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Living in the U.S as a Nonresident

If you are a resident of the US but have not passed the citizenship test, you come into the nonresident alien category. Keep reading to know all the details about it.

Olivia Martínez

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If you are a resident of the US, you may be facing some confusion about paying the taxes. The rules for the residents, nonresidents, and citizens are different when it comes to paying taxes in the US. You must be aware of the specific regulations applying to your status as a person living in the US so you can file taxes accordingly.

If you are a resident of the US but have not passed the citizenship test, you come into the nonresident alien category. Keep reading to know all the details about it.

What Is A Nonresident Alien?

You are termed as an alien if you belong to a foreign land. A nonresident alien is a person who hasn’t passed the “Green Card” test or the “substantial presence” test. People coming into the country on F-1, J-1, M-1, Q-1 or Q-2 visas are considered nonresident aliens. This classification is necessary for proper tax filing systems.

As soon as you take the substantial presence test, you can qualify to become a resident alien and will be taxed as such. You have to meet certain criteria before taking the said test.

If you have a spouse already living in the US who is a resident alien for the particular tax year, they can choose to treat you as a resident alien in the US by filing taxes under the “Married Filing Jointly” category on the Form 1040.

Who Should File As A Nonresident Alien?

Any person who is involved in business activities or trade in the US needs to file taxes on the income earned from these activities. Even if you don’t have any business in the US or are not involved in any trade in the country, you still must file taxes on any income earned from US sources. Reporting your taxable income will allow you to avail the benefit of creditors or tax refund on your withholdings.

As a nonresident alien, you are eligible to get some exemptions on the taxes. You don’t have to pay the FICA tax if you are a nonresident alien student, researcher, teacher, professor, scholar, or in a related field. Full-time students are exempted from this tax for the first five years, while part-time students are excluded from their presence in the US for the first two years.

Tax Rate for Nonresident Aliens in the US

While nonresident aliens have to pay taxes on all income earned in the US, they are subject to special considerations regarding their income from different sources.

The income of a nonresident alien in the US should be connected to a business or a trade to be considered taxable. Income effectively connected includes money earned from salaries, wages, commissions, different forms of investments, some income coming from businesses, and other related sources. This income is to be taxed at the rate other US citizens and residents are taxed.

However, if the income earned in the US is not connected to business or trade, it ill is subjected to a flat rate of 30 percent taxation. As a nonresident alien, you can avail quite a few tax-related benefits, such as exemption from international treaties.

The income generated by owning assets in the US will also be subjected to taxes. If you have rent coming in from the properties you own in the US or royalties earned through some other sources, you will have to report it and submit it for tax filing.

If there are no dependents on the person filing for nonresident alien taxes, you must fill out the form 1040 NR or Form 1040 NR-EZ. For all the employees earning salaries, the deadline for filing these forms is till April, but for others, it is till June.

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What Happens If You Are Leaving The US?

If you have been living with the nonresident alien status in the US but are now leaving the country, you must ensure that you have paid all the tax obligations. In this case, you will have to submit Form 1040-C. Only after you file this form will you get a certificate for compliance, also known as the departure permit.

Form 1040-C only shows that you have complied with the tax regulations and have fulfilled the obligations before leaving, but it does not mean that you don’t have to file for annual taxes while you are there. You still have to fill out Form 1040 NR.

Some important points to remember are that you must file for taxes while living in the US, no matter what status you have. A nonresident alien hasn’t passed the required tests for becoming a citizen, such as the green card test. As a nonresident alien, you can avail several benefits regarding taxes.

Make sure to understand where your income comes from and how you can classify it. Only after that can you properly file the taxes. For more information, visit the official federal website of the IRS.