US Tax Filing for Non-Resident Aliens
Non-resident aliens with US-source income must file Form 1040-NR with the IRS. TYM CPAs handle FDAP income, Effectively Connected Income (ECI), FIRPTA withholding, treaty positions, and ITIN applications for non-residents earning income in the United States.
The US tax rules for non-residents are fundamentally different from the rules for US citizens and residents. The distinction between FDAP income and ECI determines both the tax rate and the filing requirements. Treaty provisions can significantly reduce or eliminate US withholding — but only if claimed correctly.
Types of US-Source Income for Non-Residents
The US tax treatment of non-resident income depends on whether the income is FDAP (passive income subject to flat withholding), ECI (business income taxed at graduated rates), or US real property income subject to FIRPTA.
FDAP income is generally subject to 30% withholding at source. The payer (US withholding agent) is responsible for withholding and remitting the tax. The non-resident files Form 1040-NR to report FDAP income and claim any treaty reductions or withholding credits.
ECI is income that is effectively connected with the conduct of a trade or business in the United States. ECI is taxed at the same graduated rates as US residents, and the non-resident can deduct allowable expenses against ECI. ECI is reported on Form 1040-NR.
Gain from the sale of US real property by a non-resident is subject to 15% FIRPTA withholding on the gross sale price. The non-resident files Form 1040-NR to report the actual gain and claim a refund of excess withholding. Rental income can be elected as ECI to allow deduction of expenses.
Who Must File Form 1040-NR?
Under IRC §6012(a)(1) and the regulations thereunder, the following non-resident aliens are required to file Form 1040-NR:
- Non-resident aliens who were engaged in a trade or business in the United States during the year
- Non-resident aliens who received US-source income not effectively connected with a US trade or business (FDAP income), unless all tax was withheld at source
- Non-resident aliens who are claiming a refund of over-withheld US tax
- Non-resident aliens who are claiming treaty benefits that reduce or eliminate US withholding
- Representatives or agents of non-resident aliens who are required to file
Scope Boundaries
Included
- Form 1040-NR preparation and filing (federal)
- FDAP income reporting and withholding credit reconciliation
- ECI reporting (Schedule C, E, or F as applicable)
- Treaty position analysis and Form 8833 (Treaty-Based Return Position)
- FIRPTA withholding analysis and Form 8288-B (withholding certificate)
- ITIN application (Form W-7) for non-residents without SSN
- State income tax returns where applicable
- Refund claims for over-withheld US tax
Not Included
- Canadian T1 or other foreign country tax returns (available separately)
- US business entity returns (Form 1120, 1065) — available separately
- FBAR filings (required only for US persons — not applicable to non-residents)
- Estate and gift tax returns
- Bookkeeping or accounting services
FAQ: US Tax for Non-Residents
Who is a non-resident alien for US tax purposes?
A non-resident alien is any individual who is not a US citizen and does not meet either the Green Card Test or the Substantial Presence Test. The Green Card Test: you are a US resident if you have a green card (lawful permanent resident status) at any time during the year. The Substantial Presence Test: you are a US resident if you are present in the US for at least 31 days during the current year and 183 days during the 3-year period (current year + 2 prior years, weighted). If you do not meet either test, you are a non-resident alien.
What is the difference between FDAP income and ECI?
FDAP income (Fixed, Determinable, Annual, or Periodical) is passive US-source income — dividends, interest, rents, royalties, salaries. FDAP income is generally subject to 30% withholding at source (reduced by treaty). ECI (Effectively Connected Income) is income connected with a US trade or business — business profits, self-employment income, rental income elected as ECI. ECI is taxed at graduated rates (same as US residents) and allows deduction of expenses. The distinction determines both the tax rate and the filing requirements.
Do I need an ITIN to file Form 1040-NR?
Yes, if you do not have a Social Security Number (SSN). Non-resident aliens who are not eligible for an SSN must obtain an Individual Taxpayer Identification Number (ITIN) by filing Form W-7. TYM is an IRS Certified Acceptance Agent and can certify your identity documents for the ITIN application, eliminating the need to mail original documents to the IRS.
What is FIRPTA and how does it affect non-residents selling US real estate?
FIRPTA (Foreign Investment in Real Property Tax Act) requires the buyer of US real estate from a non-resident to withhold 15% of the gross sale price and remit it to the IRS. The non-resident then files Form 1040-NR to report the actual capital gain and claim a refund of any excess withholding. TYM can file Form 8288-B (Application for Withholding Certificate) before closing to reduce the withholding to the actual tax owed on the gain, rather than 15% of the gross price.
Can treaty benefits reduce or eliminate US withholding?
Yes. The US has income tax treaties with more than 65 countries. Treaty provisions can reduce or eliminate US withholding on FDAP income — for example, the US-Canada Tax Treaty reduces withholding on dividends to 15% (5% for ≥10% corporate shareholders) and eliminates withholding on interest and royalties. To claim treaty benefits, the non-resident must provide Form W-8BEN to the withholding agent and may need to file Form 8833 with Form 1040-NR.
What is the deadline for filing Form 1040-NR?
For non-resident aliens who receive wages subject to US withholding, Form 1040-NR is due June 15 (not April 15). For non-resident aliens who do not receive wages subject to US withholding, Form 1040-NR is due June 15. An extension to December 15 can be obtained by filing Form 4868. Note that an extension to file is not an extension to pay — any tax owed is due by the original deadline.
Non-Resident US Tax Services — Toronto & Miami
TYM serves non-resident aliens with US-source income from offices in Toronto and Miami. TYM is an IRS Certified Acceptance Agent, enabling ITIN applications without mailing original documents to the IRS. TYM's CPAs are licensed in both Canada (CPA Ontario) and the United States (CPA Florida).
The content on this page is for informational purposes only and does not constitute professional tax advice. US tax obligations for non-resident aliens depend on individual facts and circumstances, including residency status, income type, and applicable treaty provisions. Consult a qualified CPA for guidance specific to your situation.
