IRS Releases Publication 519 (2016), U.S. Tax Guide for Aliens

 

• How to determine if you are a nonresident, resident, or dual-status alien, and

• How to treat a nonresident spouse as a resident alien.

 

• Form 1040 U.S. Individual Income Tax Return

• Form 1040A U.S. Individual Income Tax Return

• Form 1040NR U.S. Nonresident Alien Income Tax Return

• Form 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)

• Form 8840 Closer Connection Exception Statement for Aliens

• Form 8843 Statement for Exempt Individuals and Individuals With a Medical Condition

 

• Your application for abandonment.

• Your Alien Registration Receipt Card attached to a letter stating your intent to abandon your resident status.

 

1. 31 days during 2016, and

2. 183 days during the 3-year period that includes 2016, 2015, and 2014, counting:

 

• All 50 states and the District of Columbia.

• The territorial waters of the United States.

• The seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources.

 

• Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico.

• Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States.

• Days you are in the United States as a crew member of a foreign vessel.

• Days you are unable to leave the United States because of a medical condition that arose while you are in the United States.

• Days you are an exempt individual.

 

• You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave.

• You returned to the United States for treatment of a medical condition that arose during a prior stay.

• The condition existed before your arrival in the United States and you were aware of the condition. It does not matter whether you needed treatment for the condition when you entered the United States.

 

• An individual temporarily present in the United States as a foreign government-related individual under an "A" or "G" visa, other than individuals holding "A-3" or "G-5" class visas.

• A teacher or trainee temporarily present in the United States under a "J" or "Q" visa, who substantially complies with the requirements of the visa.

• A student temporarily present in the United States under an "F," "J," "M," or "Q" visa, who substantially complies with the requirements of the visa.

• A professional athlete temporarily in the United States to compete in a charitable sports event.

 

• As a full-time employee of an international organization,

• By reason of diplomatic status, or

• By reason of a visa (other than a visa that grants lawful permanent residence) that the Secretary of the Treasury determines represents full-time diplomatic or consular status.

 

• Has been accredited by a foreign government that is recognized by the United States,

• Intends to engage primarily in official activities for that foreign government while in the United States, and

• Has been recognized by the President, Secretary of State, or a consular officer as being entitled to that status.

 

• Are under 21 years of age,

• Reside regularly in the exempt individual's household, and

• Are not members of another household.

 

• You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years,

• A foreign employer paid all of your compensation during 2016,

• You were present in the United States as a teacher or trainee in any of the 6 prior years, and

• A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee.

 

• You establish that you do not intend to reside permanently in the United States.

• You have substantially complied with the requirements of your visa.

 

• Whether you have maintained a closer connection to a foreign country (discussed later).

• Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident as discussed later under Closer Connection to a Foreign Country.

 

• The main purpose is to benefit a qualified charitable organization.

• The entire net proceeds go to charity.

• Volunteers perform substantially all the work.

 

• You were unable to leave the United States as planned because of a medical condition or problem.

• You were temporarily in the United States as a teacher or trainee on a "J" or "Q" visa.

• You were temporarily in the United States as a student on an "F," "J," "M," or "Q" visa.

• You were a professional athlete competing in a charitable sports event.

 

• Are present in the United States for less than 183 days during the year,

• Maintain a tax home in a foreign country during the year, and

• Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

 

• You maintained a tax home beginning on the first day of the year in one foreign country.

• You changed your tax home during the year to a second foreign country.

• You continued to maintain your tax home in the second foreign country for the rest of the year.

• You had a closer connection to each foreign country than to the United States for the period during which you maintained a tax home in that foreign country.

• You are subject to tax as a resident under the tax laws of either foreign country for the entire year or subject to tax as a resident in both foreign countries for the period during which you maintained a tax home in each foreign country.

 

• Any territory under the sovereignty of the United Nations or a government other than that of the United States,

• The territorial waters of the foreign country (determined under U.S. law),

• The seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over which the foreign country has exclusive rights under international law to explore and exploit natural resources, and

• Possessions and territories of the United States.

 

1. The country of residence you designate on forms and documents.

2. The types of official forms and documents you file, such as Form W-9, Form W-8BEN, or Form W-8ECI.

3. The location of:

 

• You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or

• You had an application pending for adjustment of status during the current year.

 

• You had a closer connection to a foreign country than to the United States, and

• Your tax home was in that foreign country.

 

• You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10.

• You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded.

• Although you can exclude up to 10 days of presence in determining your residency starting date, you must include those days when determining whether you meet the substantial presence test.

 

• Your name, address, U.S. taxpayer identification number (if any), and U.S. visa number (if any).

• Your passport number and the name of the country that issued your passport.

• The tax year for which the statement applies.

• The first day that you were present in the United States during the year.

• The dates of the days you are excluding in figuring your first day of residency.

• Sufficient facts to establish that you have maintained your tax home in and a closer connection to a foreign country during the period you are excluding.

 

1. Be present in the United States for at least 31 days in a row in 2016, and

2. Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2016. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States.

 

• That you are making the first-year choice for 2016.

• That you were not a resident in 2015.

• That you are a resident under the substantial presence test in 2017.

• The number of days of presence in the United States during 2017.

• The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2016.

• The date or dates of absence from the United States during 2016 that you are treating as days of presence.

 

• You were a nonresident alien at the beginning of the year.

• You are a resident alien or U.S. citizen at the end of the year.

• You are married to a U.S. citizen or resident alien at the end of the year.

• Your spouse joins you in making the choice.

 

• You and your spouse are treated as U.S. residents for the entire year for income tax purposes.

• You and your spouse are taxed on worldwide income.

• You and your spouse must file a joint return for the year of the choice.

• Neither you nor your spouse can make this choice for any later tax year, even if you are separated, divorced, or remarried.

• The special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you.

 

• A declaration that you both qualify to make the choice and that you choose to be treated as U.S. residents for the entire tax year.

• The name, address, and taxpayer identification number (SSN or ITIN) of each spouse. (If one spouse died, include the name and address of the person who makes the choice for the deceased spouse.)

 

1. The last day in 2016 that you are physically present in the United States, if you met the substantial presence test,

2. The first day in 2016 that you are no longer a lawful permanent resident of the United States, if you met the green card test, or

3. The later of (1) or (2), if you met both tests.

 

• You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10.

• You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded.

• Although you can exclude up to 10 days of presence in determining your residency termination date, you must include those days when determining whether you meet the substantial presence test.

 

• Your name, address, U.S. taxpayer identification number (if any), and U.S. visa number (if any).

• Your passport number and the name of the country that issued your passport.

• The tax year for which the statement applies.

• The last day that you were present in the United States during the year.

• Sufficient facts to establish that you have maintained your tax home in, and that you have a closer connection to, a foreign country following your last day of presence in the United States during the year or following the abandonment or rescission of your status as a lawful permanent resident during the year.

• The date that your status as a lawful permanent resident was abandoned or rescinded.

• Sufficient facts (including copies of relevant documents) to establish that your status as a lawful permanent resident has been abandoned or rescinded.

• If you can exclude days as discussed earlier under De minimis presence, include the dates of the days you are excluding and sufficient facts to establish that you have maintained your tax home in, and that you have a closer connection to, a foreign country during the period you are excluding.

 

• A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year.

• The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)

 

1. Revocation. Either spouse can revoke the choice for any tax year, provided he or she makes the revocation by the due date for filing the tax return for that tax year. The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. The statement must include the name, address, and identification number of each spouse. (If one spouse dies, include the name and address of the person who is revoking the choice for the deceased spouse.) The statement also must include a list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. File the statement as follows.

 

2. Death. The death of either spouse ends the choice, beginning with the first tax year following the year the spouse died. However, if the surviving spouse is a U.S. citizen or resident and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died.

3. Legal separation. A legal separation under a decree of divorce or separate maintenance ends the choice as of the beginning of the tax year in which the legal separation occurs.

4. Inadequate records. The IRS can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records.

 

• Income source rules, and

• Community income.

 

• Interest on bonds, notes, or other interest-bearing obligations of U.S. residents or domestic corporations.

• Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U.S. trade or business at any time during the tax year.

• Original issue discount.

• Interest from a state, the District of Columbia, or the U.S. government.

 

1. Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income:

 

2. Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association.

3. Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business.

 

1. A noncorporate resident or U.S. corporation, or

2. Any foreign person if the amounts are effectively connected with the conduct of a U.S. trade or business.

 

• Housing.

• Education.

• Local transportation.

• Tax reimbursement.

• Hazardous or hardship duty pay as defined in Regulations section 1.861-4(b)(2)(ii)(D)(5).

• Moving expense reimbursement.

 

• The total time you spend at each place,

• The amount of work you do at each place, and

• How much money you earn at each place.

 

• Rent.

• Utilities (except telephone charges).

• Real and personal property insurance.

• Occupancy taxes not deductible under section 164 or 216(a).

• Nonrefundable fees for securing a leasehold.

• Rental of furniture and accessories.

• Household repairs.

• Residential parking.

• Fair rental value of housing provided in kind by your employer.

 

• Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation),

• The cost of buying property, including principal payments on a mortgage,

• The cost of domestic labor (maids, gardeners, etc.),

• Pay television subscriptions,

• Improvements and other expenses that increase the value or appreciably prolong the life of property,

• Purchased furniture or accessories,

• Depreciation or amortization of property or improvements,

• The value of meals or lodging that you exclude from gross income, or

• The value of meals or lodging that you deduct as moving expenses.

 

• Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment.

• Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance.

 

1. Your name and social security number (written across the top of the statement).

2. The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis.

3. For each item in (2), the alternative basis of allocation of source used.

4. For each item in (2), a computation showing how the alternative allocation was computed.

5. A comparison of the dollar amount of the U.S. compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier.

 

• Both you and your spouse are nonresident aliens, or

• One of you is a nonresident alien and the other is a U.S. citizen or resident and you do not both choose to be treated as U.S. residents as explained in chapter 1.

 

• Nontaxable interest,

• Nontaxable dividends,

• Certain compensation paid by a foreign employer,

• Gain from sale of home, and

• Scholarships and fellowship grants.

 

• Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad

• Publication 523 Selling Your Home

 

• Deposits (including certificates of deposit) with persons in the banking business,

• Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and

• Amounts held by an insurance company under an agreement to pay interest on them.

 

• There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person,

• Interest on the obligation is payable only outside the United States and its possessions, and

• The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws.

 

1. Interest that is determined by reference to:

 

2. Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations.

 

• Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).

• Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules.

• Certain corporations, partnerships, and other entities. For details, see Nondeductible Loss in chapter 2 of Pub. 544.

 

• On or before April 7, 1993, or

• After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued.

 

1. You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U.S. corporation, a U.S. partnership, or a U.S. citizen or resident.

2. You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year.

3. Your pay for these services is not more than $3,000.

 

• A nonresident alien individual, foreign partnership, or foreign corporation, or

• An office or place of business maintained in a foreign country or in a U.S. possession by a U.S. corporation, a U.S. partnership, or an individual who is a U.S. citizen or resident.

 

1. You receive the annuity only because:

 

2. At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U.S. citizens or residents.

 

• You are a resident of a country that gives a substantially equal exclusion to U.S. citizens and residents, or

• You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974.

 

1. You are a candidate for a degree at an eligible educational institution, and

2. You use the scholarship or fellowship to pay qualified education expenses.

 

1. Attend a primary or secondary school or are pursuing a degree at a college or university, or

2. Attend an accredited educational institution that is authorized to provide:

 

• Tuition and fees required to enroll at or attend an eligible educational institution, and

• Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

 

• Room and board,

• Travel,

• Research,

• Clerical help, or

• Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.

 

• Income that is effectively connected with a U.S. trade or business.

• Income that is not effectively connected with a U.S. trade or business.

• Interrupted period of residence.

• Expatriation tax.

 

• Publication 544 Sales and Other Dispositions of Assets

• Publication 1212 List of Original Issue Discount Instruments

 

• Form 6251 Alternative Minimum Tax--Individuals

• Schedule D (Form 1040) Capital Gains and Losses

 

1. Income that is effectively connected with a trade or business in the United States, and

2. Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later).

 

1. Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc.).

2. Gains (some of which are considered capital gains) from the sale or exchange of the following types of property.

 

3. Capital gains (and losses).

 

• Held for the principal purpose of promoting the conduct of a trade or business in the United States,

• Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or

• Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs.

 

• Dividends or interest are received by a dealer in stocks or securities,

• Royalties are received in the trade or business of licensing patents or similar property, or

• Service fees are earned by a servicing business.

 

1. You had a fixed place of business in the United States involved in earning the income.

2. At least 90% of your U.S. source transportation income is attributable to regularly scheduled transportation.

 

1. Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits.

2. Improvements on land, including buildings, other permanent structures, and their structural components.

3. Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is:

 

• The corporation's U.S. real property interests, plus

• The corporation's interests in real property located outside the United States, plus

• The corporation's other assets that are used in, or held for use in, a trade or business.

 

1. A person holding less than 5% of any class of stock of the QIE, which is regularly traded on an established securities market in the United States at all times during the testing period, would be treated as a U.S. person unless the QIE has actual knowledge that such person is not a U.S. person.

2. Any stock in a QIE that is held by another QIE will be treated as held by a foreign person if:

 

3. Stock in a QIE held by any other QIE not described above will be treated as held by a U.S. person in proportion to the stock of such other QIE that is (or is treated as) held by a U.S. person.

 

1. Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U.S. real property interest, and

2. Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period.

 

• You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or

• You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution.

 

• You have an office or other fixed place of business in the United States to which the income can be attributed,

• That office or place of business is a material factor in producing the income, and

• The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business.

 

1. Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States.

2. Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security.

3. Income, gain, or loss from the sale outside the United States, through the U.S. office or other fixed place of business, of:

 

1. You received a payment on a debt instrument. In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument.

2. You sold or exchanged the debt instrument. The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above.

 

• You bought the debt instrument at a premium or paid an acquisition premium.

• The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U.S. Treasury securities).

• The debt instrument is a contingent payment or inflation-indexed debt instrument.

 

• Inventory.

• Business accounts or notes receivable.

• Depreciable property used in a trade or business.

• Real property used in a trade or business.

• Supplies regularly used in a trade or business.

• Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property.

• Certain U.S. government publications.

• Certain commodities derivative financial instruments held by a commodities derivatives dealer.

• Hedging transactions.

 

1. Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest.

2. Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966.

3. Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966.

4. Gains on the sale or exchange of original issue discount obligations.

 

• The four types of gains listed earlier.

• The deduction for a capital loss carryover.

• Capital losses in excess of capital gains.

• Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion).

• Losses from the sale or exchange of property held for personal use. However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). See Itemized Deductions in chapter 5.

 

• That you are making the choice.

• Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty.

• A complete list of all your real property, or any interest in real property, located in the United States. Give the legal identification of U.S. timber, coal, or iron ore in which you have an interest.

• The extent of your ownership in the property.

• The location of the property.

• A description of any major improvements to the property.

• The dates you owned the property.

• Your income from the property.

• Details of any previous choices and revocations of the real property income choice.

 

• Your name, taxpayer identification number, and tax year.

• A description of the types of services performed (whether on or off board).

• Names of vessels or registration numbers of aircraft on which you performed the services.

• Amount of U.S. source transportation income derived from each type of service for each vessel or aircraft for the calendar year.

• Total amount of U.S. source transportation income derived from all types of services for the calendar year.

 

1. You were a U.S. resident for a period that includes at least 3 consecutive calendar years.

2. You were a U.S. resident for at least 183 days in each of those years.

3. You ceased to be treated as a U.S. resident.

4. You then again became a U.S. resident before the end of the third calendar year after the end of the period described in (1) above.

 

• Expatriation After June 3, 2004, and Before June 17, 2008.

• Expatriation After June 16, 2008.

 

1. Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than:

 

2. Your net worth is $2 million or more on the date of your expatriation or termination of residency.

3. You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency.

 

• You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of that other country.

• You were never a resident alien of the United States (as defined in chapter 1).

• You never held a U. S. passport.

• You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. S. citizenship.

 

• You became a U.S. citizen at birth.

• Neither of your parents was a U.S. citizen at the time of your birth.

• You expatriated before you were 18 1/2.

• You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation.

 

1. You have ties with other countries. You have ties with other countries if:

 

2. You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843.

 

• Members of your family. This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).

• A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest.

• A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. (See Pub. 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock.)

• A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable.

 

• You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency.

• You file Form 8854 in accordance with the form instructions.

 

• Property (other than stock or debt obligations) located in the United States,

• Stock issued by a U.S. domestic corporation, and

• Debt obligations of U.S. persons or of the United States, a state or political subdivision thereof, or the District of Columbia.

 

• The total combined voting power of all classes of that corporation's stock, or

• The total value of the stock.

 

1. Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than:

 

2. Your net worth is $2 million or more on the date of your expatriation or termination of residency.

3. You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency.

4. You expatriated before 2016 and you:

 

• You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country.

• You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1.

 

• You expatriated before you were 18 1/2.

• You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1.

 

1. The date you renounced U.S. citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality).

2. The date you furnished to the State Department a signed statement of voluntary relinquishment of U.S. nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality).

3. The date the State Department issued a certificate of loss of nationality.

4. The date that a U.S. court canceled your certificate of naturalization.

 

1. The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U.S. consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status.

2. The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order.

3. If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. See Effect of Tax Treaties in chapter 1 for more information about dual residents.

 

1. $600,000 if you expatriated or terminated residency before January 1, 2009.

2. $626,000 if you expatriated or terminated residency in 2009.

3. $627,000 if you expatriated or terminated residency in 2010.

4. $636,000 if you expatriated or terminated residency in 2011.

5. $651,000 if you expatriated or terminated residency in 2012.

6. $668,000 if you expatriated or terminated residency in 2013.

7. $680,000 if you expatriated or terminated residency in 2014.

8. $690,000 if you expatriated or terminated residency in 2015.

9. $693,000 if you expatriated or terminated residency in 2016.

 

1. Eligible deferred compensation items.

2. Ineligible deferred compensation items.

3. Interests in nongrantor trusts.

4. Specified tax deferred accounts.

 

1. You can make the election on a property-by-property basis.

2. The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property.

3. Interest is charged for the period the tax is deferred.

4. The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates.

 

5. You make the election on Form 8854.

6. You must provide adequate security (such as a bond).

7. You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax.

 

• Identification numbers,

• Filing status,

• Deductions,

• Exemptions,

• Tax credits and payments, and

• Special rules for bona fide residents of American Samoa and Puerto Rico.

 

• Publication 501 Exemptions, Standard Deduction, and Filing Information

• Publication 521 Moving Expenses

• Publication 526 Charitable Contributions

• Publication 535 Business Expenses

• Publication 597 Information on the United States--Canada Income Tax Treaty

 

• Form W-7 Application for IRS Individual Taxpayer Identification Number

• Form 1040 U.S. Individual Income Tax Return

• Form 1040NR U.S. Nonresident Alien Income Tax Return

• Form 1040NR-EZ U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents

• Form 2106 Employee Business Expenses

• Form 2106-EZ Unreimbursed Employee Business Expenses

• Form 3903 Moving Expenses

• Form 4563 Exclusion of Income for Bona Fide Residents of American Samoa

• Form 8959 Additional Medicare Tax

 

• An alien who has income effectively connected with the conduct of a U.S. trade or business at any time during the year,

• An alien who has a U.S. office or place of business at any time during the year,

• A nonresident alien spouse treated as a resident, as discussed in chapter 1, or

• Any other alien who files a tax return, an amended return, or a refund claim (but not information returns).

 

• Alien individuals who are claimed as dependents and are not eligible for an SSN, and

• Alien spouses who are claimed as exemptions and are not eligible for an SSN.

 

1. You were a resident of Canada, Mexico, or South Korea, or a U.S. national (defined later).

2. Your spouse died in 2014 or 2015 and you did not remarry before the end of 2016.

3. You have a dependent child living with you.

 

• Your spouse is a resident alien or U.S. citizen for the entire tax year,

• You do not choose to be treated as a resident alien, and

• Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens.

 

• You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move.

• Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. If you had no former job location, the new job location must be at least 50 miles from your former home.

 

1. Your filing status is any filing status except married filing separately.

2. Your modified adjusted gross income is less than $80,000.

3. No one else is claiming an exemption for you on his or her 2016 tax return.

4. You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that:

 

5. The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan.

6. The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out.

7. The person for whom the expenses were paid or incurred was an eligible student.

 

1. The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and

2. The additional deduction for the exemptions must be prorated based on the ratio of the alien's U.S. source gross income effectively connected with a U.S. trade or business for the tax year to the alien's entire income from all sources during the tax year.

 

1. The amount of any money contributed,

2. Whether the organization gave you any goods or services in return for your contribution, and

3. A description and estimate of the value of any goods or services described in (2).

 

• Ordinary income property, or

• Capital gain property.

 

• Union dues,

• Safety equipment and small tools needed for your job,

• Dues to professional organizations,

• Subscriptions to professional journals,

• Tax return preparation fees, and

• Casualty and theft losses of property used in performing services as an employee (employee property).

 

• Transportation--airfare, local transportation, including train, bus, etc.,

• Lodging--rent paid, utilities (do not include telephone), hotel or motel room expenses, and

• Meal expenses--actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. You generally can deduct only 50% of unreimbursed meal expenses. The standard meal allowance rates for high-cost areas are available at http://www.gsa.gov/perdiem. The rates for other areas are in  

Use 2106-EZ to figure your allowable expenses that you claim on line 7 of Schedule A (Form 1040NR).

Expenses allocable to U.S. tax-exempt income. You cannot deduct an expense, or part of an expense, that is allocable to U.S. tax-exempt income, including income exempt by tax treaty.

Example. Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U.S. company. During her stay in the United States, she received a salary of $8,000 from her Polish employer. She received no other U.S. source income. She spent $3,000 on travel expenses, of which $1,000 were for meals. None of these expenses were reimbursed. Under the tax treaty with Poland, $5,000 of her salary is exempt from U.S. income tax. In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). She must reduce the remaining $2,500 of travel expenses by 62.5% ($1,563) because 62.5% ($5,000 ÷ $8,000) of her salary is exempt from tax. She enters the remaining total of $937 on line 7 of Schedule A (Form 1040NR). She completes the remaining lines according to the instructions for Schedule A.

More information. For more information about deductible expenses, reimbursements, and recordkeeping, get Pub. 514.

Child and dependent care credit. You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Generally, you must be able to claim an exemption for your dependent.

For more information, get Pub. 503 and Form 2441.

Credit for the elderly or the disabled. You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. For more information on this credit, get Schedule R (Form 1040A or 1040).

Education credits. You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent. There are two education credits: the American Opportunity Credit and the lifetime learning credit. You cannot claim these credits if you are married filing separately. Use Form 8863 to figure the credit. For more information, see Pub. 970.

Nonresident aliens, see Education credits under Nonresident Aliens, later.

Retirement savings contributions credit. You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2016. You cannot claim this credit if:

Use Form 8880 to figure the credit. For more information, see Pub. 590.

Child tax credit. You may be able to take this credit if you have a qualifying child.

A qualifying child for purposes of the child tax credit is a child who:

 

An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. See your form instructions for additional details.

If you did not have an SSN (or ITIN) by the due date of your 2016 return (including extensions), you cannot claim the child tax credit on either your original or an amended 2016 return, even if you later get an SSN (or ITIN). Also, no credit is allowed on either your original or an amended 2016 return with respect to a child who did not have an SSN, ATIN, or ITIN by the due date of your return (including extensions), even if that child later gets one of those numbers.

Adoption credit. You may qualify to take a tax credit of up to $13,460 for qualifying expenses paid to adopt an eligible child. This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit, file Form 1040.

Earned income credit (EIC). You may qualify for an earned income credit of up to $3,373 if a child lived with you in the United States and your earned income and adjusted gross income were each less than $39,296 ($44,846 if married filing jointly). If two children lived with you in the United States and your earned income and adjusted gross income were each less than $44,648 ($50,198 if married filing jointly), your credit could be as much as $5,572. If three or more children lived with you in the United States and your earned income and adjusted gross income were each less than $47,955 ($53,505 if married filing jointly), your credit could be as much as $6,269. If you do not have a qualifying child and your earned income and adjusted gross income were each less than $14,880 ($20,430 if married filing jointly), your credit could be as much as $506. You cannot claim the earned income credit if your filing status is married filing separately.

You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim the EIC. You cannot claim the EIC using an ITIN.

If you did not have an SSN by the due date of the 2016 return (including extensions), you cannot claim the EIC on either your original or an amended 2016 return, even if you later get an SSN. Also, if a child did not have an SSN by the due date of your return (including extensions), you cannot count that child as a qualifying child in figuring the EIC on either your original or an amended 2016 return, even if that child later gets an SSN.

CAUTION: If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the EIC. An example of a federally funded benefit is Medicaid. If a card has this legend and the individual's immigration status has changed so that the individual is now a U.S. citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend.

Other information. There are other eligibility rules that are not discussed here. For more information, get Pub. 596.

Nonresident Aliens

You can claim some of the same credits that resident aliens can claim. You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income.

Credits

Credits are allowed only if you receive effectively connected income. You may be able to claim some of the following credits.

Foreign tax credit. If you receive foreign source income that is effectively connected with a trade or business in the United States, you can claim a credit for any income taxes paid or accrued to any foreign country or U.S. possession on that income.

If you do not have foreign source income effectively connected with a U.S. trade or business, you cannot claim credits against your U.S. tax for taxes paid or accrued to a foreign country or U.S. possession.

You cannot take any credit for taxes imposed by a foreign country or U.S. possession on your U.S. source income if those taxes were imposed only because you are a citizen or resident of the foreign country or possession.

If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. See Pub. 514 for more information.

Child and dependent care credit. You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Generally, you must be able to claim an exemption for your dependent.

Married nonresident aliens can claim the credit only if they choose to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Pub. 503).

The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income from the United States for that tax year. Earned income generally means wages, salaries, and professional fees for personal services performed.

For more information, get Pub. 503.

Education credits. If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, you may be able to claim an education credit under the following circumstances.

 

Additional information on the American Opportunity tax credit is available at http://www.irs.gov/individuals/aotc.

Retirement savings contributions credit. You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2016. You cannot claim this credit if:

 

Use Form 8880 to figure the credit. For more information, see Pub. 590.

Child tax credit. You may be able to take this credit if you have a qualifying child.

A qualifying child for purposes of the child tax credit is a child who:

 

An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. See your form instructions for additional details.

If you did not have an SSN (or ITIN) by the due date of your 2016 return (including extensions), you cannot claim the child tax credit on either your original or an amended 2016 return, even if you later get an SSN (or ITIN). Also, no credit is allowed on either your original or an amended 2016 return with respect to a child who did not have an SSN, ATIN, or ITIN by the due date of your return (including extensions), even if that child later gets one of those numbers.

Adoption credit. You may qualify to take a tax credit of up to $13,460 for qualifying expenses paid to adopt an eligible child. This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit, file Form 8839 with your Form 1040NR.

Married nonresident aliens can claim the credit only if they choose to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions).

Credit for prior year minimum tax. If you paid alternative minimum tax in a prior year, get Form 8801 to see if you qualify for this credit.

Earned income credit. If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, you may be eligible for the credit.

You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim the EIC. You cannot claim the EIC using an ITIN.

If you did not have an SSN by the due date of the 2016 return (including extensions), you cannot claim the EIC on either your original or an amended 2016 return, even if you later get an SSN. Also, if a child did not have an SSN by the due date of your return (including extensions), you cannot count that child as a qualifying child in figuring the EIC on either your original or an amended 2016 return, even if that child later gets an SSN.

CAUTION: If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the EIC. An example of a federally funded benefit is Medicaid. If a card has this legend and the individual's immigration status has changed so that the individual is now a U.S. citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend.

See Pub. 596 for more information on the credit.

Tax Withheld

You can claim the tax withheld during the year as a payment against your U.S. tax. You claim it on line 62 of Form 1040NR or on line 18 of Form 1040NR-EZ. The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ.

Withholding from wages. Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed as a payment against your U.S. income tax liability for the same year. You can claim the income tax withheld whether or not you were engaged in a trade or business in the United States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the United States.

Excess social security tax withheld. If you have two or more employers, you may be able to claim a credit against your U.S. income tax liability for social security tax withheld in excess of the maximum required. See Social Security and Medicare Taxes in chapter 8 for more information.

Additional Medicare Tax. Your employer is responsible for withholding the 0.9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2016. If you do not owe Additional Medicare Tax, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959.

Tax paid on undistributed long-term capital gains. If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust, you can claim a credit for your share of any taxes paid by the company on its undistributed long-term capital gains. You will receive information on Form 2439, which you must attach to your return.

Tax withheld at the source. You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively connected income. Wage or salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. Taxes on fixed or determinable income are withheld at a 30% rate or at a lower treaty rate.

Tax withheld on partnership income. If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. The partnership will give you a statement on Form 8805, showing the tax withheld. A partnership that is publicly traded may withhold on your actual distributions of effectively connected income. In this case, the partnership will give you a statement on Form 1042-S. Claim the tax withheld as a payment on line 62b or 62d of Form 1040NR, as appropriate.

Claiming tax withheld on your return. When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information documents. The following table lists some of the more common information documents and shows where to find the amount of tax withheld.

 -----------------------------

 

                      Location

 

                       of tax

 

 Form number          withheld

 

 -----------------------------

 

 RRB-1042S            Box 12

 

 SSA-1042S            Box 9

 

 W-2                  Box 2

 

 W-2c                 Box 2

 

 1042-S               Box 10

 

 8805                 Line 10

 

 8288-A               Box 2

 

 -----------------------------

 

 

 Bona Fide Residents of American Samoa or Puerto Rico

 

 

If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. You should file Form 1040 and report all income from sources both in and outside the United States. However, you can exclude the income discussed in the following paragraphs.

For tax purposes other than reporting income, however, you will be treated as a nonresident alien. For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. There are also limits on what deductions and credits are allowed. See Nonresident Aliens under Deductions, Itemized Deductions, and Tax Credits and Payments in this chapter.

Residents of Puerto Rico. If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from sources in Puerto Rico (other than amounts for services performed as an employee of the United States or any of its agencies).

If you report income on a calendar year basis and you do not have wages subject to withholding for 2016, file your return and pay your tax by June 15, 2017. You must also make your first payment of estimated tax for 2017 by June 15, 2017. You cannot file a joint income tax return or make joint payments of estimated tax. However, if you are married to a U.S. citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1.

If you earn wages subject to withholding, your U.S. income tax return is due by April 18, 2017. Your first payment of estimated tax is also due by April 18, 2017. For information on withholding and estimated tax, see chapter 8.

Residents of American Samoa. If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income from sources in American Samoa (other than amounts for services performed as an employee of the U.S. government or any of its agencies). An employee of the American Samoan government is not considered an employee of the U.S. government or any of its agencies for purposes of the exclusion. For more information about this exclusion, get Form 4563 and Pub. 570.

6. Dual-Status Tax Year

Introduction

You have a dual-status tax year when you have been both a resident alien and a nonresident alien in the same year. Dual status does not refer to your citizenship; it refers only to your resident status in the United States. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the United States and the part of the year you are a nonresident.

The most common dual-status tax years are the years of arrival and departure. See Dual-Status Aliens in chapter 1.

If you are married and choose to be treated as a U.S. resident for the entire year, as explained in chapter 1, the rules of this chapter do not apply to you for that year.

Topics

This chapter discusses:

 

Useful Items

You may want to see:

Publication

 

Form (and Instructions)

 

See chapter 12 for information about getting these publications and forms.

Tax Year

You must file your tax return on the basis of an annual accounting period called a tax year. If you have not previously established a fiscal tax year, your tax year is the calendar year. A calendar year is 12 consecutive months ending on December 31. If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December, or a 52-53 week year) and are considered to be a U.S. resident for any calendar year, you will be treated as a U.S. resident for any part of your fiscal year that falls within that calendar year.

Income Subject to Tax

For the part of the year you are a resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien. The income is taxable even if you earned it while you were a nonresident alien or if you became a nonresident alien after receiving it and before the end of the year.

For the part of the year you are a nonresident alien, you are taxed on income from U.S. sources and on certain foreign source income treated as effectively connected with a U.S. trade or business. (The rules for treating foreign source income as effectively connected are discussed in chapter 4 under Foreign Income.)

Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.

Income from U.S. sources is taxable whether you receive it while a nonresident alien or a resident alien unless specifically exempt under the Internal Revenue Code or a tax treaty provision. Generally, tax treaty provisions apply only to the part of the year you were a nonresident. In certain cases, however, treaty provisions may apply while you were a resident alien. See chapter 9 for more information.

When determining what income is taxed in the United States, you must consider exemptions under U.S. tax law as well as the reduced tax rates and exemptions provided by tax treaties between the United States and certain foreign countries. For a further discussion of tax treaties, see chapter 9.

Restrictions for Dual-Status Taxpayers

The following restrictions apply if you are filing a tax return for a dual-status tax year.

See the instructions for Form 1040NR to see if you qualify.

A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.

Exemptions

As a dual-status taxpayer, you usually will be able to claim your own personal exemption. Subject to the general rules for qualification, you can claim exemptions for your spouse and dependents when you figure taxable income for the part of the year you are a resident alien. The amount you can claim for these exemptions is limited to your taxable income (figured before subtracting exemptions) for the part of the year you are a resident alien. You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period.

Special rules apply to exemptions for the part of the tax year you are a nonresident alien if you are a:

 

For more information, see Exemptions in chapter 5.

How To Figure Tax

When you figure your U.S. tax for a dual-status year, you are subject to different rules for the part of the year you are a resident and the part of the year you are a nonresident.

Income

All income for your period of residence and all income that is effectively connected with a trade or business in the United States for your period of nonresidence, after allowable deductions, is added and taxed at the rates that apply to U.S. citizens and residents. Income that is not connected with a trade or business in the United States for your period of nonresidence is subject to the flat 30% rate or lower treaty rate. You cannot take any deductions against this income.

Social security and railroad retirement benefits. During the part of the year you are a nonresident alien, 85% of any U.S. social security benefits (and the equivalent portion of tier 1 railroad retirement benefits) you receive is subject to the flat 30% tax, unless exempt, or subject to a lower treaty rate. (See The 30% Tax in chapter 4.)

During the part of the year you are a resident alien, part of the social security and the equivalent portion of tier 1 railroad retirement benefits will be taxed at graduated rates if your modified adjusted gross income plus half of these benefits is more than a certain base amount.

Use the Social Security Benefits Worksheet in the Form 1040 instructions to help you figure the taxable part of your social security and equivalent tier 1 railroad retirement benefits for the part of the year you were a resident alien.

If you received U.S. social security benefits while you were a nonresident alien, the Social Security Administration will send you Form SSA-1042S showing your combined benefits for the entire year and the amount of tax withheld. You will not receive separate statements for the benefits received during your periods of U.S. residence and nonresidence. Therefore, it is important for you to keep careful records of these amounts. You will need this information to properly complete your return and determine your tax liability.

If you received railroad retirement benefits while you were a nonresident alien, the U.S. Railroad Retirement Board (RRB) will send you Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, and/or Form RRB-1099-R, Annuities or Pensions by the Railroad Retirement Board. If your country of legal residence changed or your rate of tax changed during the tax year, you may receive more than one form.

Tax Credits and Payments

This discussion covers tax credits and payments for dual-status aliens.

Credits

As a dual-status alien, you generally can claim tax credits using the same rules that apply to resident aliens. There are certain restrictions that may apply. These restrictions are discussed here, along with a brief explanation of credits often claimed by individuals.

Foreign tax credit. If you have paid or are liable for the payment of income tax to a foreign country on income from foreign sources, you may be able to claim a credit for the foreign taxes.

If you claim the foreign tax credit, you generally must file Form 1116 with your income tax return. For more information, see the Instructions for Form 1116 and Pub. 514.

Child and dependent care credit. You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse so that you can work or look for work. Generally, you must be able to claim an exemption for your dependent.

Married dual-status aliens can claim the credit only if they choose to file a joint return as discussed in chapter 1, or if they qualify as certain married individuals living apart.

The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income for that tax year.

For more information, get Pub. 503 and Form 2441.

Retirement savings contributions credit. You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2016. You cannot claim this credit if:

 

Use Form 8880 to figure the credit. For more information, see Pub. 590.

Child tax credit. You may be able to take this credit if you have a qualifying child.

A qualifying child for purposes of the child tax credit is a child who:

 

An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

See your form instructions for additional details.

Adoption credit. You may qualify to take a tax credit of up to $13,460 for qualifying expenses paid to adopt an eligible child. This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit, file Form 8839 with the U.S. income tax return that you file.

Married dual-status aliens can claim the credit only if they choose to file a joint return with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions).

Payments

You can report as payments against your U.S. income tax liability certain taxes you paid, are considered to have paid, or that were withheld from your income. These include:

 

Forms To File

The U.S. income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year.

Resident at end of year. You must file Form 1040 if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040NR or Form 1040NR-EZ as the statement, but be sure to mark "Dual-Status Statement" across the top.

Nonresident at end of year. You must file Form 1040NR or Form 1040NR-EZ if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a resident. You can use Form 1040 as the statement, but be sure to mark "Dual-Status Statement" across the top.

If you expatriated or terminated your residency in 2016, you may be required to file an expatriation statement (Form 8854) with your tax return. For more information, see Expatriation Tax in chapter 4.

Statement. Any statement must have your name, address, and taxpayer identification number on it. You do not need to sign a separate statement or schedule accompanying your return, because your signature on the return also applies to the supporting statements and schedules.

When and Where To File

If you are a resident alien on the last day of your tax year and report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year (but see the Tip, later). If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. In either case, file your return with the address for dual-status aliens shown on the back page of the Form 1040 instructions.

If you are a nonresident alien on the last day of your tax year and you report your income on a calendar year basis, you must file no later than April 15 of the year following the close of your tax year if you receive wages subject to withholding. If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 4th month following the close of your tax year. If you did not receive wages subject to withholding and you report your income on a calendar year basis, you must file no later than June 15 of the year following the close of your tax year. If you report your income on other than a calendar year basis, file your return no later than the 15th day of the 6th month following the close of your tax year. In any case, mail your return to:

Department of the Treasury Internal Revenue Service Austin, TX 73301-0215

If enclosing a payment, mail your return to:

Internal Revenue Service P.O. Box 1303 Charlotte, NC 28201-1303

TIP: If the regular due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day that is not a Saturday, Sunday, or legal holiday.

7. Filing Information

Introduction

This chapter provides the basic filing information that you may need.

Topics

This chapter discusses:

 

Useful Items

You may want to see:

Forms (and Instructions)

 

See chapter 12 for information about getting these forms.

What, When, and Where To File

What return you must file as well as when and where you file that return, depends on your status at the end of the tax year as a resident or a nonresident alien.

Resident Aliens

Resident aliens should file Form 1040EZ, 1040 at the address shown in the instructions for that form. The due date for filing the return and paying any tax due is April 15 of the year following the year for which you are filing a return (but see the Tip, later).

Under U.S. immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status.

Extensions of time to file. You are allowed an automatic extension to June 15 to file if your main place of business and the home you live in are outside the United States and Puerto Rico on April 15. You can get an extension of time to October 15 to file your return if you get an extension by April 15 (June 15 if you qualify for the June 15 extension). Use Form 4868 to get the extension to October 15. In addition to this 6-month extension, taxpayers who are out of the country (as defined in the Form 4868 instructions) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address.

Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215

You will not receive any notification from the IRS unless your request is denied for being untimely.

The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350 (for U.S. citizens and resident aliens abroad who expect to qualify for special tax treatment).

TIP: If the due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day which is not a Saturday, Sunday, or legal holiday.

IRS e-file: You may be able to file your return electronically. See IRS e-file at IRS.gov.

Nonresident Aliens

Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ.

If you are any of the following, you must file a return.

 

You must file even if:

 

You must also file if you want to: Exceptions. You do not need to file Form 1040NR or Form 1040NR-EZ if you meet either of the following conditions.

 

CAUTION: Even if you have left the United States and filed a Form 1040-C, U.S. Departing Alien Income Tax Return, on departure, you still must file an annual U.S. income tax return. If you are married and both you and your spouse are required to file, you must each file a separate return.

Form 1040NR-EZ

You can use Form 1040NR-EZ if all of the following conditions are met.

 

If you do not meet all of the above conditions, you must file Form 1040NR.

When To File

If you are an employee and you receive wages subject to U.S. income tax withholding, you will generally file by the 15th day of the 4th month after your tax year ends. For the 2016 calendar year, file your return by April 18, 2017.

If you are not an employee who receives wages subject to U.S. income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. For the 2016 calendar year, file your return by June 15, 2017.

Extensions of time to file. If you cannot file your return by the due date, file Form 4868 or use one of the electronic filing options explained in the Form 4868 instructions. For the 2016 calendar year, this will extend the due date to October 16, 2017 (December 15, 2017, if the regular due date of your return is June 15, 2017). You must file the extension by the regular due date of your return.

In addition to the 6-month extension to October 15, taxpayers whose main place of business is outside the United States and Puerto Rico and who live outside those jurisdictions can request a discretionary 2-month extension of time to file their returns (to December 15 for calendar year taxpayers). To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address:

Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215

You will not receive any notification from the IRS unless your request is denied for being untimely.

When to file for deductions and credits. To get the benefit of any allowable deductions or credits, you must timely file a true and accurate return. For this purpose, a return is timely if it is filed within 16 months of the due date just discussed. However, if you did not file a 2015 tax return and 2016 is not the first year for which you are required to file one, your 2016 return is timely for this purpose if it is filed by the earlier of:

 

The allowance of the following credits is not affected by this time requirement.

 

Protective return. If your activities in the United States were limited and you do not believe that you had any gross income effectively connected with a U.S. trade or business during the year, you can file a protective return (Form 1040NR) by the deadline explained above. By filing a protective return, you protect your right to receive the benefit of deductions and credits in the event it is later determined that some or all of your income is effectively connected. You are not required to report any effectively connected income or any deductions on the protective return, but you must give the reason the return is being filed.

If you believe some of your activities resulted in effectively connected income, file your return reporting that income and related deductions by the regular due date. To protect your right to claim deductions or credits resulting from other activities, attach a statement to that return explaining that you wish to protect your right to claim deductions and credits if it is later determined that the other activities produced effectively connected income.

You can follow the same procedure if you believe you have no U.S. tax liability because of a U.S. tax treaty. Be sure to also complete item L on page 5 of Form 1040NR.

Waiver of filing deadline. The IRS may waive the filing deadline if you establish that, based on the facts and circumstances, you acted reasonably and in good faith in failing to file a U.S. income tax return (including a protective return) and you cooperate with the IRS in determining your U.S. income tax liability for the tax year for which you did not file a return.

Where To File

If you are not enclosing a payment, file Form 1040NR-EZ and Form 1040NR at the following address.

Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215

If enclosing a payment, mail your return to:

Internal Revenue Service P.O. Box 1303 Charlotte, NC 28201-1303

Aliens from the U.S. Virgin Islands.

If you are a bona fide resident of the U.S. Virgin Islands during your entire tax year and work temporarily in the United States, you must pay your income taxes to the U.S. Virgin Islands and file your income tax returns at the following address.

Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Thomas, VI 00802

Report all income from U.S. sources, as well as income from other sources, on your return. For information on filing U.S. Virgin Islands returns, contact the U.S. Virgin Islands Bureau of Internal Revenue.

Chapter 8 discusses withholding from U.S. wages of U.S. Virgin Islanders.

Aliens from Guam or the Commonwealth of the Northern Mariana Islands. If you are a bona fide resident of Guam or the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you must file your return with, and pay any tax due to, Guam or the CNMI. Report all income, including income from U.S. sources, on your return. It is not necessary to file a separate U.S. income tax return.

Bona fide residents of Guam should file their Guam returns at the following address.

Department of Revenue and Taxation Government of Guam P.O. Box 23607 GMF, GU 96921

Bona fide residents of the CNMI should file their CNMI income tax returns at the following address.

Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P.O. Box 5234 CHRB Saipan, MP 96950

If you are not a bona fide resident of Guam or the CNMI, see Pub. 570 for information on where to file your return.

Amended Returns and Claims for Refund

If you find changes in your income, deductions, or credits after you mail your return, file Form 1040X, Amended U.S. Individual Income Tax Return. Also use Form 1040X if you should have filed 1040EZ instead of Form 1040NR or 1040NR-EZ, or vice versa. If you amend Form 1040NR or Form 1040NR-EZ or file the correct return, attach the corrected return (Form 1040, Form 1040NR, etc.) to Form 1040X. Print "Amended" across the top. Ordinarily, an amended return claiming a refund must be filed within 3 years from the date your return was filed or within 2 years from the time the tax was paid, whichever is later. A return filed before the final due date is considered to have been filed on the due date.

Other Forms You May Have To File

You may be required to file information returns to report certain foreign income or assets, or monetary transactions.

FinCEN Form 105

FinCEN Form 105 must be filed by each person who physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped, currency or other monetary instruments in a total amount of more than $10,000 at one time from the United States to any place outside the United States, or into the United States from any place outside the United States. The filing requirement also applies to each person who receives in the United States currency or monetary instruments totaling more than $10,000 at one time from any place outside of the United States.

The term "monetary instruments" means the following.

 

However, the term does not include:

 

A transfer of funds through normal banking procedures (wire transfer) that does not involve the physical transportation of currency or monetary instruments is not required to be reported on FinCEN Form 105.

Filing requirements. FinCEN Form 105 filing requirements follow.

Recipients. Each person who receives currency or other monetary instruments in the United States must file FinCEN Form 105 within 15 days after receipt, with the Customs officer in charge at any port of entry or departure, or by mail at the following address.

Commissioner of Customs Attention: Currency Transportation Reports Washington, DC 20229

Shippers or mailers. If the currency or other monetary instrument does not accompany the person entering or departing the United States, FinCEN Form 105 can be filed by mail at the above address on or before the date of entry, departure, mailing, or shipping.

Travelers. Travelers must file FinCEN Form 105 with the Customs officer in charge at any Customs port of entry or departure, when entering or departing the United States.

Penalties. Civil and criminal penalties are provided for failing to file a report, filing a report containing material omissions or misstatements, or filing a false or fraudulent report. Also, the entire amount of the currency or monetary instrument may be subject to seizure and forfeiture.

More information. More information regarding the filing of FinCEN Form 105 can be found in the instructions on the back of the form.

Form 8938

You may have to file Form 8938 to report the ownership of specified foreign financial asset(s) if you are one of the following individuals.

 

You must file Form 8938 if the total value of those assets exceeds an applicable threshold (the "reporting threshold"). The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U.S. person.

You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset.

More information about the filing of Form 8938 can be found in the separate instructions for Form 8938.

Penalties

The law provides penalties for failure to file returns or pay taxes as required.

Civil Penalties

If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax submission, or fail to supply your taxpayer identification number. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty.

Filing late. If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is based on the tax not paid by the due date (without regard to extensions). The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%.

Fraud. If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.

Return over 60 days late. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $205 or 100% of the unpaid tax.

Exception. You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect.

Paying tax late. You will have to pay a failure-to-pay penalty of 1/2 of 1% (0.50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the automatic 6-month extension of time to file period, if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.

The monthly rate of the failure-to-pay penalty is half the usual rate (0.25% instead of 0.50%) if an installment agreement is in effect for that month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty.

If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued.

This penalty cannot be more than 25% of your unpaid tax. You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time.

Combined penalties. If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $205 or 100% of the unpaid tax.

Accuracy-related penalty. You may have to pay an accuracy-related penalty if you underpay your tax because:

 

The penalty is equal to 20% of the underpayment. The penalty is 40% of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction. The penalty will not be figured on any part of an underpayment on which the fraud penalty (discussed later) is charged.

Negligence or disregard. The term "negligence" includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. Negligence also includes failure to keep adequate books and records. You will not have to pay a negligence penalty if you have a reasonable basis for a position you took.

The term "disregard" includes any careless, reckless, or intentional disregard.

Adequate disclosure. You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable basis. See Disclosure statement, later.

This exception will not apply to an item that is attributable to a tax shelter. In addition, it will not apply if you fail to keep adequate books and records, or substantiate items properly.

Substantial understatement of income tax. You understate your tax if the tax shown on your return is less than the correct tax. The understatement is substantial if it is more than the larger of 10% of the correct tax or $5,000. However, the amount of the understatement is reduced to the extent the understatement is due to:

 

If an item on your return is attributable to a tax shelter, there is no reduction for an adequate disclosure. However, there is a reduction for a position with substantial authority, but only if you reasonably believed that your tax treatment was more likely than not the proper treatment.

Substantial authority. Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as yours.

Disclosure statement. To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275. You must also have a reasonable basis for treating the item the way you did.

In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2016-13 available at http://www.irs.gov/irb/2016-04_IRB/ar08.html (or later update) are considered adequately disclosed on your return without filing Form 8275.

Use Form 8275-R to disclose items or positions contrary to regulations.

Transaction lacking economic substance. For more information on economic substance, see section 7701(o).

Foreign financial asset. For more information on undisclosed foreign financial assets, see section 6662(j) or the Instructions for Form 8938.

Reasonable cause. You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. You must also show that you acted in good faith. This does not apply to a transaction that lacks economic substance.

Filing erroneous claim for refund or credit. You may have to pay a penalty if you file an erroneous claim for refund or credit. The penalty is equal to 20% of the disallowed amount of the claim, unless you can show a reasonable basis for the way you treated an item. However, any disallowed amount due to a transaction that lacks economic substance will not be treated as having a reasonable basis. The penalty will not be figured on any part of the disallowed amount of the claim that relates to the earned income credit or on which the accuracy-related or fraud penalties are charged.

Frivolous tax submission. You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. For more information on frivolous returns, frivolous submissions, and a list of positions that are identified as frivolous, see Notice 2010-33, 2010-17 I.R.B. 609 available at http://www.irs.gov/irb/2010-17_IRB/ar13.html.

You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. This includes altering or striking out the preprinted language above the space provided for your signature.

This penalty is added to any other penalty provided by law.

Fraud. If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax.

Failure to supply taxpayer identification number. If you do not include your social security number (SSN) or individual taxpayer identification number (ITIN) or the SSN or ITIN of another person where required on a return, statement, or other document, you will be subject to a penalty of $50 for each failure. You will also be subject to a penalty of $50 if you do not give your SSN or ITIN to another person when it is required on a return, statement, or other document.

For example, if you have a bank account that earns interest, you must give your SSN or ITIN to the bank. The number must be shown on the Form 1099-INT or other statement the bank sends you. If you do not give the bank your SSN or ITIN, you will be subject to the $50 penalty. (You also may be subject to "backup" withholding of income tax.)

You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect.

Criminal Penalties

You may be subject to criminal prosecution (brought to trial) for actions such as:

 

8. Paying Tax Through Withholding or Estimated Tax

Introduction

This chapter discusses how to pay your U.S. income tax as you earn or receive income during the year. In general, the federal income tax is a pay as you go tax. There are two ways to pay as you go.

 

Topics

This chapter discusses:

 

Useful Items

You may want to see:

Publication

 

Form (and Instructions)

 

See chapter 12 for information about getting these publications and forms.

Notification of Alien Status

You must let your employer know whether you are a resident or a nonresident alien so your employer can withhold the correct amount of tax from your wages.

If you are a resident alien under the rules discussed in chapter 1, you must file Form W-9 or a similar statement with your employer. If you are a nonresident alien under those rules, you must furnish to your employer Form 8233 or Form W-8BEN, establishing that you are a foreign person, or Form W-4, establishing that your compensation is subject to graduated withholding at the same rates as resident aliens or U.S. citizens.

If you are a resident alien and you receive income other than wages (such as dividends and royalties) from sources within the United States, file Form W-9 or similar statement with the withholding agent (generally, the payer of the income) so the agent will not withhold tax on the income at the 30% (or lower treaty) rate. If you receive this type of income as a nonresident alien, file Form W-8BEN with the withholding agent so that the agent will withhold tax at the 30% (or lower treaty) rate. However, if the income is effectively connected with a U.S. trade or business, file Form W-8ECI instead.

Withholding From Compensation

The following discussion generally applies only to nonresident aliens. Tax is withheld from resident aliens in the same manner as U.S. citizens.

Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, unless it is specifically excluded from the term "wages" by law, or is exempt from tax by treaty, is subject to graduated withholding.

Withholding on Wages

If you are an employee and you receive wages subject to graduated withholding, you will be required to fill out a Form W-4. Also fill out Form W-4 for a scholarship or fellowship grant to the extent it represents payment for past, present, or future services and for which you are not claiming a tax treaty withholding exemption on Form 8233 (discussed later under Income Entitled to Tax Treaty Benefits). These are services you are required to perform as an employee and as a condition of receiving the scholarship or fellowship (or tuition reduction).

Nonresident aliens should fill out Form W-4 using the following instructions instead of the instructions on the Form W-4. This is because of the restrictions on a nonresident alien's filing status, the limited number of personal exemptions a nonresident alien is allowed, and because a nonresident alien cannot claim the standard deduction.

 

A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans, and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.

See Withholding on Scholarships and Fellowship Grants, later, for how to fill out Form W-4 if you receive a U.S. source scholarship or fellowship grant that is not a payment for services.

Students and business apprentices from India. If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you may claim an additional withholding allowance for the standard deduction. You can claim an additional withholding allowance for your spouse only if your spouse will have no gross income for 2016 and cannot be claimed as a dependent on another U.S. taxpayer's 2016 return. You may also claim an additional withholding allowance for each of your dependents not admitted to the United States on "F-2," "J-2," or "M-2" visas if they meet the same rules that apply to U.S. citizens.

Household employees. If you work as a household employee, your employer does not have to withhold income tax. However, you may agree to voluntary income tax withholding by filing a Form W-4 with your employer. The agreement goes into effect when your employer accepts the agreement by beginning the withholding. You or your employer may end the agreement by letting the other know in writing.

Agricultural workers. If you are an agricultural worker on an H-2A visa, your employer does not have to withhold income tax. However, your employer will withhold income tax only if you and your employer agree to withhold. In that case, you must provide your employer with a properly completed Form W-4. You can find more information about not having tax withheld at http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers.

Wages Exempt From Withholding

Wages that are exempt from U.S. income tax under an income tax treaty are generally exempt from withholding. For information on how to claim this exemption from withholding, see Income Entitled to Tax Treaty Benefits, later.

Wages paid to aliens who are residents of American Samoa, Canada, Mexico, Puerto Rico, or the U.S. Virgin Islands may be exempt from withholding. The following paragraphs explain these exemptions.

Residents of Canada or Mexico engaged in transportation-related employment. Certain residents of Canada or Mexico who enter or leave the United States at frequent intervals are not subject to withholding on their wages. These persons either:

 

CAUTION: This employment is subject to withholding of social security and Medicare taxes unless the services are performed for a railroad.

To qualify for the exemption from withholding during a tax year, a Canadian or Mexican resident must give the employer a statement in duplicate with name, address, and identification number, certifying that the resident:

 

The statement can be in any form, but it must be dated and signed by the employee and must include a written declaration that it is made under the penalties of perjury.

Residents of American Samoa and Puerto Rico. If you are a nonresident alien employee who is a resident of American Samoa or Puerto Rico, wages for services performed in American Samoa or Puerto Rico are generally not subject to withholding unless you are an employee of the United States or any of its agencies in American Samoa or Puerto Rico.

Residents of the U.S. Virgin Islands. Nonresident aliens who are bona fide residents of the U.S Virgin Islands are not subject to withholding of U.S. tax on income earned while temporarily employed in the United States. This is because those persons pay their income tax to the U.S. Virgin Islands. To avoid having tax withheld on income earned in the United States, bona fide residents of the U.S. Virgin Islands should write a letter, in duplicate, to their employers, stating that they are bona fide residents of the U.S. Virgin Islands and expect to pay tax on all income to the U.S. Virgin Islands.

Withholding on Pensions

If you receive a pension as a result of personal services performed in the United States, the pension income is subject to the 30% (or lower treaty) rate of withholding. You may, however, have tax withheld at graduated rates on the portion of the pension that arises from the performance of services in the United States after December 31, 1986. You must fill out Form W-8BEN and give it to the withholding agent or payer before the income is paid or credited to you.

Withholding on Tip Income

Tips you receive during the year for services performed in the United States are subject to U.S. income tax. Include them in taxable income. In addition, tips received while working for one employer, amounting to $20 or more in a month, are subject to graduated withholding.

Independent Contractors

If there is no employee-employer relationship between you and the person for whom you perform services, your compensation is subject to the 30% (or lower treaty) rate of withholding. However, if you are engaged in a trade or business in the United States during the tax year, your compensation for personal services as an independent contractor (independent personal services) may be entirely or partly exempt from withholding if you reach an agreement with the IRS on the amount of withholding required. An agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for payments covered by the agreement after it is agreed to by all parties. You must agree to timely file an income tax return for the current tax year.

Central withholding agreements. If you are a nonresident alien entertainer or athlete performing or participating in athletic events in the United States, you may be able to enter into a withholding agreement with the IRS for reduced withholding provided certain requirements are met. Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability.

File Form 13930 and the required attachments with the IRS to request a central withholding agreement. Either you or your authorized representative can file the form. It should be sent to the IRS at least 45 days before the tour begins or the event occurs. Exceptions will be considered on a case by case basis.

For more information on the CWA program, go to http://www.irs.gov/Individuals/International-Taxpayers/Central-Withholding-Agreements.

Final payment exemption. Your final payment of compensation during the tax year for independent personal services may be entirely or partly exempt from withholding. This exemption is available only once during your tax year and applies to a maximum of $5,000 of compensation. To obtain this exemption, you or your agent must give the following statements and information to the Commissioner or his delegate.

 

If satisfied with the information, the IRS will determine the amount of your tentative income tax for the tax year on gross income effectively connected with your trade or business in the United States. Ordinary and necessary business expenses can be taken into account if proven to the satisfaction of the Commissioner or his delegate.

The Commissioner or his delegate will send you a letter, directed to the withholding agent, showing the amount of the final payment of compensation that is exempt from withholding and the amount that can be paid to you because of the exemption. You must give two copies of the letter to the withholding agent and must also attach a copy of the letter to your income tax return for the tax year for which the exemption is effective.

Allowance for Personal Exemption

Withholding on payments for independent personal services is generally based on the amount of your compensation payment minus the value of one exemption ($4,050 for 2017).

To determine the income for independent personal services performed in the United States to which the 30% (or lower treaty) rate will apply, you are allowed one personal exemption if you are not a U.S. national and are not a resident of Canada, Mexico, or South Korea. For purposes of 30% withholding, the exemption is prorated at $11.10 a day in 2017 for the period that labor or personal services are performed in the United States. To claim an exemption from withholding on the personal exemption amount, fill out the applicable parts of Form 8233 and give it to the withholding agent.

Example. Eric Johannsen, who is a resident of Country X worked under a contract with a U.S. firm (not as an employee) in the United States for 100 days during 2017 before returning to his country. He earned $6,000 for the services performed (not considered wages) in the United States. Eric is married and has three dependent children. His wife is not employed and has no income subject to U.S. tax. The amount of the personal exemption to be allowed against the income for his personal services performed within the United States in 2017 is $1,110 (100 days × $11.10), and withholding at 30% is applied against the balance. Thus, $1,467 in tax is withheld from Eric's earnings (30% of $4,890 ($6,000 - $1,110)).

U.S. nationals or residents of Canada, Mexico, or South Korea. If you are a nonresident alien who is a resident of Canada, Mexico, or South Korea, or who is a national of the United States, you are subject to the same 30% withholding on your compensation for independent personal services performed in the United States. However, if you are a U.S. national or a resident of Canada or Mexico, you are allowed the same personal exemptions as U.S. citizens. For the 30% (or lower treaty) rate withholding, you can take $11.10 per day for each allowable exemption in 2017. If you are a resident of South Korea, you are allowed personal exemptions for yourself and for your spouse and children who live with you in the United States at any time during the tax year. However, the additional exemptions for your spouse and children must be further prorated as explained in chapter 5 under Exemptions.

Students and business apprentices from India. If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you are allowed an exemption for your spouse only if your spouse will have no gross income for 2017 and cannot be claimed as a dependent on another U.S. taxpayer's 2017 return. You are also allowed an exemption for each dependent not admitted to the United States on "F-2," "J-2," or "M-2" visas if they meet the same rules that apply to U.S. citizens. For the 30% (or lower treaty rate) withholding on compensation for independent personal services performed in the United States, you are allowed $11.10 per day for each allowable exemption in 2017.

Refund of Taxes Withheld in Error

Multi-level marketing. If you are a distributor for a multi-level marketing company who had taxes withheld in error, file a U.S. income tax return (Form 1040NR, Form 1040NR-EZ, or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040X or amended Form 1120-F) to recover the amount withheld in error. You must also attach to the U.S. income tax return or claim for refund supporting information that includes, but is not limited to, the following items.

 

Refund of taxes withheld in error on social security benefits paid to resident aliens. Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. For U.S. income tax purposes, green card holders continue to be resident aliens until their lawful permanent resident status under immigration laws is either taken away or is administratively or judicially determined to have been abandoned. See Green Card Test in chapter 1. If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. If SSA cannot refund the taxes withheld, you must file a 1040A with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. You must also attach the following to your Form 1040 or 1040A.

 

Withholding From Other Income

Other income subject to 30% withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. It also includes 85% of social security benefits paid to nonresident aliens.

Other income not subject to withholding of 30% (or lower treaty) rate. The following income is not subject to withholding at the 30% (or lower treaty) rate if you file Form W-8ECI with the payer of the income.

 

Special rules for withholding on partnership income, scholarships, and fellowships are explained next.

Tax Withheld on Partnership Income

If you are a foreign partner in a U.S. or foreign partnership, the partnership will withhold tax on your share of effectively connected taxable income (ECTI) from the partnership. You may be able to reduce your ECTI subject to withholding by certain partner-level deductions. Generally, you must use Form 8804-C for this purpose. See the Instructions for Form 8804-C for more information.

The withholding rate on your share of effectively connected income is generally the highest rate of tax specified under section 1 of the Code (39.6% for 2017). However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation. Long-term capital gain is an example of a particular type of income to which the highest tax rate applies. Claim the tax withheld as a credit on your 2017 Form 1040NR.

The partnership will give you a statement on Form 8805 showing the tax withheld. A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. In this case the partnership will give you a statement on Form 1042-S.

Withholding on Scholarships and Fellowship Grants

There is no withholding on a qualified scholarship received by a candidate for a degree. See chapter 3.

If you are a nonresident alien student or grantee with an "F," "J," "M," or "Q" visa and you receive a U.S. source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate.

Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding as discussed earlier under Withholding on Wages.

Alternate Withholding Procedure

Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). Use the following instructions instead of the Form W-4 instructions to complete the worksheet.

Line A. Enter the total of the following amounts on line A.

Personal exemption. Include the prorated part of your allowable personal exemption. Figure the amount by multiplying the number of days you expect to be in the United States in 2017 by the daily exemption amount ($11.10).

Expenses. Include expenses that will be deductible on your return. These include away-from-home expenses (meals, lodging, and transportation), certain state and local income taxes, charitable contributions, and casualty losses, discussed earlier under Itemized Deductions in chapter 5. They also include business expenses, moving expenses, and the IRA deduction discussed under Deductions in chapter 5.

Nontaxable grant or scholarship. Include the part of your grant or scholarship that is not taxable under U.S. law or under a tax treaty.

Line B. Enter -0- unless the following paragraph applies to you.

If you are a student who qualifies under Article 21(2) of the United States-India Income Tax Treaty, and you are not claiming deductions for away-from-home expenses or other itemized deductions (discussed earlier), enter the standard deduction on line B. The standard deduction amount for 2017 is $6,350.

Lines C and D. Enter -0- on both lines unless the following paragraphs apply to you.

If you are a resident of Canada, Mexico, South Korea, or a U.S. national, an additional daily exemption amount may be allowed for your spouse and each of your dependents.

If you are a resident of India who is eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you can claim an additional daily exemption amount for your spouse only if your spouse will have no gross income for 2017 and cannot be claimed as a dependent on another U.S. taxpayer's 2017 return. You can also claim an additional amount for each of your dependents not admitted to the United States on "F-2," "J-2," or "M-2" visas if they meet the same rules that apply to U.S. citizens.

Enter any additional amount for your spouse on line C. Enter any additional amount for your dependents on line D.

Lines E, F, and G. No entries should be made on lines E, F, and G.

Line H. Add the amounts on lines A through D and enter the total on line H.

Form W-4. Complete lines 1 through 4 of Form W-4. Sign and date the form and give it with the Personal Allowances Worksheet to your withholding agent.

If you file a Form W-4 to reduce or eliminate the withholding on your scholarship or grant, you must file an annual U.S. income tax return to be allowed the exemptions and deductions you claimed on that form. If you are in the United States during more than one tax year, you must attach a statement to your yearly Form W-4 indicating that you have filed a U.S. income tax return for the previous year. If you have not been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a U.S. income tax return when required.

After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. The gross amount of the income is reduced by the amount on line H of the worksheet and the withholding tax is figured on the remainder.

You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less the withholding allowance amount, the tax rate, and the amount of tax withheld. Use this form to prepare your annual U.S. income tax return.

Income Entitled to Tax Treaty Benefits

If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, tax for certain items of income, you should notify the payor of the income (the withholding agent) of your foreign status to claim a tax treaty withholding exemption. Generally, you do this by filing either Form W-8BEN or Form 8233 with the withholding agent.

File Form W-8BEN for income that is not personal services income. File Form 8233 for personal services income as discussed next.

Employees and independent contractors. If you perform personal services as an employee or as an independent contractor and you can claim an exemption from withholding on that personal service income because of a tax treaty, give Form 8233 to each withholding agent from whom amounts will be received.

Even if you submit Form 8233, the withholding agent may have to withhold tax from your income. This is because the factors on which the treaty exemption is based may not be determinable until after the close of the tax year. In this case, you must file Form 1040NR (or Form 1040NR-EZ if you qualify) to recover any over-withheld tax and to provide the IRS with proof that you are entitled to the treaty exemption.

Students, teachers, and researchers. Students, teachers, and researchers must attach the appropriate statement shown in Appendix A (for students) or Appendix B (for teachers and researchers) at the end of this publication to the Form 8233 and give it to the withholding agent. For treaties not listed in the appendices, attach a statement in a format similar to those for other treaties.

If you received a scholarship or fellowship and personal services income from the same withholding agent, use Form 8233 to claim an exemption from withholding based on a tax treaty for both types of income.

Special events and promotions. Withholding at the full 30% rate is required for payments made to a nonresident alien or foreign corporation for gate receipts (or television or other receipts) from rock music festivals, boxing promotions, and other entertainment or sporting events, unless the withholding agent has been specifically advised otherwise by letter from the IRS. Form 13930 is used to request a reduction in withholding. Withholding may be required even if the income may be exempt from taxation by provisions of a tax treaty. One reason for this is that the partial or complete exemption is usually based on factors that cannot be determined until after the close of the tax year.

CAUTION: You will be required to pay U.S. tax, at the time of your departure from the United States, on any income for which you incorrectly claimed a treaty exemption. For more details on treaty provisions that apply to compensation, see Pub. 901.

Tax Withheld on Real Property Sales

If you are a nonresident alien and you disposed of a U.S. real property interest before February 17, 2016, the transferee (buyer) of the property generally was required to withhold a tax equal to 10% of the amount realized on the disposition.

For dispositions of a U.S. real property interest after February 16, 2016, the rate of withholding has generally increased to 15%. However, if the property is acquired after February 16, 2016, by the buyer for use as a residence and the amount realized does not exceed $1,000,000, the rate of withholding remains at 10%.

The amount realized is the sum of:

 

If the property transferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of each transferor.

A distribution by a qualified investment entity to a nonresident alien shareholder that is treated as gain from the sale or exchange of a U.S. real property interest by the shareholder is subject to withholding at 35%. Withholding is also required on certain distributions and other transactions by domestic or foreign corporations, partnerships, trusts, and estates. These rules are covered in Pub. 515.

For information on the tax treatment of dispositions of U.S. real property interests, see Real Property Gain or Loss in chapter 4.

If you are a partner in a domestic partnership, and the partnership disposes of a U.S. real property interest at a gain, the partnership will withhold tax on the amount of gain allocable to its foreign partners. Your share of the income and tax withheld will be reported to you on Form 8805, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding (in the case of a publicly traded partnership).

Withholding is not required in the following situations.

 

You can give the certification to a qualified substitute. The qualified substitute gives the buyer a statement, under penalties of perjury, that the certification is in the possession of the qualified substitute. For this purpose, a qualified substitute is (a) the person (including any attorney or title company) responsible for closing the transaction, other than your agent, and (b) the buyer's agent. You may not give the buyer a written notice for any of the following transfers: the sale of your main home on which you exclude gain, a like-kind exchange that does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind exchange that has not been completed at the time the buyer must file Form 8288. Instead, a withholding certificate (described next) must be obtained.

 

The certifications in (3) and (4) must be disregarded by the buyer if the buyer or qualified substitute has actual knowledge, or receives notice from a seller's or buyer's agent (or substitute), that they are false. This also applies to the qualified substitute's statement under (4).

Withholding certificates. The tax required to be withheld on a disposition can be reduced or eliminated under a withholding certificate issued by the IRS. In most cases, either you or the buyer can request a withholding certificate.

A withholding certificate can be issued due to any of the following.

 

Get Pub. 515 and Form 8288-B for information on procedures to request a withholding certificate.

Credit for tax withheld. The buyer must report and pay over the withheld tax within 20 days after the transfer using Form 8288. This form is filed with the IRS with copies A and B of Form 8288-A. Copy B of this statement will be stamped received by the IRS and returned to you (the seller) if the statement is complete and includes your taxpayer identification number (TIN). You must file Copy B with your tax return to take credit for the tax withheld.

A stamped copy of Form 8288-A will not be provided to you if your TIN is not included on that form. The IRS will send you a letter requesting the TIN and provide instructions for how to get a TIN. When you provide the IRS with a TIN, the IRS will provide you with a stamped Copy B of Form 8288-A.

Social Security and Medicare Taxes

If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. Your payments of these taxes contribute to your coverage under the U.S. social security system. Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who meet certain eligibility requirements.

In most cases, the first $118,500 of taxable wages received in 2016 for services performed in the United States is subject to social security tax. All taxable wages are subject to Medicare tax. Your employer deducts these taxes from each wage payment. Your employer must deduct these taxes even if you do not expect to qualify for social security or Medicare benefits. You can claim a credit for excess social security tax on your income tax return if you have more than one employer and the amount deducted from your combined wages for 2016 is more than $7,347. Use the appropriate worksheet in chapter 3 of Pub. 505 to figure your credit.

If any one employer deducted more than $7,347, you cannot claim a credit for that amount. Ask your employer to refund the excess. If your employer does not refund the excess, you can file a claim for refund using Form 843.

In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. In limited situations, these taxes apply to wages for services performed outside the United States. Your employer should be able to tell you if social security and Medicare taxes apply to your wages. You cannot make voluntary payments if no taxes are due.

Additional Medicare Tax. In addition to the Medicare tax, a 0.9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income that are more than:

 

There are no special rules for nonresident aliens for purposes of Additional Medicare Tax. Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold.

Your employer is responsible for withholding the 0.9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in the calendar year. If you intend to file a joint return and you anticipate that you and your spouse's individual wages are not going to be more than $200,000 but your combined wages and self-employment income are going to be more than $250,000, you may want to request additional withholding on Form W-4 and/or make estimated tax payments.

If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR).

See Form 8959 and its separate instructions to determine whether you are required to pay Additional Medicare Tax. For more information on Additional Medicare Tax, go to IRS.gov and enter "Additional Medicare Tax" in the search box.

Self-employed individuals may also be required to pay Additional Medicare Tax. See Self-Employment Tax, later.

Students and Exchange Visitors

Generally, services performed by you as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment.

Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification ("F," "J," "M," or "Q") remains the same.

Services performed by a spouse or minor child of nonimmigrant aliens with the classification of "F-2," "J-2," "M-2," and "Q-3" are covered under social security.

Nonresident Alien Students

If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. In some cases, a student admitted to the United States in "F-1," "M-1," or "J-1" status is granted permission to work. Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien.

TIP: Any student who is enrolled and regularly attending classes at a school may be exempt from social security and Medicare taxes on pay for services performed for that school.

The U.S. Citizenship and Immigration Services (USCIS) permits on-campus work for students in "F-1" status if it does not displace a U.S. resident. On-campus work means work performed on the school's premises. On-campus work includes work performed at an off-campus location that is educationally affiliated with the school. On-campus work under the terms of a scholarship, fellowship, or assistantship is considered part of the academic program of a student taking a full course of study and is permitted by the USCIS. Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien.

If services performed by a nonresident alien student are not considered as performed to carry out the purpose for which the student was admitted to the United States, social security and Medicare taxes will be withheld from pay for the services unless the pay is exempt under the Internal Revenue Code.

Exchange Visitors

Exchange visitors are temporarily admitted to the United States under section 101(a)(15)(J) of the Immigration and Nationality Act. Social security and Medicare taxes are not withheld on pay for services of an exchange visitor who has been given permission to work and who possesses or obtains a letter of authorization from the sponsor unless the exchange visitor is considered a resident alien.

If services performed by an exchange visitor are not considered as performed to carry out the purpose for which the visitor was admitted to the United States, social security and Medicare taxes are withheld from pay for the services unless the pay is exempt under the Internal Revenue Code.

Nonresident aliens temporarily admitted to the United States as participants in international cultural exchange programs under section 101(a)(15)(Q) of the Immigration and Nationality Act may be exempt from social security and Medicare taxes. The employer must be the petitioner through whom the alien obtained the "Q" visa. Social security and Medicare taxes are not withheld from pay for this work unless the alien is considered a resident alien.

Refund of Taxes Withheld in Error

If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund with the IRS on Form 843. Attach the following items to Form 843.

 

File Form 843 (with attachments) with the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0038.

CAUTION: Do not use Form 843 to request a refund of Additional Medicare Tax. If Additional Medicare Tax was withheld from your pay in error, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959 with Form 1040 or 1040NR. If Additional Medicare Tax was withheld in error in a prior year for which you already filed Form 1040 or 1040NR, you must file Form 1040X for the prior year in which the wages or compensation were originally received to recover the Additional Medicare Tax withheld in error. See the Instructions for Form 1040X.

Agricultural Workers

Agricultural workers temporarily admitted into the United States on H-2A visas are exempt from social security and Medicare taxes on compensation paid to them for services performed in connection with the H-2A visa. You can find more information about not having tax withheld at http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers.

Self-Employment Tax

Self-employment tax is the social security and Medicare taxes for individuals who are self-employed. Nonresident aliens are not subject to self-employment tax unless an international social security agreement in effect determines that they are covered under the U.S. social security system. Residents of the U.S. Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are considered U.S. residents for this purpose and are subject to the self-employment tax.

Resident aliens must pay self-employment tax under the same rules that apply to U.S. citizens. However, a resident alien employed by an international organization, a foreign government, or a wholly-owned instrumentality of a foreign government is not subject to the self-employment tax on income earned in the United States.

Self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien.

Example. Bill Jones is an author engaged in the business of writing books. Bill had several books published in a foreign country while he was a citizen and resident of that country. During 2016, Bill entered the United States as a resident alien. After becoming a U.S. resident, he continued to receive royalties from his foreign publisher. Bill reports his income and expenses on the cash basis (he reports income on his tax return when received and deducts expenses when paid). Bill's 2016 self-employment income includes the royalties received after he became a U.S. resident even though the books were published while he was a nonresident alien. This royalty income is subject to self-employment tax.

Reporting self-employment tax. Use Schedule SE (Form 1040) to report and figure your self-employment tax. Then enter the tax on Form 1040, line 57, or Form 1040NR, line 55. Attach Schedule SE to Form 1040 or Form 1040NR.

Additional Medicare Tax. Self-employed individuals must pay a 0.9% Additional Medicare Tax on self-employment income that exceeds one of the following threshold amounts (based on your filing status).

 

If you have both wages and self-employment income, the threshold amount for applying the Additional Medicare Tax on the self-employment income is reduced (but not below zero) by the amount of wages subject to Additional Medicare Tax. A self-employment loss should not be considered for purposes of this tax.

If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR).

See Form 8959 and its separate instructions to determine whether you are required to pay Additional Medicare Tax. For more information on Additional Medicare Tax, go to IRS.gov and enter "Additional Medicare Tax" in the search box.

Deduction for employer-equivalent portion of self-employment tax. If you must pay self-employment tax, you can deduct a portion of the self-employment tax paid in figuring your adjusted gross income. This deduction is figured on Schedule SE (Form 1040).

Note. No portion of the Additional Medicare Tax is deductible for self-employment tax.

More information. Get Pub. 334 for more information about self-employment tax.

International Social Security Agreements

The United States has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. These agreements are commonly referred to as totalization agreements. Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements generally make sure that social security taxes (including self-employment tax) are paid only to one country.

For a list of current international social security agreements, go to http://www.socialsecurity.gov/international/status.html. As agreements with additional countries enter into force, they will be posted at this website. For more information on international social security agreements, go to http://www.socialsecurity.gov/international/totalization_agreements.html.

Employees. Generally, under these agreements, you are subject to social security taxes only in the country where you are working. However, if you are temporarily sent to work for the same employer in the United States and your pay would normally be subject to social security taxes in both countries, most agreements provide that you remain covered only by the social security system of the country from which you were sent.

To establish that your pay is subject only to foreign social security taxes and is exempt from U.S. social security taxes (including the Medicare tax) under an agreement, you or your employer should request a certificate of coverage from the appropriate agency of the foreign country. This will usually be the same agency to which you or your employer pays your foreign social security taxes. The foreign agency will be able to tell you what information is needed for them to issue the certificate. Your employer should keep a copy of the certificate because it may be needed to show why you are exempt from U.S. social security taxes. Only wages paid on or after the effective date of the agreement can be exempt from U.S. social security taxes.

Some of the countries with which the United States has agreements will not issue certificates of coverage. In this case, either you or your employer should request a statement that your wages are not covered by the U.S. social security system. Request the statement from the following address.

U.S. Social Security Administration Office of International Programs P.O. Box 17741 Baltimore, MD 21235-7741

Self-employed individuals. Under most agreements, self-employed individuals are covered by the social security system of the country where they reside. However, under some agreements, you may be exempt from U.S. self-employment tax if you temporarily transfer your business activity to or from the United States.

If you believe that your self-employment income is subject only to U.S. self-employment tax and is exempt from foreign social security taxes, request a certificate of coverage from the U.S. Social Security Administration online at http://www.socialsecurity.gov/coc or by writing to the address given earlier. This certificate will establish your exemption from foreign social security taxes. For more information about requesting a certificate of coverage go to http://www.socialsecurity.gov/international/CoC_link.html.

To establish that your self-employment income is subject only to foreign social security taxes and is exempt from U.S. self-employment tax, request a certificate of coverage from the appropriate agency of the foreign country. If the foreign country will not issue the certificate, you should request a statement that your income is not covered by the U.S. social security system. Request it from the U.S. Social Security Administration at the address given earlier. Attach a photocopy of either statement to Form 1040 each year you are exempt. Also print "Exempt, see attached statement" on the line for self-employment tax.

Estimated Tax Form 1040-ES (NR)

You may have income from which no U.S. income tax is withheld. Or the amount of tax withheld may be less than the income tax you estimate you will owe at the end of the year. If so, you may have to pay estimated tax.

Generally, you must make estimated tax payments for 2017 if you expect to owe at least $1,000 in tax and you expect your withholding and certain refundable credits to be less than the smaller of:

 

If your adjusted gross income for 2016 was more than $150,000 ($75,000 if your filing status for 2017 is married filing separately), substitute 110% for 100% in (2) above if you are not a farmer or fisherman. Item (2) does not apply if you did not file a 2016 return.

A nonresident alien should use Form 1040-ES (NR) to figure and pay estimated tax. If you pay by check, make it payable to the "United States Treasury."

How to estimate your tax for 2017. If you filed a 2016 return on Form 1040NR or Form 1040NR-EZ and expect your income, number of exemptions, and total deductions for 2017 to be nearly the same, you should use your 2016 return as a guide to complete the Estimated Tax Worksheet in the Form 1040-ES (NR) instructions. If you did not file a return for 2016, or if your income, exemptions, deductions, or credits will be different for 2017, you must estimate these amounts. Figure your estimated tax liability using the Tax Rate Schedule in the 2017 Form 1040-ES (NR) instructions for your filing status.

Note. If you expect to be a resident of Puerto Rico during the entire year, use Form 1040-ES or Formulario 1040-ES (PR).

When to pay estimated tax. Make your first estimated tax payment by the due date for filing the previous year's Form 1040NR or Form 1040NR-EZ. If you have wages subject to the same withholding rules that apply to U.S. citizens, you must file Form 1040NR or Form 1040NR-EZ and make your first estimated tax payment by April 18, 2017. If you do not have wages subject to withholding, file your income tax return and make your first estimated tax payment by June 15, 2017.

If your first estimated tax payment is due April 18, 2017, you can pay your estimated tax in full at that time or in four equal installments by the dates shown next.

 1st installment            April 18, 2017

 

 2nd installment             June 15, 2017

 

 3rd installment            Sept. 15, 2017

 

 4th installment             Jan. 15, 2018

 

 

If your first payment is not due until June 15, 2017, you can pay your estimated tax in full at that time or:

 

TIP: You do not have to make the payment due January 15, 2018, if you file your 2017 Form 1040NR or 1040NR-EZ by January 31, 2018, and pay the entire balance due with your return.

Fiscal year. If your return is not on a calendar year basis, your due dates are the 15th day of the 4th, 6th, and 9th months of your fiscal year, and the 1st month of the following fiscal year. If any date falls on a Saturday, Sunday, or legal holiday, use the next day that is not a Saturday, Sunday, or legal holiday.

Changes in income, deductions, or exemptions. Even if you are not required to make an estimated tax payment in April or June, your circumstances may change so that you will have to make estimated tax payments later. This can happen if you receive additional income or if any of your deductions are reduced or eliminated. If so, see the instructions for Form 1040-ES (NR) and Pub. 505 for information on figuring your estimated tax.

Amended estimated tax. If, after you have made estimated tax payments, you find your estimated tax is substantially increased or decreased because of a change in your income or exemptions, you should adjust your remaining estimated tax payments. To do this, see the instructions for Form 1040-ES (NR) and Pub. 505.

Penalty for failure to pay estimated income tax. You will be subject to a penalty for underpayment of installments of estimated tax except in certain situations. These situations are explained on Form 2210.

9. Tax Treaty Benefits

Introduction

A nonresident alien (and certain resident aliens) from a country with which the United States has an income tax treaty may qualify for certain benefits. Most treaties require that the nonresident alien be a resident of the treaty country to qualify. However, some treaties require that the nonresident alien be a national or a citizen of the treaty country.

Tax treaties. The tax treaty table previously located at the end of chapter 9 has been updated and moved. It is now Table 3 at http://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables.

The full text of individual tax treaties is available at http://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z. For more information about tax treaties, go to http://www.irs.gov/individuals/international-taxpayers/tax-treaties.

You can generally arrange to have withholding tax reduced or eliminated on wages and other income that are eligible for tax treaty benefits. See Income Entitled to Tax Treaty Benefits in chapter 8.

Topics

This chapter discusses:

 

Useful Items

You may want to see:

Publication

 

Form (and Instructions)

 

See chapter 12 for information about getting these publications and forms.

Treaty Income

A nonresident alien's treaty income is the gross income on which the tax is limited by a tax treaty. Treaty income includes, for example, dividends from sources in the United States that are subject to tax at a tax treaty rate not to exceed 15%. Nontreaty income is the gross income of a nonresident alien on which the tax is not limited by a tax treaty.

Figure the tax on treaty income on each separate item of income at the reduced rate that applies to that item under the treaty.

To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the graduated rate, depending upon whether or not the income is effectively connected with your trade or business in the United States.

Your tax liability is the sum of the tax on treaty income plus the tax on nontreaty income, but cannot be more than the tax liability figured as if the tax treaty had not come into effect.

Example. Arthur Banks is a nonresident alien who is single and a resident of a foreign country that has a tax treaty with the United States. He received gross income of $25,900 during the tax year from sources within the United States, consisting of the following items.

 Dividends on which the tax is limited to a 15%

 

 rate by the tax treaty                            $1,400

 

 Compensation for personal services on which

 

 the tax is not limited by the tax treaty          24,500

 

 Total gross income                               $25,900

 

                                                  =======

 

 

Arthur was engaged in business in the United States during the tax year. His dividends are not effectively connected with that business. He has no deductions other than his own personal exemption.

His tax liability, figured as though the tax treaty had not come into effect, is $3,028 determined as follows.

 Total compensation                               $24,500

 

 Less: Personal exemption your tax                  4,050

 

 Taxable income                                   $20,450

 

                                                  =======

 

 Tax determined by graduated rate (Tax Table

 

 column for single taxpayers)                      $2,608

 

 Plus: Tax on gross dividends ($1,400 ×

 

 30%)                                                 420

 

 Tax determined as though treaty had not

 

 come into effect                                  $3,028

 

                                                  =======

 

 

Arthur's tax liability, figured by taking into account the reduced rate on dividend income as provided by the tax treaty, is $2,818 determined as follows.

 Tax determined by graduated rate (same as

 

 figured above)                                    $2,608

 

 Plus: Tax on gross dividends ($1,400 ×

 

 15%)                                                 210

 

 Tax on compensation and dividends                 $2,818

 

                                                  =======

 

 

His tax liability, therefore, is limited to $2,818, the tax liability figured using the tax treaty rate on the dividends.

Some Typical Tax Treaty Benefits

The following paragraphs briefly explain the exemptions that are available under tax treaties for personal services income, remittances, scholarships, fellowships, and capital gain income. The conditions for claiming the exemptions vary under each tax treaty. For more information about the conditions under a particular tax treaty, see Pub. 901. Or, you can download the complete text of most U.S. tax treaties at http://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z. Technical explanations for many of those treaties are also available at that site.

Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. These types of income may be exempt from U.S. tax or may be subject to a reduced rate of tax. For more information, see Pub. 901 or the applicable tax treaty.

For more information about tax treaties, go to http://www.irs.gov/individuals/international-taxpayers/tax-treaties.

Personal Services

Nonresident aliens from treaty countries who are in the United States for a short stay and also meet certain other requirements may be exempt from tax on their compensation received for personal services performed in the United States. Many tax treaties require that the nonresident alien claiming this exemption be present in the United States for a total of not more than 183 days during the tax year. Other tax treaties specify different periods of maximum presence in the United States, such as 180 days or 90 days. Spending part of a day in the United States counts as a day of presence.

Tax treaties may also require that:

 

Note. Under most treaties, income received as an employee (generally designated as dependent personal services) and income received as a self-employed person (generally designated as independent personal services or business income) are treated differently.

Teachers, Professors, and Researchers

Under many income tax treaties, nonresident alien teachers or professors who temporarily visit the United States for the primary purpose of teaching at a university or other accredited educational institution are not subject to U.S. income tax on compensation received for teaching for the first 2 or 3 years after their arrival in the United States. Many treaties also provide an exemption for engaging in research.

Generally, the teacher or professor must be in the United States primarily to teach, lecture, instruct, or engage in research. A substantial part of that person's time must be devoted to those duties. The normal duties of a teacher or professor include not only formal classroom work involving regularly scheduled lectures, demonstrations, or other student-participation activities, but also the less formal method of presenting ideas in seminars or other informal groups and in joint efforts in the laboratory.

If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens, later under Resident Aliens.

Employees of Foreign Governments

All treaties have provisions for the exemption of income earned by certain employees of foreign governments. However, a difference exists among treaties as to who qualifies for this benefit. Under many treaties, aliens admitted to the United States for permanent residence do not qualify. Under most treaties, aliens who are not nationals or subjects of the foreign country do not qualify. Employees of foreign governments should read the pertinent treaty carefully to determine whether they qualify for benefits. Chapter 10 of this publication also has information for employees of foreign governments.

Students, Apprentices, and Trainees

Under some income tax treaties, students, apprentices, and trainees are exempt from tax on remittances received from abroad for study and maintenance. Also, under some treaties, scholarship and fellowship grants, and a limited amount of compensation received by students, apprentices, and trainees may be exempt from tax.

If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens, later, under Resident Aliens.

Capital Gains

Most treaties provide for the exemption of gains from the sale or exchange of personal property. Generally, gains from the sale or exchange of real property located in the United States are taxable.

Resident Aliens

Resident aliens may qualify for tax treaty benefits in the situations discussed below.

U.S. Residency Under Tax Treaty "Tie-Breaker" Rule

In certain circumstances, individuals who are treated as residents of the United States under an income tax treaty (after application of the so-called "tie-breaker" rule) will be entitled to treaty benefits. (The "tie-breaker" rule is explained in chapter 1 under Effect of Tax Treaties.) If this applies to you, you generally will not need to file a Form 8833 for the income for which treaty benefits are claimed. This is because the income will typically be of a category for which disclosure on a Form 8833 is waived. See Reporting Treaty Benefits Claimed.

In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages or salaries). Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Next to the amount write "Exempt income," the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22.

Also follow the above procedure for income that is subject to a reduced rate of tax, instead of an exemption, under the treaty. Attach a statement to Form 1040 showing a computation of the tax at the reduced rate, the name of the treaty country, and the treaty article that provides for the reduced tax rate. Include this tax on Form 1040, line 63. On the dotted line next to line 63, write "Tax from attached statement" and the amount of the tax.

Example. Jacques Dubois, who is a resident of the United States under Article 4 of the U.S.-France income tax treaty, receives French social security benefits. Under Article 18(1) of the treaty, French social security benefits are not taxable by the United States. Mr. Dubois is not required to file a Form 8833 for his French social security benefits or report the benefits on Form 1040.

Special Rule for Canadian and German Social Security Benefits

Under income tax treaties with Canada and Germany, if a U.S. resident receives social security benefits from Canada or Germany, those benefits are treated for U.S. income tax purposes as if they were received under the social security legislation of the United States. If you receive social security benefits from Canada or Germany, include them on line 1 of your Social Security Benefits Worksheet for purposes of determining the taxable amount to be reported on Form 1040A, line 14b. You are not required to file a Form 8833 for those benefits.

Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens

Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption for remittances from abroad for study and maintenance in the United States, for scholarship, fellowship, and research grants, and for wages or other personal service compensation. Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income.

However, if you entered the United States as a nonresident alien, but you are now a resident alien for U.S. tax purposes, the treaty exemption will continue to apply if the tax treaty's saving clause (explained later) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including any time limit, explained later). This is true even if you are a nonresident alien electing to file a joint return as explained in chapter 1.

Some exceptions to the saving clause apply to all resident aliens (for example, under the U.S.-People's Republic of China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders).

If you qualify under an exception to the treaty's saving clause, you can avoid income tax withholding by giving the payor a Form W-9 with the statement required by the Form W-9 instructions.

Saving clause. Most tax treaties have a saving clause. A saving clause preserves or "saves" the right of each country to tax its own residents as if no tax treaty were in effect. Thus, once you become a resident alien of the United States, you generally lose any tax treaty benefits that relate to your income. However, many tax treaties have exceptions to the saving clause, which may allow you to continue to claim certain treaty benefits when you become a resident alien. Read the treaty to find out if it has a saving clause and an exception to it.

Time limit for claiming treaty exemptions. Many treaties limit the number of years you can claim a treaty exemption. For students, apprentices, and trainees, the limit is usually 4-5 years; for teachers, professors, and researchers, the limit is usually 2-3 years. Once you reach this limit, you can no longer claim the treaty exemption. See the treaty or Pub. 901 for the time limits that apply.

How to report income on your tax return. In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Next to the amount write "Exempt income," the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22.

Example. Mr. Yu, a citizen of the People's Republic of China, entered the United States as a nonresident alien student on January 1, 2012. He remained a nonresident alien through 2016 and was able to exclude his scholarship from U.S. tax in those years under Article 20 of the U.S.-People's Republic of China income tax treaty. On January 1, 2017, he became a resident alien under the substantial presence test because his stay in the United States exceeded 5 years. Even though Mr. Yu is now a resident alien, the provisions of Article 20 still apply because of the exception to the saving clause in paragraph 2 of the Protocol to the U.S.-People's Republic of China treaty dated April 30, 1984. Mr. Yu should submit Form W-9 and the required statement to the payor.

Reporting Treaty Benefits Claimed

If you claim treaty benefits that override or modify any provision of the Internal Revenue Code, and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833 to your tax return. See below, for the situations where you are not required to file Form 8833.

You must file a U.S. tax return and Form 8833 if you claim the following treaty benefits.

 

These are the more common situations for which Form 8833 is required.

Exceptions. You do not have to file Form 8833 for any of the following situations.

The exception described in (6) above does not apply to any amounts for which a treaty-based return disclosure is specifically required by the Form 8833 instructions.

Penalty for failure to provide required information on Form 8833. If you are required to report the treaty benefits but do not, you may be subject to a penalty of $1,000 for each failure.

Additional information. For additional information, see section 301.6114-1(c) of the Income Tax Regulations.

10. Employees of Foreign Governments and International Organizations

Introduction

Employees of foreign governments (including foreign municipalities) have two ways to get exemption of their governmental wages from U.S. income tax.

 

Employees of international organizations can exempt their wages either by a provision, if one exists, in the international agreement creating the international organization, or by meeting the requirements of U.S. tax law.

The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international organization. Other U.S. income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision. The proper treatment of this kind of income (interest, dividends, etc.) is discussed earlier in this publication.

Exemption Under Tax Treaty

If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. The income of U.S. citizens and resident aliens working for foreign governments usually is not exempt. However, in a few instances, the income of a U.S. citizen with dual citizenship may qualify. Often the exemption is limited to the income of persons who also are nationals of the foreign country involved.

Exemption Under U.S. Tax Law

Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U.S. tax law.

CAUTION: The exemption under U.S. tax law applies only to current employees and not to former employees. Pensions received by former employees living in the United States do not qualify for the exemption discussed here.

Employees of foreign governments. If you are not a U.S. citizen, or if you are a U.S. citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by U.S. government employees in that foreign country and that foreign government grants an equivalent exemption to U.S. government employees.

Certification. To qualify for the exemption under U.S. tax law, either the Department of State must certify that you perform services similar to those performed by employees of the government of the United States in foreign countries and that your foreign government employer grants an equivalent exemption to U.S. government employees performing similar services in its country or you must establish those facts. However, see Aliens who keep immigrant status, later, for a special rule that may affect your qualifying for this exemption.

Employees of international organizations. If you work for an international organization in the United States and you are not a U.S. citizen (or you are a U.S. citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U.S. tax. However, see Aliens who keep immigrant status, later, for a special rule that may affect your qualifying for this exemption.

An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act.

You should find out if you have been made known to, and have been accepted by, the Secretary of State as an officer or an employee of that organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective officer or employee.

If you are claiming exemption, you should know the number of the Executive Order covering the international organization and should have some written evidence of your acceptance or designation by the Secretary of State.

The exemption is denied when, because the Secretary of State determines your presence in the United States is no longer desirable, you leave the United States (or after a reasonable time allowed for leaving the United States). The exemption is also denied when a foreign country does not allow similar exemptions to U.S. citizens. Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country.

Aliens who keep immigrant status. If you file the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form I-508) to keep your immigrant status (green card), you no longer qualify for the exemption from U.S. tax under U.S. tax law from the date of filing the waiver with the Attorney General.

However, you do not lose the exemption if you file the waiver, and meet either of the following conditions.

 

For more information about a specific foreign country or international organization, send an email to embassy@irs.gov.

11. Departing Aliens and the Sailing or Departure Permit

Introduction

Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. These forms are discussed in this chapter.

To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits. If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. Read Aliens Required To Obtain Sailing or Departure Permits.

Topics

This chapter discusses:

 

Useful Items

You may want to see:

Form (and Instructions)

 

See chapter 12 for information about getting these forms.

Aliens Not Required To Obtain Sailing or Departure Permits

If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States.

If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption.

Category 1. Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that:

 

The statement must be presented to an IRS office.

Category 2. Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households:

 

CAUTION: If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. This is true even if your income is exempt from U.S. tax because of an income tax treaty, consular agreement, or international agreement.

Category 3. Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an "F-1," "F-2," "H-3," "H-4," "J-1," "J-2," or "Q" visa only and who receive no income from U.S. sources while in the United States under those visas other than:

 

Category 4. Alien students, including their spouses and children, who enter on an "M-1" or "M-2" visa only and who receive no income from U.S. sources while in the United States under those visas, other than:

 

Category 5. Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. Aliens in this category are: Category 6. Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U.S. tax.

Aliens Required To Obtain Sailing or Departure Permits

If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. See Forms To File, later. You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. See Paying Taxes and Obtaining Refunds, later.

Getting a Sailing or Departure Permit

The following discussion covers when and where to get your sailing permit.

Where to get a sailing or departure permit. If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure.

When to get a sailing or departure permit. You should get your sailing or departure permit at least 2 weeks before you plan to leave. You cannot apply earlier than 30 days before your planned departure date. Do not wait until the last minute in case there are unexpected problems.

Papers to submit. Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. Bring the following records with you if they apply.

 

Note. If you are married and reside in a community property state, also bring the above-listed documents for your spouse. This applies whether or not your spouse requires a permit.

Forms To File

If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. Employees in the IRS office can assist in filing these forms. Both forms have a "certificate of compliance" section. When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U.S. tax obligations have been satisfied according to available information. Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit.

Form 2063

This is a short form that asks for certain information but does not include a tax computation. The following departing aliens can get their sailing or departure permits by filing Form 2063.

 

Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063.

The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure.

Form 1040-C

If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C.

Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. See Bond To Ensure Payment, discussed later. The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued.

Returning to the United States. If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns.

Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy.

Joint return on Form 1040-C. Departing husbands and wives who are nonresident aliens cannot file joint returns. However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if:

 

Paying Taxes and Obtaining Refunds

You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. You must also pay any taxes due for past years. If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. However, the IRS cannot provide a refund at the time of departure. If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year.

Bond To Ensure Payment

Usually, you must pay the tax shown as due on Form 1040-C when you file it. However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired.

The bond must equal the tax due plus interest to the date of payment as figured by the IRS. Information about the form of bond and security on it can be obtained from your IRS office.

Filing Annual U.S. Income Tax Returns

Form 1040-C is not an annual U.S. income tax return. If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. Chapters 5 and 7 discuss filing an annual U.S. income tax return. The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U.S. income tax return.

12. How To Get Tax Help

Assistance for overseas taxpayers is available in the U.S and certain foreign locations.

Taxpayer Assistance Inside the United States

If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.gov and find resources that can help you right away.

Preparing and filing your tax return. Find free options to prepare and file your return on IRS.gov or in your local community if you qualify.

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing their own tax returns. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.

You can go to IRS.gov and click on the Filing tab to see your options for preparing and filing your return which include the following.

 

Getting answers to your tax law questions. On IRS.gov get answers to your tax questions anytime, anywhere.

 

Getting tax forms and publications. Go to IRS.gov/forms to view, download, or print all of the forms and publications you may need. You can also download and view popular tax publications and instructions (including the 1040 instructions) on mobile devices as an eBook at no charge. Or, you can go to IRS.gov/orderforms to place an order and have forms mailed to you within 10 business days.

Using direct deposit. The fastest way to receive a tax refund is to combine direct deposit and IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. IRS issues more than 90% of refunds in less than 21 days.

Delayed refund for returns claiming certain credits. Due to changes in the law, the IRS can't issue refunds before February 15, 2017, for returns that claim the earned income credit (EIC) or the additional child tax credit (ACTC). This applies to the entire refund, not just the portion associated with these credits.

Getting a transcript or copy of a return. The quickest way to get a copy of your tax transcript is to go to IRS.gov/transcripts. Click on either "Get Transcript Online" or "Get Transcript by Mail" to order a copy of your transcript. If you prefer, you can:

 

Using online tools to help prepare your return. Go to IRS.gov/tools for the following.

 

Resolving tax-related identity theft issues.

 

Checking on the status of your refund.

 

Making a tax payment. The IRS uses the latest encryption technology to ensure your electronic payments are safe and secure. You can make electronic payments online, by phone, and from a mobile device using the IRS2Go app. Paying electronically is quick, easy, and faster than mailing in a check or money order. Go to IRS.gov/payments to make a payment using any of the following options.

 

What if I can't pay now? Go to IRS.gov/payments for more information about your options.

 

Checking the status of an amended return. Go to IRS.gov and click on Where's My Amended Return? (IRS.gov/wmar) under the "Tools" bar to track the status of Form 1040X amended returns. Please note that it can take up to 3 weeks from the date you mailed your amended return for it show up in our system and processing it can take up to 16 weeks.

Understanding an IRS notice or letter. Go to IRS.gov/notices to find additional information about responding to an IRS notice or letter.

Contacting your local IRS office. Keep in mind, many questions can be resolved on IRS.gov without visiting an IRS Tax Assistance Center (TAC). Go to IRS.gov/letushelp for the topics people ask about most. If you still need help, IRS TACs provide tax help when a tax issue can't be handled online or by phone. All TACs now provide service by appointment so you'll know in advance that you can get the service you need without waiting. Before you visit, go to IRS.gov/taclocator to find the nearest TAC, check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on "Local Offices."

Watching IRS videos. The IRS Video portal (IRSvideos.gov) contains video and audio presentations for individuals, small businesses, and tax professionals.

Getting tax information in other languages. For taxpayers whose native language isn't English, we have the following resources available. Taxpayers can find information on IRS.gov in the following languages.

 

The IRS TACs provide over-the-phone interpreter service in over 170 languages, and the service is available free to taxpayers.

The Taxpayer Advocate Service Is Here To Help You

What is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.

What Can the Taxpayer Advocate Service Do For You?

We can help you resolve problems that you can't resolve with the IRS. And our service is free. If you qualify for our assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

 

How Can You Reach Us?

We have offices in every state, the District of Columbia, and Puerto Rico. Your local advocate's number is in your local directory and at taxpayeradvocate.irs.gov. You can also call us at 1-877-777-4778.

How Can You Learn About Your Taxpayer Rights?

The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Our Tax Toolkit at taxpayeradvocate.irs.gov can help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

How Else Does the Taxpayer Advocate Service Help Taxpayers?

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at IRS.gov/sams.

Low Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. To find a clinic near you, visit IRS.gov/litc or see IRS Publication 4134, Low Income Taxpayer Clinic List.

Taxpayer Assistance Outside the United States

If you are outside the United States, you can call 267-941-1000 (English-speaking only). This number is not toll free.

If you wish to write instead of calling, please address your letter to:

Internal Revenue Service International Accounts Philadelphia, PA 19255-0725 U.S.A.

Additional contacts for taxpayers who live outside the United States are available at http://www.irs.gov/uac/Contact-My-Local-Office-Internationally.

Taxpayer Advocate Service. If you live outside of the United States, you can call the Taxpayer Advocate at (787) 522-8601 in English or (787) 522-8600 in Spanish. You can contact the Taxpayer Advocate at:

Internal Revenue Service Taxpayer Advocate Service City View Plaza, 48 Carr 165, Guaynabo, P.R. 00968-8000

You can call the Taxpayer Advocate toll-free at 1-877-777-4778. For more information on the Taxpayer Advocate Service and contacts if you are outside of the United States go to http://www.irs.gov/Advocate/Local-Taxpayer-Advocate/Contact-Your-Local-Taxpayer-Advocate.

Frequently Asked Questions

This section answers tax-related questions commonly asked by aliens.

What is the difference between a resident alien and a nonresident alien for tax purposes?

For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as resident aliens and nonresident aliens. Resident aliens are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their U.S. source income and certain foreign source income that is effectively connected with a U.S. trade or business.

What is the difference between the taxation of income that is effectively connected with a trade or business in the United States and income that is not effectively connected with a trade or business in the United States?

The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate.

I am a student with an F-1 visa. I was told that I was an exempt individual. Does this mean I am exempt from paying U.S. tax?

The term "exempt individual" does not refer to someone exempt from U.S. tax. You were referred to as an exempt individual because as a student temporarily in the United States on an F visa, you do not have to count the days you were present in the United States as a student during the first 5 years in determining if you are a resident alien under the substantial presence test. See chapter 1.

I am a resident alien. Can I claim any treaty benefits?

Generally, you cannot claim tax treaty benefits as a resident alien. However, there are exceptions. See Effect of Tax Treaties in chapter 1. See also Resident Aliens under Some Typical Tax Treaty Benefits in chapter 9.

I am a nonresident alien with no dependents. I am working temporarily for a U.S. company. What return do I file?

You must file Form 1040NR if you are engaged in a trade or business in the United States, or have any other U.S. source income on which tax was not fully paid by the amount withheld.

You can use Form 1040NR-EZ instead of Form 1040NR if you meet all 11 conditions listed under Form 1040NR-EZ in chapter 7.

I came to the United States on June 30th of last year. I have an H-1B visa. What is my tax status, resident alien or nonresident alien? What tax return do I file?

You were a dual-status alien last year. As a general rule, because you were in the United States for 183 days or more, you have met the substantial presence test and you are taxed as a resident. However, for the part of the year that you were not present in the United States, you are a nonresident. File Form 1040. Print "Dual-Status Return" across the top. Attach a statement showing your U.S. source income for the part of the year you were a nonresident. You may use Form 1040NR as the statement. Print "Dual-Status Statement" across the top. See First Year of Residency in chapter 1 for rules on determining your residency starting date.

When is my Form 1040NR due?

If you are an employee and you receive wages subject to U.S. income tax withholding, you must generally file by the 15th day of the 4th month after your tax year ends. If you file for the 2016 calendar year, your return is due April 18, 2017.

If you are not an employee who receives wages subject to U.S. income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. For the 2016 calendar year, file your return by June 15, 2017. For more information on when and where to file, see chapter 7.

My spouse is a nonresident alien. Does he need a social security number?

A social security number (SSN) must be furnished on returns, statements, and other tax-related documents. If your spouse does not have and is not eligible to get an SSN, he must apply for an individual taxpayer identification number (ITIN).

If you are a U.S. citizen or resident and you choose to treat your nonresident spouse as a resident and file a joint tax return, your nonresident spouse needs an SSN or an ITIN. Alien spouses who are claimed as exemptions or dependents are also required to furnish an SSN or an ITIN.

See Identification Number in chapter 5 for more information.

I am a nonresident alien. Can I file a joint return with my spouse?

Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year.

However, nonresident aliens married to U.S. citizens or residents can choose to be treated as U.S. residents and file joint returns. For more information on this choice, see Nonresident Spouse Treated as a Resident in chapter 1.

I have an H-1B visa and my husband has an F-1 visa. We both lived in the United States all of last year and had income. What kind of form should we file? Do we file separate returns or a joint return?

Assuming both of you had these visas for all of last year, you are a resident alien. Your husband is a nonresident alien if he has not been in the United States as a student for more than 5 years. You and your husband can file a joint tax return on 1040EZ if he makes the choice to be treated as a resident for the entire year. See Nonresident Spouse Treated as a Resident in chapter 1. If your husband does not make this choice, you must file a separate return on Form 1040 or Form 1040A. Your husband must file Form 1040NR or 1040NR-EZ.

Is a "dual-resident taxpayer" the same as a "dual-status taxpayer"?

No. A dual-resident taxpayer is one who is a resident of both the United States and another country under each country's tax laws. See Effect of Tax Treaties in chapter 1. You are a dual-status taxpayer when you are both a resident alien and a nonresident alien in the same year. See chapter 6.

I am a nonresident alien and invested money in the U.S. stock market through a U.S. brokerage company. Are the dividends and the capital gains taxable? If yes, how are they taxed?

The following rules apply if the dividends and capital gains are not effectively connected with a U.S. trade or business.

 

If the capital gains and dividends are effectively connected with a U.S. trade or business, they are taxed according to the same rules and at the same rates that apply to U.S. citizens and residents.

I am a nonresident alien. I receive U.S. social security benefits. Are my benefits taxable?

If you are a nonresident alien, 85% of any U.S. social security benefits (and the equivalent portion of tier 1 railroad retirement benefits) you receive is subject to the flat 30% tax, unless exempt, or subject to a lower treaty rate. See The 30% Tax in chapter 4.

Do I have to pay taxes on my scholarship?

If you are a nonresident alien and the scholarship is not from U.S. sources, it is not subject to U.S. tax. See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your scholarship is from U.S. sources.

If your scholarship is from U.S. sources or you are a resident alien, your scholarship is subject to U.S. tax according to the following rules.

 

I am a nonresident alien. Can I claim the standard deduction?

Nonresident aliens cannot claim the standard deduction. However, see Students and business apprentices from India, under Itemized Deductions in chapter 5 for an exception.

I am a dual-status taxpayer. Can I claim the standard deduction?

You cannot claim the standard deduction allowed on Form 1040. However, you can itemize any allowable deductions.

I am filing Form 1040NR. Can I claim itemized deductions?

Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U.S. trade or business. See Itemized Deductions in chapter 5.

I am not a U.S. citizen. What exemptions can I claim?

Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U.S. citizens. However, nonresident aliens generally can claim only a personal exemption for themselves on their U.S. tax return. There are special rules for residents of Mexico, Canada, and South Korea; for U.S. nationals; and for students and business apprentices from India. See Exemptions in chapter 5.

What exemptions can I claim as a dual-status taxpayer?

As a dual-status taxpayer, you usually will be able to claim your own personal exemption. Subject to the general rules for qualification, you can claim exemptions for your spouse and dependents when you figure taxable income for the part of the year you are a resident alien. The amount you can claim for these exemptions is limited to your taxable income (figured before subtracting exemptions) for the part of the year you are a resident alien. You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period.

I am single with a dependent child. I was a dual-status alien in 2016. Can I claim the earned income credit on my 2016 tax return?

If you are a nonresident alien for any part of the year, you cannot claim the earned income credit. See chapter 6 for more information on dual-status aliens.

I am a nonresident alien student. Can I claim an education credit on my Form 1040NR?

If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse, you may be eligible for these credits. See Nonresident Spouse Treated as a Resident in chapter 1.

I am a nonresident alien, temporarily working in the U.S. under a J visa. Am I subject to social security and Medicare taxes?

Generally, services you perform as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if you perform the services to carry out the purpose for which you were admitted to the United States. See Social Security and Medicare Taxes in chapter 8.

I am a nonresident alien student. Social security taxes were withheld from my pay in error. How do I get a refund of these taxes?

If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund with the IRS on Form 843. Do not use Form 843 to request a refund of Additional Medicare Tax. See Refund of Taxes Withheld in Error in chapter 8.

I am an alien who will be leaving the United States. What forms do I have to file before I leave?

Before leaving the United States, aliens generally must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. These forms are discussed in chapter 11.

I filed a Form 1040-C when I left the United States. Do I still have to file an annual U.S. tax return?

Form 1040-C is not an annual U.S. income tax return. If an income tax return is required by law, you must file that return even though you already filed a Form 1040-C. Chapters 5 and 7 discuss filing an annual U.S. income tax return.

Appendix A--Tax Treaty Exemption Procedure for Students

This appendix contains the statements nonresident alien students and trainees must file with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. For treaty countries not listed, attach a statement in a format similar to those for other treaties. See chapter 8 for more information on withholding.

Belgium

 

Bulgaria

 

China, People's Republic of

 

Cyprus

 

Czech Republic, Estonia, Latvia, Lithuania, and Slovak Republic

 

Egypt

 

France

 

Germany

 

Iceland

 

Indonesia

 

Israel, Philippines and Thailand

 

Korea, Norway, Poland, and Romania

 

Morocco

 

Netherlands

 

Pakistan

 

Portugal and Spain

 

Slovenia and Venezuela

 

Trinidad and Tobago

 

Tunisia

 

Appendix B--Tax Treaty Exemption Procedure for Teachers and Researchers

This appendix contains the statements nonresident alien teachers and researchers must file with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. For treaty countries not listed, attach a statement in a format similar to those for other treaties. See chapter 8 for more information on withholding.

Belgium

 

Bulgaria

 

China, People's Republic of

 

Commonwealth of Independent States

The treaty with former Union of Soviet Socialist Republics remains in effect for the following countries: Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

 

Czech Republic and Slovak Republic

 

Egypt, Hungary, Korea, Philippines, Poland, and Romania

 

France

 

Germany

 

Greece

 

India

 

Indonesia

 

Israel

 

Italy

 

Jamaica

 

Luxembourg

 

Netherlands

 

Norway

 

Pakistan

 

Portugal

 

Slovenia and Venezuela

 

Thailand

 

Trinidad and Tobago

 

United Kingdom