A Non-Resident Alien is an individual who has not substantiated the green card test. You can be either a based out temporarily or on a more permanent basis. Your tax reporting requirement varies accordingly.
Temporary Non-Resident Aliens in the U.S.A. (Less than 90 days)
Your income earned can be free from federal tax if the below conditions apply.
- If you were in the U.S. for less than 90 days.
- If your total compensation is less than $3,000.
- If you are an employee or under contract with a foreign person not engaged in business in the U.S.A. If the services are performed for the U.S. person's office overseas or a U.S. government agency's foreign office.
Please note that the $3,000 remuneration is exclusive of funds received for travel expenses, excluding pension or retirement payments from services performed in the U.S.
There are exceptions to these rules as the U.S. government negotiates tax treaties with many countries. At Next Level Tax, we are aware of these changes and will evaluate your taxes according to your home country, professional service, and limit of stay.
Permanent Non-Resident Aliens in the U.S.A. (More than 90 days)
In the U.S., we have both resident aliens and non-resident aliens. Resident aliens are taxed on worldwide income, while non-resident aliens are taxed on US-sourced income only. As a non-resident alien, you can avail yourself of many opportunities of the U.S. Tax laws.
The first step is to verify your non-resident alien status. You are treated as a resident alien in the following cases:
- You are a lawful permanent resident.
- You meet the substantial presence test.
- You choose to be treated as a resident alien.
If these are not fulfilled, you are considered a non-resident alien. There are exceptions to these rules where you can be considered for dual-status residency. All departing aliens, be it resident or non-resident, must obtain a sailing or departure permit from the I.R.S. stating that they have complied with the U.S. income tax laws.
Income is subject to withholding if it is an FDAP (Fixed or determinable annual or periodical) in nature like interest, alimony, dividends, royalties, pension and annuities, original issue discount compensation for personal services.
Non-resident aliens file for 1040-NR, subject to certain rules depending on their marital status. Non-resident aliens cannot claim standard deductions. However, India's students and apprentices may be eligible to claim the standard deduction under article 21 of the U.S.A. - India Income Tax.
Non-resident aliens may claim an exemption for a spouse or a dependent depending on their home country and other criteria. Next Level Tax helps you explore your options based on your unique circumstances and advises the best tax option for you.