A non-resident foreigner is a non-citizen who has not passed or is exempt from the green card or substantial presence tests. Typical examples of non-resident foreigners are teachers, those seeking medical treatment and students.
Break up the non-resident alien
Once a person has stayed in the United States for a specific period of time, they can be considered a resident alien under the substantial presence test. To be successful, the individual must remain in the United States for more than 31 days in a current year. They can also be classified as resident aliens if they have resided in the United States for more than 183 days over a three-year period, which includes the current year.
Tax consequences for foreign non-residents
Like permanent citizens, resident foreigners pay taxes on all income earned. However, a non-resident foreigner is subject to tax only in specific circumstances. For a foreigner not resident in the United States, only income earned in the United States is taxable. Dividends from activities based in the United States are taxed at 30%, while there is a capital gains exclusion from the tax. Non-resident foreigners can also benefit from other tax advantages such as exemptions from international treaties.
Non-resident foreign sources of income may be taxable if the source is from the United States. For example, rent payments on properties they own in the United States would be taxable, as well as royalties associated with the extraction of natural resources from properties. Non-resident foreigners are required to submit tax returns for their income-generating activities in the United States.
Non-resident foreigners must file a 1040NR or 1040NR-EZ if they are filing without dependents. All taxes or refunds, due or due, must meet the standard filing deadline of April 15. A non-resident foreigner whose salary is less than the personal exemption amount and no other US income is required to produce.
Departure of non-resident foreigners
To leave the United States, a non-resident foreigner must file a Form 1040-C. This form confirms that they have paid all tax obligations. Non-resident foreigners must file this form to obtain a certificate of compliance, known as a navigation or departure license.
The certificate of conformity states that the non-resident foreigner complies with the tax laws applicable on the date of his departure. However, a Form 1040-C does not remove the requirement to file an appropriate Form 1040NR for the purposes of the annual income tax return.