any of its agen-
is subject to graduated withholding. ment goes into effect when your employer ac- cies in American Samoa or Puerto Rico.
cepts the agreement by beginning the
Residents of the U.S. Virgin Islands. Non-
Withholding on Wages withholding. You or your employer may end the
agreement by letting the other know in writing. resident aliens who are bona fide residents of
the U.S Virgin Islands are not subject to with-
If you are an employee and you receive wages
Agricultural workers. If you are an agricul- holding of U.S. tax on income earned while tem-
subject to graduated withholding, you will be re-
tural worker on an H-2A visa, your employer porarily employed in the United States. This is
quired to fill out a Form W-4. Also fill out Form
does not have to withhold income tax. However, because those persons pay their income tax to
W-4 for a scholarship or fellowship grant to the
your employer will withhold income tax only if the U.S. Virgin Islands. To avoid having tax
extent it represents payment for past, present,
you and your employer agree to withhold. In withheld on income earned in the United States,
or future services and for which you are not
that case, you must provide your employer with bona fide residents of the U.S. Virgin Islands
claiming a tax treaty withholding exemption on
a properly completed Form W-4. You can find should write a letter, in duplicate, to their em-
Form 8233 (discussed later under Income Enti-
more information about not having tax withheld ployers, stating that they are bona fide resi-
tled to Tax Treaty Benefits). These are services
at www.irs.gov/Individuals/International- dents of the U.S. Virgin Islands and expect to
you are required to perform as an employee
Taxpayers/Foreign-Agricultural-Workers. pay tax on all income to the U.S. Virgin Islands.
and as a condition of receiving the scholarship
or fellowship (or tuition reduction).
Nonresident aliens should fill out Form W-4
Wages Exempt From Withholding Withholding on Pensions
using the following instructions instead of the in- Wages that are exempt from U.S. income tax
structions on the Form W-4. This is because of If you receive a pension as a result of personal
under an income tax treaty are generally ex- services performed in the United States, the
the restrictions on a nonresident alien's filing empt from withholding. For information on how
status, the limited number of personal exemp- pension income is subject to the 30% (or lower
to claim this exemption from withholding, see treaty) rate of withholding. You may, however,
tions a nonresident alien is allowed, and be- Income Entitled to Tax Treaty Benefits, later.
cause a nonresident alien cannot claim the have tax withheld at graduated rates on the por-
standard deduction. tion of the pension that arises from the perform-
Wages paid to aliens who are residents of ance of services in the United States after De-
1. Enter your social security number (SSN) American Samoa, Canada, Mexico, Puerto cember 31, 1986. You must fill out Form
on line 2. Do not enter an individual tax- Rico, or the U.S. Virgin Islands may be exempt W-8BEN and give it to the withholding agent or
payer identification number (ITIN). from withholding. The following paragraphs ex- payer before the income is paid or credited to
plain these exemptions. you.
2. Check only Single marital status on line 3
(regardless of your actual marital status).
Residents of Canada or Mexico engaged in
3. Claim only one allowance on line 5, unless transportation-related employment. Certain Withholding on Tip Income
you are a resident of Canada, Mexico, or residents of Canada or Mexico who enter or
South Korea, or a U.S. national. leave the United States at frequent intervals are Tips you receive during the year for services
not subject to withholding on their wages. performed in the United States are subject to
4. Write Nonresident Alien or NRA on the U.S. income tax. Include them in taxable in-
dotted line on line 6. You can request ad- These persons either:
Perform duties in transportation service come. In addition, tips received while working
ditional withholding on line 6 at your op-
between the United States and Canada or for one employer, amounting to $20 or more in
tion.
Mexico, or a month, are subject to graduated withholding.
5. Do not claim Exempt withholding status Perform duties connected to the construc-
on line 7. tion, maintenance, or operation of a water- Independent Contractors
way, viaduct, dam, or bridge crossed by, or
A U.S. national is an individual who, al- crossing, the boundary between the United
If there is no employee-employer relationship
though not a U.S. citizen, owes his or her alle- States and Canada or the boundary be-
between you and the person for whom you per-
giance to the United States. U.S. nationals in- tween the United States and Mexico.
form services, your compensation is subject to
clude American Samoans, and Northern
This employment is subject to with- the 30% (or lower treaty) rate of withholding.
Mariana Islanders who chose to become U.S.
holding of social security and Medi- However, if you are engaged in a trade or busi-
nationals instead of U.S. citizens. !
CAUTION care taxes unless the services are per- ness in the United States during the tax year,
See Withholding on Scholarships and Fel- formed for a railroad. your compensation for personal services as an
lowship Grants later, for how to fill out Form independent contractor (independent personal
W-4 if you receive a U.S. source scholarship or To qualify for the exemption from withhold- services) may be entirely or partly exempt from
fellowship grant that is not a payment for serv- ing during a tax year, a Canadian or Mexican withholding if you reach an agreement with the
ices. resident must give the employer a statement in Internal Revenue Service on the amount of
duplicate with name, address, and identification withholding required. An agreement that you
Students and business apprentices from In- number, certifying that the resident: reach with the IRS regarding withholding from
dia. If you are eligible for the benefits of Article Is not a U.S. citizen or resident, your compensation for independent personal
21(2) of the United States-India Income Tax services is effective for payments covered by
Is a resident of Canada or Mexico, which-
Treaty, you may claim an additional withholding the agreement after it is agreed to by all parties.
ever applies, and
allowance for the standard deduction. You can You must agree to timely file an income tax re-
claim an additional withholding allowance for Expects to perform duties previously de-
turn for the current tax year.
your spouse only if your spouse will have no scribed during the tax year in question.
gross income for 2014 and cannot be claimed The statement can be in any form, but it Central withholding agreements. If you are a
as a dependent on another U.S. taxpayer's must be dated and signed by the employee and nonresident alien entertainer or athlete perform-
2014 return. You may also claim an additional must include a written declaration that it is ing or participating in athletic events in the Uni-
withholding allowance for each of your depend- made under the penalties of perjury. ted States, you may be able to enter into a with-
ents not admitted to the United States on F-2, holding agreement with the IRS for reduced
J-2, or M-2 visas if they meet the same rules Residents of American Samoa and Puerto withholding provided certain requirements are
that apply to U.S. citizens. Rico. If you are a nonresident alien employee met. Under no circumstances will such a

Chapter 8 Paying Tax Through Withholding or Estimated Tax Page 39


withholding agreement reduce taxes withheld to proven to the satisfaction of the Commissioner Students and business apprentices from In-
less than the anticipated amount of income tax or his delegate. dia. If you are eligible for the benefits of Article
liability. The Commissioner or his delegate will send 21(2) of the United States-India Income Tax
File Form 13930 and the required attach- you a letter, directed to the withholding agent, Treaty, you are allowed an exemption for your
ments with the IRS to request a central with- showing the amount of the final payment of spouse only if your spouse will have no gross
holding agreement. Either you or your author- compensation that is exempt from withholding income for 2015 and cannot be claimed as a
ized representative can file the form. It should and the amount that can be paid to you be- dependent on another U.S. taxpayer's 2015 re-
be sent to the IRS at least 45 days before the cause of the exemption. You must give two cop- turn. You are also allowed an exemption for
tour begins or the event occurs. Exceptions will ies of the letter to the withholding agent and each dependent not admitted to the United
be considered on a case by case basis. must also attach a copy of the letter to your in- States on F-2, J-2, or M-2 visas if they
For more information on the CWA program, come tax return for the tax year for which the meet the same rules that apply to U.S. citizens.
go to www.irs.gov/Individuals/International- exemption is effective. For the 30% (or lower treaty rate) withholding
Taxpayers/Central-Withholding-Agreements. on compensation for independent personal
services performed in the United States, you
Allowance for
Final payment exemption. Your final pay- are allowed $10.96 per day for each allowable
Personal Exemption
ment of compensation during the tax year for in- exemption in 2015.
dependent personal services may be entirely or Withholding on payments for independent per-
partly exempt from withholding. This exemption sonal services is generally based on the Refund of Taxes Withheld in Error
is available only once during your tax year and amount of your compensation payment minus
applies to a maximum of $5,000 of compensa- the value of one exemption ($4,000 for 2015).
tion. To obtain this exemption, you or your Multi-level marketing. If you are a distributor
agent must give the following statements and for a multi-level marketing company who had
To determine the income for independent
information to the Commissioner or his dele- taxes withheld in error, file a U.S. income tax re-
personal services performed in the United
gate. turn (Form 1040NR, Form 1040NR-EZ, or Form
States to which the 30% (or lower treaty) rate
A statement by each withholding agent 1120-F) or, if a tax return has already been
will apply, you are allowed one personal ex-
from whom you have received gross in- filed, a claim for refund (Form 1040X or amen-
emption if you are not a U.S. national and are
come effectively connected with a trade or ded Form 1120-F) to recover the amount with-
not a resident of Canada, Mexico, or South Ko-
business in the United States during the held in error. You must also attach to the U.S.
rea. For purposes of 30% withholding, the ex-
tax year, showing the amount of income income tax return or claim for refund supporting
emption is prorated at $10.96 a day in 2015 for
paid and the tax withheld. Each statement information that includes, but is not limited to,
the period that labor or personal services are
must be signed by the withholding agent the following items.
performed in the United States. To claim an ex-
and verified by a declaration that it is made A copy of your Form W-2, Form 1042-S, or
emption from withholding on the personal ex-
under penalties of perjury. Form 1099 to prove the amount of taxes
emption amount, fill out the applicable parts of
A statement by the withholding agent from withheld.
whom you expect to receive the final pay- Form 8233 and give it to the withholding agent.
A statement explaining why income repor-
ment of compensation, showing the ted on your Form W-2, Form 1042-S, or
Example. Eric Johannsen, who is a resi-
amount of the payment and the amount of Form 1099 is not subject to U.S. taxation.
dent of Country X worked under a contract with
tax that would be withheld if a final pay- A statement listing all the dates you en-
a U.S. firm (not as an employee) in the United
ment exemption were not granted. This tered and left the United States during the
States for 100 days during 2015 before return-
statement must also be signed by the with- taxable year. If the compensation is
ing to his country. He earned $6,000 for the
holding agent and verified by a declaration multi-year compensation, the statement
services performed (not considered wages) in
that it is made under penalties of perjury. must list all the dates you entered and left
the United States. Eric is married and has three
A statement by you that you do not intend the United States during each of the taxa-
dependent children. His wife is not employed
to receive any other income effectively ble years to which the compensation is at-
and has no income subject to U.S. tax. The
connected with a trade or business in the tributable.
amount of the personal exemption to be al-
United States during the current tax year. A copy of any documents or records that
lowed against the income for his personal serv-
The amount of tax that has been withheld show the number of days you actually
ices performed within the United States in 2015
or paid under any other provision of the In- were present in the United States during
is $1,096 (100 days $10.96), and withholding
ternal Revenue Code or regulations for any the years listed.
at 30% is applied against the balance. Thus,
income effectively connected with your A statement providing: (a) the number of
$1,471.20 in tax is withheld from Eric's earnings
trade or business in the United States dur- days (or unit of time less than a day, if ap-
(30% of $4,904 ($6,000 $1,096)).
ing the current tax year. propriate) that personal services were per-
The amount of your outstanding tax liabili- formed in the United States in connection
U.S. nationals or residents of Canada, Mex-
ties, if any, including interest and penalties, with recruiting, training, and supporting
ico, or South Korea. If you are a nonresident
from the current tax year or prior tax peri- your lower-tier distributors; and (b) the total
alien who is a resident of Canada, Mexico, or
ods. number of days (or unit of time less than a
South Korea, or who is a national of the United
Any provision of an income tax treaty un- day, if appropriate) that personal services
States, you are subject to the same 30% with-
der which a partial or complete exemption were performed globally in connection with
holding on your compensation for independent
from withholding may be claimed, the recruiting, training, and supporting your
personal services performed in the United
country of your residence, and a statement lower-tier distributors.
States. However, if you are a U.S. national or a
of sufficient facts to justify an exemption Any further relevant document or record
resident of Canada or Mexico, you are allowed
under the treaty. supporting your claim that the taxes were
the same personal exemptions as U.S. citizens.
A statement signed by you, and verified by withheld in error.
For the 30% (or lower treaty) rate withholding,
a declaration that it is made under penal-
you can take $10.96 per day for each allowable
ties of perjury, that all the information given Refund of taxes withheld in error on social
exemption in 2015. If you are a resident of
is true and that to your knowledge no rele- security benefits paid to resident aliens.
South Korea, you are allowed personal exemp-
vant information has been omitted. Social security benefits paid to a lawful perma-
tions for yourself and for your spouse and chil-
If satisfied with the information, the IRS will dren who live with you in the United States at nent resident (green card holder) are not sub-
determine the amount of your tentative income any time during the tax year. However, the addi- ject to 30% withholding. For U.S. income tax
tax for the tax year on gross income effectively tional exemptions for your spouse and children purposes, green card holders continue to be
connected with your trade or business in the must be further prorated as explained in chap- resident aliens until their lawful permanent resi-
United States. Ordinary and necessary busi- ter 5 under Exemptions. dent status under immigration laws is either
ness expenses can be taken into account if taken away or is administratively or judicially

Page 40 Chapter 8 Paying Tax Through Withholding or Estimated Tax


determined to have been abandoned. See you must use Form 8804-C for this purpose. business expenses, moving expenses, and the
Green Card Test in chapter 1. If you are a green See the Instructions for Form 8804-C for more IRA deduction discussed under Deductions in
card holder and tax was withheld in error on information. chapter 5.
your social security benefits because you have
a foreign address, the withholding tax is refund- The withholding rate on your share of effec- Nontaxable grant or scholarship. Include
able by the Social Security Administration tively connected income is generally the highest the part of your grant or scholarship that is not
(SSA) or the IRS. SSA will refund taxes errone- rate of tax specified under section 1 of the Code taxable under U.S. law or under a tax treaty.
ously withheld if the refund can be processed (39.6% for 2015). However, the partnership
may withhold at the highest rate that applies to Line B. Enter -0- unless the following para-
during the same calendar year in which the tax
a particular type of income allocable to you if graph applies to you.
was withheld. If SSA cannot refund the taxes
withheld, you must file a Form 1040 or 1040A you gave the partnership the appropriate docu- If you are a student who qualifies under Arti-
with the Department of the Treasury, Internal mentation. Long-term capital gain is an exam- cle 21(2) of the United States-India Income Tax
Revenue Service Center, Austin, TX 73301 to ple of a particular type of income to which the Treaty, and you are not claiming deductions for
determine if you are entitled to a refund. You highest tax rate applies. Claim the tax withheld away-from-home expenses or other itemized
must also attach the following to your Form as a credit on your 2015 Form 1040NR. deductions (discussed earlier), enter the stand-
1040 or 1040A. ard deduction on line B. The standard deduc-
The partnership will give you a statement on tion amount for 2015 is $6,300.
A copy of Form SSA-1042S, Social Secur- Form 8805, Foreign Partner's Information State-
ity Benefit Statement. ment of Section 1446 Withholding Tax, showing Lines C and D. Enter -0- on both lines unless
A copy of the green card. the tax withheld. A partnership that is publicly the following paragraphs apply to you.
A signed declaration that includes the fol- traded will withhold tax on your actual distribu- If you are a resident of Canada, Mexico,
lowing statements: The SSA should not tions of effectively connected income. In this South Korea, or a U.S. national, an additional
have withheld income tax from my social case the partnership will give you a statement daily exemption amount may be allowed for
security benefits because I am a U.S. law- on Form 1042-S, Foreign Person's U.S. Source your spouse and each of your dependents.
ful permanent resident and my green card Income Subject to Withholding.
If you are a resident of India who is eligible
has been neither revoked nor administra- for the benefits of Article 21(2) of the United
tively or judicially determined to have been
abandoned. I am filing a U.S. income tax
Withholding on Scholarships States-India Income Tax Treaty, you can claim
return for the tax year as a resident alien and Fellowship Grants an additional daily exemption amount for your
spouse only if your spouse will have no gross
reporting all of my worldwide income. I income for 2015 and cannot be claimed as a
have not claimed benefits for the tax year There is no withholding on a qualified scholar-
ship received by a candidate for a degree. See dependent on another U.S. taxpayer's 2015 re-
under an income tax treaty as the resident turn. You can also claim an additional amount
of a country other than the United States. chapter 3.
for each of your dependents not admitted to the
If you are a nonresident alien student or United States on F-2, J-2, or M-2 visas if
grantee with an F, J, M, or Q visa and you they meet the same rules that apply to U.S. citi-
Withholding From receive a U.S. source grant or scholarship that zens.
Other Income is not fully exempt, the withholding agent (usu-
ally the payer of the scholarship) withholds tax
Enter any additional amount for your spouse
on line C. Enter any additional amount for your
at 14% (or lower treaty rate) of the taxable part dependents on line D.
Other income subject to 30% withholding gen- of the grant or scholarship that is not a payment
erally includes fixed or determinable income for services. However, if you are not a candi- Lines E, F, and G. No entries should be made
such as interest (other than portfolio interest), date for a degree and the grant does not meet on lines E, F, and G.
dividends, pensions and annuities, and gains certain requirements, tax will be withheld at the
from certain sales and exchanges, discussed in 30% (or lower treaty) rate. Line H. Add the amounts on lines A through D
chapter 4. It also includes 85% of social security and enter the total on line H.
benefits paid to nonresident aliens. Any part of a scholarship or fellowship grant
that is a payment for services is subject to grad- Form W-4. Complete lines 1 through 4 of Form
Other income not subject to withholding of uated withholding as discussed earlier under W-4. Sign and date the form and give it with the
30% (or lower treaty) rate. The following in- Withholding on Wages. Personal Allowances Worksheet to your with-
come is not subject to withholding at the 30% holding agent.
(or lower treaty) rate if you file Form W-8ECI Alternate Withholding Procedure If you file a Form W-4 to reduce or eliminate
with the payer of the income.
the withholding on your scholarship or grant,
Income (other than compensation) that is Your withholding agent may choose to use an you must file an annual U.S. income tax return
effectively connected with your U.S. trade alternate procedure by asking you to fill out to be allowed the exemptions and deductions
or business. Form W-4 and the Personal Allowances Work- you claimed on that form. If you are in the Uni-
Income from real property that you choose sheet (attached to Form W-4). Use the following ted States during more than one tax year, you
to treat as effectively connected with a instructions instead of the Form W-4 instruc- must attach a statement to your yearly Form
U.S. trade or business. See Income From tions to complete the worksheet. W-4 indicating that you have filed a U.S. income
Real Property in chapter 4 for details about tax return for the previous year. If you have not
this choice. Line A. Enter the total of the following amounts been in the United States long enough to be re-
Special rules for withholding on partnership on line A. quired to file a return, you must attach a state-
income, scholarships, and fellowships are ex- Personal exemption. Include the prorated ment to your Form W-4 saying you will file a
plained next. part of your allowable personal exemption. Fig- U.S. income tax return when required.
ure the amount by multiplying the number of
After the withholding agent has accepted
Tax Withheld on days you expect to be in the United States in
your Form W-4, tax will be withheld on your
Partnership Income 2015 by the daily exemption amount ($10.96).
scholarship or grant at the graduated rates that
Expenses. Include expenses that will be apply to wages. The gross amount of the in-
If you are a foreign partner in a U.S. or foreign deductible on your return. These include come is reduced by the amount on line H of the
partnership, the partnership will withhold tax on away-from-home expenses (meals, lodging, worksheet and the withholding tax is figured on
your share of effectively connected taxable in- and transportation), certain state and local in- the remainder.
come (ECTI) from the partnership. You may be come taxes, charitable contributions, and casu-
able to reduce your ECTI subject to withholding alty losses, discussed earlier under Itemized You will receive a Form 1042-S from the
by certain partner-level deductions. Generally, Deductions in chapter 5. They also include withholding agent (usually the payer of your

Chapter 8 Paying Tax Through Withholding or Estimated Tax Page 41


grant) showing the gross amount of your taxa- You will be required to pay U.S. tax, at gives the buyer a statement, under penal-
ble scholarship or fellowship grant less the with- ! the time of your departure from the ties of perjury, that the certification is in the
holding allowance amount, the tax rate, and the CAUTION United States, on any income for possession of the qualified substitute. For
amount of tax withheld. Use this form to prepare which you incorrectly claimed a treaty exemp- this purpose, a qualified substitute is (a)
your annual U.S. income tax return. tion. For more details on treaty provisions that the person (including any attorney or title
apply to compensation, see Publication 901. company) responsible for closing the
transaction, other than your agent, and (b)
Income Entitled to the buyer's agent.

Tax Treaty Benefits Tax Withheld on 5. The buyer receives a withholding certifi-
cate from the Internal Revenue Service.
If a tax treaty between the United States and
Real Property Sales 6. You give the buyer written notice that you
your country provides an exemption from, or a are not required to recognize any gain or
reduced rate of, tax for certain items of income, If you are a nonresident alien and you dispose
loss on the transfer because of a nonre-
you should notify the payor of the income (the of a U.S. real property interest, the transferee
cognition provision in the Internal Revenue
withholding agent) of your foreign status to (buyer) of the property generally must withhold
Code or a provision in a U.S. tax treaty.
claim a tax treaty withholding exemption. Gen- a tax equal to 10% of the amount realized on
The buyer must file a copy of the notice
erally, you do this by filing either Form W-8BEN the disposition.
with the Ogden Service Center, P.O. Box
or Form 8233 with the withholding agent. 409101, Ogden, UT 84409. You must ver-
A distribution by a qualified investment entity
File Form W-8BEN for income that is not to a nonresident alien shareholder that is ify the notice as true and sign it under pen-
personal services income. File Form 8233 for treated as gain from the sale or exchange of a alties of perjury. The notice must contain
personal services income as discussed next. U.S. real property interest by the shareholder is the following information.
subject to withholding at 35%. Withholding is a. A statement that the notice is a notice
Employees and independent contractors. If also required on certain distributions and other of nonrecognition under regulation
you perform personal services as an employee transactions by domestic or foreign corpora- section 1.1445-2(d)(2).
or as an independent contractor and you can tions, partnerships, trusts, and estates. These
claim an exemption from withholding on that rules are covered in Publication 515. b. Your name, taxpayer identification
personal service income because of a tax number, and home address.
treaty, give Form 8233 to each withholding For information on the tax treatment of dis-
c. A statement that you are not required
agent from whom amounts will be received. positions of U.S. real property interests, see
to recognize any gain or loss on the
Even if you submit Form 8233, the withhold- Real Property Gain or Loss in chapter 4.
transfer.
ing agent may have to withhold tax from your in-
If you are a partner in a domestic partner- d. A brief description of the transfer.
come. This is because the factors on which the
ship, and the partnership disposes of a U.S.
treaty exemption is based may not be determi- e. A brief summary of the law and facts
real property interest at a gain, the partnership
nable until after the close of the tax year. In this supporting your claim that recognition
will withhold tax on the amount of gain allocable
case, you must file Form 1040NR (or Form of gain or loss is not required.
to its foreign partners. Your share of the income
1040NR-EZ if you qualify) to recover any over-
and tax withheld will be reported to you on Form You may not give the buyer a written
withheld tax and to provide the IRS with proof
8805, Foreign Partner's Information Statement notice for any of the following transfers:
that you are entitled to the treaty exemption.
of Section 1446 Withholding Tax, or Form the sale of your main home on which you
Students, teachers, and researchers. 1042-S, Foreign Person's U.S. Source Income
exclude gain, a like-kind exchange that
Students, teachers, and researchers must at- Subject to Withholding (in the case of a publicly
does not qualify for nonrecognition treat-
tach the appropriate statement shown in Ap- traded partnership).
ment in its entirety, or a deferred like-kind
pendix A (for students) or Appendix B (for exchange that has not been completed at
teachers and researchers) at the end of this Withholding is not required in the following
situations. the time the buyer must file Form 8288. In-
publication to the Form 8233 and give it to the stead, a withholding certificate (described
withholding agent. For treaties not listed in the 1. The property is acquired by the buyer for next) must be obtained.
appendices, attach a statement in a format sim- use as a residence and the amount real-
ilar to those for other treaties. ized (sales price) is not more than 7. The amount you realize on the transfer of
If you received a scholarship or fellowship $300,000. a U.S. real property interest is zero.
and personal services income from the same 8. The property is acquired by the United
withholding agent, use Form 8233 to claim an 2. The property disposed of is an interest in a
domestic corporation if any class of stock States, a U.S. state or possession, a politi-
exemption from withholding based on a tax cal subdivision, or the District of Columbia.
treaty for both types of income. of the corporation is regularly traded on an
established securities market. However, 9. The distribution is from a domestically
Special events and promotions. Withholding this exception does not apply to certain controlled qualified investment entity (QIE)
at the full 30% rate is required for payments dispositions of substantial amounts of and is treated as a distribution of a U.S.
made to a nonresident alien or foreign corpora- non-publicly traded interests in publicly real property interest only because an in-
tion for gate receipts (or television or other re- traded corporations. terest in the entity was disposed of in an
ceipts) from rock music festivals, boxing promo- 3. The property disposed of is an interest in a applicable wash sale transaction. For the
tions, and other entertainment or sporting U.S. corporation that is not regularly tra- definition of a QIE, see Qualified invest-
events, unless the withholding agent has been ded on an established market and you ment entities under Real Property Gain or
specifically advised otherwise by letter from the (the seller) give the buyer a copy of a Loss, earlier. See Wash sale under Real
IRS. Form 13930 is used to request a reduction statement issued by the corporation certi- Property Gain or Loss in chapter 4.
in withholding. Withholding may be required fying that the interest is not a U.S. real
even if the income may be exempt from taxation The certifications in (3) and (4) must be dis-
property interest. regarded by the buyer if the buyer or qualified
by provisions of a tax treaty. One reason for this
is that the partial or complete exemption is usu- 4. You (the seller) give the buyer a certifica- substitute has actual knowledge, or receives
ally based on factors that cannot be determined tion stating, under penalties of perjury, that notice from a seller's or buyer's agent (or substi-
until after the close of the tax year. you are not a foreign person, and contain- tute), that they are false. This also applies to the
ing your name, U.S. taxpayer identification qualified substitute's statement under (4).
number, and home address.
You can give the certification to a quali- Withholding certificates. The tax required to
fied substitute. The qualified substitute be withheld on a disposition can be reduced or

Page 42 Chapter 8 Paying Tax Through Withholding or Estimated Tax


eliminated under a withholding certificate is- than $7,254. Use the appropriate worksheet in Immigration and Nationality Act are not covered
sued by the IRS. Either you or the buyer can re- chapter 3 of Publication 505, Tax Withholding under the social security program if the services
quest a withholding certificate. and Estimated Tax, to figure your credit. are performed to carry out the purpose for
A withholding certificate can be issued due which you were admitted to the United States.
to any of the following. If any one employer deducted more than This means that there will be no withholding of
$7,254, you cannot claim a credit for that social security or Medicare taxes from the pay
1. The IRS determines that reduced with- amount. Ask your employer to refund the ex- you receive for these services. These types of
holding is appropriate because either: cess. If your employer does not refund the ex- services are very limited, and generally include
a. The amount required to be withheld cess, you can file a claim for refund using Form only on-campus work, practical training, and
would be more than your maximum 843. economic hardship employment.
tax liability, or In general, U.S. social security and Medi- Social security and Medicare taxes will be
b. Withholding of the reduced amount care taxes apply to payments of wages for serv- withheld from your pay for these services if you
would not jeopardize collection of the ices performed as an employee in the United are considered a resident alien as discussed in
tax. States, regardless of the citizenship or resi- chapter 1, even though your nonimmigrant clas-
dence of either the employee or the employer. sification (F, J, M, or Q) remains the
2. All of your realized gain is exempt from In limited situations, these taxes apply to wages same.
U.S. tax. for services performed outside the United
3. You or the buyer enters into an agreement States. Your employer should be able to tell you Services performed by a spouse or minor
for the payment of tax providing security if social security and Medicare taxes apply to child of nonimmigrant aliens with the classifica-
for the tax liability. your wages. You cannot make voluntary pay- tion of F-2, J-2, M-2, and Q-3 are covered
ments if no taxes are due. under social security.
Get Publication 515 and Form 8288-B for in-
formation on procedures to request a withhold- Additional Medicare Tax. In addition to the Nonresident Alien Students
ing certificate. Medicare tax, a 0.9% Additional Medicare Tax
applies to Medicare wages, Railroad Retire- If you are a nonresident alien temporarily admit-
Credit for tax withheld. The buyer must re- ment Tax Act (RRTA) compensation, and ted to the United States as a student, you gen-
port and pay over the withheld tax within 20 self-employment income that are more than: erally are not permitted to work for a wage or
days after the transfer using Form 8288, U.S. $250,000 if married filing jointly, salary or to engage in business while you are in
Withholding Tax Return for Dispositions by For-
$125,000 if married filing separately, or the United States. In some cases, a student ad-
eign Persons of U.S. Real Property Interests.
$200,000 for any other filing status. mitted to the United States in F-1, M-1, or
This form is filed with the IRS with copies A and
J-1 status is granted permission to work. So-
B of Form 8288-A, Statement of Withholding on
There are no special rules for nonresident cial security and Medicare taxes are not with-
Dispositions by Foreign Persons of U.S. Real
aliens for purposes of Additional Medicare Tax. held from pay for the work unless the student is
Property Interests. Copy B of this statement will
Wages, RRTA compensation, and self-employ- considered a resident alien.
be stamped received by the IRS and returned to
ment income that are subject to Medicare tax
you (the seller) if the statement is complete and Any student who is enrolled and regu-
will also be subject to Additional Medicare Tax if
includes your taxpayer identification number TIP larly attending classes at a school may
in excess of the applicable threshold.
(TIN). You must file Copy B with your tax return be exempt from social security and
to take credit for the tax withheld. Your employer is responsible for withholding
Medicare taxes on pay for services performed
the 0.9% Additional Medicare Tax on Medicare
A stamped copy of Form 8288-A will not be for that school.
wages or RRTA compensation it pays to you in
provided to you if your TIN is not included on
excess of $200,000 in the calendar year. If you
that form. The IRS will send you a letter re- The U.S. Citizenship and Immigration Serv-
intend to file a joint return and you anticipate
questing the TIN and providing instructions for ices (USCIS) permits on-campus work for stu-
that you and your spouse's individual wages are
how to get a TIN. When you provide the IRS dents in F-1 status if it does not displace a
not going to be more than $200,000 but your
with a TIN, the IRS will provide you with a stam- U.S. resident. On-campus work means work
combined wages and self-employment income
ped Copy B of Form 8288-A. performed on the school's premises. On-cam-
are going to be more than $250,000, you may
want to request additional withholding on Form pus work includes work performed at an
off-campus location that is educationally affili-
Social Security and W-4 and/or make estimated tax payments.
If you file Form 1040NR, you must pay Addi- ated with the school. On-campus work under
Medicare Taxes tional Medicare Tax if the total of your wages the terms of a scholarship, fellowship, or assis-
tantship is considered part of the academic pro-
and your self-employment income was more
than $125,000 if married (Box 3, 4, or 5 on gram of a student taking a full course of study
If you work as an employee in the United
page 1 of Form 1040NR), or $200,000 if single and is permitted by the USCIS. Social security
States, you must pay social security and Medi-
or qualifying widow(er) (Box 1, 2, or 6 on page 1 and Medicare taxes are not withheld from pay
care taxes in most cases. Your payments of
of Form 1040NR). for this work unless the student is considered a
these taxes contribute to your coverage under
See Form 8959, Additional Medicare Tax, resident alien.
the U.S. social security system. Social security
coverage provides retirement benefits, survi- and the Instructions for Form 8959 to determine
whether you are required to pay Additional If services performed by a nonresident alien
vors and disability benefits, and medical insur-
Medicare Tax. For more information on Addi- student are not considered as performed to
ance (Medicare) benefits to individuals who
tional Medicare Tax, go to IRS.gov and enter carry out the purpose for which the student was
meet certain eligibility requirements.
Additional Medicare Tax in the search box. admitted to the United States, social security
In most cases, the first $117,000 of taxable and Medicare taxes will be withheld from pay
Self-employed individuals may also be re-
wages received in 2014 for services performed for the services unless the pay is exempt under
quired to pay Additional Medicare Tax. See
in the United States is subject to social security the Internal Revenue Code.
Self-Employment Tax, later.
tax. All taxable wages are subject to Medicare
tax. Your employer deducts these taxes from Exchange Visitors
each wage payment. Your employer must de- Students and
duct these taxes even if you do not expect to Exchange Visitors Exchange visitors are temporarily admitted to
qualify for social security or Medicare benefits. the United States under section 101(a)(15)(J) of
You can claim a credit for excess social security Generally, services performed by you as a non- the Immigration and Nationality Act. Social se-
tax on your income tax return if you have more resident alien temporarily in the United States curity and Medicare taxes are not withheld on
than one employer and the amount deducted as a nonimmigrant under subparagraph (F), (J), pay for services of an exchange visitor who has
from your combined wages for 2014 is more (M), or (Q) of section 101(a)(15) of the been given permission to work and who

Chapter 8 Paying Tax Through Withholding or Estimated Tax Page 43


possesses or obtains a letter of authorization filing Form 8959 with Form 1040 or 1040NR. If Additional Medicare Tax. Self-employed in-
from the sponsor unless the exchange visitor is Additional Medicare Tax was withheld in error in dividuals must pay a 0.9% Additional Medicare
considered a resident alien. a prior year for which you already filed Form Tax on self-employment income that exceeds
1040 or 1040NR, you must file Form 1040X, one of the following threshold amounts (based
If services performed by an exchange visitor Amended U.S. Individual Income Tax Return, on your filing status):
are not considered as performed to carry out for the prior year in which the wages or com- Married filing jointly $250,000;
the purpose for which the visitor was admitted pensation were originally received to recover Married filing separately $125,000;
to the United States, social security and Medi- the Additional Medicare Tax withheld in error.
care taxes are withheld from pay for the serv- See the Instructions for Form 1040X. Single, Head of household, or Qualifying
ices unless the pay is exempt under the Internal widow(er) $200,000.
Revenue Code. If you have both wages and self-employ-
Agricultural Workers ment income, the threshold amount for applying
Nonresident aliens temporarily admitted to the Additional Medicare Tax on the self-employ-
the United States as participants in international Agricultural workers temporarily admitted into ment income is reduced (but not below zero) by
cultural exchange programs under section the United States on H-2A visas are exempt the amount of wages subject to Additional Med-
101(a)(15)(Q) of the Immigration and National- from social security and Medicare taxes on icare Tax. A self-employment loss should not
ity Act may be exempt from social security and compensation paid to them for services per- be considered for purposes of this tax.
Medicare taxes. The employer must be the peti- formed in connection with the H-2A visa. You If you file Form 1040NR, you must pay Addi-
tioner through whom the alien obtained the Q can find more information about not having tax tional Medicare Tax if the total of your wages
visa. Social security and Medicare taxes are not withheld at www.irs.gov/Individuals/ and your self-employment income was more
withheld from pay for this work unless the alien International-Taxpayers/Foreign-Agricultural- than $125,000 if married (Box 3, 4, or 5 on
is considered a resident alien. Workers. page 1 of Form 1040NR), or $200,000 if single
or qualifying widow(er) (Box 1, 2, or 6 on page 1
Refund of Taxes Withheld in Error Self-Employment Tax of Form 1040NR).
See Form 8959, Additional Medicare Tax,
If social security or Medicare taxes were with- and the Instructions for Form 8959 to determine
Self-employment tax is the social security and
held in error from pay that is not subject to whether you are required to pay Additional
Medicare taxes for individuals who are self-em-
these taxes, contact the employer who withheld Medicare Tax. For more information on Addi-
ployed. Nonresident aliens are not subject to
the taxes for a refund. If you are unable to get a tional Medicare Tax, go to IRS.gov and enter
self-employment tax unless an international so-
full refund of the amount from your employer, Additional Medicare Tax in the search box.
cial security agreement in effect determines that
file a claim for refund with the Internal Revenue
they are covered under the U.S. social security
Service on Form 843, Claim for Refund and Re- Deduction for employer-equivalent portion
system. Residents of the U.S. Virgin Islands,
quest for Abatement. Attach the following items of self-employment tax. If you must pay
Puerto Rico, Guam, the Commonwealth of the
to Form 843. self-employment tax, you can deduct a portion
Northern Mariana Islands, or American Samoa
A copy of your Form W-2 to prove the of the self-employment tax paid in figuring your
are considered U.S. residents for this purpose
amount of social security and Medicare adjusted gross income. This deduction is fig-
and are subject to the self-employment tax.
taxes withheld. ured on Schedule SE (Form 1040).
A copy of your visa. Resident aliens must pay self-employment
Form I-94 (or other documentation show- tax under the same rules that apply to U.S. citi- Note. No portion of the Additional Medicare
ing your dates of arrival or departure). zens. However, a resident alien employed by Tax is deductible for self-employment tax.
If you have an F-1 visa, documentation an international organization, a foreign govern-
showing permission to work in the U.S. ment, or a wholly-owned instrumentality of a for- More information. Get Publication 334, Tax
If you have a J-1 visa, documentation eign government is not subject to the self-em- Guide for Small Business, for more information
showing permission to work in the U.S. ployment tax on income earned in the United about self-employment tax.
If you are engaged in optional practical States.
training or employment due to severe eco-
Self-employment income you receive while
International Social
nomic necessity, documentation showing
permission to work in the U.S. you are a resident alien is subject to self-em- Security Agreements
A statement from your employer indicating ployment tax even if it was paid for services you
the amount of the reimbursement your em- performed as a nonresident alien. The United States has entered into social se-
ployer provided and the amount of the curity agreements with foreign countries to co-
credit or refund your employer claimed or Example. Bill Jones is an author engaged ordinate social security coverage and taxation
you authorized your employer to claim. If in the business of writing books. Bill had several of workers employed for part or all of their work-
you cannot obtain this statement from your books published in a foreign country while he ing careers in one of the countries. These
employer, you must provide this informa- was a citizen and resident of that country. Dur- agreements are commonly referred to as totali-
tion on your own statement and explain ing 2014, Bill entered the United States as a zation agreements. Under these agreements,
why you are not attaching a statement from resident alien. After becoming a U.S. resident, dual coverage and dual contributions (taxes) for
your employer or on Form 8316 claiming he continued to receive royalties from his for- the same work are eliminated. The agreements
your employer will not issue the refund. eign publisher. Bill reports his income and ex- generally make sure that social security taxes
If you were exempt from social security penses on the cash basis (he reports income (including self-employment tax) are paid only to
and Medicare tax for only part of the year, on his tax return when received and deducts one country. Agreements are in effect with the
pay statements showing the tax paid dur- expenses when paid). Bill's 2014 self-employ- following countries.
ing the period you were exempt. ment income includes the royalties received af- Australia.
ter he became a U.S. resident even though the
Austria.
File Form 843 (with attachments) with the books were published while he was a nonresi-
dent alien. This royalty income is subject to Belgium.
Department of the Treasury, Internal Revenue
Service Center, Ogden, UT 84201-0038. self-employment tax. Canada.
Chile.
Do not use Form 843 to request a re- Reporting self-employment tax. Use Sched-
fund of Additional Medicare Tax. If Ad- ule SE (Form 1040) to report and figure your Czech Republic.
!
CAUTION ditional Medicare Tax was withheld self-employment tax. Then enter the tax on Denmark.
from your pay in error, you can claim a credit for Form 1040, line 57, or Form 1040NR, line 55. Finland.
any withheld Additional Medicare Tax against Attach Schedule SE to Form 1040 or Form
the total tax liability shown on your tax return by 1040NR. France.

Page 44 Chapter 8 Paying Tax Through Withholding or Estimated Tax


Germany. try where they reside. However, under some Form 1040-ES (NR) instructions for your filing
Greece. agreements, you may be exempt from U.S. status.
self-employment tax if you temporarily transfer
Ireland. your business activity to or from the United Note. If you expect to be a resident of Pu-
Italy. States. erto Rico during the entire year, use Form
1040-ES or Formulario 1040-ES (PR).
Japan. If you believe that your self-employment in-
Korea, South. come is subject only to U.S. self-employment
When to pay estimated tax. Make your first
tax and is exempt from foreign social security
Luxembourg. estimated tax payment by the due date for filing
taxes, request a certificate of coverage from the
the previous year's Form 1040NR or Form
The Netherlands. U.S. Social Security Administration at the ad-
1040NR-EZ. If you have wages subject to the
Norway. dress given earlier. This certificate will establish
same withholding rules that apply to U.S. citi-
your exemption from foreign social security
Poland. zens, you must file Form 1040NR or Form
taxes.
Portugal. 1040NR-EZ and make your first estimated tax
To establish that your self-employment in-
payment by April 15, 2015. If you do not have
Slovak Republic. come is subject only to foreign social security
wages subject to withholding, file your income
Spain. taxes and is exempt from U.S. self-employment
tax return and make your first estimated tax
tax, request a certificate of coverage from the
Sweden. payment by June 15, 2015.
appropriate agency of the foreign country. If the
Switzerland. foreign country will not issue the certificate, you If your first estimated tax payment is due
should request a statement that your income is April 15, 2015, you can pay your estimated tax
The United Kingdom. in full at that time or in four equal installments by
not covered by the U.S. social security system.
Agreements with other countries are expected Request it from the U.S. Social Security Admin- the dates shown next.
to enter into force in the future. istration at the address given earlier. Attach a
photocopy of either statement to Form 1040 1st installment . . . . . . . . . . . . . April 15, 2015
Employees. Generally, under these agree- each year you are exempt. Also print Exempt, 2nd installment . . . . . . . . . . . . June 15, 2015
ments, you are subject to social security taxes see attached statement on the line for self-em- 3rd installment . . . . . . . . . . . . . Sept. 15, 2015
4th installment . . . . . . . . . . . . Jan. 15, 2016
only in the country where you are working. ployment tax.
However, if you are temporarily sent to work for
If your first payment is not due until June 15,
the same employer in the United States and
your pay would normally be subject to social se- Estimated Tax 2015, you can pay your estimated tax in full at
that time or:
curity taxes in both countries, most agreements
provide that you remain covered only by the so- Form 1040-ES (NR) 1. 1
2 of your estimated tax by June 15, 2015,
cial security system of the country from which
2. 1
4 of the tax by September 15, 2015, and
you were sent. You can get more information on You may have income from which no U.S. in-
any agreement by contacting the U.S. Social come tax is withheld. Or the amount of tax with- 3. 1
4 by January 15, 2016.
Security Administration at the address given held may be less than the income tax you esti-
later. If you have access to the Internet, you can mate you will owe at the end of the year. If so, You do not have to make the payment
get more information at www.socialsecurity.gov/ you may have to pay estimated tax. TIP due January 15, 2016, if you file your
international. 2015 Form 1040NR or 1040NR-EZ by
Generally, you must make estimated tax February 1, 2016, and pay the entire balance
To establish that your pay is subject only to
payments for 2015 if you expect to owe at least due with your return.
foreign social security taxes and is exempt from
$1,000 in tax and you expect your withholding
U.S. social security taxes (including the Medi-
and certain refundable credits to be less than Fiscal year. If your return is not on a calen-
care tax) under an agreement, you or your em-
the smaller of: dar year basis, your due dates are the 15th day
ployer should request a certificate of coverage
from the appropriate agency of the foreign 1. 90% of the tax to be shown on your 2015 of the 4th, 6th, and 9th months of your fiscal
country. This will usually be the same agency to income tax return, or year, and the 1st month of the following fiscal
which you or your employer pays your foreign year. If any date falls on a Saturday, Sunday, or
2. 100% of the tax shown on your 2014 in- legal holiday, use the next day that is not a Sat-
social security taxes. The foreign agency will be
come tax return (if your 2014 return cov- urday, Sunday, or legal holiday.
able to tell you what information is needed for
ered all 12 months of the year).
them to issue the certificate. Your employer
should keep a copy of the certificate because it Changes in income, deductions, or exemp-
If your adjusted gross income for 2014 was
may be needed to show why you are exempt tions. Even if you are not required to make an
more than $150,000 ($75,000 if your filing sta-
from U.S. social security taxes. Only wages estimated tax payment in April or June, your cir-
tus for 2015 is married filing separately), substi-
paid on or after the effective date of the agree- cumstances may change so that you will have
tute 110% for 100% in (2) above if you are not a
ment can be exempt from U.S. social security to make estimated tax payments later. This can
farmer or fisherman. Item (2) does not apply if
taxes. happen if you receive additional income or if
you did not file a 2014 return.
any of your deductions are reduced or elimina-
Some of the countries with which the A nonresident alien should use Form ted. If so, see the instructions for Form 1040-ES
United States has agreements will not 1040-ES (NR) to figure and pay estimated tax. (NR) and Publication 505 for information on fig-
issue certificates of coverage. In this If you pay by check, make it payable to the "Uni- uring your estimated tax.
case, either you or your employer should re- ted States Treasury."
quest a statement that your wages are not cov- Amended estimated tax. If, after you have
ered by the U.S. social security system. Re- How to estimate your tax for 2015. If you made estimated tax payments, you find your
quest the statement from the following address. filed a 2014 return on Form 1040NR or Form estimated tax is substantially increased or de-
1040NR-EZ and expect your income, number creased because of a change in your income or
U.S. Social Security Administration of exemptions, and total deductions for 2015 to exemptions, you should adjust your remaining
Office of International Programs be nearly the same, you should use your 2014 estimated tax payments. To do this, see the in-
P.O. Box 17741 return as a guide to complete the Estimated Tax structions for Form 1040-ES (NR) and Publica-
Baltimore, MD 21235-7741 Worksheet in the Form 1040-ES (NR) instruc- tion 505.
tions. If you did not file a return for 2014, or if
your income, exemptions, deductions, or cred- Penalty for failure to pay estimated income
Self-employed individuals. Under most its will be different for 2015, you must estimate tax. You will be subject to a penalty for under-
agreements, self-employed individuals are cov- these amounts. Figure your estimated tax liabil- payment of installments of estimated tax except
ered by the social security system of the coun- ity using the Tax Rate Schedule in the 2015 in certain situations. These situations are

Chapter 8 Paying Tax Through Withholding or Estimated Tax Page 45


explained on Form 2210, Underpayment of Es- are subject to tax at a tax treaty rate not to ex-
timated Tax by Individuals, Estates, and Trusts. ceed 15%. Nontreaty income is the gross in-
come of a nonresident alien on which the tax is Some Typical Tax
not limited by a tax treaty. Treaty Benefits
Figure the tax on treaty income on each
The following paragraphs briefly explain the ex-
separate item of income at the reduced rate that
emptions that are available under tax treaties
applies to that item under the treaty.
9. To determine tax on nontreaty income, fig-
for personal services income, remittances,
scholarships, fellowships, and capital gain in-
come. The conditions for claiming the exemp-
ure the tax at either the flat 30% rate or the
tions vary under each tax treaty. For more infor-
graduated rate, depending upon whether or not
Tax Treaty the income is effectively connected with your
mation about the conditions under a particular
tax treaty, see Publication 901. Or, you can
trade or business in the United States.
download the complete text of most U.S. tax
Benefits Your tax liability is the sum of the tax on
treaties at IRS.gov. Enter Tax Treaties in the
search box. Click on United States Income Tax
treaty income plus the tax on nontreaty income,
Treaties A to Z. Technical explanations for
but cannot be more than the tax liability figured
many of those treaties are also available at that
Introduction as if the tax treaty had not come into effect.
site.
A nonresident alien (and certain resident aliens) Example. Arthur Banks is a nonresident Tax treaty benefits also cover income such
from a country with which the United States has alien who is single and a resident of a foreign as dividends, interest, rentals, royalties, pen-
an income tax treaty may qualify for certain ben- country that has a tax treaty with the United sions, and annuities. These types of income
efits. Most treaties require that the nonresident States. He received gross income of $25,900 may be exempt from U.S. tax or may be subject
alien be a resident of the treaty country to qual- during the tax year from sources within the Uni- to a reduced rate of tax. For more information,
ify. However, some treaties require that the ted States, consisting of the following items: see Publication 901 or the applicable tax treaty.
nonresident alien be a national or a citizen of
the treaty country.
See Table 9-1 for a list of tax treaty coun-
Dividends on which the tax is limited to a 15%
rate by the tax treaty . . . . . . . . . . . . . . . . . $1,400 Personal Services
tries.
Nonresident aliens from treaty countries who
You can generally arrange to have withhold- Compensation for personal services on which
the tax is not limited by the tax treaty . . . . . . 24,500 are in the United States for a short stay and also
ing tax reduced or eliminated on wages and
meet certain other requirements may be ex-
other income that are eligible for tax treaty ben-
Total gross income . . . . . . . . . . . . . $25,900 empt from tax on their compensation received
efits. See Income Entitled to Tax Treaty Bene-
for personal services performed in the United
fits in chapter 8.
Arthur was engaged in business in the Uni- States. Many tax treaties require that the non-
ted States during the tax year. His dividends are resident alien claiming this exemption be
Topics not effectively connected with that business. He present in the United States for a total of not
This chapter discusses: has no deductions other than his own personal more than 183 days during the tax year. Other
exemption. tax treaties specify different periods of maxi-
Typical tax treaty benefits, His tax liability, figured as though the tax mum presence in the United States, such as
How to obtain copies of tax treaties, and treaty had not come into effect, is $3,053 deter- 180 days or 90 days. Spending part of a day in
mined as follows: the United States counts as a day of presence.
How to claim tax treaty benefits on your tax
return. Tax treaties may also require that:
Total compensation . . . . . . . . . . . . . . . . . . $24,500 The compensation cannot be more than a
Useful Items specific amount (frequently $3,000), and
You may want to see:
Less: Personal exemption . . . . . . . . . . . . . 3,950 The individual have a foreign employer;
that is, an individual, corporation, or entity
Taxable income . . . . . . . . . . . . . . $20,550 of a foreign country.
Publication
Tax determined by graduated rate (Tax Table
Note. Under most treaties, income received
901 U.S. Tax Treaties $2,633 as an employee (generally designated as de-
column for single taxpayers) . . . . . . . . . . . .
pendent personal services) and income re-
Form (and Instructions)
Plus: Tax on gross dividends ($1,400 ceived as a self-employed person (generally
30%) . . . . . . . . . . . . . . . . . . . . . . . 420 designated as independent personal services
1040NR U.S. Nonresident Alien Income . . . . .

Tax Return or business income) are treated differently.


Tax determined as though treaty had not
1040NR-EZ U.S. Income Tax Return for come into effect . . . . . . . . . . . . . . $3,053
Certain Nonresident Aliens With No Teachers, Professors,
Dependents Arthur's tax liability, figured by taking into ac- and Researchers
count the reduced rate on dividend income as
8833 Treaty-Based Return Position provided by the tax treaty, is $2,843 determined Under many income tax treaties, nonresident
Disclosure Under Section 6114 or as follows: alien teachers or professors who temporarily
7701(b) visit the United States for the primary purpose
See chapter 12 for information about getting Tax determined by graduated rate (same as of teaching at a university or other accredited
figured above) . . . . . . . . . . . . . . . . . . . . . $2,633 educational institution are not subject to U.S. in-
these publications and forms.
come tax on compensation received for teach-
Plus: Tax on gross dividends ($1,400 ing for the first 2 or 3 years after their arrival in
210
Treaty Income
15%) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the United States. Many treaties also provide
an exemption for engaging in research.
Tax on compensation and dividends . . . $2,843
A nonresident alien's treaty income is the gross Generally, the teacher or professor must be
income on which the tax is limited by a tax His tax liability, therefore, is limited to in the United States primarily to teach, lecture,
treaty. Treaty income includes, for example, $2,843, the tax liability figured using the tax instruct, or engage in research. A substantial
dividends from sources in the United States that treaty rate on the dividends. part of that person's time must be devoted to

Page 46 Chapter 9 Tax Treaty Benefits


those duties. The normal duties of a teacher or explained in chapter 1 under Effect of Tax Trea- maintenance in the United States, for scholar-
professor include not only formal classroom ties.) If this applies to you, you generally will not ship, fellowship, and research grants, and for
work involving regularly scheduled lectures, need to file a Form 8833 for the income for wages or other personal service compensation.
demonstrations, or other student-participation which treaty benefits are claimed. This is be- Once you become a resident alien, you gener-
activities, but also the less formal method of cause the income will typically be of a category ally can no longer claim a tax treaty exemption
presenting ideas in seminars or other informal for which disclosure on a Form 8833 is waived. for this income.
groups and in joint efforts in the laboratory. See Reporting Treaty Benefits Claimed.
However, if you entered the United States
If you entered the United States as a non- as a nonresident alien, but you are now a resi-
resident alien, but are now a resident alien, the In most cases, you also will not need to re-
port the income on your Form 1040 because dent alien for U.S. tax purposes, the treaty ex-
treaty exemption may still apply. See Students, emption will continue to apply if the tax treaty's
Apprentices, Trainees, Teachers, Professors, the income will be exempt from U.S. tax under
the treaty. However, if the income has been re- saving clause (explained later) provides an ex-
and Researchers Who Became Resident Ali-
ported as taxable income on a Form W-2, Form ception for it and you otherwise meet the re-
ens, later under Resident Aliens.
1042-S, Form 1099, or other information return, quirements for the treaty exemption (including
you should report it on the appropriate line of any time limit, explained later). This is true even
Employees of Form 1040 (for example, line 7 in the case of if you are a nonresident alien electing to file a
Foreign Governments wages or salaries). Enter the amount for which joint return as explained in chapter 1.
treaty benefits are claimed in parentheses on
All treaties have provisions for the exemption of Form 1040, line 21. Next to the amount write Some exceptions to the saving clause apply
income earned by certain employees of foreign Exempt income, the name of the treaty coun- to all resident aliens (for example, under the
governments. However, a difference exists try, and the treaty article that provides the ex- U.S.-People's Republic of China treaty); others
among treaties as to who qualifies for this bene- emption. On Form 1040, subtract this amount apply only to resident aliens who are not lawful
fit. Under many treaties, aliens admitted to the from your income to arrive at total income on permanent residents of the United States
United States for permanent residence do not Form 1040, line 22. (green card holders).
qualify. Under most treaties, aliens who are not
nationals or subjects of the foreign country do If you qualify under an exception to the trea-
Also follow the above procedure for income ty's saving clause, you can avoid income tax
not qualify. Employees of foreign governments that is subject to a reduced rate of tax, instead
should read the pertinent treaty carefully to de- withholding by giving the payor a Form W-9 with
of an exemption, under the treaty. Attach a the statement required by the Form W-9 instruc-
termine whether they qualify for benefits. Chap- statement to Form 1040 showing a computation
ter 10 of this publication also has information for tions.
of the tax at the reduced rate, the name of the
employees of foreign governments. treaty country, and the treaty article that pro- Saving clause. Most tax treaties have a sav-
vides for the reduced tax rate. Include this tax ing clause. A saving clause preserves or
Students, Apprentices, on Form 1040, line 63. On the dotted line next saves the right of each country to tax its own
and Trainees to line 63, write Tax from attached statement residents as if no tax treaty were in effect. Thus,
and the amount of the tax. once you become a resident alien of the United
Under some income tax treaties, students, ap- States, you generally lose any tax treaty bene-
prentices, and trainees are exempt from tax on Example. Jacques Dubois, who is a resi- fits that relate to your income. However, many
remittances received from abroad for study and dent of the United States under Article 4 of the tax treaties have exceptions to the saving
maintenance. Also, under some treaties, schol- U.S.-France income tax treaty, receives French clause, which may allow you to continue to
arship and fellowship grants, and a limited social security benefits. Under Article 18(1) of claim certain treaty benefits when you become
amount of compensation received by students, the treaty, French social security benefits are a resident alien. Read the treaty to find out if it
apprentices, and trainees may be exempt from not taxable by the United States. Mr. Dubois is has a saving clause and an exception to it.
tax. not required to file a Form 8833 for his French
social security benefits or report the benefits on Time limit for claiming treaty exemptions.
If you entered the United States as a non- Form 1040. Many treaties limit the number of years you can
resident alien, but are now a resident alien, the claim a treaty exemption. For students, appren-
treaty exemption may still apply. See Students,
Special Rule for Canadian and tices, and trainees, the limit is usually 45
Apprentices, Trainees, Teachers, Professors,
and Researchers Who Became Resident Ali-
German Social Security Benefits years; for teachers, professors, and research-
ers, the limit is usually 23 years. Once you
ens, later, under Resident Aliens. reach this limit, you can no longer claim the
Under income tax treaties with Canada and
Germany, if a U.S. resident receives social se- treaty exemption. See the treaty or Publication
Capital Gains curity benefits from Canada or Germany, those 901 for the time limits that apply.
benefits are treated for U.S. income tax purpo-
Most treaties provide for the exemption of gains ses as if they were received under the social How to report income on your tax return. In
from the sale or exchange of personal property. security legislation of the United States. If you most cases, you also will not need to report the
Generally, gains from the sale or exchange of receive social security benefits from Canada or income on your Form 1040 because the income
real property located in the United States are Germany, include them on line 1 of your Social will be exempt from U.S. tax under the treaty.
taxable. Security Benefits Worksheet for purposes of However, if the income has been reported as
determining the taxable amount to be reported taxable income on a Form W-2, Form 1042-S,
Form 1099, or other information return, you
Resident Aliens on Form 1040, line 20b or Form 1040A,
line 14b. You are not required to file a Form should report it on the appropriate line of Form
8833 for those benefits. 1040 (for example, line 7 in the case of wages,
Resident aliens may qualify for tax treaty bene- salaries, scholarships, or fellowships). Enter the
fits in the situations discussed below. amount for which treaty benefits are claimed in
Students, Apprentices, Trainees, parentheses on Form 1040, line 21. Next to the
U.S. Residency Under Tax Teachers, Professors, and amount write Exempt income, the name of the
Treaty Tie-Breaker Rule Researchers Who Became treaty country, and the treaty article that pro-
Resident Aliens vides the exemption. On Form 1040, subtract
In certain circumstances, individuals who are this amount from your income to arrive at total
treated as residents of the United States under Generally, you must be a nonresident alien stu- income on Form 1040, line 22.
an income tax treaty (after application of the dent, apprentice, trainee, teacher, professor, or
so-called tie-breaker rule) will be entitled to researcher in order to claim a tax treaty exemp- Example. Mr. Yu, a citizen of the People's
treaty benefits. (The tie-breaker rule is tion for remittances from abroad for study and Republic of China, entered the United States as

Chapter 9 Tax Treaty Benefits Page 47


a nonresident alien student on January 1, 2010. You receive payments or income items to- a. Reported to you on Form 1042-S and
He remained a nonresident alien through 2014 taling more than $100,000 and you deter-
b. Received by you:
and was able to exclude his scholarship from mine your country of residence under a
U.S. tax in those years under Article 20 of the treaty and not under the rules for residency i. As a related party from a report-
U.S.-People's Republic of China income tax discussed in chapter 1. ing corporation within the mean-
treaty. On January 1, 2015, he became a resi- ing of Internal Revenue Code
These are the more common situations for
dent alien under the substantial presence test section 6038A (relating to infor-
which Form 8833 is required.
because his stay in the United States exceeded mation returns on Form 5472 filed
5 years. Even though Mr. Yu is now a resident Exceptions. You do not have to file Form 8833 by U.S. corporations that are
alien, the provisions of Article 20 still apply be- for any of the following situations. 25-percent owned by a foreign
cause of the exception to the saving clause in person), or
paragraph 2 of the Protocol to the U.S.-People's 1. You claim a reduced rate of withholding
tax under a treaty on interest, dividends, ii. As a beneficial owner that is a di-
Republic of China treaty dated April 30, 1984.
rent, royalties, or other fixed or determina- rect account holder of a U.S. fi-
Mr. Yu should submit Form W-9 and the re-
ble annual or periodic income ordinarily nancial institution or qualified in-
quired statement to the payor.
subject to the 30% rate. termediary, or a direct partner,
beneficiary, or owner of a with-
2. You claim a treaty reduces or modifies the
Reporting Treaty taxation of income from dependent per-
holding foreign partnership or
trust, from that U.S. financial insti-
Benefits Claimed sonal services, pensions, annuities, social
security and other public pensions, or in-
tution, qualified intermediary, or
withholding foreign partnership or
come of artists, athletes, students, train- trust.
If you claim treaty benefits that override or mod- ees, or teachers. This includes taxable
ify any provision of the Internal Revenue Code, scholarship and fellowship grants. The exception described in (6)
and by claiming these benefits your tax is, or above does not apply to any amounts
might be, reduced, you must attach a fully com- 3. You claim a reduction or modification of for which a treaty-based return disclo-
pleted Form 8833 to your tax return. See below, taxation of income under an International sure is specifically required by the
for the situations where you are not required to Social Security Agreement or a Diplomatic Form 8833 instructions.
file Form 8833. or Consular Agreement.
4. You are a partner in a partnership or a Penalty for failure to provide required infor-
You must file a U.S. tax return and Form
beneficiary of an estate or trust and the mation on Form 8833. If you are required to
8833 if you claim the following treaty benefits.
partnership, estate, or trust reports the re- report the treaty benefits but do not, you may be
You claim a reduction or modification in the
quired information on its return. subject to a penalty of $1,000 for each failure.
taxation of gain or loss from the disposition
of a U.S. real property interest based on a 5. The payments or items of income that are Additional information. For additional infor-
treaty. otherwise required to be disclosed total no mation, see section 301.6114-1(c) of the In-
You claim a credit for a specific foreign tax more than $10,000. come Tax Regulations.
for which foreign tax credit would not be al-
lowed by the Internal Revenue Code. 6. You are claiming treaty benefits for
amounts that are:

Page 48 Chapter 9 Tax Treaty Benefits


Table 91. List of Tax Treaties (updated through December 31, 2014)
Note. You can find the text of the tax treaties listed below on IRS.gov. Enter Tax Treaties in the search box. Click on United States Income Tax
Treaties A to Z.
General General
Country Effective Date Country Effective Date
Australia Dec. 1, 1983 Kazakhstan Jan. 1, 1996
Protocol Jan. 1, 2004 Korea, South Jan. 1, 1980
Austria Jan. 1, 1999 Latvia Jan. 1, 2000
Bangladesh Jan. 1, 2007 Lithuania Jan. 1, 2000
Barbados Jan. 1, 1984 Luxembourg Jan. 1, 2001
Protocol Jan. 1, 1994 Malta Jan. 1, 2011
Protocol Jan. 1, 2005 Mexico Jan. 1, 1994
Belgium Jan. 1, 2008 Protocol Oct. 26,1995
Bulgaria Jan. 1, 2009 Protocol Jan. 1, 2004
Canada1 Jan. 1, 1985 Morocco Jan. 1, 1981
Protocol Jan. 1, 1996 Netherlands Jan. 1, 1994
Protocol Dec.16, 1997 Protocol Jan. 1, 2005
Protocol Jan. 1, 2009 New Zealand Nov. 2, 1983
China, People's Republic of Jan. 1, 1987 Protocol Jan. 1, 2011
Commonwealth of Independent States2 Jan. 1, 1976 Norway Jan. 1, 1971
Cyprus Jan. 1, 1986 Protocol Jan. 1, 1982
Czech Republic Jan. 1, 1993 Pakistan Jan. 1, 1959
Denmark Jan. 1, 2001 Philippines Jan. 1, 1983
Protocol Jan. 1, 2008 Poland Jan. 1, 1974
Egypt Jan. 1, 1982 Portugal Jan. 1, 1996
Estonia Jan. 1, 2000 Romania Jan. 1, 1974
Finland Jan. 1, 1991 Russia Jan. 1, 1994
Protocol Jan. 1, 2008 Slovak Republic Jan. 1, 1993
France Jan. 1, 1996 Slovenia Jan. 1, 2002
Protocol Jan. 1, 2007 South Africa Jan. 1, 1998
Protocol Jan. 1, 2009 Spain Jan. 1, 1991
Germany Jan. 1, 1990 Sri Lanka Jan. 1, 2004
Protocol Jan. 1, 2008 Sweden Jan. 1, 1996
Greece Jan. 1, 1953 Protocol Jan. 1, 2007
Hungary Jan. 1, 1980 Switzerland Jan. 1, 1998
Iceland Jan. 1, 2009 Thailand Jan. 1, 1998
India Jan. 1, 1991 Trinidad and Tobago Jan. 1, 1970
Indonesia Jan. 1, 1990 Tunisia Jan. 1, 1990
Ireland Jan. 1, 1998 Turkey Jan. 1, 1998
Israel Jan. 1, 1995 Ukraine Jan. 1, 2001
Italy Jan. 1, 2010 United Kingdom Jan. 1, 2004
Jamaica Jan. 1, 1982 Venezuela Jan. 1, 2000
Japan Jan. 1, 2005

1
Information on the treaty can be found in Publication 597, Information on the United States-Canada Income Tax Treaty.
2
The U.S.-U.S.S.R. income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan,
Turkmenistan, and Uzbekistan.

Chapter 9 Tax Treaty Benefits Page 49


for exemption by meeting the following require- migration and Nationality Act (USCIS Form
ments of U.S. tax law. I-508) to keep your immigrant status (green
10. The exemption under U.S. tax law ap-
card), you no longer qualify for the exemption
from U.S. tax under U.S. tax law from the date
! plies only to current employees and of filing the waiver with the Attorney General.
not to former employees. Pensions re-
However, you do not lose the exemption if
CAUTION

Employees ceived by former employees living in the United


States do not qualify for the exemption dis-
you file the waiver, and meet either of the fol-
lowing conditions.
cussed here.
of Foreign You are exempt from U.S. tax under an in-
come tax treaty, consular agreement, or in-
Employees of foreign governments. If you ternational agreement between the United
Governments are not a U.S. citizen, or if you are a U.S. citizen
but also a citizen of the Philippines, and you
States and your foreign government em-
ployer.
work for a foreign government in the United You work for an international organization
and States, your foreign government salary is ex-
empt from U.S. tax if you perform services simi-
and the international organization agree-
ment creating the international organiza-

International lar to those performed by U.S. government em-


ployees in that foreign country and that foreign
tion provides that alien employees are ex-
empt from U.S. income tax. Two
government grants an equivalent exemption to international organizations that have such
Organizations U.S. government employees. a provision are the International Monetary
Fund (IMF) and the International Bank for
Certification. To qualify for the exemption
under U.S. tax law, either the Department of Reconstruction and Development (World
Employees of foreign governments (including
State must certify that you perform services Bank).
foreign municipalities) have two ways to get ex-
emption of their governmental wages from U.S. similar to those performed by employees of the .
income tax: government of the United States in foreign For more information about a specific for-
countries and that your foreign government em- eign country or international organization, send
1. By a provision in a tax treaty or consular ployer grants an equivalent exemption to U.S. an email to embassy@irs.gov.
convention between the United States and government employees performing similar serv-
their country, or ices in its country or you must establish those
2. By meeting the requirements of U.S. tax facts. However, see Aliens who keep immigrant
law. status, later, for a special rule that may affect
your qualifying for this exemption.
Employees of international organizations can
exempt their wages either by a provision, if one
exists, in the international agreement creating
Employees of international organizations.
If you work for an international organization in
11.
the international organization, or by meeting the the United States and you are not a U.S. citizen
requirements of U.S. tax law. (or you are a U.S. citizen but are also a citizen

The exemption discussed in this chapter ap-


of the Philippines), your salary from that organi-
zation is exempt from U.S. tax. However, see
Departing Aliens
plies only to pay received for services per-
formed for a foreign government or international
Aliens who keep immigrant status, later, for a
special rule that may affect your qualifying for and the Sailing
organization. Other U.S. income received by this exemption.
persons who qualify for this exemption may be
fully taxable or given favorable treatment under
An international organization is an organiza-
tion designated by the President of the United
or Departure
an applicable tax treaty provision. The proper
treatment of this kind of income (interest, divi-
States through Executive Order to qualify for
the privileges, exemptions, and immunities pro- Permit
dends, etc.) is discussed earlier in this publica- vided in the International Organizations Immuni-
tion. ties Act.
You should find out if you have been made
known to, and have been accepted by, the Sec- Introduction
Exemption retary of State as an officer or an employee of Before leaving the United States, all aliens (ex-
Under Tax Treaty that organization, or if you have been designa-
ted by the Secretary of State, before formal no-
cept those listed under Aliens Not Required To
Obtain Sailing or Departure Permits must obtain
tification and acceptance, as a prospective offi- a certificate of compliance. This document, also
If you are from a country that has a tax treaty cer or employee. popularly known as the sailing permit or depar-
with the United States, you should first look at If you are claiming exemption, you should ture permit, is part of the income tax form you
the treaty to see if there is a provision that ex- know the number of the Executive Order cover- must file before leaving. You will receive a sail-
empts your income. The income of U.S. citizens ing the international organization and should ing or departure permit after filing a Form
and resident aliens working for foreign govern- have some written evidence of your acceptance 1040-C or Form 2063. These forms are dis-
ments usually is not exempt. However, in a few or designation by the Secretary of State. cussed in this chapter.
instances, the income of a U.S. citizen with dual
The exemption is denied when, because the To find out if you need a sailing or departure
citizenship may qualify. Often the exemption is
Secretary of State determines your presence in permit, first read Aliens Not Required To Obtain
limited to the income of persons who also are the United States is no longer desirable, you Sailing or Departure Permits. If you do not fall
nationals of the foreign country involved. leave the United States (or after a reasonable into one of the categories in that discussion,
time allowed for leaving the United States). The you must obtain a sailing or departure permit.
Exemption Under exemption is also denied when a foreign coun-
try does not allow similar exemptions to U.S.
Read Aliens Required To Obtain Sailing or De-
parture Permits.
U.S. Tax Law citizens. Then the Secretary of State can with-
draw the privileges, exemptions, and immuni- Topics
ties from the nationals of that foreign country. This chapter discusses:
Employees of foreign governments who do not
qualify under a tax treaty provision and employ- Aliens who keep immigrant status. If you file
ees of international organizations may qualify the waiver provided by section 247(b) of the Im- Who needs a sailing permit,

Page 50 Chapter 11 Departing Aliens and the Sailing or Departure Permit


How to get a sailing permit, and Category 3. Alien students, industrial trainees, c. In transit through the United States or
Forms you file to get a sailing permit. and exchange visitors, including their spouses any of its possessions.
and children, who enter on an F-1, F-2,
H-3, H-4, J-1, J-2, or Q visa only and Category 6. Alien residents of Canada or Mex-
Useful Items who receive no income from U.S. sources while ico who frequently commute between that
You may want to see: in the United States under those visas other country and the United States for employment,
than: and whose wages are subject to the withholding
Form (and Instructions) Allowances to cover expenses incident to of U.S. tax.
study or training in the United States, such
1040-C U.S. Departing Alien Income Tax as expenses for travel, maintenance, and
Return tuition, Aliens Required To
The value of any services or food and
2063 U.S. Departing Alien Income Tax
Statement
lodging connected with this study or train- Obtain Sailing or
See chapter 12 for information about getting
ing,
Income from employment authorized by
Departure Permits
these forms. the U.S. Citizenship and Immigration Serv-
ices (USCIS), or If you do not fall into one of the categories listed
Interest income on deposits that is not ef- under Aliens Not Required To Obtain Sailing or

Aliens Not Required fectively connected with a U.S. trade or


business. (See Interest Income in chap-
Departure Permits, you must obtain a sailing or
departure permit. To obtain a permit, file Form
To Obtain Sailing ter 3.) 1040-C or Form 2063 (whichever applies) with
your local IRS office before you leave the Uni-
or Departure Permits Category 4. Alien students, including their ted States. See Forms To File, later. You must
spouses and children, who enter on an M-1 or also pay all the tax shown as due on Form
If you are included in one of the following cate- M-2 visa only and who receive no income 1040-C and any taxes due for past years. See
gories, you do not have to get a sailing or de- from U.S. sources while in the United States un- Paying Taxes and Obtaining Refunds, later.
parture permit before leaving the United States. der those visas, other than:
If you are in one of these categories and do
Income from employment authorized by Getting a Sailing
not have to get a sailing or departure permit,
the U.S. Citizenship and Immigration Serv-
ices (USCIS) or
or Departure Permit
you must be able to support your claim for ex- Interest income on deposits that is not ef-
emption with proper identification or give the fectively connected with a U.S. trade or The following discussion covers when and
authority for the exemption. business. (See Interest Income in chap- where to get your sailing permit.
ter 3.)
Category 1. Representatives of foreign gov- Where to get a sailing or departure permit.
ernments with diplomatic passports, whether Category 5. Certain other aliens temporarily in If you have been working in the United States,
accredited to the United States or other coun- the United States who have received no taxable you should get the permit from an IRS office in
tries, members of their households, and serv- income during the tax year up to and including the area of your employment, or you may obtain
ants accompanying them. Servants who are the date of departure or during the preceding one from an IRS office in the area of your de-
leaving, but not with a person with a diplomatic tax year. If the IRS has reason to believe that an parture.
passport, must get a sailing or departure permit. alien has received income subject to tax and
However, they can get a sailing or departure that the collection of income tax is jeopardized When to get a sailing or departure permit.
permit on Form 2063 without examination of by departure, it may then require the alien to ob- You should get your sailing or departure permit
their income tax liability by presenting a letter tain a sailing or departure permit. Aliens in this at least 2 weeks before you plan to leave. You
from the chief of their diplomatic mission certify- category are: cannot apply earlier than 30 days before your
ing that: planned departure date. Do not wait until the
Their name appears on the White List (a 1. Alien military trainees who enter the Uni- last minute in case there are unexpected prob-
list of employees of diplomatic missions), ted States for training under the sponsor- lems.
and ship of the Department of Defense and
They do not owe to the United States any who leave the United States on official Papers to submit. Getting your sailing or de-
income tax, and will not owe any tax up to military travel orders, parture permit will go faster if you bring to the
and including the intended date of depar- 2. Alien visitors for business on a B-1 visa, IRS office papers and documents related to
ture. or on both a B-1 visa and a B-2 visa, your income and your stay in the United States.
who do not remain in the United States or Bring the following records with you if they ap-
The statement must be presented to an IRS
a U.S. possession for more than 90 days ply.
office.
during the tax year, 1. Your passport and alien registration card
Category 2. Employees of international organ- 3. Alien visitors for pleasure on a B-2 visa, or visa.
izations and foreign governments (other than
4. Aliens in transit through the United States 2. Copies of your U.S. income tax returns
diplomatic representatives exempt under cate-
or any of its possessions on a C-1 visa, filed for the past 2 years. If you were in the
gory 1) and members of their households:
or under a contract, such as a bond agree- United States for less than 2 years, bring
Whose compensation for official services
ment, between a transportation line and the income tax returns you filed for that pe-
is exempt from U.S. tax under U.S. tax
the Attorney General, and riod.
laws (described in chapter 10), and
Who receive no other income from U.S. 5. Aliens who enter the United States on a 3. Receipts for income taxes paid on these
sources. border-crossing identification card or for returns.
whom passports, visas, and border-cross- 4. Receipts, bank records, canceled checks,
If you are an alien in category (1) or
ing identification cards are not required, if and other documents that prove your de-
! (2), above, who filed the waiver under
they are: ductions, business expenses, and de-
CAUTION section 247(b) of the Immigration and
Nationality Act, you must get a sailing or depar- a. Visitors for pleasure, pendents claimed on your returns.
ture permit. This is true even if your income is 5. A statement from each employer showing
b. Visitors for business who do not re-
exempt from U.S. tax because of an income tax wages paid and tax withheld from January
main in the United States or a U.S.
treaty, consular agreement, or international 1 of the current year to the date of depar-
possession for more than 90 days
agreement. ture if you were an employee. If you were
during the tax year, or

Chapter 11 Departing Aliens and the Sailing or Departure Permit Page 51


self-employed, you must bring a statement tax year up to and including the date of de- 1040-C can be used for all departures during
of income and expenses up to the date parture and for the preceding year, if the the current year. However, the Service may
you plan to leave. period for filing the income tax return for cancel the sailing or departure permit for any
that year has not expired. later departure if the payment of income tax ap-
6. Proof of estimated tax payments for the
Resident aliens who have received taxable pears to be in jeopardy.
past year and this year.
income during the tax year or preceding
7. Documents showing any gain or loss from year and whose departure will not hinder Joint return on Form 1040-C. Departing hus-
the sale of personal property and/or real the collection of any tax. However, if the bands and wives who are nonresident aliens
property, including capital assets and mer- IRS has information indicating that the cannot file joint returns. However, if both spou-
chandise. aliens are leaving to avoid paying their in- ses are resident aliens, they can file a joint re-
8. Documents relating to scholarship or fel- come tax, they must file a Form 1040-C. turn on Form 1040-C if:
lowship grants including: Both spouses can reasonably be expected
Aliens in either of these categories who to qualify to file a joint return at the normal
a. Verification of the grantor, source, and have not filed an income tax return or paid in- close of their tax year, and
purpose of the grant. come tax for any tax year must file the return The tax years of the spouses end at the
b. Copies of the application for, and ap- and pay the income tax before they can be is- same time.
proval of, the grant. sued a sailing or departure permit on Form
c. A statement of the amount paid, and
2063. Paying Taxes and
your duties and obligations under the
The sailing or departure permit detached
Obtaining Refunds
grant.
from Form 2063 can be used for all departures You must pay all tax shown as due on the Form
d. A list of any previous grants. during the current year. However, the IRS may 1040-C at the time of filing it, except when a
9. Documents indicating you qualify for any cancel the sailing or departure permit for any bond is furnished, or the IRS is satisfied that
special tax treaty benefits claimed. later departure if it believes the collection of in- your departure does not jeopardize the collec-
come tax is jeopardized by that later departure. tion of income tax. You must also pay any taxes
10. Document verifying your date of departure
from the United States, such as an airline due for past years. If the tax computation on
ticket.
Form 1040-C Form 1040-C results in an overpayment, there
is no tax to pay at the time you file that return.
11. Document verifying your U.S. taxpayer If you must get a sailing or departure permit and However, the IRS cannot provide a refund at
identification number, such as a social se- you do not qualify to file Form 2063, you must the time of departure. If you are due a refund,
curity card or an IRS issued Notice CP file Form 1040-C. you must file either Form 1040NR or Form
565 showing your individual taxpayer 1040NR-EZ at the end of the tax year.
identification number (ITIN). Ordinarily, all income received or reasona-
Note. If you are married and reside in a
bly expected to be received during the tax year
up to and including the date of departure must
Bond To Ensure Payment
community property state, also bring the
be reported on Form 1040-C and the tax on it
above-listed documents for your spouse. This Usually, you must pay the tax shown as due on
must be paid. When you pay any tax shown as
applies whether or not your spouse requires a Form 1040-C when you file it. However, if you
due on the Form 1040-C, and you file all returns
permit. pay all taxes due that you owe for prior years,
and pay all tax due for previous years, you will you can furnish a bond guaranteeing payment
receive a sailing or departure permit. However, instead of paying the income taxes shown as
Forms To File the IRS may permit you to furnish a bond guar- due on the Form 1040-C or the tax return for the
anteeing payment instead of paying the taxes preceding year if the period for filing that return
If you must get a sailing or departure permit, for certain years. See Bond To Ensure Pay- has not expired.
you must file Form 2063 or Form 1040-C. Em- ment, discussed later. The sailing or departure
ployees in the IRS office can assist in filing permit issued under the conditions in this para- The bond must equal the tax due plus inter-
these forms. Both forms have a certificate of graph is only for the specific departure for which est to the date of payment as figured by the
compliance section. When the certificate of it is issued. IRS. Information about the form of bond and se-
compliance is signed by an agent of the Field curity on it can be obtained from your IRS office.
Assistance Area Director, it certifies that your Returning to the United States. If you furnish
U.S. tax obligations have been satisfied accord- the IRS with information showing, to the satis-
ing to available information. Your Form 1040-C faction of the IRS, that you intend to return to
Filing Annual U.S.
copy of the signed certificate, or the one de- the United States and that your departure does Income Tax Returns
tached from Form 2063, is your sailing or de- not jeopardize the collection of income tax, you
parture permit. can get a sailing or departure permit by filing Form 1040-C is not an annual U.S. income tax
Form 1040-C without having to pay the tax return. If an income tax return is required by
law, that return must be filed even though a
Form 2063 shown on it. You must, however, file all income
tax returns that have not yet been filed as re- Form 1040-C has already been filed. Chapters
This is a short form that asks for certain infor- quired, and pay all income tax that is due on 5 and 7 discuss filing an annual U.S. income tax
mation but does not include a tax computation. these returns. return. The tax paid with Form 1040-C should
The following departing aliens can get their sail- Your Form 1040-C must include all income be taken as a credit against the tax liability for
ing or departure permits by filing Form 2063. received and reasonably expected to be re- the entire tax year on your annual U.S. income
Aliens, whether resident or nonresident, ceived during the entire year of departure. The tax return.
who have had no taxable income for the sailing or departure permit issued with this Form

Page 52 Chapter 11 Departing Aliens and the Sailing or Departure Permit


Call TeleTax at 1-800-829-4477 for recor- Download the free IRS2Go app to your
ded information on a variety of tax topics. smart phone and use it to check your re-
12. Access tax law information in your elec-
tronic filing software.
fund status.
Call the automated refund hotline at
Go to IRS.gov and click on the Help & Re- 1-800-829-1954.
sources tab for more information.
How To Get Tax Tax forms and publications. You can down-
Making a tax payment. You can make elec-
tronic payments online, by phone, or from a mo-
load or print all of the forms and publications bile device. Paying electronically is safe and se-
Help you may need on IRS.gov/formspubs. Other- cure. The IRS uses the latest encryption
wise, you can: technology and does not store banking informa-
Assistance for overseas taxpayers is available Go to IRS.gov/orderforms to place an or- tion. Its easy and secure and much quicker
in the U.S and certain foreign locations. der and have forms mailed to you, or than mailing in a check or money order. Go to
Call 1-800-829-3676 to order current-year IRS.gov and click on the Payments tab or the
forms, instructions, publications, and Pay Your Tax Bill icon to make a payment us-
Taxpayer Assistance prior-year forms and instructions (limited to
5 years).
ing the following options.
Direct Pay (only if you are an individual
Inside the United States You should receive your order within 10 busi-
who has a checking or savings account).
Debit or credit card.
ness days.
Do you need help with a tax issue or preparing Electronic Federal Tax Payment System.
your tax return, or do you need a free publica- Where to file your tax return. Check or money order.
tion or form? There are many ways to file your return
electronically. Its safe, quick and easy.
Preparing and filing your tax return. Find What if I cant pay now? Click on the Pay-
See Preparing and filing your tax return,
free options to prepare and file your return on ments tab or the Pay Your Tax Bill icon on
earlier, for more information.
IRS.gov or in your local community if you qual- IRS.gov to find more information about these
See your tax return instructions to deter-
ify. additional options.
mine where to mail your completed paper
Go to IRS.gov and click on the Filing tab to An online payment agreement determines
tax return.
see your options. if you are eligible to apply for an installment
Enter Free File in the search box to use agreement if you cannot pay your taxes in
Getting a transcript or copy of a return.
brand name software to prepare and e-file full today. With the needed information,
Go to IRS.gov and click on Get Transcript
your federal tax return for free. you can complete the application in about
of Your Tax Records under Tools.
Enter VITA in the search box, download 30 minutes, and get immediate approval.
Download the free IRS2Go app to your
the free IRS2Go app, or call An offer in compromise allows you to settle
smart phone and use it to order transcripts
1-800-906-9887 to find the nearest Volun- your tax debt for less than the full amount
of your tax returns or tax account.
teer Income Tax Assistance or Tax Coun- you owe. Use the Offer in Compromise
Call the transcript toll-free line at
seling for the Elderly (TCE) location for free Pre-Qualifier to confirm your eligibility.
1-800-908-9946.
tax preparation. Mail Form 4506-T or Form 4506T-EZ (both
Enter TCE in the search box, download Checking the status of an amended return.
available on IRS.gov). Go to IRS.gov and click on the Tools tab and
the free IRS2Go app, or call
1-888-227-7669 to find the nearest Tax then Wheres My Amended Return?
Using online tools to help prepare your re-
Counseling for the Elderly location for free turn. Go to IRS.gov and click on the Tools bar Understanding an IRS notice or letter. Enter
tax preparation. to use these and other self-service options. Understanding your notice in the search box
The Volunteer Income Tax Assistance The Earned Income Tax Credit Assistant on IRS.gov to find additional information about
(VITA) program offers free tax help to people determines if you are eligible for the EIC. your IRS notice or letter.
who generally make $53,000 or less, persons The First Time Homebuyer Credit Account
with disabilities, the elderly, and limited-Eng- Look-up tool provides information on your Visiting the IRS. Locate the nearest Taxpayer
lish-speaking taxpayers who need help prepar- repayments and account balance. Assistance Center using the Office Locator tool
ing their own tax returns. The Tax Counseling The Alternative Minimum Tax (AMT) on IRS.gov. Enter office locator in the search
for the Elderly (TCE) program offers free tax Assistant determines whether you may be box. Or choose the Contact Us option on the
help for all taxpayers, particularly those who are subject to AMT. IRS2Go app and search Local Offices. Before
60 years of age and older. TCE volunteers spe- The Online EIN Application helps you get you visit, use the Locator tool to check hours
cialize in answering questions about pensions an Employer Identification Number. and services available.
and retirement-related issues unique to seniors. The IRS Withholding Calculator estimates
the amount you should have withheld from Watching IRS videos. The IRS Video portal
Getting answers to your tax law questions. your paycheck for federal income tax pur- IRSvideos.gov contains video and audio pre-
IRS.gov and IRS2Go are ready when you poses. sentations on topics of interest to individuals,
are24 hours a day, 7 days a week. The Electronic Filing PIN Request helps to small businesses, and tax professionals. Youll
Enter ITA in the search box on IRS.gov verify your identity when you do not have find video clips of tax topics, archived versions
for the Interactive Tax Assistant, a tool that your prior year AGI or prior year self-selec- of live panel discussions and Webinars, and au-
will ask you questions on a number of tax ted PIN available. dio archives of tax practitioner phone forums.
law topics and provide answers. You can
print the entire interview and the final re- Understanding identity theft issues. Getting tax information in other languages.
sponse. Go to IRS.gov/uac/Identity-Protection for For taxpayers whose native language is not
Enter Tax Map or Tax Trails in the information and videos. English, we have the following resources availa-
search box for detailed information by tax Contact the Identity Protection Specialized ble.
topic. Unit at 1-800-908-4490 if you believe you
are at risk due to a lost or stolen purse or 1. Taxpayers can find information on IRS.gov
Enter Pub 17 in the search box to get
wallet, questionable credit card activity or in the following languages.
Pub. 17, Your Federal Income Tax for Indi-
viduals, which features details on tax-sav- credit report, etc. a. Spanish.
ing opportunities, 2014 tax changes, and
Checking on the status of a refund. b. Chinese.
thousands of interactive links to help you
find answers to your questions. Go to IRS.gov/refunds. c. Vietnamese.

Chapter 12 How To Get Tax Help Page 53


d. Korean. the IRS. Our Tax Toolkit at phone or visitjust be sure to have last years
taxpayeradvocate.irs.gov can help you under- tax return, your wage and income statements,
e. Russian.
stand what these rights mean to you and how and your other tax records with you. If you wish
2. The IRS Taxpayer Assistance Centers they apply. These are your rights. Know them. to write instead of calling, please contact the of-
provide over-the-phone interpreter service Use them. fice to obtain the mailing address.
in over 170 languages, and the service is Frankfurt, Germany
available free to taxpayers.
How Else Does the Taxpayer
Advocate Service Help Taxpayers? U.S. Consulate Frankfurt
The Taxpayer Advocate Giessener Str. 30
Service Is Here To Help You TAS works to resolve large-scale problems that 60435 Frankfurt am Main
Germany
affect many taxpayers. If you know of one of
What is the Taxpayer Advocate these broad issues, please report it to us Tel. {49} (69) 7535-3823
Service? atirs.gov/sams.
London, England
The Taxpayer Advocate Service (TAS) is an in-
dependent organization within the Internal Low Income Taxpayer U.S. Embassy
Revenue Service that helps taxpayers and pro- Clinics 24 Grosvenor Square
tects taxpayer rights. Our job is to ensure that London, W1K 6AH
every taxpayer is treated fairly and that you Low Income Taxpayer Clinics (LITCs) serve in- United Kingdom
know and understand your rights under the dividuals whose income is below a certain level Tel. {44} (207) 894-0477
Taxpayer Bill of Rights. and need to resolve tax problems such as au- Fax {44} (207) 495-4224
dits, appeals, and tax collection disputes. Some
What Can the Taxpayer Advocate clinics can provide information about taxpayer Paris, France
Service Do For You? rights and responsibilities in different languages
for individuals who speak English as a second U.S. Embassy
We can help you resolve problems that you language. To find a clinic near you, visit irs.gov/ 2 avenue Gabriel
cant resolve with the IRS. And our service is litc or see IRS Publication 4134, Low Income 75382 Paris Cedex 08
free. If you qualify for our assistance, you will be Taxpayer Clinic List. France
assigned to one advocate who will work with Tel. {33} (1) 4312-2555
you throughout the process and will do every- Fax {33} (1) 4312-2303
thing possible to resolve your issue. TAS can Taxpayer Assistance
help you if:
Your problem is causing financial difficulty Outside the United Many of our U.S. embassies and consulates
abroad also offer tax forms, instructions, publi-
for you, your family, or your business,
You face (or your business is facing) an
States cations and services (but only during the tax re-
turn filing period).
immediate threat of adverse action, or If you are outside the United States,
Youve tried repeatedly to contact the IRS you can call 267-941-1000 (Eng- Taxpayer Advocate Service. If you live out-
but no one has responded, or the IRS lish-speaking only). This number is not side of the United States, you can call the Tax-
hasnt responded by the date promised. toll free. payer Advocate at (787) 522-8601 in English or
(787) 522-8600 in Spanish. You can contact the
How Can You Reach Us? If you wish to write instead of calling, Taxpayer Advocate at:
please address your letter to:
We have offices in every state, the District of Internal Revenue Service
Columbia, and Puerto Rico. Your local advo- Taxpayer Advocate Service
cates number is in your local directory and at Internal Revenue Service City View Plaza, 48 Carr 165,
taxpayeradvocate.irs.gov. You can also call us International Accounts Guaynabo, P.R. 00968-8000
at 1-877-777-4778. Philadelphia, PA 19255-0725
U.S.A.
How Can You Learn About Your
Taxpayer Rights?
Outside the United States, we will answer
The Taxpayer Bill of Rights describes ten basic your tax questions and help with account prob-
rights that all taxpayers have when dealing with lems at any of our overseas offices. You can

Page 54 Chapter 12 How To Get Tax Help


Frequently Asked Questions
This section answers tax-related I am a nonresident alien with no and is not eligible to get an SSN, he both a resident alien and a nonresi-
questions commonly asked by ali- dependents. I am working tem- must apply for an individual tax- dent alien in the same year. See
ens. porarily for a U.S. company. payer identification number (ITIN). chapter 6.
What return do I file?
What is the difference between a If you are a U.S. citizen or resi- I am a nonresident alien and in-
resident alien and a nonresident You must file Form 1040NR if you dent and you choose to treat your vested money in the U.S. stock
alien for tax purposes? are engaged in a trade or business nonresident spouse as a resident market through a U.S. brokerage
in the United States, or have any and file a joint tax return, your non- company. Are the dividends and
For tax purposes, an alien is an indi- other U.S. source income on which resident spouse needs an SSN or the capital gains taxable? If yes,
vidual who is not a U.S. citizen. Ali- tax was not fully paid by the amount an ITIN. Alien spouses who are how are they taxed?
ens are classified as resident aliens withheld. claimed as exemptions or depend-
and nonresident aliens. Resident ents are also required to furnish an The following rules apply if the divi-
You can use Form 1040NR-EZ SSN or an ITIN.
aliens are taxed on their worldwide dends and capital gains are not ef-
instead of Form 1040NR if you meet
income, the same as U.S. citizens. fectively connected with a U.S.
all 11 conditions listed under Form See Identification Number in trade or business.
Nonresident aliens are taxed only
1040NR-EZ in chapter 7. chapter 5 for more information.
on their U.S. source income and Capital gains are generally not
certain foreign source income that is taxable if you were in the Uni-
I came to the United States on I am a nonresident alien. Can I
effectively connected with a U.S. ted States for less than 183
June 30th of last year. I have an file a joint return with my
trade or business. days during the year. See
H-1B visa. What is my tax status, spouse?
Sales or Exchanges of Capital
resident alien or nonresident ali-
What is the difference between Assets in chapter 4 for more in-
en? What tax return do I file?
the taxation of income that is ef- Generally, you cannot file as mar- formation and exceptions.
fectively connected with a trade ried filing jointly if either spouse was Dividends are generally taxed
or business in the United States You were a dual-status alien last a nonresident alien at any time dur- at a 30% (or lower treaty) rate.
and income that is not effectively year. As a general rule, because ing the tax year. The brokerage company or
connected with a trade or busi- you were in the United States for payor of the dividends should
ness in the United States? 183 days or more, you have met the However, nonresident aliens withhold this tax at source. If
substantial presence test and you married to U.S. citizens or residents tax is not withheld at the cor-
are taxed as a resident. However, can choose to be treated as U.S. rect rate, you must file Form
The difference between these two
for the part of the year that you were residents and file joint returns. For 1040NR to receive a refund or
categories is that effectively con-
not present in the United States, you more information on this choice, see pay any additional tax due.
nected income, after allowable de-
are a nonresident. File Form 1040. Nonresident Spouse Treated as a
ductions, is taxed at graduated If the capital gains and dividends
Print Dual-Status Return across Resident in chapter 1.
rates. These are the same rates that are effectively connected with a
the top. Attach a statement showing
apply to U.S. citizens and residents.
your U.S. source income for the part I have an H-1B visa and my hus- U.S. trade or business, they are
Income that is not effectively con-
of the year you were a nonresident. band has an F-1 visa. We both taxed according to the same rules
nected is taxed at a flat 30% (or
You may use Form 1040NR as the lived in the United States all of and at the same rates that apply to
lower treaty) rate.
statement. Print Dual-Status State- last year and had income. What U.S. citizens and residents.
ment across the top. See First Year kind of form should we file? Do
I am a student with an F-1 visa. I
of Residency in chapter 1 for rules we file separate returns or a joint I am a nonresident alien. I re-
was told that I was an exempt in- ceive U.S. social security bene-
on determining your residency start- return?
dividual. Does this mean I am ex- fits. Are my benefits taxable?
ing date.
empt from paying U.S. tax?
Assuming both of you had these vi-
When is my Form 1040NR due? If you are a nonresident alien, 85%
The term exempt individual does sas for all of last year, you are a res-
ident alien. Your husband is a non- of any U.S. social security benefits
not refer to someone exempt from (and the equivalent portion of tier 1
If you are an employee and you re- resident alien if he has not been in
U.S. tax. You were referred to as an railroad retirement benefits) you re-
ceive wages subject to U.S. income the United States as a student for
exempt individual because as a stu- ceive is subject to the flat 30% tax,
tax withholding, you must generally more than 5 years. You and your
dent temporarily in the United unless exempt, or subject to a lower
file by the 15th day of the 4th month husband can file a joint tax return on
States on an F visa, you do not have treaty rate. See The 30% Tax in
after your tax year ends. If you file Form 1040, 1040A, or 1040EZ if he
to count the days you were present chapter 4.
for the 2014 calendar year, your re- makes the choice to be treated as a
in the United States as a student
turn is due April 15, 2015. resident for the entire year. See
during the first 5 years in determin- Do I have to pay taxes on my
ing if you are a resident alien under If you are not an employee who Nonresident Spouse Treated as a
scholarship?
the substantial presence test. See receives wages subject to U.S. in- Resident in chapter 1. If your hus-
chapter 1. come tax withholding, you must file band does not make this choice,
by the 15th day of the 6th month af- you must file a separate return on If you are a nonresident alien and
I am a resident alien. Can I claim ter your tax year ends. For the 2014 Form 1040 or Form 1040A. Your the scholarship is not from U.S.
any treaty benefits? calendar year, file your return by husband must file Form 1040NR or sources, it is not subject to U.S. tax.
June 15, 2015. For more informa- 1040NR-EZ. See Scholarships, Grants, Prizes,
and Awards in chapter 2 to deter-
Generally, you cannot claim tax tion on when and where to file, see mine whether your scholarship is
treaty benefits as a resident alien. chapter 7. Is a dual-resident taxpayer the
same as a dual-status taxpay- from U.S. sources.
However, there are exceptions. See
Effect of Tax Treaties in chapter 1. My spouse is a nonresident ali- er? If your scholarship is from U.S.
See also Resident Aliens under en. Does he need a social securi- sources or you are a resident alien,
Some Typical Tax Treaty Benefits in ty number? No. A dual-resident taxpayer is one your scholarship is subject to U.S.
chapter 9. who is a resident of both the United tax according to the following rules.
A social security number (SSN) States and another country under If you are a candidate for a de-
must be furnished on returns, state- each country's tax laws. See Effect gree, you may be able to ex-
ments, and other tax-related docu- of Tax Treaties in chapter 1. You are clude from your income the
ments. If your spouse does not have a dual-status taxpayer when you are part of the scholarship you use

Publication 519 (2014) Page 55


to pay for tuition, fees, books, I am not a U.S. citizen. What ex- If you are a nonresident alien for any is not subject to these taxes, contact
supplies, and equipment re- emptions can I claim? part of the year, you cannot claim the employer who withheld the
quired by the educational insti- the earned income credit. See taxes for a refund. If you are unable
tution. However, the part of the Resident aliens can claim personal chapter 6 for more information on to get a full refund of the amount
scholarship you use to pay for exemptions and exemptions for de- dual-status aliens. from your employer, file a claim for
other expenses, such as room pendents in the same way as U.S. refund with the Internal Revenue
and board, is taxable. See citizens. However, nonresident ali- I am a nonresident alien student. Service on Form 843, Claim for Re-
Scholarships and Fellowship ens generally can claim only a per- Can I claim an education credit fund and Request for Abatement.
Grants in chapter 3 for more in- sonal exemption for themselves on on my Form 1040NR? Do not use Form 843 to request a
formation. their U.S. tax return. There are spe- refund of Additional Medicare Tax.
If you are not a candidate for a cial rules for residents of Mexico, If you are a nonresident alien for any See Refund of Taxes Withheld in
degree, your scholarship is tax- Canada, and South Korea; for U.S. part of the year, you generally can- Error in chapter 8.
able. nationals; and for students and busi- not claim the education credits.
ness apprentices from India. See However, if you are married and I am an alien who will be leaving
I am a nonresident alien. Can I Exemptions in chapter 5. choose to file a joint return with a the United States. What forms do
claim the standard deduction? U.S. citizen or resident spouse, you I have to file before I leave?
What exemptions can I claim as may be eligible for these credits.
Nonresident aliens cannot claim the a dual-status taxpayer? See Nonresident Spouse Treated Before leaving the United States,
standard deduction. However, see as a Resident in chapter 1. aliens generally must obtain a certif-
Students and business apprentices As a dual-status taxpayer, you usu- icate of compliance. This document,
from India, under Itemized Deduc- ally will be able to claim your own I am a nonresident alien, tempo- also popularly known as the sailing
tions in chapter 5 for an exception. personal exemption. Subject to the rarily working in the U.S. under a permit or departure permit, is part of
general rules for qualification, you J visa. Am I subject to social se- the income tax form you must file
I am a dual-status taxpayer. Can can claim exemptions for your curity and Medicare taxes? before leaving. You will receive a
I claim the standard deduction? spouse and dependents when you sailing or departure permit after fil-
figure taxable income for the part of Generally, services you perform as ing a Form 1040-C or Form 2063.
You cannot claim the standard de- the year you are a resident alien. a nonresident alien temporarily in These forms are discussed in chap-
duction allowed on Form 1040. The amount you can claim for these the United States as a nonimmigrant ter 11.
However, you can itemize any al- exemptions is limited to your taxable under subparagraph (F), (J), (M), or
lowable deductions. income (figured before subtracting (Q) of section 101(a)(15) of the Im- I filed a Form 1040-C when I left
exemptions) for the part of the year migration and Nationality Act are not the United States. Do I still have
I am filing Form 1040NR. Can I you are a resident alien. You cannot covered under the social security to file an annual U.S. tax return?
claim itemized deductions? use exemptions (other than your program if you perform the services
own) to reduce taxable income to to carry out the purpose for which Form 1040-C is not an annual U.S.
Nonresident aliens can claim some less than zero for that period. you were admitted to the United income tax return. If an income tax
of the same itemized deductions States. See Social Security and return is required by law, you must
that resident aliens can claim. How- I am single with a dependent Medicare Taxes in chapter 8. file that return even though you al-
ever, nonresident aliens can claim child. I was a dual-status alien in ready filed a Form 1040-C. Chap-
itemized deductions only if they 2014. Can I claim the earned in- I am a nonresident alien student. ters 5 and 7 discuss filing an annual
have income effectively connected come credit on my 2014 tax re- Social security taxes were with- U.S. income tax return.
with their U.S. trade or business. turn? held from my pay in error. How
See Itemized Deductions in chap- do I get a refund of these taxes?
ter 5.
If social security or Medicare taxes
were withheld in error from pay that

Page 56 Publication 519 (2014)


Appendix ATax Treaty Exemption Procedure for Students
This appendix contains the state- at [insert the name residing permanently in the training at [insert the
ments nonresident alien students of the university or other rec- United States as an immi- name of the university or
and trainees must file with Form ognized educational institu- grant. other recognized educational
8233, Exemption From Withhold- tion at which you study] or se- institution at which you study];
2. I am temporarily present in
ing on Compensation for Inde- curing training to practice a or, I am temporarily present in
the United States for the pri-
pendent (and Certain Dependent) profession or professional the United States as a recipi-
mary purpose of studying at
Personal Services of a Nonresi- specialty. . ent of a grant, allowance, or
[insert the name of
dent Alien Individual, to claim a tax award from [insert
3. I will receive compensation the university or other recog-
treaty exemption from withholding the name of the nonprofit or-
for personal services per- nized educational institution
of tax on compensation for de- ganization or government in-
formed in the United States. at which you study].
pendent personal services. For stitution providing the grant,
This compensation qualifies
treaty countries not listed, attach a 3. I will receive compensation allowance, or award].
for exemption from withhold-
statement in a format similar to for personal services per-
ing of federal income tax un- 3. I will receive compensation
those for other treaties. See chap- formed in the United States.
der the tax treaty between the for services performed in the
ter 8 for more information on with- This compensation qualifies
United States and Bulgaria in United States. This compen-
holding. for exemption from withhold-
an amount not in excess of sation qualifies for exemption
$9,000 for any tax year. ing of federal income tax un-
from withholding of federal in-
Belgium 4. I arrived in the United States
der the tax treaty between the
United States and Cyprus in
come tax under the tax treaty
between the United States
on [insert the date an amount not in excess of
1. I was a resident of Belgium on and [Insert the
of your last arrival in the Uni- $2,000 ($10,000 if you are a
the date of my arrival in the name of the country] in the
ted States before beginning participant in a government
United States. I am not a U.S. amount not in excess of
study or training] . The treaty sponsored program of study
citizen. I have not been law- $5,000 ($10,000 if you are a
exemption for training is avail- not exceeding one year) for
fully accorded the privilege of participant in a government
able only for compensation any tax year. I have not previ-
residing permanently in the sponsored program of study
paid during a period of two ously claimed an income tax
United States as an immi- not exceeding one year) for
years. exemption under that treaty
grant. any tax year.
for income received as a stu-
2. I am present in the United
States for the purpose of my China, People's dent before the date of my ar- 4. I arrived in the United States
on [insert the date
rival in the United States.
education or training. Republic of of your last arrival in the Uni-
4. I arrived in the United States
3. I will receive compensation ted States before beginning
1. I was a resident of the Peo- on [insert the date
for personal services per- study at the U.S. educational
ple's Republic of China on the of your last arrival in the Uni- institution]. The $5,000 treaty
formed in the United States. date of my arrival in the Uni- ted States before beginning
This compensation qualifies exemption is available only
ted States. I am not a U.S. study at the U.S. educational for compensation paid during
for exemption from withhold- citizen. institution]. The $2,000 treaty
ing of federal income tax un- a period of five tax years be-
exemption is available only ginning with the tax year that
der the tax treaty between the 2. I am present in the United
for compensation paid during includes my arrival date.
United States and Belgium in States solely for the purpose
a period of five tax years be-
an amount not in excess of of my education or training.
ginning with the tax year that
$9,000 for any tax year. 3. I will receive compensation includes my arrival date, and Egypt
4. I arrived in the United States for personal services per- for such additional period of
on [insert the date formed in the United States. time as is necessary to com- 1. I was a resident of Egypt on
of your last arrival in the Uni- This compensation qualifies plete, as a full-time student, the date of my arrival in the
ted States before beginning for exemption from withhold- educational requirements as United States. I am not a U.S.
study or training]. For a ing of federal income tax un- a candidate for a postgradu- citizen. I have not been law-
trainee who is temporarily der the tax treaty between the ate or professional degree fully accorded the privilege of
present in the United States United States and the Peo- from a recognized educa- residing permanently in the
for the purpose of securing ple's Republic of China in an tional institution. United States as an immi-
training required to practice a amount not in excess of grant.
profession or professional
specialty, the treaty exemp-
$5,000 for any tax year.
Czech Republic, 2. I am temporarily present in
tion is available only for com-
4. I arrived in the United States Estonia, Latvia, the United States for the pri-
on [insert the date mary purpose of studying at
pensation paid during a pe-
of your last arrival in the Uni-
Lithuania, and [insert the name of
riod of two years.
ted States before beginning Slovak Republic the university or other recog-
study or training]. I am claim- nized educational institution
Bulgaria ing this exemption only for 1. I was a resident of at which you study].
such period of time as is rea- [insert the name of the coun-
3. I will receive compensation
1. I was a resident of Bulgaria sonably necessary to com- try under whose treaty you
for personal services per-
on the date of my arrival in the plete the education or train- claim exemption] on the date
formed in the United States.
United States. I am not a U.S. ing. of my arrival in the United
This compensation qualifies
citizen. I have not been law- States. I am not a U.S. citi-
for exemption from withhold-
zen. I have not been lawfully
fully accorded the privilege of
residing permanently in the
Cyprus accorded the privilege of re-
ing of federal income tax un-
der the tax treaty between the
United States as an immi- siding permanently in the Uni-
1. I was a resident of Cyprus on United States and Egypt in an
grant. ted States as an immigrant.
the date of my arrival in the amount not in excess of
2. I am temporarily present in United States. I am not a U.S. 2. I am temporarily present in $3,000 ($10,000 if you are a
the United States for the citizen. I have not been law- the United States for the pri- participant in a government
primary purpose of studying fully accorded the privilege of mary purpose of studying or sponsored program of study

Publication 519 (2014) Page 57


not exceeding one year) for compensation paid during a the university or other recog- tax year, provided such serv-
any tax year. I have not previ- period of five tax years. nized educational institution ices are performed in connec-
ously claimed an income tax at which you study]; or, I am tion with my studies or are
exemption under that treaty temporarily present in the necessary for my mainte-
for income received as a
Germany United States to obtain pro- nance.
teacher, researcher, or stu- fessional training or to study
1. I was a resident of Germany 4. I arrived in the United States
dent before the date of my ar- or do research as a recipient
on the date of my arrival in the on [insert the date
rival in the United States. of a grant, allowance, or
United States. I am not a U.S. of your last arrival in the Uni-
award from [insert
4. I arrived in the United States citizen. I have not been law- ted States before beginning
the name of the nonprofit or-
on [insert the date fully accorded the privilege of study at the U.S. educational
ganization or government in-
of your last arrival in the Uni- residing permanently in the institution]. The treaty exemp-
stitution providing the grant,
ted States before beginning United States as an immi- tion is available only for com-
allowance, or award].
study at the U.S. educational grant. pensation paid during a pe-
institution]. The $3,000 treaty 3. I will receive compensation riod of five tax years
exemption is available only 2. I am temporarily present in for services performed in the beginning with the tax year
for compensation paid during the United States as a stu- United States. This compen- that includes my arrival date.
a period of five tax years be- dent or business apprentice sation qualifies for exemption
for the purpose of full-time from withholding of federal in-
ginning with the tax year that
includes my arrival date, and study or training at come tax under the tax treaty
Israel, Philippines
for such period of time as is [insert the name of the ac- between the United States and Thailand
necessary to complete, as a credited university, college, and Iceland in the amount not
full-time student, educational school or other educational in excess of $9,000 for any 1. I was a resident of the
requirements as a candidate institution]; or, I am tempora- tax year. [insert the name of
for a postgraduate or profes- rily present in the United the country under whose
4. I arrived in the United States treaty you claim exemption]
sional degree from a recog- States as a recipient of a
on [insert the date on the date of my arrival in the
nized educational institution. grant, allowance, or award
of your last arrival in the Uni- United States. I am not a U.S.
from [insert the
ted States before beginning citizen. I have not been law-
name of the nonprofit organi-
France zation or government institu-
study at the U.S. educational fully accorded the privilege of
institution]. The treaty exemp- residing permanently in the
tion providing the grant, al-
1. I was a resident of France on tion is available only for com- United States as an immi-
lowance, or award].
the date of my arrival in the pensation paid during a pe- grant.
United States. I am not a U.S. 3. I will receive compensation riod of five tax years
citizen. I have not been law- for dependent personal serv- beginning with the tax year 2. I am temporarily present in
fully accorded the privilege of ices performed in the United that includes my arrival date. the United States for the pri-
residing permanently in the States. This compensation mary purpose of studying at
[insert the name of
United States as an immi-
grant.
qualifies for exemption from
withholding of federal income
Indonesia the university or other recog-
tax under the tax treaty be- nized educational institution
2. I am temporarily present in 1. I was a resident of Indonesia at which you study].
tween the United States and on the date of my arrival in the
the United States for the pri-
Germany in an amount not in United States. I am not a U.S. 3. I will receive compensation
mary purpose of studying at
excess of $9,000 for any tax citizen. I have not been law- for personal services per-
[insert the name of
year, provided that such serv- fully accorded the privilege of formed in the United States.
the accredited university, col-
ices are performed for the residing permanently in the This compensation qualifies
lege, school or other educa-
purpose of supplementing United States as an immi- for exemption from withhold-
tional institution].
funds otherwise available for grant. ing of federal income tax un-
3. I will receive compensation my maintenance, education, der the tax treaty between the
for personal services per- or training. 2. I am temporarily present in United States and
formed in the United States. the United States solely for [insert the name of the coun-
This compensation qualifies 4. I arrived in the United States the purpose of study at
on [insert the date try under whose treaty you
for exemption from withhold- [insert the name of claim exemption] in an
ing of federal income tax un- of your last arrival in the Uni- the university or other ac- amount not in excess of
der the tax treaty between the ted States before beginning credited educational institu- $3,000 for any tax year. I
United States and France in study at the U.S. educational tion at which you study]; or, I have not previously claimed
an amount not in excess of institution]. The treaty exemp- am temporarily present in the an income tax exemption un-
$5,000 for any taxable year. I tion is available only for com- United States as a recipient of der that treaty for income re-
have not previously claimed pensation paid during a pe- a grant, allowance or award ceived as a teacher, re-
an income tax exemption un- riod of four tax years from [insert the searcher, or student before
der this treaty for income re- beginning with the tax year name of the nonprofit organi- the date of my arrival in the
ceived as a teacher, re- that includes my arrival date. zation or government institu- United States.
searcher, or student before tion providing the grant, al-
the date of my arrival in the Iceland lowance, or award] for the 4. I arrived in the United States
on [insert the date
United States. primary purpose of study, re-
search, or training. of your last arrival in the Uni-
4. I will be present in the United 1. I was a resident of Iceland on ted States before beginning
States only for such period of the date of my arrival in the 3. I will receive compensation study at the U.S. educational
time as may be reasonably or United States. I am not a U.S. for services performed in the institution]. The treaty exemp-
customarily required to effec- citizen. I have not been law- United States. This compen- tion is available only for com-
tuate the purpose of this visit. fully accorded the privilege of sation qualifies for exemption pensation paid during a pe-
residing permanently in the from withholding of federal in- riod of five tax years
5. I arrived in the United States come tax under the tax treaty
United States as an immi- beginning with the tax year
on [insert the date between the United States
grant. that includes my arrival date.
of your last arrival in the Uni- and Indonesia in an amount
ted States before beginning 2. I am temporarily present in
not in excess of $2,000 for my
study at the U.S. educational the United States for the pri-
institution]. The treaty exemp- mary purpose of studying at
tion is available only for [insert the name of

Page 58 Publication 519 (2014)


Korea, Norway, This compensation qualifies not otherwise be considered Slovenia and
for exemption from withhold- a resident alien for the rele-
Poland, and Romania ing of federal income tax un- vant tax year.
Venezuela
der the tax treaty between the
1. I was a resident of 2. I am temporarily present in 1. I was a resident of
United States and Morocco in
[insert the name of the coun- the United States solely as a [insert the name of the coun-
an amount not in excess of
try under whose treaty you student at [insert try under whose treaty you
$2,000 for any tax year. I
claim exemption] on the date the name of the recognized claim exemption] on the date
have not previously claimed
of my arrival in the United university, college, or school of my arrival in the United
an income tax exemption un-
States. I am not a U.S. citi- in the United States at which States. I am not a U.S. citi-
der that treaty for income re-
zen. I have not been lawfully you study]. zen. I have not been lawfully
ceived as a student before
accorded the privilege of re- the date of my arrival in the 3. I will receive compensation accorded the privilege of re-
siding permanently in the Uni- United States. for personal services per- siding permanently in the Uni-
ted States as an immigrant. formed in the United States. ted States as an immigrant.
4. I arrived in the United States
2. I am temporarily present in This compensation qualifies 2. I am temporarily present in
on [insert the date
the United States for the pri- for exemption from withhold- the United States for the pri-
of your last arrival in the Uni-
mary purpose of studying at ing of federal income tax un- mary purpose of studying or
ted States before beginning
[insert the name of der the tax treaty between the
study at the U.S. educational training at [insert the
the university or other recog- United States and Pakistan in
institution]. The treaty exemp- name of the university or
nized educational institution an amount not in excess of
tion is available only for com- other accredited educational
at which you study]. $5,000 for any tax year.
pensation paid during a pe- institution at which you study
3. I will receive compensation riod of five tax years, or train].
for personal services per- beginning with the tax year Portugal and Spain 3. I will receive compensation
formed in the United States. that includes my arrival date.
for services performed in the
This compensation qualifies 1. I was a resident of
United States. This compen-
[insert the name of the coun-
for exemption from withhold- Netherlands try under whose treaty you
sation qualifies for exemption
ing of federal income tax un- from withholding of federal in-
der the tax treaty between the claim exemption] on the date
1. I was a resident of the Nether- come tax under the tax treaty
United States and of my arrival in the United
lands on the date of my arrival between the United States
[insert the name of the coun- States. I am not a U.S. citi-
in the United States. I am not and [insert the
try under whose treaty you zen. I have not been lawfully
a U.S. citizen. I have not been name of the country under
claim exemption] in an accorded the privilege of re-
lawfully accorded the privi- whose treaty you claim ex-
amount not in excess of siding permanently in the Uni-
lege of residing permanently emption] in an amount not in
$2,000 for any tax year. I ted States as an immigrant.
in the United States as an im- excess of $5,000 for any tax
have not previously claimed migrant. 2. I am temporarily present in year.
an income tax exemption un- the United States for the pri-
der this treaty for income re- 2. I am temporarily present in 4. I arrived in the United States
mary purpose of studying or
ceived as a teacher, re- the United States for the pri- on [insert the date
training at [insert the
searcher, or student before mary purpose of full time of your last arrival in the Uni-
name of the university or
the date of my arrival in the study at [insert the ted States before beginning
other recognized educational
United States. name of the recognized uni- study at the U.S. educational
institution at which you study];
versity, college, or school in institution]. The treaty exemp-
4. I arrived in the United States or, I am temporarily present in
the United States at which tion is available only for com-
on [insert the date the United States as a recipi-
you study]. pensation paid during a pe-
of your last arrival in the Uni- ent of a grant, allowance, or
3. I will receive compensation award from [insert riod of five tax years
ted States before beginning beginning with the taxable
study at the U.S. educational for personal services per- the name of the nonprofit or-
formed in the United States. ganization or government in- year that includes my arrival
institution]. The treaty exemp- date, and for such period of
tion is available only for com- This compensation qualifies stitution providing the grant,
for exemption from withhold- allowance, or award]. time as is necessary to com-
pensation paid during a pe- plete, as a full-time student,
riod of five tax years ing of federal income tax un-
3. I will receive compensation educational requirements as
beginning with the tax year der the tax treaty between the
for services performed in the a candidate for a postgradu-
that includes my arrival date. United States and the Nether-
United States. This compen- ate or professional degree
lands in an amount not in ex- sation qualifies for exemption
cess of $2,000 for any tax from a recognized educa-
Morocco year.
from withholding of federal in-
come tax under the tax treaty
tional institution.

4. I arrived in the United States between the United States


1. I was a resident of Morocco
on [insert the date and [Insert the Trinidad and Tobago
on the date of my arrival in the
of your last arrival in the Uni- name of the country] in the
United States. I am not a U.S.
ted States before beginning amount not in excess of 1. I was a resident of Trinidad
citizen. I have not been law-
study at the U.S. educational $5,000 for any tax year. and Tobago on the date of my
fully accorded the privilege of
institution]. I am claiming this 4. I arrived in the United States arrival in the United States. I
residing permanently in the
exemption only for such pe- on [insert the date am not a U.S. citizen. I have
United States as an immi-
riod of time as is reasonably of your last arrival in the Uni- not been lawfully accorded
grant.
necessary to complete my ted States before beginning the privilege of residing per-
2. I am temporarily present in education. manently in the United States
study at the U.S. educational
the United States for the pri- as an immigrant.
institution]. The treaty exemp-
mary purpose of studying at
[insert the name of
Pakistan tion is available only for com- 2. I am temporarily present in
pensation paid during a pe- the United States for the pri-
the university or other recog-
1. I am a resident of Pakistan. I riod of five tax years mary purpose of studying at
nized educational institution
am not a U.S. citizen. I have beginning with the tax year [insert the name of
at which you study]. that includes my arrival date.
not been lawfully accorded the university or other ac-
3. I will receive compensation the privilege of residing per- credited educational institu-
for personal services per- manently in the United States tion at which you study].
formed in the United States. as an immigrant and would

Publication 519 (2014) Page 59


3. I will receive compensation 4. I will be present in the United United States. I am not a U.S. from withholding of federal in-
for personal services per- States only for such period of citizen. I have not been law- come tax under the tax treaty
formed in the United States. time as may be reasonably or fully accorded the privilege of between the United States
This compensation qualifies customarily required to effec- residing permanently in the and Tunisia in an amount not
for exemption from withhold- tuate the purpose of this visit. United States as an immi- in excess of $4,000 for any
ing of federal income tax un- grant. tax year.
5. I arrived in the United States
der the tax treaty between the
on [insert the date 2. I am temporarily present in 4. I arrived in the United States
United States and Trinidad
of your last arrival in the Uni- the United States for the pur- on [insert the date
and Tobago in an amount not
ted States before beginning pose of full-time study, train- of your last arrival in the Uni-
in excess of $2,000 (or, if you
study at the U.S. educational ing, or research at ted States before beginning
are securing training required
institution]. The treaty exemp- [insert the name of the univer- study at the U.S. educational
to qualify you to practice a
tion is available only for com- sity or other accredited edu- institution]. The treaty exemp-
profession or a professional
pensation paid during a pe- cational institution at which tion is available only for
specialty, not in excess of
riod of five tax years. you study, train, or perform compensation paid during a
$5,000) for any taxable year. I
research]. period of five tax years begin-
have not previously claimed
ning with the tax year that in-
an income tax exemption un- Tunisia 3. I will receive compensation
cludes my arrival date.
der this treaty for income re- for services performed in the
ceived as a teacher, re- United States. This compen-
1. I was a resident of Tunisia on
searcher, or student before sation qualifies for exemption
the date of my arrival in the
the date of my arrival in the
United States.

Page 60 Publication 519 (2014)


Appendix BTax Treaty Exemption Procedure for Teachers and Researchers
This appendix contains the state- citizen. I have not been law- year (or during the period compensation for my teach-
ments nonresident alien teachers fully accorded the privilege of from to ) quali- ing, research, or conference
and researchers must file with residing permanently in the fies for exemption from with- activities.
Form 8233, Exemption From With- United States as an immi- holding of federal tax under
3. The teaching, research or
holding on Compensation for Inde- grant. the tax treaty between the
conference compensation re-
pendent (and Certain Dependent) United States and the Peo-
2. I am visiting the United States ceived the entire tax year (or
Personal Services of a Nonresi- ple's Republic of China. I
for the purpose of teaching or for the period from to
dent Alien Individual, to claim a tax have not previously claimed
conducting research at ) qualifies for exemp-
treaty exemption from withholding an income tax exemption un-
[insert the name of tion from withholding of fed-
of tax on compensation for de- der that treaty for income re-
the university, college, or eral tax under the tax treaty
pendent personal services. For ceived as a teacher, lecturer,
other recognized educational between the United States
treaty countries not listed, attach a researcher, or student before
or research institution]. I will and the former Union of So-
statement in a format similar to the date of my arrival in the
receive compensation for my viet Socialist Republics. I
those for other treaties. See chap- United States.
teaching or research activi- have not previously claimed
ter 8 for more information on with-
ties. 4. Any research I perform will be an income tax exemption un-
holding.
3. The teaching or research undertaken in the public inter- der that treaty for income re-
est and not primarily for the ceived as a teacher, re-
Belgium compensation received dur-
ing the entire tax year (or dur- private benefit of a specific searcher, conference
ing the period from person or persons. participant, or student before
1. I am a resident of Belgium. I the date of my arrival in the
to ) for these activi- 5. I arrived in the United States
am not a U.S. citizen. I have United States.
ties qualifies for exemption on [insert the date
not been lawfully accorded
from withholding of federal of your last arrival in the Uni- 4. Any research I perform will
the privilege of residing per-
tax under the tax treaty be- ted States before beginning not be undertaken primarily
manently in the United States
tween the United States and your teaching, lecturing, or re- for the benefit of a private
as an immigrant.
Bulgaria. search activities]. The treaty person or commercial enter-
2. I am visiting the United States exemption is available only prise of the United States or a
for the purpose of teaching or 4. Any research I perform will be
undertaken in the public inter- for compensation received foreign trade organization of
engaging in research at during a maximum aggregate [insert the name of
[insert the name of est and not primarily for the
private benefit of a specific period of three years. country], unless the research
the educational or research is conducted on the basis of
institution at which you teach person or persons.
or perform research] for a pe- 5. I arrived in the United States Commonwealth of intergovernmental agree-
ments on cooperations.
riod not exceeding two years. on [insert the date Independent States
I will receive compensation of your last arrival into the 5. I arrived in the United States
for my teaching or research United States before begin- on [insert the date
The treaty with former Union of So-
activities. ning the services for which of your last arrival in the Uni-
viet Socialist Republics remains in
the exemption is claimed]. ted States before beginning
3. The teaching or research effect for the following countries:
The treaty exemption is avail- the teaching or research serv-
compensation received dur- Armenia, Azerbaijan, Belarus,
able only for compensation ices for which exemption is
ing the entire tax year (or dur- Georgia, Kyrgyzstan, Moldova, Ta-
paid during a period of two claimed], The treaty exemp-
ing the period from jikistan, Turkmenistan, and Uzbeki-
years beginning on that date. tion is available only for com-
to ) for these activi- stan.
pensation received during a
ties qualifies for exemption
period of two years beginning
from withholding of federal China, People's 1. I am a resident of
on that date.
tax under the tax treaty be-
tween the United States and
Republic of [insert the name of country]. I
am not a U.S. citizen.
Belgium. 1. I was a resident of the Peo- 2. I have accepted an invitation
Czech Republic and
4. Any research I perform will be ple's Republic of China on the by a governmental agency or Slovak Republic
undertaken in the public inter- date of my arrival in the Uni- institution in the United
est and not primarily for the ted States. I am not a U.S. States, or by an educational 1. I was a resident of the
private benefit of a specific citizen. or scientific research institu- [insert the name of
person or persons. tion in the United States, to the country under whose
2. I am visiting the United States
5. I arrived in the United States for the primary purpose of come to the United States for treaty you claim exemption]
on [insert the date teaching, giving lectures, or the primary purpose of teach- on the date of my arrival in the
of your last arrival in the Uni- conducting research at ing, engaging in research, or United States. I am not a U.S.
ted States before beginning [insert the name of participating in scientific, citizen. I have not been law-
the teaching or research for the educational institution or technical, or professional fully accorded the privilege of
which exemption is claimed]. scientific research institution conferences at [in- residing permanently in the
The treaty exemption is avail- at which you teach, lecture, or sert the name of governmen- United States as an immi-
able only for compensation conduct research], which is tal agency or institution, edu- grant.
received during a period of an accredited educational in- cational or scientific
2. I am visiting the United States
two years beginning on that stitution or scientific research institution, or organization
for the primary purpose of
date. institution. I will receive com- sponsoring professional con-
teaching or conducting re-
pensation for my teaching, ference], which is a govern-
search at [insert the
lecturing, or research activi- mental agency or institution,
Bulgaria ties. an educational or scientific in-
name of the educational or
scientific institution], which is
stitution, or an organization
1. I was a resident of Bulgaria 3. The teaching, lecturing, or re- an accredited educational or
sponsoring a professional
on the date of my arrival in the search compensation re- research institution. I will re-
conference. I will receive
United States. I am not a U.S. ceived during the entire tax ceive compensation for my

Publication 519 (2014) Page 61


teaching or research exemption from withholding 5. I arrived in the United States paid during a period of two
activities. of federal tax under the tax on [insert the date years beginning on that date.
treaty between the United of your last arrival in the Uni-
3. The teaching or research
States and [insert
compensation received dur-
the name of the country under
ted States before beginning
the teaching or research serv-
Greece
ing the entire tax year (or dur-
whose treaty you claim ex- ices for which exemption is
ing the period from to 1. I am a resident of Greece. I
emption]. I have not previ- claimed]. The treaty exemp-
) qualifies for exemp- am not a U.S. citizen. I have
ously claimed an income tax tion is available only for com-
tion from withholding of fed- not been lawfully accorded
exemption under this treaty pensation received during a
eral tax under the tax treaty the privilege of residing per-
for income received as a period of two years beginning
between the United States manently in the United States
teacher, researcher, or stu- on that date.
and the [insert the as an immigrant (and would
dent before the date of my ar-
name of the country under not otherwise be considered
rival in the United States.
whose treaty you claim ex- Germany a resident alien for the rele-
emption]. I have not previ- 4. Any research I perform will be vant tax year).
ously claimed an income tax undertaken in the public inter- 1. I am a resident of Germany. I
exemption under that treaty est and not primarily for the 2. I am a professor or teacher
am not a U.S. citizen. I have
for income received as a private benefit of a specific visiting the United States for
not been lawfully accorded
teacher, researcher, or stu- person or persons. the purpose of teaching at
the privilege of residing per-
dent before the date of my ar- [insert the name of
5. I arrived in the United States manently in the United States
rival in the United States. the other educational institu-
on [insert the date as an immigrant.
tion at which you teach],
4. Any research I perform will be of your last arrival in the Uni- 2. I am a professor or teacher which is an educational insti-
undertaken in the public inter- ted States before beginning visiting the United States for tution. I will receive compen-
est and not primarily for the the teaching or research serv- the purpose of advanced sation for my teaching activi-
private benefit of a specific ices for which exemption is study, teaching, or research ties.
person or persons. claimed]. The treaty exemp- at [insert the name
tion is available only for com- 3. The teaching compensation
5. I arrived in the United States of the accredited university,
pensation received during a received during the entire tax
on [insert the date college, school, or other edu-
period of two years beginning year (or during the period
of your last arrival in the Uni- cational institution, or a public
on that date. from to ) quali-
ted States before beginning research institution or other
fies for exemption from with-
the teaching, research, or institution engaged in re-
holding of federal tax under
conference services for which France search for the public benefit].
the tax treaty between the
exemption is claimed]. The I will receive compensation
United States and Greece. I
treaty exemption is available 1. I was a resident of France on for my teaching, research, or
have not previously claimed
only for compensation re- the date of my arrival in the study activities.
an income tax exemption un-
ceived during a period of two United States. I am not a U.S. 3. The compensation received der that treaty for income re-
years beginning on that date. citizen. I have not been law- during the entire tax year (or ceived as a teacher or stu-
fully accorded the privilege of during the period from dent before the date of my
residing permanently in the
Egypt, Hungary, United States as an immi-
to ) for arrival in the United States.
these activities qualifies for
Korea, Philippines, grant. exemption from withholding
4. I arrived in the United States
Poland, and Romania 2. I have accepted an invitation of federal tax under the tax
on [insert the date
of your last arrival in the Uni-
by the U.S. government, or by treaty between the United
ted States before beginning
1. I was a resident of a university or other recog- States and Germany. I have
the teaching services for
[insert the name of the coun- nized educational or research not previously claimed an in-
which exemption is claimed].
try under whose treaty you institution in the United States come tax exemption under
The treaty exemption is avail-
claim exemption] on the date for the primary purpose of that treaty for income re-
able only for compensation
of my arrival in the United teaching or engaging in re- ceived as a student, appren-
received during a period of
States. I am not a U.S. citi- search at [insert the tice, or trainee during the im-
three years beginning on that
zen. I have not been lawfully name of the educational or re- mediately preceding period.
date.
accorded the privilege of re- search institution]. I will re- (If, however, following the pe-
siding permanently in the Uni- ceive compensation for my riod in which the alien
ted States as an immigrant. teaching or research activi- claimed benefits as a student, India
ties. apprentice, or trainee, that
2. I have accepted an invitation
person returned to Germany 1. I was a resident of India on
by the U.S. government (or by 3. The teaching or research and resumed residence and the date of my arrival in the
a political subdivision or local compensation received dur- physical presence before re- United States. I am not a U.S.
authority thereof), or by a uni- ing the entire tax year (or for turning to the United States citizen. I have not been law-
versity or other recognized the portion of the year from as a teacher or researcher, fully accorded the privilege of
educational institution in the to ) qualifies for
that person may claim the residing permanently in the
United States for a period not exemption from withholding
benefits of this treaty.) United States as an immi-
expected to exceed two years of federal tax under the tax
grant.
for the purpose of teaching or treaty between the United 4. Any research I perform will be
engaging in research at States and France. I have not undertaken in the public inter- 2. I am visiting the United States
[insert the name of previously claimed an income est and not primarily for the for the purpose of teaching or
the educational institution], tax exemption under this private benefit of a specific conducting research at
which is a recognized educa- treaty for income received as person or persons. [insert the name of
tional institution. I will receive a teacher, researcher, or stu- the university, college, or
5. I arrived in the United States
compensation for my teach- dent before the date of my ar- other recognized educational
on [insert the date
ing or research activities. rival in the United States. institution]. I will receive com-
of your last arrival into the
pensation for my teaching or
3. The teaching or research 4. Any research I perform will be United States before begin-
research activities.
compensation received dur- undertaken in the public inter- ning the services for which
ing the entire tax year (or for est and not primarily for the the exemption is claimed]. 3. The teaching or research
the portion of the year from private benefit of a specific The treaty exemption is avail- compensation received dur-
to ) qualifies for person or persons. able only for compensation ing the entire tax year (or

Page 62 Publication 519 (2014)


during the period from 5. Any research I perform will be permanently in the United 3. The teaching or research
to ) for undertaken in the public inter- States as an immigrant. compensation received dur-
these activities qualifies for est and not primarily for the ing the entire tax year (or dur-
2. I am a professor or teacher
exemption from withholding private benefit of a specific ing the period from to
visiting the United States for
of federal tax under the tax person or persons. ) qualifies for exemp-
the purpose of teaching or
treaty between the United tion from withholding of fed-
performing research at
eral tax under the tax treaty
States and India.
Israel [insert the name of
between the United States
4. Any research I perform will be the educational institution or
and Jamaica. I have not pre-
undertaken in the public inter- 1. I was a resident of Israel on medical facility at which you
viously claimed an income tax
est and not primarily for the the date of my arrival in the teach or perform research],
exemption under that treaty
private benefit of a specific United States. I am not a U.S. which is a recognized educa-
for income received as a
person or persons. citizen. I have not been law- tional institution or a medical
teacher, researcher, or stu-
fully accorded the privilege of facility primarily funded from
5. I arrived in the United States dent before the date of my ar-
residing permanently in the governmental sources. I will
on [insert the date rival in the United States.
United States as an immi- receive compensation for my
of your last arrival into the teaching or research activi- 4. I arrived in the United States
United States before begin- grant.
ties. on [insert the date
ning the services for which 2. I have accepted an invitation of your last arrival in the Uni-
the exemption is claimed]. by the U.S. government (or by 3. The compensation received
ted States before beginning
The treaty exemption is avail- a political subdivision or local during the entire tax year (or
the teaching or research serv-
able only for compensation authority thereof), or by a uni- during the period from
ices for which exemption is
paid during a period of two versity or other recognized to ) qualifies for ex-
claimed]. The treaty exemp-
years beginning on that date. educational institution in the emption from withholding of
tion is available only for com-
United States, to come to the federal tax under the tax
pensation paid during a pe-
treaty between the United
Indonesia United States for a period not
States and Italy. I have not
riod of two years beginning
expected to exceed two years on that date.
previously claimed an income
for the purpose of teaching or
1. I was a resident of Indonesia tax exemption under that
engaging in research at
on the date of my arrival in the
[insert the name of
treaty for income received as Luxembourg
United States. I am not a U.S. a teacher, researcher, or stu-
the educational institution],
citizen. I have not been law- dent before the date of my ar- 1. I am a resident of Luxem-
which is a recognized educa-
fully accorded the privilege of rival in the United States. bourg. I am not a U.S. citizen.
tional institution. I will receive
residing permanently in the I have not been lawfully ac-
compensation for my teach- 4. Any research I perform will be
United States as an immi- corded the privilege of resid-
ing or research activities. undertaken in the general in-
grant. ing permanently in the United
terest and not primarily for the
3. The teaching or research States as an immigrant.
2. I have accepted an invitation private benefit of a specific
compensation received dur-
by [insert the name person or persons. 2. I have accepted an invitation
ing the entire tax year (or for
of the university, college, by [insert the name
the portion of the year from 5. I arrived in the United States
school, or other similar edu- of the educational institution
to ) qualifies for on [insert the date
cational institution] to come to at which you teach or perform
exemption from withholding of your last arrival in the Uni-
the United States solely for research], which is a recog-
of federal tax under the tax ted States before beginning
the purpose of teaching or en- nized educational institution,
treaty between the United the teaching or research serv-
gaging in research at that ed- to come to the United States
States and Israel. I have not ices for which exemption is
ucational institution. I will re- for the purpose of teaching or
previously claimed an income claimed]. The treaty exemp-
ceive compensation for my engaging in research at that
tax exemption under this tion is available only for com-
teaching or research activi- institution. I will receive com-
treaty for income received as pensation received during a
ties. pensation for my teaching or
a teacher, researcher, or stu- period of two years beginning
research activities.
3. The teaching or research dent before the date of my ar- on that date.
compensation received dur- rival in the United States. 3. The teaching or research
ing the entire tax year (or dur- 4. Any research I perform will be Jamaica compensation received dur-
ing the entire tax year (or dur-
ing the period from undertaken in the public inter-
to ) qualifies for ex- ing the period from to
est and not primarily for the 1. I was a resident of Jamaica
emption from withholding of ) qualifies for exemp-
private benefit of a specific on the date of my arrival in the
federal tax under the tax tion from withholding of fed-
person or persons. United States. I am not a U.S.
treaty between the United citizen. I have not been law- eral tax under the tax treaty
States and Indonesia. I have 5. I arrived in the United States fully accorded the privilege of between the United States
not previously claimed an in- on [insert the date residing permanently in the and Luxembourg. I have not
come tax exemption under of your last arrival in the Uni- United States as an immi- previously claimed an income
that treaty for income re- ted States before beginning grant. tax exemption under that
ceived as a teacher or re- the teaching or research serv- treaty for income received as
searcher before the date ices for which exemption is 2. I am visiting the United States a teacher, researcher, or stu-
specified in the next para- claimed]. The treaty exemp- for the purpose of teaching or dent before the date of my ar-
graph. tion is available only for com- conducting research for a pe- rival in the United States.
pensation received during a riod not expected to exceed
4. I arrived in the United States two years at [insert 4. Any research I perform will
period of two years beginning not be carried on for the ben-
on [insert the date on that date. the name of the educational
of your arrival into the United institution at which you teach efit of any person using or
States before beginning the or conduct research], which is disseminating the results for
teaching or research services Italy a recognized educational in- purposes of profit.
for which the exemption is stitution. I will receive com- 5. I arrived in the United States
claimed]. The treaty exemp- 1. I was a resident of Italy on the pensation for my teaching or on [insert the date
tion is available only for com- date of my arrival in the Uni- research activities. of your last arrival into the
pensation paid during a pe- ted States. I am not a U.S. United States before begin-
riod of two years beginning citizen. I have not been accor- ning the teaching services for
on that date. ded the privilege of residing which exemption is claimed].

Publication 519 (2014) Page 63


The treaty exemption is avail- in the United States for a pe- an income tax exemption un- Slovenia and
riod not expected to exceed der this treaty for income re-
able only for compensation
received during a period of two years for the purpose of ceived as a teacher or stu-
Venezuela
two years beginning on that teaching or engaging in re- dent before the date of my
date. search at [insert the arrival in the United States. 1. I was a resident of
name of the educational insti- [insert the name of the coun-
4. I arrived in the United States try under whose treaty you
tution], which is a recognized
Netherlands educational institution. I will
on [insert the date claim exemption] on the date
of your last arrival into the of my arrival in the United
receive compensation for my
1. I am a resident of the Nether- United States before begin- States. I am not a U.S. citi-
teaching or research activi-
lands. I am not a U.S. citizen. ning the teaching services for zen. I have not been lawfully
ties.
I have not been lawfully ac- which exemption is claimed]. accorded the privilege of re-
corded the privilege of resid- 3. The teaching or research The treaty exemption is avail- siding permanently in the Uni-
ing permanently in the United compensation qualifies for able only for compensation ted States as an immigrant.
States as an immigrant. exemption from withholding paid during a period of two
of federal tax under the tax years beginning on that date. 2. I am temporarily present in
2. I am visiting the United States treaty between the United the United States for the pur-
for the purpose of teaching or States and Norway. I have pose of teaching or carrying
engaging in research at not previously claimed an in-
Portugal on research at [in-
[insert the name of come tax exemption under sert the name of the educa-
the educational institution at 1. I was a resident of Portugal tional or research institution],
this treaty for income re-
which you teach or perform on the date of my arrival in the which is a recognized educa-
ceived as a teacher, re-
research] for a period not ex- United States. I am not a U.S.
searcher, or student before tional or research institution. I
ceeding two years. I will re- citizen. I have not been law-
the date of my arrival in the will receive compensation for
ceive compensation for my fully accorded the privilege of
United States. my teaching or research ac-
teaching or research activi- residing permanently in the
tivities.
ties. 4. Any research I perform will United States as an immi-
not be undertaken primarily grant. 3. The teaching or research
3. The compensation received for the private benefit of a compensation received dur-
during the entire tax year (or 2. I have accepted an invitation
specific person or persons. ing the entire tax year (or dur-
during the period from by [insert the name
ing the period from to
to ) for these activities 5. I arrived in the United States of the university, college,
) qualifies for exemp-
qualifies for exemption from on [insert the date school, or other similar edu-
tion from withholding of fed-
withholding of federal tax un- of your last arrival in the Uni- cational institution] to come to
eral tax under the tax treaty
der the tax treaty between the ted States before beginning the United States solely for
between the United States
United States and Nether- the teaching or research serv- the purpose of teaching or en-
and [insert the
lands. I have not previously ices for which exemption is gaging in research at that ed-
name of the country under
claimed an income tax ex- claimed]. The treaty exemp- ucational institution. I will re-
whose treaty you claim ex-
emption under that treaty for tion is available only for com- ceive compensation for my
emption]. I have not previ-
income received as a pensation received during a teaching or research activi-
ously claimed an income tax
teacher, researcher, or stu- period of two years beginning ties.
exemption under this treaty
dent before the date of my ar- on that date.
3. The teaching or research for income received as a
rival in the United States. compensation received dur- teacher, researcher, or stu-
4. Any research I perform will be Pakistan ing the entire tax year (or dur- dent before the date of my ar-
undertaken in the public inter- ing the period from rival in the United States.
est and not primarily for the 1. I am a resident of Pakistan. I to ) qualifies for ex-
am not a U.S. citizen. I have emption from withholding of 4. Any research I perform will be
benefit of a specific person or undertaken in the general in-
persons. not been lawfully accorded federal tax under the tax
the privilege of residing per- treaty between the United terest and not primarily for the
5. I arrived in the United States manently in the United States States and Portugal. I have private benefit of a specific
on [insert the date as an immigrant and would not previously claimed an in- person or persons.
of your last arrival into the not otherwise be considered come tax exemption under 5. I arrived in the United States
United States before begin- a resident alien for the rele- that treaty for income re- on [insert the date
ning the teaching or research vant tax year. ceived as a teacher or re- of your last arrival in the Uni-
services for which exemption searcher before the date ted States before beginning
is claimed]. The treaty ex- 2. I am a professor or teacher
specified in paragraph 5. the teaching or research serv-
emption is available for com- visiting the United States for
the purpose of teaching at 4. Any research I perform will be ices for which exemption is
pensation received during a claimed]. The treaty exemp-
period of two years beginning [insert the name of undertaken in the public inter-
the educational institution at est and not primarily for the tion is available only for com-
on that date only if my visit pensation received during a
does not exceed 2 years. which you teach], which is a private benefit of a specific
recognized educational insti- person or persons. period of two years beginning
tution. I will receive compen- on that date. In no event have
Norway sation for my teaching activi-
5. I arrived in the United States
on [insert the date
I claimed an exemption under
ties. this treaty for income re-
of your arrival into the United ceived as a teacher or re-
1. I was a resident of Norway on
3. The teaching compensation States before beginning the searcher for more than five
the date of my arrival in the
received during the entire tax teaching or research services years.
United States. I am not a U.S.
year (or during the period for which the exemption is
citizen. I have not been law-
from to ) quali- claimed]. The treaty exemp-
fully accorded the privilege of
fies for exemption from with- tion is available only for com- Thailand
residing permanently in the
holding of federal tax under pensation paid during a pe-
United States as an immi-
the tax treaty between the riod of two years beginning 1. I was a resident of Thailand
grant.
United States and Pakistan. I on that date. on the date of my arrival in the
2. I have accepted an invitation have not previously claimed United States. I am not a U.S.
by the U.S. government, or by citizen. I have not been law-
a university or other recog- fully accorded the privilege of
nized educational institution residing permanently in the

Page 64 Publication 519 (2014)


United States as an immi- Trinidad and Tobago an income tax exemption un- receive compensation for my
grant. der that treaty for income re- teaching or research activi-
ceived as a teacher, re- ties.
2. I am visiting the United States 1. I was a resident of Trinidad
searcher, or student before
for the purpose of teaching or and Tobago on the date of my 3. The teaching or research
the date of my arrival in the
engaging in research at arrival in the United States. I compensation received dur-
United States.
[insert the name of am not a U.S. citizen. I have ing the entire tax year (or dur-
the educational or research not been lawfully accorded 4. Any research I perform will be ing the period from to
institution at which you teach the privilege of residing per- undertaken in the public inter- ) qualifies for exemp-
or perform research] for a pe- manently in the United States est and not primarily for the tion from withholding of fed-
riod not exceeding two years. as an immigrant. private benefit of a specific eral tax under the tax treaty
I will receive compensation person or persons. between the United States
for my teaching or research 2. I have accepted an invitation and the United Kingdom. I
by the U.S. government, or by 5. I arrived in the United States
activities. have not previously claimed
a university or other educa- on [insert the date
3. The compensation received an income tax exemption un-
tional institution in the United of your last arrival in the Uni-
during the entire tax year (or der that treaty for income re-
States, to come to the United ted States before beginning
during the period from ceived as a teacher, re-
States for the purpose of the teaching or research serv-
to ) for these activities searcher, or student before
teaching or engaging in re- ices for which exemption is
qualifies for exemption from the date of my arrival in the
search at [insert the claimed]. The treaty exemp-
withholding of federal tax un- United States.
name of the educational insti- tion is available only for com-
der the tax treaty between the tution], which is an educa- pensation received during a 4. Any research I perform will be
United States and Thailand. I tional institution approved by period of two years beginning undertaken in the public inter-
have not previously claimed an appropriate governmental on that date. est and not primarily for the
an income tax exemption un- education authority. No benefit of any private person
der that treaty for income re-
ceived as a teacher, re-
agreement exists between United Kingdom or persons.
the government of the United 5. I arrived in the United States
searcher, or student before States and the government of 1. I was a resident of the United on [insert the date
the date of my arrival in the Trinidad and Tobago for the Kingdom on the date of my of your last arrival in the Uni-
United States. provision of my services. I will arrival in the United States. I ted States before beginning
4. Any research I perform will be receive compensation for my am not a U.S. citizen. I have the teaching or research serv-
undertaken in the public inter- teaching or research serv- not been accorded the privi- ices for which exemption is
est and not primarily for the ices. lege of residing permanently claimed]. The treaty exemp-
benefit of a specific person or in the United States as an im- tion is available only for com-
3. The teaching or research
persons. migrant. pensation received during a
compensation received dur-
5. I arrived in the United States ing the entire tax year (or for 2. I am a professor or teacher period of two years beginning
on [insert the date the period from to visiting the United States for a on that date. The entire treaty
of your last arrival into the ) qualifies for exemp- period of not more than two exemption is lost retroactively
United States before begin- tion from withholding of fed- years for the purpose of if my stay in the United States
ning the teaching or research eral tax under the tax treaty teaching or engaging in re- exceeds two years.
services for which exemption between the United States search at [insert the
is claimed]. The treaty ex- and Trinidad and Tobago. I name of the educational insti-
emption is available only for have not previously claimed tution], which is a recognized
compensation received dur- educational institution. I will
ing a period of two years be-
ginning on that date.

Publication 519 (2014) Page 65


To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See Comments and Suggestions in the Introduction for the ways you can reach us.

Commuters from Canada or Withholding tax 41


30% Tax 20 Mexico 4 E Filing requirements 34
Compensation for labor or Earned income credit: Filing returns 24
personal services: Dual-status alien 32 Amended returns 36
A Geographical basis 11 Nonresident alien 31 Claims for refund 36
Accuracy-related penalties 37 Contingent interest 15 Resident alien 30 Commonwealth of the Northern
Additional Medicare Tax 43, 44 Credit for the elderly or the Education credits: Mariana Islands 36
Adoption credit: disabled: Dual-status alien 32 Dual-status taxpayer 33
Dual-status alien 33 Dual-status alien 32 Nonresident alien 30 Estimated tax 45
Nonresident alien 31 Resident alien 30 Resident alien 30 Form 1040-C 52
Resident alien 30 Credits against tax: Effectively connected Form 1040NR 24, 34
Agricultural workers 39, 44 Child and dependent care income 17 Form 1040NR-EZ 24, 35
Alien: credit 30, 33 Foreign income 19 Form 2063 52
Nonresident 3, 10, 17 Child tax credit 30, 31, 33 Investment income 18 Guam 36
Resident 3, 10, 17 Credit for the elderly or the Pensions 18 Nonresident alien 24
Alien status, employer disabled 32 Real property gain or loss 18 U.S. Virgin Islands 36
notification of 38 Dual-status alien 33 Real property income Who must file 34
Alternative minimum tax 19 Earned income credit 31, 32 choice 21 Filing status 25
Amended returns 36 Education credits 30, 32 Tax on 19 First-year choice 7
American Samoa, residents Excess social security tax Transportation income 18 Fixed or determinable
of 10, 26, 31 withheld 31 Employees, household 39 income 20
Annuities: Foreign tax credit 30, 33 Employees, withholding Foreign country 6
Income 16 Hope credit 30 exemption under tax Foreign earned income
Source rule 12 Lifetime learning credit 30 treaty 42 exclusion 14
Asset-use test 18 Retirement savings Employees of foreign Foreign employer 15, 16
Athletes, professional 5 contributions 30, 33 governments 50 Foreign government
Awards 12 Tax paid on undistributed Employees of international employees:
long-term capital gains 31 organizations 50 Alien status 5
Tax withheld at source 31 Employer identification Exempt from U.S. tax 50
B Tax withheld on partnership number 25 Tax treaty exemption 47
Basis of property 13 income 31 Estate, beneficiary 17 Foreign income subject to U.S.
Beneficiary of estate or trust 17 Withholding from wages 31 Estimated tax 38, 45 tax 19
Business, U.S. 17 Crew members: Excess social security tax 31 Foreign organizations,
Business-activities test 18 Alien status 4 Exchange visitors 43 charitable contributions
Business expenses, ordinary Compensation 16 Income from foreign to 28
and necessary 26 Currency, transporting 36 employer 16 Foreign tax credit:
Business operations 17 Social security and Medicare Dual-status alien 33
Business profits and losses and taxes 43 Nonresident alien 30
sales transactions 18 D Exclusions from gross Resident alien 29
Days of presence 4 income 14 Forms 6
Deductions 26, 27 Annuities 16 1040-C 52
De minimis presence 8 1040-ES(NR) 45
C Compensation from a foreign
Departure permit 51 employer 16 1040NR 34
Canada:
Depreciable property 13 Gambling winnings, dog or 1040NR-EZ 35
Commuters 4
Diplomats (See Foreign horse racing 16 1040X 36
Exemptions 32
government employees) Students and exchange 1042-S 42
Personal exemption 27
Direct economic visitors 16 1116 29, 30, 33
Qualifying widow filing
relationship 18 Treaty income 16, 46 2063 52
status 26
Disclosure statement 37 Exempt individual 5 2106 29
Residents of 27
Dividends, U.S. source Exemption from withholding: 2210 45
Social security benefits 47
income 10 Employees 42 3903 26
Transportation-related
Dual-status aliens 7 Independent contractors 42 4563 32
employment 39
Dual-status tax year 7, 32 Students, teachers, and 4790 (See FinCEN 105)
Withholding tax 40
Child care credit 33 researchers 42 6251 19
Capital assets, sales or
Computation of tax 33 Exemptions: 8233 42
exchanges 20
Credit for the elderly or the Dual-status taxpayer 32 8275 37
Casualty and theft losses 29
disabled 32 Indian students and business 8288 43
Central withholding
Earned income credit 32 apprentices 27 8288-A 43
agreements 40
Education credit 32 Nonresident alien 27 8288-B 42
Charitable contributions 28
Exemptions 32 Resident alien 27 8801 31
Child and dependent care
Foreign tax credit 33 Residents of Mexico or 8805 41, 42
credit:
Forms to file 33 Canada 27 8833 6, 47
Dual-status alien 33
Head of household. 32 Residents of South Korea 27 8840 6
Nonresident alien 30
Income subject to tax 32 U.S. nationals 27 8843 6
Resident alien 30
Joint return 32 Expatriation tax 22 8854 22
Child tax credit:
Residency ending date 7 FinCEN 105 36
Resident alien 30, 31, 33
Residency starting date 7 W-4 39, 41
Claims for refund 36
Restrictions 32 F W-7 25
Closer connection 6
Standard deduction 32 Fellowship grant: W-8BEN 42
Commodities, trading in 17
Tax rates 32 Excludable 16 W-8ECI 39
Community income 14
When and where to file 34 Source rule 12 W-9 38

Page 66 Publication 519 (2014)


Forms to file: International organization Credit for excess social security Personal exemption:
Dual-status alien 33 employees: tax withheld 31 Prorating 41
Nonresident aliens 34 Alien status 5 Credit for income tax Withholding allowance 40
Resident alien 34 Exempt from U.S. tax 50 withheld 31 Personal property 13
Sailing permits 52 International social security Credit for prior year minimum Personal services income:
agreements 44 tax 31 Connected with U.S.
Interrupted period of Defined 3 business 18
G residence 21 Earned income credit 31 Paid by foreign employer 15
Gambling winnings, dog or Inventory 13 Education credits 30 Source rule 11
horse racing 16 Investment income 18 Effectively connected income, Tax treaty exemption 46
German social security Itemized deductions 27 tax on 19 Withholding on wages 39
benefits 47 Filing Form 1040NR 24 Portfolio interest 15
Green card test 3 Filing Form 1040NR-EZ 24 Prizes 12
J Foreign tax credit 30 Professional athletes 5
Job expenses 29 Gambling winnings, dog or Property:
H horse racing 16 Depreciable 13
Head of household: Head of household 26 Intangible 13
Nonresident alien 26 K How income is taxed 17 Inventory 13
Resident alien 25 Korea, South: Individual retirement Personal 13
Home, sale of 16 Exemptions 27, 32 arrangement (IRA) 26 Real 13, 18
Household employees 39 Married filing separately 25 Interest income 10 Protective return 35
Qualifying widow filing Job expenses 29 Puerto Rico, residents of 10,
status 26 Losses 26 26, 31, 39
I Withholding tax 40 Married filing jointly 25
Identification number, taxpayer: Miscellaneous deductions 29
Defined 25 Moving expenses 26 Q
Penalty for failure to supply 38 L Personal exemptions 27 Qualified investment entity:
Income: Last year of residency 8 Qualifying widow(er) 26 Distributions paid by 19
Community 14 Long-term U.S. resident: Standard deduction 28
Effectively connected 17 Defined 22 State and local income
Exclusions 14 Expatriation tax 22 taxes 28 R
Fixed or determinable 20 Losses: Students 43 Railroad retirement
Foreign 19 Business 18 Tax paid on undistributed benefits 20, 33
From real property 21 Capital Assets 20 long-term capital gains 31 Real estate (See Real property)
Income affected by treaties 16 Casualty and theft 29 Tax withheld at source 31 Real property:
Interest 14 Of nonresident aliens 26 Travel expenses 29 Definition 13
Investment 18 Real property 18 Withholding from partnership Income from 21
Personal services 18 income 31 Natural resources 13
Reporting 26 Withholding tax 38 Sale or exchange of 18
Sale of home 16 M Nonresident spouse treated as Source rule 13
Tip 39 Married filing jointly: a resident 9 Tax withheld on sale of 42
Income code: Nonresident alien 25 U.S. real property interest 18
28 20 Resident alien 25 Real property income 20
Income from U.S. sources 10 Medical condition 4 O Refunds, claims for 36
Dividends 10 Medicare tax 43 Obligations: Registered obligations 15
Interest 10 Mexico: Not in registered form 15 Rents 13
Pensions and annuities 12 Commuters 4 Registered 15 Researchers, wage withholding
Personal property 13 Exemptions 32 Original issue discount 20 exemption under tax
Personal services 11 Personal exemption 27 treaty 42, 61
Real property 13 Qualifying widow filing Residence, interrupted 21
Rents or royalties 13 status 26 P Residency:
Independent contractors: Residents of 27 Partnership Income, tax First year 7
Withholding exemption under Transportation-related withheld on 41 Last year 8
tax treaty 42 employment 39 Partnerships 17 Starting date 7
Withholding rules 39 Withholding tax 40 Payment against U.S. tax 33 Termination date 8
India, students and business Miscellaneous deductions 29 Tax withheld at the source 31 Tests 3
apprentices from: Monetary instruments, Withholding from wages 31 Resident alien 3
Exemptions 40 transporting 36 Penalties 36, 37 Child tax credit 30, 31, 33
Exemptions for spouse and Moving expenses 26 Accuracy-related 37 Defined 3
dependents 27 Multi-level marketing 11, 40 Failure to file 37 Education credits 30
Standard deduction 28 Municipal bonds 14 Failure to pay 37 Head of household 25
Withholding allowances 39 Failure to supply taxpayer Married filing jointly 25
Individual retirement identification number 38 Qualifying widow(er) 25
arrangement (IRA) 26 N Fraud 38 Resident alien status,
Individual taxpayer National of the United Frivolous tax submission 38 choosing 8
identification number States 26, 32, 39 Negligence 37 Retirement savings
(ITIN) 25 Natural resources (See Real Substantial understatement of contributions credit:
Intangible property 13 property) income tax 37 Dual-status alien 33
Interest: Non-registered obligations 15 Penalty for failure to pay Nonresident alien 30
Portfolio 15 Nonresident alien 3 estimated income tax 45 Resident alien 30
Interest income: Annuity income 16 Penalty on early withdrawal of Royalties 13
Contingent 15 Business expenses 26 savings 27
Excludable 14 Casualty and theft losses 29 Pensions 18
Source rule 10 Charitable contributions 28 Source rule 12
Child care credit 30 Withholding on 39

Publication 519 (2014) Page 67


Stocks, trading in 17 Teachers: U.S. Virgin Islands, residents of:
S Student loan interest Alien status 5 Where to file 36
Sailing permits, departing expense 27 Tax treaty exemption 46 U.S Virgin Islands, residents of:
aliens: Students: Wage withholding exemption Withholding on wages 39
Aliens not requiring 51 Alien status 5 under tax treaty 42, 61
Bond furnished, insuring tax Engaged in U.S. business 17 Tie-breaker rule 6
payment 52 Fellowship grant 12, 41 Tip income 39 W
Form 1040-C 52 Income from foreign Totalization agreements 44 Wages (See Personal services
Form 2063 52 employer 16 Trade or business, U.S. 17 income)
Forms to file 52 Scholarship 12, 41 Beneficiary of estate or Wages, withholding on 39
When to get 51 Social security and Medicare trust 17 Wages exempt from
Where to get 51 taxes 43 Business operations 17 withholding 39
Salary (See Personal services Tax treaty exemption 47 Income from U.S. sources 17 Waiver of filing deadline 35
income) Wage withholding exemption Partnerships 17 When to file 35
Sale of home, income from 16 under tax treaty 42, 57 Personal services 17 Where to file 35
Sales or exchanges, capital Students and business Students and trainees 17 Who must file 34
assets 20 apprentices from India 27, Trading in stocks, securities, Withholding 38, 41
Scholarship: 28, 39, 40 and commodities 17 Withholding tax:
Excludable 16 Substantial presence test 4 Trading in stocks, securities, Allowance for personal
Source rule 12 and commodities 17 exemption 40
Withholding tax 41 Trainees 5, 17 Central withholding
Securities, trading in 17 T Transportation income: agreements 39
Self-employed retirement Tax, expatriation 22 Connected with U.S. Notification of alien status 38
plans 27 Tax, transportation 21 business 18 On sale of real property 19
Self-employment tax 44 Tax credits and payments: Source rule 12 Pensions 39
Social security benefits: Nonresident aliens 30 Transportation of currency or Puerto Rico, residents of 39
Dual-status alien 33 Resident aliens 29 monetary instruments 36 Real property sales 42
Nonresident alien 20 Tax home 6, 13 Transportation-related Residents of Canada, Mexico,
Social security number 25 Tax paid on undistributed employment, residents of or South Korea 40
Social security tax: long-term capital gains 31 Canada or Mexico 39 Scholarships and grants 41
Credit for excess tax Taxpayer identification number: Transportation tax 21 Social security taxes 43
withheld 43 Defined 25 Travel expenses 29 Tax treaty benefits 42
Excess withheld 31 Penalty for failure to supply 38 Treaties, income affected by 16 Tip income 39
Foreign students and exchange Tax treaties: Treaty benefits, reporting U.S. nationals 40
visitors 43 Tax Treaties: benefits claimed 48 U.S. Virgin Islands, residents
International agreements 44 Benefits 46 Treaty benefits for resident of 39
Self-employment tax 44 Capital gains 47 aliens 47 Wages 39
Totalization agreements 44 Effect of 6 Trust, beneficiary 17 Wages exempt from 39
Withheld in error 44 Employees of foreign Where to report on the
Source of compensation for governments 47 return 31
labor or personal services: Exclusions from income 16 U Withholding from
Alternative basis 12 Income affected by 16 U.S. national 26, 32, 39 compensation 38
Multi-year compensation 11 Income entitled to benefits 42 U.S. real property holding
Time basis 11 Reporting benefits claimed 48 corporation 19
Source of income 10 Teachers and professors 46 U.S. real property interest 18
Standard deduction 28 Trainees, students, and U.S. tax-exempt income,
State and local income apprentices 47 expenses allocable to 29
taxes 28 Tax year 25, 32

Page 68 Publication 519 (2014)