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Publication 519 Cat. No. 15023T Contents

Introduction ...... 1 Department of the U.S. Tax Guide What's New ...... 2 Treasury Internal Reminders ...... 3 Revenue for Aliens Service Chapter 1. Nonresident Alien or Resident Alien? ...... 3 For use in preparing Chapter 2. Source of Income ...... 11 Chapter 3. Exclusions From 2020 Returns Gross Income ...... 15 Chapter 4. How Income of Aliens Is Taxed ...... 18

Chapter 5. Figuring Your Tax ...... 25

Chapter 6. Dual-Status Tax Year .... 32

Chapter 7. Filing Information ...... 35

Chapter 8. Paying Tax Through Withholding or Estimated Tax ... 38

Chapter 9. Tax Treaty Benefits ..... 46

Chapter 10. Employees of Foreign Governments and International Organizations ...... 49

Chapter 11. Departing Aliens and the Sailing or Departure Permit ...... 50

Chapter 12. How To Get Tax Help ... 52

Appendix A—Tax Treaty Exemption Procedure for Students ...... 57

Appendix B—Tax Treaty Exemption Procedure for Teachers and Researchers ...... 61

Index ...... 66

Future Developments For the latest information about developments related to Pub. 519, such as legislation enacted after it was published, go to IRS.gov/Pub519. Introduction For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as nonresident aliens and resident aliens. This publication will help you determine your status and give you information you will need to file your U.S. tax return. Resident aliens are gener- ally taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their income from sources within the United States and on certain income connected Get forms and other information faster and easier at: with the conduct of a trade or business in the • IRS.gov (English) • IRS.gov/Korean (한국어) United States. • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) The information in this publication is not as • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) comprehensive for resident aliens as it is for

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Table A. Where To Find What You Need To Know About U.S. Taxes

Commonly Asked Questions Where To Find the Answer

Am I a nonresident alien or resident alien? See chapter 1.

Can I be a nonresident alien and a resident alien in the same • See Dual-Status Aliens in chapter 1. year? • See chapter 6. I am a resident alien and my spouse is a nonresident alien. Are • See Nonresident Spouse Treated as a Resident there special rules for us? in chapter 1. • See Community Income in chapter 2. Is all my income subject to U.S. tax? • See chapter 2. • See chapter 3. Is my scholarship subject to U.S. tax? • See Scholarships, Grants, Prizes, and Awards in chapter 2. • See Scholarships and Fellowship Grants in chapter 3. • See chapter 9.

What is the tax rate on my income subject to U.S. tax? See chapter 4.

I moved to the United States this year. Can I deduct my moving See Deductions in chapter 5. expenses on my U.S. return?

Can I claim my spouse and/or children as dependents? See Dependents in chapter 5.

I pay income taxes to my home country. Can I get credit for See Tax Credits and Payments in chapter 5. these taxes on my U.S. tax return?

What forms must I file and when and where do I file them? See chapter 7.

How should I pay my U.S. income taxes? See chapter 8.

Am I eligible for any benefits under a tax treaty? • See Income Entitled to Tax Treaty Benefits in chapter 8. • See chapter 9.

Are employees of foreign governments and international See chapter 10. organizations exempt from U.S. tax?

Is there anything special I have to do before leaving the United • See Expatriation Tax in chapter 4. States? • See chapter 11. nonresident aliens. Resident aliens are gener- publication or the How To Get Tax Help section Economic Security (CARES) Act permits cer- ally treated the same as U.S. citizens and can at the end of this publication, go to the IRS In- tain self-employed individuals to defer the pay- find more information in other IRS publications teractive Tax Assistant page at IRS.gov/ ment of 50% of the social security tax on net at IRS.gov/Forms. Help/ITA where you can find topics by using the earnings from self-employment imposed for the Table A provides a list of questions and the search feature or viewing the categories listed. period beginning on March 27, 2020, and end- chapter or chapters in this publication where ing December 31, 2020. For more information, you will find the related discussion. Getting tax forms, instructions, and pub- see chapter 8, later. Answers to frequently asked questions are lications. Visit IRS.gov/Forms to download Credits for certain self-employed individu- presented in the back of the publication. current and prior-year forms, instructions, and publications. als. New refundable income tax credits are available for certain self-employed individuals Comments and suggestions. We welcome Ordering tax forms, instructions, and impacted by COVID-19. For more information, your comments about this publication and sug- publications. Go to IRS.gov/OrderForms to see chapter 5, later. Also see Form 7202 and its gestions for future editions. order current forms, instructions, and publica- instructions. You can send us comments through tions; call 800-829-3676 to order prior-year IRS.gov/FormComments. Or, you can write to forms and instructions. The IRS will process COVID-19 waiver of time requirements for the Internal Revenue Service, Tax Forms and your order for forms and publications as soon the foreign earned income exclusion. Due Publications, 1111 Constitution Ave. NW, as possible. Do not resubmit requests you’ve to COVID-19, you may be allowed a waiver of IR-6526, Washington, DC 20224. already sent us. You can get forms and publica- the time requirements necessary to meet either Although we can’t respond individually to tions faster online. the bona fide residence test or physical pres- each comment received, we do appreciate your ence test for purposes of claiming the foreign feedback and will consider your comments and earned income exclusion. For more information, suggestions as we revise our tax forms, instruc- see Exclusions From Gross Income in chap- tions, and publications. Do not send tax ques- What's New ter 3, later. Also see Revenue Procedure tions, tax returns, or payments to the above ad- 2020-27, available at IRS.gov/irb/ dress. Coronavirus tax relief for self-employed in- 2020-20_IRB#REV-PROC-2020-27, and the In- dividuals. The Coronavirus Aid, Relief, and structions for Form 2555. Getting answers to your tax questions. If you have a tax question not answered by this COVID-19 Medical Condition Travel Excep- tion. If you intended to leave the United States

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in 2020, but you were unable to do so due to Form 1040 Schedules 1, 2, or 3 to Form asking the IRS for copies of notices or tran- COVID-19 travel disruptions, you may be eligi- 1040-NR. For more information, see Form scripts related to your return. Also, the authori- ble to exclude up to 60 days of continuous pres- 1040-NR and its instructions. zation can be revoked. See your income tax re- ence in the United States starting on or after turn instructions for details. February 1, 2020, but no later than April 1, Change of address. If you change your mail- 2020, for purposes of applying the substantial ing address, be sure to notify the IRS using presence test. Also, these days are not taken Reminders Form 8822. into account for purposes of determining your Disaster tax relief. Disaster tax relief is avail- eligibility for treaty benefits with respect to in- Photographs of missing children. The IRS is able for those impacted by certain Presidentially come from employment or the performance of a proud partner with the National Center for declared disasters in 2020 (see IRS.gov/ dependent personal services in the United Missing & Exploited Children® (NCMEC). Pho- DisasterTaxRelief). Aliens who are required to States. For more information, see COVID-19 tographs of missing children selected by the Medical Condition Travel Exception, later. Also file a U.S. income tax return may be affected. Center may appear in this publication on pages see Revenue Procedure 2020-20, available at For more information, see the Instructions for that would otherwise be blank. You can help IRS.gov/irb/2020-20_IRB#REV- Forms 1040 and 1040-SR, or the Instructions bring these children home by looking at the PROC-2020-20; FAQs for Individual Claiming for Form 1040-NR. photographs and calling 800-THE-LOST the Medical Condition Exception in 2020, avail- Multilevel marketing. For clarification regard- (800-843-5678) if you recognize a child. able at IRS.gov/newsroom/FAQs-for- ing the characterization and source of income Individuals-Claiming-the-Medical-Condition- received from multilevel marketing companies Exception-in-2020; and the instructions for by distributors (upper-tier distributors) that are Forms 8843 and 8233. based on the sales or purchases of persons whom they have recruited and sponsored COVID-19 30-day medical condition excep- (lower-tier distributors), see Multilevel market- tion. If you qualify to exclude days of presence ing under Personal Services in chapter 2. because of a medical condition for purposes of 1. the substantial presence test, you may file Form Additional Medicare Tax. You may be re- 8843 without a physician's statement to cover a quired to pay Additional Medicare Tax. Also, single period of up to 30 consecutive calendar you may need to report Additional Medicare Nonresident days in 2020. See Days of Presence in the Uni- Tax withheld by your employer. For more infor- ted States, later. Also see FAQs for Individuals mation, see Additional Medicare Tax under So- Claiming the Medical Condition Exception in cial Security and Medicare Taxes and Addi- Alien or 2020, available at IRS.gov/newsroom/FAQs- tional Medicare Tax under Self-Employment for-Individuals-Claiming-the-Medical-Condition- Tax in chapter 8. For more information on Addi- Exception-in-2020, and the instructions for tional Medicare Tax, go to IRS.gov and enter Resident Alien? Form 8843. “Additional Medicare Tax” in the search box. COVID-19 relief for certain nonresident Premium tax credit. You may be eligible to alien individuals temporarily performing claim the premium tax credit if you, your Introduction services or other activities in the United spouse, or a dependent enrolled in health insur- States. Due to COVID-19, you may be eligible ance through the Health Insurance Marketplace You should first determine whether, for income to choose an uninterrupted period of up to 60 (Marketplace). See Form 8962 and the Instruc- tax purposes, you are a nonresident alien or a calendar days, beginning on or after February tions for Form 8962 for more information. resident alien. 1, 2020, and on or before April 1, 2020, during Advance payments of the premium tax If you are both a nonresident and resident in which your services or other activities conduc- credit. Advance payments of the premium tax the same year, you have a dual status. See ted in the United States will not be taken into credit may have been made to the health in- Dual Status Alien, later. Also see Nonresident account in determining whether you were en- surer to help pay for the insurance coverage of Spouse Treated as a Resident and some other gaged in a trade or business in the United you, your spouse, or your dependent. If ad- special situations explained later in the chapter. States or have a permanent establishment un- vance payments of the premium tax credit were der an income tax treaty. For more information, made, you must file a 2020 tax return and Form Topics see Personal Services in chapter 4, later. Also 8962. If you enrolled someone who is not This chapter discusses: see FAQs for Nonresident Alien Individuals and claimed as a dependent on your tax return or for Foreign Businesses with Employees or Agents more information, see the Instructions for Form • How to determine if you are a nonresident, Impacted by COVID-19 Emergency Travel Dis- 8962. resident, or dual-status alien; and ruptions, available at IRS.gov/newsroom/FAQs- Form 1095-A. If you, your spouse, or a de- • How to treat a nonresident spouse as a for-Nonresident-Alien-Individuals-and-Foreign- pendent enrolled in health insurance through resident alien. Businesses-with-Employees-or-Agents- the Marketplace, you should have received a Impacted-by-COVID-19-Emergency-Travel- Form 1095-A. If you receive a Form 1095-A for Disruptions. Useful Items 2020, save it. It will help you figure your pre- You may want to see: Charitable contributions. Students or busi- mium tax credit. If you did not receive a Form ness apprentices eligible for the benefits of Arti- 1095-A, contact the Marketplace. Form (and Instructions) cle 21(2) of the United States-India Income Tax Refunds of certain withholding tax delayed.

Treaty who have elected to use the standard Refund requests for tax withheld and reported 1040 1040 U.S. Individual Income Tax Return deduction may qualify to take a deduction for on Form 1042-S, Form 8288-A, or Form 8805 1040-SR 1040-SR U.S. Tax Return for Seniors charitable contributions of up to $300. For more may require additional time for processing. Al- information, see chapter 5. low up to 6 months for these refunds to be is- 1040-NR 1040-NR U.S. Nonresident Alien Income Form 1040-NR-EZ discontinued. Beginning sued. Tax Return with tax year 2020, Form 1040-NR-EZ is no lon- Third-party designee. You can check the 8833 8833 Treaty-Based Return Position ger available. Nonresident alien taxpayers “Yes” box in the “Third-Party Designee” area of Disclosure Under Section 6114 or should use Form 1040-NR. your return to authorize the IRS to discuss your 7701(b) Redesigned Form 1040-NR. Beginning with return with a friend, family member, or any other

8840 8840 Closer Connection Exception tax year 2020, nonresident alien taxpayers will person you choose. This allows the IRS to call Statement for Aliens file a redesigned Form 1040-NR, which is simi- the person you identified as your designee to

lar to the Form 1040. Attach Form 1040-NR answer any questions that may arise during the 8843 8843 Statement for Exempt Individuals Schedules OI, A, and NEC to Form 1040-NR as processing of your return. It also allows your and Individuals With a Medical necessary. Filers may also be required to attach designee to perform certain actions such as Condition

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See chapter 12 for information about getting Until you have proof your letter was re- considered a resident under the substantial these forms. ! ceived, you remain a resident alien for presence test for 2020. CAUTION tax purposes even if the USCIS would not recognize the validity of your green card be- The term “United States” includes the follow- Nonresident Aliens cause it is more than 10 years old or because ing areas. you have been absent from the United States • All 50 states and the District of Columbia. If you are an alien (not a U.S. citizen), you are for a period of time. • The territorial waters of the United States. considered a nonresident alien unless you meet • The seabed and subsoil of those submar- If the USCIS or U.S. consular officer initiates ine areas that are adjacent to U.S. territo- one of the two tests described under Resident this determination, your resident status will be Aliens below. rial waters and over which the United considered to be abandoned when the final ad- States has exclusive rights under interna- ministrative order of abandonment is issued. If tional law to explore and exploit natural re- you are granted an appeal to a federal court of sources. Resident Aliens competent jurisdiction, a final judicial order is required. The term does not include U.S. possessions You are a resident alien of the United States for Under U.S. immigration law, a lawful perma- and territories or U.S. airspace. tax purposes if you meet either the green card nent resident who is required to file a tax return test or the substantial presence test for calen- as a resident and fails to do so may be regar- Days of Presence dar year 2020 (January 1–December 31). Even ded as having abandoned status and may lose in the United States if you do not meet either of these tests, you may permanent resident status. be able to choose to be treated as a U.S. resi- You are treated as present in the United States A long-term resident (LTR) who ceases dent for part of the year. See First-Year Choice on any day you are physically present in the to be a lawful permanent resident may under Dual-Status Aliens, later. country at any time during the day. However, be subject to special reporting require- there are exceptions to this rule. Do not count ments and tax provisions. See Expatriation Tax the following as days of presence in the United Green Card Test in chapter 4. States for the substantial presence test. • Days you commute to work in the United You are a resident for tax purposes if you are a Termination of residency after June 3, States from a residence in Canada or Mex- lawful permanent resident of the United States 2004, and before June 17, 2008. If you ter- ico if you regularly commute from Canada at any time during calendar year 2020. (How- minated your residency after June 3, 2004, and or Mexico. ever, see Dual-Status Aliens, later.) This is before June 17, 2008, you will still be consid- • Days you are in the United States for less known as the “green card” test. You are a lawful ered a U.S. resident for tax purposes until you than 24 hours when you are in transit be- permanent resident of the United States at any notify the Secretary of Homeland Security and tween two places outside the United time if you have been given the privilege, ac- file Form 8854. cording to the immigration laws, of residing per- States. Days you are in the United States as a manently in the United States as an immigrant. Note. Requirements for taxpayers who ex- • crew member of a foreign vessel. You generally have this status if the U.S. Citi- patriated before June 17, 2008, are no longer Days you are unable to leave the United zenship and Immigration Services (USCIS) (or discussed in the Instructions for Form 8854 or • States because of a medical condition that its predecessor organization) has issued you an Pub. 519. For information on expatriation before arose while you are in the United States. If alien registration card, also known as a “green June 17, 2008, see the 2018 Instructions for you were unable to leave the United States card.” You continue to have resident status un- Form 8854, and chapter 4 of the 2018 Pub. due to COVID-19 travel disruptions, you der this test unless the status is taken away 519. from you or is administratively or judicially de- may be eligible to exclude up to 60 con- termined to have been abandoned. Termination of residency after June 16, secutive days in the United States during a 2008. For information on your residency termi- certain period. See COVID-19 Medical Resident status taken away. Resident status nation date, see Former LTR under Expatriation Condition Travel Exception, later. is considered to have been taken away from After June 16, 2008, in chapter 4. • Days you are in the United States under a you if the U.S. Government issues you a final NATO visa as a member of a force or civil- administrative or judicial order of exclusion or Substantial Presence Test ian component to NATO. However, this ex- deportation. A final judicial order is an order that ception does not apply to an immediate you may no longer appeal to a higher court of family member who is present in the Uni- competent jurisdiction. You are a resident for tax purposes if you meet ted States under a NATO visa. A depend- the substantial presence test for calendar year ent family member must count every day of Resident status abandoned. An administra- 2020. To meet this test, you must be physically presence for purposes of the substantial tive or judicial determination of abandonment of present in the United States on at least: presence test. resident status may be initiated by you, the US- 1. 31 days during 2020; and • Days you are an exempt individual. CIS, or a U.S. consular officer. The specific rules that apply to each of these 2. 183 days during the 3-year period that in- If you initiate the determination, your resi- categories are discussed next. dent status is considered to be abandoned cludes 2020, 2019, and 2018, counting: when you file either of the following documents a. All the days you were present in 2020, Regular commuters from Canada or Mex- with your USCIS Alien Registration Receipt and ico. Do not count the days on which you com- Card (green card) attached with the USCIS or a mute to work in the United States from your res- b. 1/3 of the days you were present in U.S. consular officer. idence in Canada or Mexico if you regularly 2019, and • USCIS.gov/Form I-407 (Record of Aban- commute from Canada or Mexico. You are con- donment of Lawful Permanent Resident c. 1/6 of the days you were present in sidered to commute regularly if you commute to Status), or 2018. work in the United States on more than 75% • A letter stating your intent to abandon your (0.75) of the workdays during your working pe- resident status. When filing by mail, you Example. You were physically present in riod. must send by certified mail, return receipt the United States on 120 days in each of the For this purpose, “commute” means to travel requested (or the foreign equivalent), and years 2020, 2019, and 2018. To determine if to work and return to your residence within a keep a copy and proof that it was mailed you meet the substantial presence test for 24-hour period. “Workdays” are the days on and received. 2020, count the full 120 days of presence in which you work in the United States or Canada 2020, 40 days in 2019 (1/3 of 120), and 20 days or Mexico. “Working period” means the period in 2018 (1/6 of 120). Because the total for the beginning with the first day in the current year 3-year period is 180 days, you are not on which you are physically present in the

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United States to work and ending on the last able to establish an intent to leave the United Medical Condition Travel Exception under Tax day in the current year on which you are physi- States before the end of that extended period. Treaty Benefits in chapter 9, later. cally present in the United States to work. If In the case of an individual who is judged your work requires you to be present in the Uni- mentally incompetent, proof of intent to leave Exempt individual. Do not count days for ted States only on a seasonal or cyclical basis, the United States can be determined by analyz- which you are an exempt individual. The term your working period begins on the first day of ing the individual's pattern of behavior before he “exempt individual” does not refer to someone the season or cycle on which you are present in or she was judged mentally incompetent. If you exempt from U.S. tax, but instead refers to any- the United States to work and ends on the last qualify to exclude days of presence because of one in the following categories. day of the season or cycle on which you are a medical condition, you must file a fully com- • An individual temporarily present in the present in the United States to work. You can pleted Form 8843 with the IRS. See Form 8843, United States as a foreign government-re- have more than one working period in a calen- later. lated individual under an “A” or “G” visa dar year, and your working period can begin in other than individuals holding “A-3” or one calendar year and end in the following cal- For 2020, you may file Form 8843 with- “G-5” class visas. endar year. TIP out a physician's statement to cover a • A teacher or trainee temporarily present in single period of up to 30 consecutive the United States under a “J” or “Q” visa Example. Maria Perez lives in Mexico and calendar days in 2020. See FAQs for Individu- who substantially complies with the re- works for Compañía ABC in its office in Mexico. als Claiming the Medical Condition Exception in quirements of the visa. She was assigned to her firm's office in the Uni- 2020, available at IRS.gov/newsroom/FAQs- • A student temporarily present in the United ted States from February 1 through June 1. On for-Individuals-Claiming-the-Medical-Condition- States under an “F,” “J,” “M,” or “Q” visa June 2, she resumed her employment in Mex- Exception-in-2020, and the instructions for who substantially complies with the re- ico. For 69 workdays, Maria commuted each Form 8843. quirements of the visa. morning from her home in Mexico to work in You cannot exclude any days of presence in • A professional athlete temporarily present Compañía ABC's U.S. office. She returned to the United States under the following circum- in the United States to compete in a chari- her home in Mexico on each of those evenings. stances. table sports event. For 7 workdays, she worked in her firm's Mex- • You were initially prevented from leaving, The specific rules for each of these four cat- ico office. For purposes of the substantial pres- were then able to leave, but remained in egories (including any rules on the length of ence test, Maria does not count the days she the United States beyond a reasonable pe- time you will be an exempt individual) are dis- commuted to work in the United States because riod for making arrangements to leave. cussed next. those days equal more than 75% (0.75) of the • You returned to the United States for treat- workdays during the working period (69 work- ment of a medical condition that arose dur- Foreign government-related individuals. days in the United States divided by 76 work- ing a prior stay. A foreign government-related individual is an in- days in the working period equals 90.8%). • The condition existed before your arrival in dividual (or a member of the individual's imme- the United States and you were aware of diate family) who is temporarily present in the Days in transit. Do not count the days you the condition. It does not matter whether United States: are in the United States for less than 24 hours you needed treatment for the condition • As a full-time employee of an international and you are in transit between two places out- when you entered the United States. organization, side the United States. You are considered to • By reason of diplomatic status, or be in transit if you engage in activities that are COVID-19 Medical Condition Travel Ex- • By reason of a visa (other than a visa that substantially related to completing travel to your ception. COVID-19 travel disruptions caused grants lawful permanent residence) that foreign destination. For example, if you travel certain eligible individuals who did not antici- the Secretary of the Treasury determines between airports in the United States to change pate meeting the substantial presence test dur- represents full-time diplomatic or consular planes en route to your foreign destination, you ing 2020 to stay in the United States longer than status. are considered to be in transit. However, you they originally intended. are not considered to be in transit if you attend Eligible individuals may exclude a single pe- Note. You are considered temporarily a business meeting while in the United States. riod of up to 60 consecutive calendar days they present in the United States regardless of the This is true even if the meeting is held at the air- select, starting no earlier than February 1, 2020, actual amount of time you are present in the port. but no later than April 1, 2020, during which United States. they were physically present in the United An international organization is any public Crew members. Do not count the days you States (your COVID-19 emergency period) for international organization that the President of are temporarily present in the United States as purposes of applying the substantial presence the United States has designated by Executive a regular crew member of a foreign vessel (boat test. Order as being entitled to the privileges, ex- or ship) engaged in transportation between the For more information, see the Instructions emptions, and immunities provided for in the In- United States and a foreign country or a U.S. for Form 8843. ternational Organizations Act. An individual is a possession. However, this exception does not You are an eligible individual if: full-time employee if his or her work schedule apply if you otherwise engage in any trade or • You were not a U.S. resident at the end of meets the organization's standard full-time work business in the United States on those days. 2019, schedule. • You were not a lawful permanent resident An individual is considered to have full-time Medical condition. Do not count the days you (green card holder) at any time in 2020, diplomatic or consular status if he or she: intended to leave, but could not leave, the Uni- • You were physically present in the United • Has been accredited by a foreign govern- ted States because of a medical condition or States on each of the days of your ment that is recognized by the United problem that arose while you were in the United COVID-19 emergency period, and States, States. Also see COVID-19 Medical Condition • You did not become a U.S. resident in • Intends to engage primarily in official activi- Travel Exception, later. Whether you intended 2020 due to days of presence in the United ties for that foreign government while in the to leave the United States on a particular day is States outside of your COVID-19 emer- United States, and determined based on all the facts and circum- gency period. • Has been recognized by the President, stances. For example, you may be able to es- For more information, see Revenue Proce- Secretary of State, or a consular officer as tablish that you intended to leave if your pur- dure 2020-20, available at IRS.gov/irb/ being entitled to that status. pose for visiting the United States could be 2020-20_IRB#REV-PROC-2020-20; FAQs for accomplished during a period that is not long Members of the immediate family include Individuals Claiming the Medical Condition Ex- the individual's spouse and unmarried children enough to qualify you for the substantial pres- ception in 2020, available at IRS.gov/ ence test. However, if you need an extended (whether by blood or adoption) but only if the newsroom/FAQs-for-Individuals-Claiming-the- spouse's or unmarried children's visa statuses period of time to accomplish the purpose of Medical-Condition-Exception-in-2020; and the your visit and that period would qualify you for instructions for Form 8843. Also see COVID-19 the substantial presence test, you would not be

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are derived from, and dependent on, the ex- exempt as a teacher for at least 2 of the past 6 the following categories, you must file a fully empt individual's visa classification. Unmarried years. completed Form 8843. children are included only if they: If her compensation for the past 2 years had • You were unable to leave the United • Are under 21 years of age, been paid by a foreign employer, she would be States as planned because of a medical • Reside regularly in the exempt individual's an exempt individual for the current year. condition or problem. household, and • You were temporarily in the United States • Are not members of another household. Students. A student is any individual who as a teacher or trainee on a “J” or “Q” visa. is temporarily in the United States on an “F,” “J,” • You were temporarily in the United States Note. Generally, if you are present in the “M,” or “Q” visa and who substantially complies as a student on an “F,” “J,” “M,” or “Q” visa. United States under an “A” or “G” class visa, with the requirements of that visa. You are con- • You were a professional athlete competing you are considered a foreign government-rela- sidered to have substantially complied with the in a charitable sports event. ted individual (with full-time diplomatic or con- visa requirements if you have not engaged in sular status). None of your days count for pur- activities that are prohibited by U.S. immigration Note. If you are an eligible individual who is poses of the substantial presence test. laws and could result in the loss of your visa claiming the COVID-19 Medical Condition status. Travel Exception under Revenue Procedure Household staff exception. If you are Also included are immediate family mem- 2020-20, then you must file Form 8843 only if present in the United States under an “A-3” or bers of exempt students. See the definition of you are required to file Form 1040-NR for 2020. “G-5” class visa as a personal employee, at- “immediate family,” earlier, under Foreign gov- If you are not required to file Form 1040-NR for tendant, or domestic worker for either a foreign ernment-related individuals. 2020, and therefore do not have to file Form government or international organization offi- You will not be an exempt individual as a 8843, you must still keep relevant records sup- cial, you are not considered a foreign govern- student in 2020 if you have been exempt as a porting your reliance on Revenue Procedure ment-related individual and must count all your teacher, trainee, or student for any part of more 2020-20. See the Instructions to Form 8843 for days of presence in the United States for purpo- than 5 calendar years unless you meet both of more information. ses of the substantial presence test. the following requirements. • You establish that you do not intend to re- Teachers and trainees. A teacher or Attach Form 8843 to your 2020 income tax side permanently in the United States. return. If you do not have to file a return, send trainee is an individual, other than a student, • You have substantially complied with the who is temporarily in the United States under a Form 8843 to the following address. requirements of your visa. “J” or “Q” visa and substantially complies with the requirements of that visa. You are consid- The facts and circumstances to be consid- Department of the Treasury ered to have substantially complied with the ered in determining if you have demonstrated Internal Revenue Service Center visa requirements if you have not engaged in an intent to reside permanently in the United Austin, TX 73301-0215 activities that are prohibited by U.S. immigration States include, but are not limited to, the follow- laws and could result in the loss of your visa ing. You must file Form 8843 by the due date for status. • Whether you have maintained a closer filing Form 1040-NR. The due date for filing is Also included are immediate family mem- connection to a foreign country (discussed discussed in chapter 7. If you are required to file bers of exempt teachers and trainees. See the later). Form 8843 and you do not timely file Form definition of “immediate family,” earlier, under • Whether you have taken affirmative steps 8843, you cannot exclude the days you were Foreign government-related individuals. to change your status from nonimmigrant present in the United States as a professional You will not be an exempt individual as a to lawful permanent resident as discussed athlete or because of a medical condition that teacher or trainee in 2020 if you were exempt later under Closer Connection to a Foreign arose while you were in the United States. This as a teacher, trainee, or student for any part of 2 Country. does not apply if you can show by clear and of the 6 preceding calendar years. However, If you qualify to exclude days of presence as convincing evidence that you took reasonable you will be an exempt individual if all of the fol- a student, you must file a fully completed Form actions to become aware of the filing require- lowing conditions are met. 8843 with the IRS. See Form 8843, later. ments and significant steps to comply with • You were exempt as a teacher, trainee, or those requirements. student for any part of 3 (or fewer) of the 6 Professional athletes. A professional ath- preceding calendar years. lete who is temporarily in the United States to If you do not timely file Form 8843, you can- • A foreign employer paid all of your com- compete in a charitable sports event is an ex- not exclude the days you were present in the pensation during 2020. empt individual. A charitable sports event is one United States as a professional athlete or be- • You were present in the United States as a that meets the following conditions. cause of a medical condition that arose while teacher or trainee in any of the 6 prior • The main purpose is to benefit a qualified you were in the United States. This does not ap- years. charitable organization. ply if you can show by clear and convincing evi- • A foreign employer paid all of your com- • The entire net proceeds go to charity. dence that you took reasonable actions to be- pensation during each of the preceding 6 • Volunteers perform substantially all the come aware of the filing requirements and years you were present in the United work. significant steps to comply with those require- States as a teacher or trainee. In figuring the days of presence in the Uni- ments. A foreign employer includes an office or place ted States, you can exclude only the days on of business of an American entity in a foreign which you actually competed in a sports event. Closer Connection country or a U.S. possession. You cannot exclude the days on which you to a Foreign Country If you qualify to exclude days of presence as were in the United States to practice for the a teacher or trainee, you must file a fully com- event, to perform promotional or other activities Even if you meet the substantial presence test, pleted Form 8843 with the IRS. See Form 8843, related to the event, or to travel between you can be treated as a nonresident alien if you: later. events. • Are present in the United States for less If you qualify to exclude days of presence as than 183 days during the year, Example. Carla was temporarily in the Uni- a professional athlete, you must file a fully com- • Maintain a tax home in a foreign country ted States during the year as a teacher on a “J” pleted Form 8843 with the IRS. See Form 8843 during the year, and visa. Her compensation for the year was paid next. • Have a closer connection during the year by a foreign employer. Carla was treated as an to one foreign country in which you have a exempt teacher for the previous 2 years, but her Form 8843. If you exclude days of presence in tax home than to the United States (unless compensation was not paid by a foreign em- the United States because you fall into any of you have a closer connection to two for- ployer. She will not be considered an exempt eign countries, discussed next). individual for the current year because she was Closer connection to two foreign countries. You can demonstrate that you have a closer

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connection to two foreign countries (but not 2. The types of official forms and documents Effect of Tax Treaties more than two) if you meet all of the following you file, such as Form W-9, Form conditions. W-8BEN, or Form W-8ECI. Dual residents. The rules given here to deter- • You maintained a tax home beginning on 3. The location of: mine if you are a U.S. resident do not override the first day of the year in one foreign Your permanent home; tax treaty definitions of residency. If you are a country. • • Your family; dual-resident taxpayer, you can still claim the • You changed your tax home during the Your personal belongings, such as benefits under an income tax treaty. A dual-resi- year to a second foreign country. • cars, furniture, clothing, and jewelry; dent taxpayer is one who is a resident of both • You continued to maintain your tax home Your current social, political, cultural, the United States and another country under in the second foreign country for the rest of • professional, or religious affiliations; each country's tax laws. The income tax treaty the year. • Your business activities (other than between the two countries must contain a provi- • You had a closer connection to each for- those that constitute your tax home); sion that provides for resolution of conflicting eign country than to the United States for The jurisdiction in which you hold a claims of residence (tiebreaker rule). If you are the period during which you maintained a • driver's license; treated as a resident of a foreign country under tax home in that foreign country. • The jurisdiction in which you vote; a tax treaty, you are treated as a nonresident • You are subject to tax as a resident under and alien in figuring your U.S. income tax. For pur- the tax laws of either foreign country for the Charitable organizations to which you poses other than figuring your tax, you will be entire year or subject to tax as a resident in • contribute. treated as a U.S. resident. For example, the both foreign countries for the period during rules discussed here do not affect your resi- which you maintained a tax home in each It does not matter whether your permanent dency time periods, as discussed under foreign country. home is a house, an apartment, or a furnished Dual-Status Aliens, later. room. It also does not matter whether you rent Tax home. Your tax home is the general area or own it. It is important, however, that your Information to be reported. If you are a of your main place of business, employment, or home be available at all times, continuously, dual-resident taxpayer and you claim treaty post of duty, regardless of where you maintain and not solely for short stays. benefits, you must file a return using Form your family home. Your tax home is the place 1040-NR with Form 8833 attached, and com- where you permanently or indefinitely work as When you cannot have a closer connection. pute your tax as a nonresident alien. A dual-res- an employee or a self-employed individual. If You cannot claim you have a closer connection ident taxpayer may also be eligible for U.S. you do not have a regular or main place of busi- to a foreign country if either of the following ap- competent authority assistance. See Revenue ness because of the nature of your work, then plies. Procedure 2015-40, 2015-35 I.R.B. 236 availa- your tax home is the place where you regularly • You personally applied, or took other steps ble at IRS.gov/irb/2015-35_IRB#RP-2015-40, live. If you do not fit either of these categories, during the year, to change your status to or its successor. you are considered an itinerant and your tax that of a permanent resident; or See Reporting Treaty Benefits Claimed in home is wherever you work. • You had an application pending for adjust- chapter 9 for more information on reporting For determining whether you have a closer ment of status during the current year. treaty benefits. connection to a foreign country, your tax home Steps to change your status to that of a perma- must also be in existence for the entire current nent resident include, but are not limited to, the Certain students and trainees from Barba- year and must be located in the same foreign filing of the following forms. dos, Hungary, and Jamaica. Nonresident country to which you are claiming to have a • Form I-508, Request for Waiver of Certain alien students from Barbados, Hungary, and Ja- closer connection. Rights, Privileges, Exemptions, and Im- maica, as well as trainees from Jamaica, may munities. qualify for an election to be treated as a resident Foreign country. In determining whether you Form I-485, Application to Register Perma- alien for U.S. tax purposes under the U.S. in- have a closer connection to a foreign country, • nent Residence or Adjust Status. come tax treaties with those countries. See the term “foreign country” means: • Form I-130, Petition for Alien Relative. Pub. 901 for additional information. If you qual- • Any territory under the sovereignty of the Form I-140, Immigrant Petition for Alien ify for this election, you can make it by filing a United Nations or a government other than • Workers. Form 1040 and attaching a signed election that of the United States, • Form ETA-750, Application for Alien Em- statement to your return. The rules about resi- • The territorial waters of the foreign country ployment Certification. dents aliens described in this publication apply (determined under U.S. law), • Form OF-230, Application for Immigrant to you. Once made, the election applies as long • The seabed and subsoil of those submar- Visa and Alien Registration. as you remain eligible, and you must obtain per- ine areas that are adjacent to the territorial mission from the U.S. competent authority in or- waters of the foreign country and over Form 8840. You must attach a fully completed der to terminate the election. which the foreign country has exclusive Form 8840 to your income tax return to claim rights under international law to explore you have a closer connection to a foreign coun- and exploit natural resources, and try or countries. Dual-Status Aliens • Possessions and territories of the United If you do not have to file a return, send the States. form to: You can be both a nonresident alien and a resi- dent alien during the same tax year. This usu- Establishing a closer connection. You will Department of the Treasury ally occurs in the year you arrive in, or depart be considered to have a closer connection to a Internal Revenue Service Center from, the United States. Aliens who have dual foreign country than the United States if you or Austin, TX 73301-0215 status should see chapter 6for information on the IRS establishes that you have maintained filing a return for a dual-status tax year. more significant contacts with the foreign coun- try than with the United States. In determining You must file Form 8840 by the due date for whether you have maintained more significant filing Form 1040-NR. The due date for filing is First Year of Residency contacts with the foreign country than with the discussed later in chapter 7. United States, the facts and circumstances to If you do not timely file Form 8840, you can- If you are a U.S. resident for the calendar year, be considered include, but are not limited to, not claim a closer connection to a foreign coun- but you were not a U.S. resident at any time the following. try or countries. This does not apply if you can during the preceding calendar year, you are a show by clear and convincing evidence that you U.S. resident only for the part of the calendar 1. The country of residence you designate on took reasonable actions to become aware of year that begins on the residency starting date. forms and documents. the filing requirements and significant steps to You are a nonresident alien for the part of the comply with those requirements. year before that date.

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Residency starting date under substantial You must submit the statement on or before If you make the first-year choice, your resi- presence test. If you meet the substantial the due date for filing Form 1040-NR. The due dency starting date for 2020 is the first day of presence test for a calendar year, your resi- date for filing is discussed in chapter 7. the earliest 31-day period (described in (1) dency starting date is generally the first day you If you do not file the required statement as above) that you use to qualify for the choice. are present in the United States during that cal- explained above, you cannot claim that you You are treated as a U.S. resident for the rest of endar year. However, you do not have to count have a closer connection to a foreign country or the year. If you are present for more than one up to 10 days of actual presence in the United countries. Therefore, your first day of residency 31-day period and you satisfy condition (2) States if on those days you establish that: will be the first day you are present in the United above for each of those periods, your residency • You had a closer connection to a foreign States. This does not apply if you can show by starting date is the first day of the first 31-day country than to the United States, and clear and convincing evidence that you took period. If you are present for more than one • Your tax home was in that foreign country. reasonable actions to become aware of the re- 31-day period but you satisfy condition (2) See Closer Connection to a Foreign Country, quirements for filing the statement and signifi- above only for a later 31-day period, your resi- earlier. cant steps to comply with those requirements. dency starting date is the first day of the later 31-day period. In determining whether you can exclude up Residency starting date under green card to 10 days, the following rules apply. test. If you meet the green card test at any time Note. You do not have to be married to • You can exclude days from more than one during a calendar year, but do not meet the make this choice. period of presence as long as the total substantial presence test for that year, your res- days in all periods are not more than 10. idency starting date is the first day in the calen- Example 1. Juan DaSilva is a citizen of the • You cannot exclude any days in a period of dar year on which you are present in the United Philippines. He came to the United States for consecutive days of presence if all the States as a lawful permanent resident. the first time on November 1, 2020, and was days in that period cannot be excluded. If you meet both the substantial presence here on 31 consecutive days (from November 1 • Although you can exclude up to 10 days of test and the green card test, your residency through December 1, 2020). Juan returned to presence in determining your residency starting date is the earlier of the first day during the Philippines on December 1 and came back starting date, you must include those days the year you are present in the United States to the United States on December 17, 2020. He when determining whether you meet the under the substantial presence test or as a law- stayed in the United States for the rest of the substantial presence test. ful permanent resident. year. During 2021, Juan was a resident of the United States under the substantial presence Example. Ivan Ivanovich is a citizen of Rus- Residency during the preceding year. If you test. Juan can make the first-year choice for sia. He came to the United States for the first were a U.S. resident during any part of the pre- 2020 because he was in the United States in time on January 6, 2020, to attend a business ceding calendar year and you are a U.S. resi- 2020 for a period of 31 days in a row (Novem- meeting and returned to Russia on January 10, dent for any part of the current year, you will be ber 1 through December 1) and for at least 75% 2020. His tax home remained in Russia. On considered a U.S. resident at the beginning of (0.75) of the days following (and including) the March 1, 2020, he moved to the United States the current year. This applies whether you are a first day of his 31-day period (46 total days of and resided here for the rest of the year. Ivan is resident under the substantial presence test or presence in the United States divided by 61 able to establish a closer connection to Russia green card test. days in the period from November 1 through for the period January 6–10, 2020. Thus, his December 31 equals 75.4% (0.754)). If Juan residency starting date is March 1, 2020. Example. Robert Bach is a citizen of Swit- makes the first-year choice, his residency start- Statement required to exclude up to 10 zerland. He came to the United States as a U.S. ing date will be November 1, 2020. days of presence. You must file a statement resident for the first time on May 1, 2019, and with the IRS if you are excluding up to 10 days remained until November 5, 2019, when he re- Example 2. The facts are the same as in of presence in the United States for purposes of turned to Switzerland. Robert came back to the Example 1, except that Juan was also absent your residency starting date. You must sign and United States on March 5, 2020, as a lawful from the United States on December 24, 25, 29, date this statement and include a declaration permanent resident and still resides here. In 30, and 31. He can make the first-year choice that it is made under penalties of perjury. The calendar year 2020, Robert's U.S. residency is for 2020 because up to 5 days of absence are statement must contain the following informa- deemed to begin on January 1, 2020, because considered days of presence for purposes of tion (as applicable). he qualified as a resident in calendar year 2019. the 75% (0.75) requirement. • Your name, address, U.S. taxpayer identi- Statement required to make the fication number (if any), and U.S. visa First-Year Choice first-year choice for 2020. You must attach a number (if any). statement to Form 1040 or 1040-SR to make • Your passport number and the name of the If you do not meet either the green card test or the first-year choice for 2020. The statement country that issued your passport. the substantial presence test for 2019 or 2020 must contain your name and address and spec- • The tax year for which the statement ap- and you did not choose to be treated as a resi- ify the following. plies. dent for part of 2019, but you meet the substan- • That you are making the first-year choice • The first day that you were present in the tial presence test for 2021, you can choose to for 2020. United States during the year. be treated as a U.S. resident for part of 2020. • That you were not a resident in 2019. • The dates of the days you are excluding in To make this choice, you must: • That you are a resident under the substan- figuring your first day of residency. tial presence test in 2021. • Sufficient facts to establish that you have 1. Be present in the United States for at least 31 days in a row in 2020, and • The number of days of presence in the maintained your tax home in, and a closer United States during 2021. connection to, a foreign country during the 2. Be present in the United States for at least • The date or dates of your 31-day period of period you are excluding. 75% of the number of days beginning with presence and the period of continuous Attach the required statement to your in- the first day of the 31-day period and end- presence in the United States during 2020. come tax return. If you are not required to file a ing with the last day of 2020. For purposes • The date or dates of absence from the Uni- return, send the statement to the following ad- of this 75% requirement, you can treat up ted States during 2020 that you are treat- dress. to 5 days of absence from the United ing as days of presence. States as days of presence in the United States. You cannot file Form 1040 or 1040-SR or the Department of the Treasury statement until you meet the substantial pres- Internal Revenue Service Center ence test for 2021. If you have not met the test When counting the days of presence in (1) Austin, TX 73301-0215 for 2021 as of April 15, 2021, you can request and (2) above, do not count the days you were an extension of time for filing your 2020 Form in the United States under any of the exceptions 1040 or 1040-SR until a reasonable period after discussed earlier under Days of Presence in the you have met that test. To request an extension United States.

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to file until October 15, 2021, use Form 4868. turn for the year of the choice. The statement termining whether you can exclude up to 10 You can file the paper form or use one of the must contain the following information. days, the following rules apply. electronic filing options explained in the Form • A declaration that you both qualify to make • You can exclude days from more than one 4868 instructions. You should pay with this ex- the choice and that you choose to be trea- period of presence as long as the total tension the amount of tax you expect to owe for ted as U.S. residents for the entire tax days in all periods are not more than 10. 2020 figured as if you were a nonresident alien year. • You cannot exclude any days in a period of the entire year. You can use Form 1040-NR to • The name, address, and taxpayer identifi- consecutive days of presence if all the figure the tax. Enter the tax on Form 4868. If cation number (SSN or ITIN) of each days in that period cannot be excluded. you do not pay the tax due, you will be charged spouse. (If one spouse died, include the • Although you can exclude up to 10 days of interest on any tax not paid by the regular due name and address of the person who presence in determining your residency date of your return, and you may be charged a makes the choice for the deceased termination date, you must include those penalty on the late payment. spouse.) days when determining whether you meet Once you make the first-year choice, you You generally make this choice when you the substantial presence test. may not revoke it without the approval of the file your joint return. However, you can also Example. Lola Bovary is a citizen of Malta. IRS. make the choice by filing Form 1040-X, Amen- She came to the United States for the first time If you do not follow the procedures dis- ded U.S. Individual Income Tax Return. Attach on March 1, 2020, and resided here until Au- cussed here for making the first-year choice, Form 1040 or 1040-SR and print “Amended” gust 25, 2020. On December 12, 2020, Lola you will be treated as a nonresident alien for all across the top of the corrected return. If you came to the United States for vacation and of 2020. However, this does not apply if you can make the choice with an amended return, you stayed here until December 16, 2020, when she show by clear and convincing evidence that you and your spouse must also amend any returns returned to Malta. She is able to establish a took reasonable actions to become aware of that you may have filed after the year for which closer connection to Malta for the period De- the filing procedures and significant steps to you made the choice. comply with the procedures. cember 12–16. Lola is not a U.S. resident for You must generally file the amended joint tax purposes during 2021 and can establish a return within 3 years from the date you filed closer connection to Malta for the rest of calen- Choosing Resident your original U.S. income tax return or 2 years dar year 2020. Lola is a U.S. resident under the Alien Status from the date you paid your income tax for that substantial presence test for 2020 because she year, whichever is later. was present in the United States for 183 days If you are a dual-status alien, you can choose to (178 days for the period March 1 to August 25 be treated as a U.S. resident for the entire year Last Year of Residency plus 5 days in December). Lola's residency ter- if all of the following apply. mination date is August 25, 2020. • You were a nonresident alien at the begin- If you were a U.S. resident in 2020 but are not a ning of the year. U.S. resident during any part of 2021, you Residency during the next year. If you are a • You are a resident alien or U.S. citizen at cease to be a U.S. resident on your residency U.S. resident during any part of 2021 and you the end of the year. termination date. Your residency termination are a resident during any part of 2020, you will • You are married to a U.S. citizen or resi- date is December 31, 2020, unless you qualify be treated as a resident through the end of dent alien at the end of the year. for an earlier date as discussed later. 2020. This applies whether you have a closer • Your spouse joins you in making the connection to a foreign country than the United choice. Earlier residency termination date. You may States during 2020, and whether you are a resi- qualify for a residency termination date that is dent under the substantial presence test or This includes situations in which both you and earlier than December 31. This date is: green card test. your spouse were nonresident aliens at the be- ginning of the tax year and both of you are resi- 1. The last day in 2020 that you are physi- Statement required to establish your resi- dent aliens at the end of the tax year. cally present in the United States, if you dency termination date. You must file a met the substantial presence test; statement with the IRS to establish your resi- Note. If you are single at the end of the 2. The first day in 2020 that you are no lon- dency termination date. You must sign and date year, you cannot make this choice. ger a lawful permanent resident of the Uni- this statement and include a declaration that it is made under penalties of perjury. The state- If you make this choice, the following rules ted States, if you met the green card test; ment must contain the following information (as apply. or applicable). • You and your spouse are treated as U.S. 3. The later of (1) or (2), if you met both tests. • Your name, address, U.S. taxpayer identi- residents for the entire year for income tax fication number (if any), and U.S. visa purposes. You can use this date only if, for the remainder number (if any). • You and your spouse are taxed on world- of 2020, your tax home was in a foreign country • Your passport number and the name of the wide income. and you had a closer connection to that foreign country that issued your passport. • You and your spouse must file a joint re- country. See Closer Connection to a Foreign • The tax year for which the statement ap- turn for the year of the choice. Country, earlier. plies. • Neither you nor your spouse can make this An LTR who ceases to be a lawful per- • The last day that you were present in the choice for any later tax year, even if you manent resident may be subject to United States during the year. are separated, divorced, or remarried. ! CAUTION special reporting requirements and tax • Sufficient facts to establish that you have The special instructions and restrictions for • provisions. See Expatriation Tax in chapter 4. maintained your tax home in, and that you dual-status taxpayers in chapter 6 do not have a closer connection to, a foreign apply to you. Termination of residency. For information country following your last day of presence on your residency termination date, see Former in the United States during the year or fol- Note. A similar choice is available if, at the LTR under Expatriation After June 16, 2008, in lowing the abandonment or rescission of end of the tax year, one spouse is a nonresident chapter 4. your status as a lawful permanent resident alien and the other spouse is a U.S. citizen or during the year. resident. See Nonresident Spouse Treated as a De minimis presence. If you are a U.S. resi- The date that your status as a lawful per- Resident, later. If you previously made that • dent because of the substantial presence test manent resident was abandoned or rescin- choice and it is still in effect, you do not need to and you qualify to use the earlier residency ter- ded. make the choice explained here. mination date, you can exclude up to 10 days of • Sufficient facts (including copies of rele- actual presence in the United States in deter- vant documents) to establish that your sta- Making the choice. You should attach a state- mining your residency termination date. In de- ment signed by both spouses to your joint re- tus as a lawful permanent resident has been abandoned or rescinded.

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• If you can exclude days, as discussed ear- How To Make the Choice If the choice is ended in one of the following lier under De minimis presence, include ways, neither spouse can make this choice in the dates of the days you are excluding Attach a statement, signed by both spouses, to any later tax year. and sufficient facts to establish that you your joint return for the first tax year for which 1. Revocation. Either spouse can revoke have maintained your tax home in, and that the choice applies. It should contain the follow- the choice for any tax year, provided he or you have a closer connection to, a foreign ing information. she makes the revocation by the due date country during the period you are exclud- • A declaration that one spouse was a non- for filing the tax return for that tax year. ing. resident alien and the other spouse a U.S. The spouse who revokes the choice must Attach the required statement to your in- citizen or resident alien on the last day of attach a signed statement declaring that come tax return. If you are not required to file a your tax year, and that you choose to be the choice is being revoked. The state- return, send the statement to the following ad- treated as U.S. residents for the entire tax ment must include the name, address, and dress: year. identification number of each spouse. (If • The name, address, and identification one spouse dies, include the name and Department of the Treasury number of each spouse. (If one spouse address of the person who is revoking the Internal Revenue Service Center died, include the name and address of the choice for the deceased spouse.) The Austin, TX 73301-0215 person making the choice for the de- statement must also include a list of any ceased spouse.) states, foreign countries, and possessions You must submit the statement on or before that have community property laws in Amended return. You generally make this the due date for filing Form 1040-NR. The due which either spouse is domiciled or where choice when you file your joint return. However, date for filing is discussed in chapter 7. real property is located from which either you can also make the choice by filing a joint If you do not file the required statement as spouse receives income. File the state- amended return on Form 1040-X. Attach Form ment as follows. explained above, you cannot claim that you 1040 or 1040-SR and print “Amended” across have a closer connection to a foreign country or the top of the corrected return. If you make the a. If the spouse revoking the choice countries. This does not apply if you can show choice with an amended return, you and your must file a return, attach the state- by clear and convincing evidence that you took spouse must also amend any returns that you ment to the return for the first year the reasonable actions to become aware of the re- may have filed after the year for which you revocation applies. quirements for filing the statement and signifi- made the choice. cant steps to comply with those requirements. b. If the spouse revoking the choice You must generally file the amended joint does not have to file a return, but return within 3 years from the date you filed does file a return (for example, to ob- Nonresident Spouse your original U.S. income tax return or 2 years tain a refund), attach the statement to from the date you paid your income tax for that the return. year, whichever is later. Treated as a Resident c. If the spouse revoking the choice does not have to file a return and If, at the end of your tax year, you are married Suspending the Choice does not file a claim for refund, send and one spouse is a U.S. citizen or a resident the statement to the Internal Revenue The choice to be treated as a resident alien is alien and the other spouse is a nonresident Service Center where you filed the suspended for any tax year (after the tax year alien, you can choose to treat the nonresident last joint return. spouse as a U.S. resident. This includes situa- you made the choice) if neither spouse is a U.S. tions in which one spouse is a nonresident alien citizen or resident alien at any time during the 2. Death. The death of either spouse ends at the beginning of the tax year, but a resident tax year. This means each spouse must file a the choice, beginning with the first tax year alien at the end of the year, and the other separate return as a nonresident alien for that following the year the spouse died. How- spouse is a nonresident alien at the end of the year if either meets the filing requirements for ever, if the surviving spouse is a U.S. citi- year. nonresident aliens discussed in chapter 7. zen or resident and is entitled to the joint tax rates as a surviving spouse, the choice If you make this choice, you and your Example. Dick Brown was a resident alien will not end until the close of the last year spouse are treated for income tax purposes as on December 31, 2017, and married to Judy, a for which these joint rates may be used. If residents for your entire tax year. Neither you nonresident alien. They chose to treat Judy as a both spouses die in the same tax year, the nor your spouse can claim under any tax treaty resident alien and filed joint 2017 and 2018 in- choice ends on the first day after the close not to be a U.S. resident. You are both taxed on come tax returns. On January 10, 2019, Dick of the tax year in which the spouses died. worldwide income. You must file a joint income became a nonresident alien. Judy had re- 3. Legal separation. A legal separation un- tax return for the year you make the choice, but mained a nonresident alien throughout the pe- der a decree of divorce or separate main- you and your spouse can file joint or separate riod. Dick and Judy could have filed joint or sep- tenance ends the choice as of the begin- returns in later years. arate returns for 2019 because Dick was a ning of the tax year in which the legal resident alien for part of that year. However, be- If you file a joint return under this provi- separation occurs. sion, the special instructions and re- cause neither Dick nor Judy is a resident alien ! at any time during 2020, their choice is suspen- CAUTION strictions for dual-status taxpayers in 4. Inadequate records. The IRS can end chapter 6 do not apply to you. ded for that year. If either meets the filing re- the choice for any tax year that either quirements for nonresident aliens discussed in spouse has failed to keep adequate chapter 7, they must file separate returns as books, records, and other information nec- Example. Bob and Sharon Williams are nonresident aliens for 2020. If Dick becomes a essary to determine the correct income tax married and both are nonresident aliens at the resident alien again in 2021, their choice is no liability, or to provide adequate access to beginning of the year. In June, Bob became a longer suspended. those records. resident alien and remained a resident for the rest of the year. Bob and Sharon both choose to be treated as resident aliens by attaching a Ending the Choice statement to their joint return. Bob and Sharon Aliens From American Once made, the choice to be treated as a resi- must file a joint return for the year they make the dent applies to all later years unless suspended Samoa or Puerto Rico choice, but they can file either joint or separate (as explained earlier under Suspending the returns for later years. Choice) or ended in one of the following ways. If you are a nonresident alien in the United States and a bona fide resident of American Sa- moa or Puerto Rico during the entire tax year,

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you are taxed, with certain exceptions, accord- This chapter will help you determine the source The general rules for determining U.S. ing to the rules for resident aliens of the United of different types of income you may receive source income that apply to most nonresident States. For more information, see Bona Fide during the tax year. aliens are shown in Table 2-1. The following Residents of American Samoa or Puerto Rico in discussions cover the general rules as well as chapter 5. Topics the exceptions to these rules. If you are a nonresident alien from American This chapter discusses: Not all items of U.S. source income are Samoa or Puerto Rico who does not qualify as TIP taxable. See chapter 3. a bona fide resident of American Samoa or Pu- • Income source rules, and erto Rico for the entire tax year, you are taxed • Community income. as a nonresident alien. This chapter also discusses special rules for Interest Income Resident aliens who formerly were bona fide married individuals who are domiciled in a Generally, U.S. source interest income includes residents of American Samoa or Puerto Rico country with community property laws. are taxed according to the rules for resident ali- the following items. ens. • Interest on bonds, notes, or other inter- est-bearing obligations of U.S. residents or Resident Aliens domestic corporations. • Interest paid by a domestic or foreign part- A resident alien's income is generally subject to nership or foreign corporation engaged in tax in the same manner as a U.S. citizen. If you a U.S. trade or business at any time during are a resident alien, you must report all interest, the tax year. 2. dividends, wages, or other compensation for • Original issue discount. services, income from rental property or royal- • Interest from a state, the District of Colum- ties, and other types of income on your U.S. tax bia, or the U.S. Government. return. You must report these amounts from sources within and outside the United States. The place or manner of payment is immate- Source of rial in determining the source of the income. A substitute interest payment made to the Income Nonresident Aliens transferor of a security in a securities lending transaction or a sale-repurchase transaction is Nonresident aliens are taxed only on their in- sourced in the same manner as the interest on come from sources within the United States and the transferred security. Introduction on certain income connected with the conduct After you have determined your alien status, of a trade or business in the United States (see Exceptions. U.S. source interest income does you must determine the source of your income. chapter 4). not include the following items. Table 2-1. Summary of Source Rules for Income of Nonresident Aliens 1. Interest paid by a resident alien or a do- mestic corporation on obligations issued Item of income Factor determining source before August 10, 2010, if for the 3-year period ending with the close of the payer's Salaries, wages, other compensation Where services performed tax year preceding the interest payment, at least 80% (0.80) of the payer's total Business income: gross income: Personal services Where services performed Sale of inventory—purchased Where sold a. Is from sources outside the United States, and Sale of inventory—produced Where produced b. Is attributable to the active conduct of Interest Residence of payer a trade or business by the individual Dividends Whether a U.S. or foreign corporation* or corporation in a foreign country or a U.S. possession. Rents Location of property However, the interest will be consid- Royalties: ered U.S. source interest income if either Natural resources Location of property of the following apply. Patents, copyrights, etc. Where property is used a. The recipient of the interest is related Sale of real property Location of property to the resident alien or domestic cor- poration. See section 954(d)(3) for the Sale of personal property Seller's tax home (but see Personal Property, definition of “related person.” later, for exceptions) b. The terms of the obligation are signifi- Pension distributions attributable to Where services were performed that earned cantly modified after August 9, 2010. contributions the pension Any extension of the term of the obli- gation is considered a significant Investment earnings on pension Location of pension trust modification. contributions 2. Interest paid by a foreign branch of a do- Sale of natural resources Allocation based on fair market value of mestic corporation or a domestic partner- product at export terminal. For more ship on deposits or withdrawable accounts information, see section 1.863-1(b) of the with mutual savings banks, cooperative regulations. banks, credit unions, domestic building and loan associations, and other savings *Exceptions include: Part of a dividend paid by a foreign corporation is U.S. source if at least institutions chartered and supervised as 25% of the corporation's gross income is effectively connected with a U.S. trade or business for savings and loan or similar associations the 3 tax years before the year in which the dividends are declared. Special rules apply for under federal or state law if the interest paid or credited can be deducted by the dividend equivalent payments. association.

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3. Interest on deposits with a foreign branch apply to complex contracts. See Regulations Time Basis of a domestic corporation or domestic section 1.871-15 and Notice 2018-72, 2018-40 partnership, but only if the branch is in the I.R.B., available at IRS.gov/irb/ Use a time basis to figure your U.S. source commercial banking business. 2018-40_IRB#NOT-2018-72, for additional in- compensation (other than the fringe benefits formation. discussed in Geographical Basis). Do this by multiplying your total compensation (other than Dividends the fringe benefits sourced on a geographical Guarantee of Indebtedness basis) by the following fraction. In most cases, dividend income received from domestic corporations is U.S. source income. Amounts received directly or indirectly, for the provision of a guarantee of indebtedness is- Number of days you performed services Dividend income from foreign corporations is in the United States during the year usually foreign source income. An exception to sued after September 27, 2010, are U.S. the second rule is discussed later. source income if they are paid by: Total number of days you performed services during the year 1. A noncorporate resident or U.S. corpora- A substitute dividend payment made to the tion, or transferor of a security in a securities lending You can use a unit of time less than a day in transaction or a sale-repurchase transaction is 2. Any foreign person if the amounts are ef- the above fraction, if appropriate. The time pe- sourced in the same manner as a distribution fectively connected with the conduct of a riod for which the compensation is made does on the transferred security. U.S. trade or business. not have to be a year. Instead, you can use an- other distinct, separate, and continuous time For more information, see section 861(a)(9). Exception. Part of the dividends received period if you can establish to the satisfaction of from a foreign corporation is U.S. source in- the IRS that this other period is more appropri- come if 25% or more of its total gross income Personal Services ate. for the 3-year period ending with the close of its tax year preceding the declaration of dividends All wages and any other compensation for serv- Example 1. Christina Brooks, a resident of was effectively connected with a trade or busi- ices performed in the United States are consid- the Netherlands, worked 240 days for a U.S. ness in the United States. If the corporation was ered to be from sources in the United States. company during the tax year. She received formed less than 3 years before the declaration, The only exceptions to this rule are discussed in $80,000 in compensation. None of it was for use its total gross income from the time it was Employees of foreign persons, organizations, or fringe benefits. Christina performed services in formed. Determine the part that is U.S. source offices, later, and in Crew members, earlier. the United States for 60 days and performed income by multiplying the dividend by the fol- services in the Netherlands for 180 days. Using If you are an employee and receive com- lowing fraction. the time basis for determining the source of pensation for labor or personal services per- compensation, $20,000 ($80,000 × 60/240) is her formed both inside and outside the United Foreign corporation's gross income U.S. source income. States, special rules apply in determining the connected with a U.S. trade or business source of the compensation. Compensation for the 3-year period Example 2. Rob Waters, a resident of (other than certain fringe benefits) is sourced on South Africa, is employed by a corporation. His Foreign corporation's gross income from a time basis. Certain fringe benefits (such as all sources for that period annual salary is $100,000. None of it is for housing and education) are sourced on a geo- fringe benefits. During the first quarter of the graphical basis. Dividend equivalent payments. U.S. source year, he worked entirely within the United dividends also include dividend equivalent pay- Or, you may be permitted to use an alterna- States. On April 1, Rob was transferred to Sin- ments. Dividend equivalent payments include: tive basis to determine the source of compen- gapore for the remainder of the year. Rob is • Substitute dividends paid pursuant to a se- sation. See Alternative Basis, later. able to establish that the first quarter of the year curities lending transaction, sale-repurch- and the last 3 quarters of the year are two sepa- ase transaction, or substantially similar Multilevel marketing. Certain companies sell rate, distinct, and continuous periods of time. transaction; products through a multilevel marketing ar- Accordingly, $25,000 of Rob's annual salary is • A payment that references a U.S. source rangement, such that an upper-tier distributor, attributable to the first quarter of the year (0.25 dividend made pursuant to a specified no- who has sponsored a lower-tier distributor, is × $100,000). All of it is U.S. source income be- tional principal contract (NPC); or entitled to a payment from the company based cause he worked entirely within the United • A payment that references a U.S. source on certain activities of that lower-tier distributor. States during that quarter. The remaining dividend made pursuant to a specified Generally, depending on the facts, payments $75,000 is attributable to the last three quarters equity-linked instrument (ELI). from such multilevel marketing companies to in- of the year. During those quarters, he worked dependent (nonemployee) distributors (up- 150 days in Singapore and 30 days in the Uni- A payment of a dividend equivalent amount per-tier distributors) that are based on the sales ted States. His periodic performance of serv- includes any gross amount that references a or purchases of persons whom they have spon- ices in the United States did not result in dis- U.S. source dividend and that is used to com- sored (lower-tier distributors) constitute income tinct, separate, and continuous periods of time. pute any net amount transferred to or from the for the performance of personal services in re- Of this $75,000, $12,500 ($75,000 × 30/180) is taxpayer under a contract, if the taxpayer is the cruiting, training, and supporting the lower-tier U.S. source income. long party under the contract. As a result, a tax- distributors. The source of such income is gen- payer may be treated as having received a divi- erally based on where the services of the up- Multiyear compensation. The source of mul- dend equivalent payment even if the taxpayer per-tier distributor are performed and may, de- tiyear compensation is generally determined on makes a net payment or no amount is paid be- pending on the facts, be considered multiyear a time basis over the period to which the com- cause the net amount is zero. compensation, with the source of income deter- pensation is attributable. Multiyear compensa- In 2020, an NPC or ELI will generally be a mined over the period to which such compen- tion is compensation that is included in your in- specified NPC or specified ELI, respectively, if sation is attributable. come in one tax year but that is attributable to a the contract is a delta one transaction. Gener- period that includes 2 or more tax years. ally, delta is the ratio of change in the fair mar- Self-employed individuals. If you are You determine the period to which the com- ket value of an NPC or ELI to a small change in self-employed, you determine the source of pensation is attributable based on the facts and the fair market value of the number of shares of compensation for labor or personal services circumstances of your case. For example, an the stock referenced by the contract. Generally, from self-employment on the basis that most amount of compensation that specifically re- the amount of a dividend equivalent for a speci- correctly reflects the proper source of that in- lates to a period of time that includes several fied NPC or specified ELI is the per share divi- come under the facts and circumstances of calendar years is attributable to the entire multi- dend amount multiplied by the number of your particular case. In many cases, the facts year period. shares of stock referenced by the contract mul- and circumstances will call for an apportion- tiplied by the delta of the contract. Special rules ment on a time basis as explained next.

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The amount of compensation treated as • The cost of buying property, including prin- cur to return to your former principal place of from U.S. sources is figured by multiplying the cipal payments on a mortgage; work regardless of whether you continue to total multiyear compensation by a fraction. The • The cost of domestic labor (maids, garden- work for your employer after returning to that lo- numerator of the fraction is the number of days ers, etc.); cation. It may contain certain conditions upon (or unit of time less than a day, if appropriate) • Pay television subscriptions; which the right to reimbursement is determined that you performed labor or personal services in • Improvements and other expenses that in- as long as those conditions set forth standards the United States in connection with the project. crease the value or appreciably prolong that are definitely ascertainable and can only be The denominator of the fraction is the total num- the life of property; fulfilled prior to, or through completion of, your ber of days (or unit of time less than a day, if ap- • Purchased furniture or accessories; return move to your former principal place of propriate) that you performed labor or personal • Depreciation or amortization of property or work. services in connection with the project. improvements; • The value of meals or lodging that you ex- Alternative Basis Geographical Basis clude from gross income; or • The value of meals or lodging that you de- If you are an employee, you can determine the Compensation you receive as an employee in duct as moving expenses. source of your compensation under an alterna- the form of the following fringe benefits is The deduction for moving expenses is avail- tive basis if you establish to the satisfaction of sourced on a geographical basis. able only if you are a member of the U.S. Armed the IRS that, under the facts and circumstances • Housing. Forces on active duty and move due to a per- of your case, the alternative basis more prop- • Education. manent change of duty station. erly determines the source of your compensa- • Local transportation. tion than the time or geographical basis. If you • Tax reimbursement. Education. The source of an education fringe use an alternative basis, you must keep (and • Hazardous or hardship duty pay as defined benefit for the education expenses of your de- have available for inspection) records to docu- in Regulations section 1.861-4(b)(2)(ii)(D) pendents is determined based on the location ment why the alternative basis more properly (5). of your principal place of work. An education determines the source of your compensation. • Moving expense reimbursement. fringe benefit includes payments only for the fol- Also, if your total compensation from all sources The amount of fringe benefits must be reasona- lowing expenses for education at an elementary is $250,000 or more, check “Yes” to both ques- tions on line K of Schedule OI (Form 1040-NR), ble and you must substantiate them by ade- or secondary school. and attach a written statement to your tax return quate records or by sufficient evidence. • Tuition, fees, academic tutoring, special needs services for a special needs stu- that sets forth all of the following. Principal place of work. The above fringe dent, books, supplies, and other equip- 1. Your name and social security number benefits, except for tax reimbursement and haz- ment. (written across the top of the statement). ardous or hardship duty pay, are sourced based • Room and board and uniforms that are re- on your principal place of work. Your principal quired or provided by the school in con- 2. The specific compensation income, or the place of work is usually the place where you nection with enrollment or attendance. specific fringe benefit, for which you are spend most of your working time. This could be using the alternative basis. Local transportation. The source of a local your office, plant, store, shop, or other location. 3. For each item in (2), the alternative basis transportation fringe benefit is determined If there is no one place where you spend most of allocation of source used. of your working time, your main job location is based on the location of your principal place of the place where your work is centered, such as work. Your local transportation fringe benefit is 4. For each item in (2), a computation show- where you report for work or are otherwise re- the amount that you receive as compensation ing how the alternative allocation was quired to “base” your work. for local transportation for you or your spouse or computed. dependents at the location of your principal If you have more than one job at any time, 5. A comparison of the dollar amount of the place of work. The amount treated as a local your main job location depends on the facts in U.S. compensation and foreign compen- transportation fringe benefit is limited to actual each case. The more important factors to be sation sourced under both the alternative expenses incurred for local transportation and considered are: basis and the time or geographical basis the fair rental value of any employer-provided • The total time you spend at each place, discussed earlier. vehicle used predominantly by you, your • The amount of work you do at each place, spouse, or your dependents for local transpor- and tation. Actual expenses do not include the cost • How much money you earn at each place. Transportation Income (including interest) of any vehicle purchased by Housing. The source of a housing fringe bene- you or on your behalf. Transportation income is income from the use fit is determined based on the location of your of a vessel or aircraft or for the performance of Tax reimbursement. The source of a tax reim- principal place of work. A housing fringe benefit services directly related to the use of any vessel bursement fringe benefit is determined based includes payments to you or on your behalf or aircraft. This is true whether the vessel or air- on the location of the jurisdiction that imposed (and your family's if your family resides with craft is owned, hired, or leased. The term “ves- the tax for which you are reimbursed. you) only for the following. sel or aircraft” includes any container used in • Rent. connection with a vessel or aircraft. Moving expense reimbursement. The • Utilities (except telephone charges). source of a moving expense reimbursement is All income from transportation that begins • Real and personal property insurance. generally based on the location of your new and ends in the United States is treated as de- • Occupancy taxes not deductible under principal place of work. However, the source is rived from sources in the United States. If the section 164 or 216(a). determined based on the location of your for- transportation begins or ends in the United • Nonrefundable fees for securing a lease- mer principal place of work if you provide suffi- States, 50% of the transportation income is hold. cient evidence that such determination of treated as derived from sources in the United • Rental of furniture and accessories. source is more appropriate under the facts and States. • Household repairs. circumstances of your case. Sufficient evidence • Residential parking. For transportation income from personal generally requires an agreement between you • Fair rental value of housing provided in services, 50% of the income is U.S. source in- and your employer, or a written statement of kind by your employer. come if the transportation is between the United company policy, which is reduced to writing be- States and a U.S. possession. For nonresident A housing fringe benefit does not include: fore the move and which is entered into or es- aliens, this only applies to income derived from, • Deductible interest and taxes (including tablished to induce you or other employees to or in connection with, an aircraft. deductible interest and taxes of a ten- move to another country. The written statement ant-stockholder in a cooperative housing or agreement must state that your employer will For information on how U.S. source trans- corporation); reimburse you for moving expenses that you in- portation income is taxed, see chapter 4.

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Scholarships, Grants, Rents or Royalties outside the United States (or vice versa) is Prizes, and Awards sourced where the property is produced. Your U.S. source income includes rent and roy- These rules apply even if your tax home is Generally, the source of scholarships, fellow- alty income received during the tax year from not in the United States. ship grants, grants, prizes, and awards is the property located in the United States or from residence of the payer regardless of who ac- any interest in that property. Depreciable property. To determine the tually disburses the funds. However, see Activi- source of any gain from the sale of depreciable U.S. source income also includes rents or ties to be performed outside the United States, personal property, you must first figure the part royalties for the use of, or for the privilege of us- later. of the gain that is not more than the total depre- ing, in the United States, intangible property ciation adjustments on the property. You allo- For example, payments for research or such as patents, copyrights, secret processes cate this part of the gain to sources in the Uni- study in the United States made by the United and formulas, goodwill, trademarks, franchises, ted States based on the ratio of U.S. States, a noncorporate U.S. resident, or a do- and similar property. depreciation adjustments to total depreciation mestic corporation are from U.S. sources. Simi- adjustments. The rest of this part of the gain is lar payments from a foreign government or for- Real Property considered to be from sources outside the Uni- eign corporation are foreign source payments ted States. even though the funds may be disbursed For this purpose, “U.S. depreciation adjust- through a U.S. agent. Real property is land and buildings and gener- ally anything built on, growing on, or attached to ments” are the depreciation adjustments to the Payments made by an entity designated as land. basis of the property that are allowable in figur- a public international organization under the In- ing taxable income from U.S. sources. How- ternational Organizations Immunities Act are Gross income from sources in the United ever, if the property is used predominantly in from foreign sources. States includes gains, profits, and income from the United States during a tax year, all depreci- the sale or other disposition of real property lo- ation deductions allowable for that year are Activities to be performed outside the Uni- cated in the United States. treated as U.S. depreciation adjustments. But ted States. Scholarships, fellowship grants, there are some exceptions for certain transpor- targeted grants, and achievement awards re- Natural resources. The income from the sale tation, communications, and other property ceived by nonresident aliens for activities per- of products of any farm, mine, oil or gas well, used internationally. formed, or to be performed, outside the United other natural deposit, or timber located in the Gain from the sale of depreciable property States are not U.S. source income. United States and sold in a foreign country, or that is more than the total depreciation adjust- located in a foreign country and sold in the Uni- ments on the property is sourced as if the prop- These rules do not apply to amounts ted States, is partly from sources in the United erty were inventory property, as discussed paid as salary or other compensation ! States. For information on determining that part, above. CAUTION for services. See Personal Services, see Regulations section 1.863-1(b). A loss is sourced in the same way as the de- earlier, for the source rules that apply. preciation deductions were sourced. However, Personal Property if the property was used predominantly in the Pensions and Annuities United States, the entire loss reduces U.S. Personal property is property, such as machi- source income. If you receive a pension from a domestic trust nery, equipment, or furniture, that is not real The basis of property usually means the for services performed both in and outside the property. cost (money plus the fair market value of other United States, part of the pension payment is property or services) of property you acquire. from U.S. sources. That part is the amount at- Gain or loss from the sale or exchange of Depreciation is an amount deducted to recover tributable to earnings of the pension plan and personal property generally has its source in the the cost or other basis of a trade or business the employer contributions made for services United States if you have a tax home in the Uni- asset. The amount you can deduct depends on performed in the United States. This applies ted States. If you do not have a tax home in the the property's cost, when you began using the whether the distribution is made under a quali- United States, the gain or loss is generally con- property, how long it will take to recover your fied or nonqualified stock bonus, pension, sidered to be from sources outside the United cost, and which depreciation method you use. profit-sharing, or annuity plan (whether or not States. A depreciation deduction is any deduction for funded). depreciation or amortization or any other allow- Tax home. Your tax home is the general area able deduction that treats a capital expenditure If you performed services as an employee of of your main place of business, employment, or as a deductible expense. the United States, you may receive a distribu- post of duty, regardless of where you maintain tion from the U.S. Government under a plan, your family home. Your tax home is the place Intangible property. Intangible property in- such as the Civil Service Retirement System, where you permanently or indefinitely work as cludes patents, copyrights, secret processes or that is treated as a qualified pension plan. Your an employee or a self-employed individual. If formulas, goodwill, trademarks, trade names, or U.S. source income is the otherwise taxable you do not have a regular or main place of busi- other like property. The gain from the sale of amount of the distribution that is attributable to ness because of the nature of your work, then amortizable or depreciable intangible property, your total U.S. Government basic pay other your tax home is the place where you regularly up to the previously allowable amortization or than tax-exempt pay for services performed live. If you do not fit either of these categories, depreciation deductions, is sourced in the same outside the United States. you are considered an itinerant and your tax way as the original deductions were sourced. home is wherever you work. Disaster tax relief. If you are required to This is the same as the source rule for gain from file a U.S. federal income tax return, you may the sale of depreciable property. See Deprecia- Inventory property. Inventory property is per- be entitled to some special disaster-related ble property, earlier, for details on how to apply sonal property that is stock in trade or that is rules regarding the use of retirement funds. For this rule. held primarily for sale to customers in the ordi- more information, see IRS.gov/Pub. 590-B. Gain in excess of the amortization or depre- nary course of your trade or business. Income Also, go to IRS.gov/DisasterTaxRelief. ciation deductions is sourced in the country from the sale of inventory that you purchased is where the property is used if the income from COVID-19 relief. If you are required to file a sourced where the property is sold. Generally, the sale is contingent on the productivity, use, U.S. federal income tax return and you were im- this is where title to the property passes to the or disposition of that property. If the income is pacted by COVID-19, you may be entitled to buyer. For example, income from the sale of in- not contingent on the productivity, use, or dis- some special rules for 2020 regarding the use ventory in the United States is U.S. source in- position of the property, the income is sourced of retirement funds. For more information, see come, whether you purchased it in the United according to your tax home (discussed earlier). Form 8915-E, Qualified 2020 Disaster Retire- States or in a foreign country. If payments for goodwill do not depend on its ment Plan Distributions and Repayments, and Income from the sale of inventory property productivity, use, or disposition, their source is its instructions. Also, see Pub. 590-B. that you produced in the United States and sold

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the country in which the goodwill was gener- which is not earned income, trade or business The exclusion is $107,600 in 2020. In addition, ated. income, or partnership distributive share in- you may be able to exclude or deduct certain come) is treated as the income of that spouse. foreign housing amounts. You may also qualify Sales through offices or fixed places of That spouse must report all of it on his or her if you are a bona fide resident of a foreign coun- business. Despite any of the earlier rules, if separate return. Use the appropriate community try and you are a citizen or national of a country you do not have a tax home in the United property law to determine what is separate with which the United States has an income tax States, but you maintain an office or other fixed property. treaty. For more information, see Pub. 54. place of business in the United States, treat the income from any sale of personal property (in- Other community income. All other commun- Foreign country. A foreign country is any terri- cluding inventory property) that is attributable to ity income is treated as provided by the applica- tory under the sovereignty of a government that office or place of business as U.S. source ble community property laws. other than that of the United States. income. However, this rule does not apply to The term “foreign country” includes the sales of inventory property for use, disposition, country's territorial waters and airspace, but not or consumption outside the United States if international waters and the airspace above your office or other fixed place of business out- them. It also includes the seabed and subsoil of side the United States materially participated in those submarine areas adjacent to the country's the sale. territorial waters over which it has exclusive If you have a tax home in the United States 3. rights under international law to explore and ex- but maintain an office or other fixed place of ploit the natural resources. business outside the United States, income The term “foreign country” does not include from sales of personal property, other than in- U.S. possessions or territories. It does not in- ventory, depreciable property, or intangibles, Exclusions From clude the Antarctic region. that is attributable to that foreign office or place of business may be treated as U.S. source in- COVID-19 emergency relief. Due to come. The income is treated as U.S. source in- Gross Income COVID-19, you may be allowed a waiver of the come if an income tax of less than 10% of the time requirements necessary to meet either the income from the sale is paid to a foreign coun- bona fide residence test or physical presence try. This rule also applies to losses if the foreign Introduction test for purposes of claiming the foreign earned country would have imposed an income tax of income exclusion. Also see Revenue Proce- less than 10% had the sale resulted in a gain. Resident and nonresident aliens are allowed dure 2020-27, available at IRS.gov/irb/ exclusions from gross income if they meet cer- 2020-20_IRB#REV-PROC-2020-27. For more tain conditions. An exclusion from gross income information, see the Instructions for Form 2555. Community Income is generally income you receive that is not inclu- ded in your U.S. income and is not subject to If you are married and you or your spouse is U.S. tax. This chapter covers some of the more Nonresident Aliens subject to the community property laws of a for- common exclusions allowed to resident and eign country, U.S. state, or U.S. possession, nonresident aliens. Nonresident aliens can exclude the following you must generally follow those laws to deter- items from their gross income. mine the income of yourself and your spouse Topics for U.S. tax purposes. But you must disregard This chapter discusses: certain community property laws if: Interest Income • Both you and your spouse are nonresident • Nontaxable interest, Interest income that is not connected with a aliens, or • Nontaxable dividends, U.S. trade or business is excluded from income • One of you is a nonresident alien and the • Certain compensation paid by a foreign if it is from: other is a U.S. citizen or resident and you employer, Deposits (including certificates of deposit) do not both choose to be treated as U.S. • • Gain from sale of home, and with persons in the banking business; residents as explained in Nonresident • Scholarships and fellowship grants. Deposits or withdrawable accounts with Spouse Treated as a Resident. • mutual savings banks, cooperative banks, In these cases, you and your spouse must re- Useful Items credit unions, domestic building and loan port community income as explained later. You may want to see: associations, and other savings institutions chartered and supervised as savings and Earned income. Earned income of a spouse, Publication loan or similar associations under federal other than trade or business income and a part- or state law (if the interest paid or credited ner's distributive share of partnership income, is 54 54 Tax Guide for U.S. Citizens and can be deducted by the association); and treated as the income of the spouse whose Resident Aliens Abroad • Amounts held by an insurance company services produced the income. That spouse 523 523 Selling Your Home under an agreement to pay interest on must report all of it on his or her separate return. them. See chapter 12 for information about getting Trade or business income. Trade or busi- these publications. State and local government obligations. In- ness income, other than a partner's distributive terest on obligations of a state or political subdi- share of partnership income, is treated as the vision, the District of Columbia, or a U.S. pos- income of the spouse carrying on the trade or Resident Aliens session, is generally not included in income. business. That spouse must report all of it on However, interest on certain private activity his or her separate return. Resident aliens may be able to exclude the fol- bonds, arbitrage bonds, and certain bonds not lowing items from their gross income. in registered form is included in income. Partnership income (or loss). A partner's distributive share of partnership income (or Foreign Earned Income Portfolio interest. Interest and original issue loss) is treated as the income (or loss) of the discount that qualifies as portfolio interest is not partner. The partner must report all of it on his and Housing Amount subject to chapter 3 (of the Internal Revenue or her separate return. Code) withholding under sections 1441 through If you are physically present in a foreign country 1443. However, such interest may be subject to Separate property income. Income derived or countries for at least 330 full days during any withholding if it is a withholdable payment, and from the separate property of one spouse (and period of 12 consecutive months, you may there is no exception to chapter 4 (of the qualify for the foreign earned income exclusion.

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Internal Revenue Code) withholding under sec- statutory rate on such payments unless some which dividends are short-term capital gain divi- tions 1471 through 1474. For more information, other exception, such as a treaty provision, ap- dends. This tax relief will not apply to you if you see the discussion of portfolio interest under plies. are present in the United States for 183 days or Withholding on Specific Income in Pub. 515. more during your tax year. Contingent interest. Portfolio interest To qualify as portfolio interest, the interest does not include contingent interest. Contingent must be paid on obligations issued after July interest is either of the following. Services Performed 18, 1984, and otherwise subject to withholding. For obligations issued after March 18, 2012, 1. Interest that is determined by reference to: for Foreign Employer portfolio interest does not include interest paid • Any receipts, sales, or other cash on debt that is not in registered form. Before flow of the debtor or related person; If you were paid by a foreign employer, your March 19, 2012, portfolio interest included inter- • Income or profits of the debtor or rela- U.S. source income may be exempt from U.S. est on certain registered and nonregistered ted person; tax, but only if you meet one of the situations (bearer) bonds if the obligations meet the re- • Any change in value of any property discussed next. quirements described below. of the debtor or a related person; or Employees of foreign persons, organiza- • Any dividend, partnership distribu- tions, or offices. Income for personal services Obligations in registered form. Portfolio tions, or similar payments made by performed in the United States as a nonresident interest includes interest paid on an obligation the debtor or a related person. alien is not considered to be from U.S. sources that is in registered form, and for which you For exceptions, see section 871(h)(4) and is tax exempt if you meet all three of the fol- have received documentation that the beneficial (C). owner of the obligation is not a U.S. person. lowing conditions. Generally, an obligation is in registered form 2. Any other type of contingent interest that is 1. You perform personal services as an em- if: identified by the Secretary of the Treasury ployee of or under a contract with a non- The obligation is registered as to both prin- in regulations. • resident alien individual, foreign partner- cipal and any stated interest with the issuer Related persons. Related persons in- ship, or foreign corporation not engaged in (or its agent) and any transfer of the obliga- clude the following. a trade or business in the United States; or tion may be effected only by surrender of Members of a family, including only broth- you work for an office or place of business the old obligation and reissuance to the • ers, sisters, half brothers, half sisters, maintained in a foreign country or posses- new holder; spouse, ancestors (parents, grandparents, sion of the United States by a U.S. corpo- • The right to principal and stated interest etc.), and lineal descendants (children, ration, U.S. partnership, or U.S. citizen or with respect to the obligation may be trans- grandchildren, etc.). resident. ferred only through a book entry system Any person who is a party to any arrange- maintained by the issuer or its agent; or • 2. You perform these services while you are ment undertaken for the purpose of avoid- • The obligation is registered as to both prin- a nonresident alien temporarily present in ing the contingent interest rules. cipal and stated interest with the issuer or the United States for a period or periods of Certain corporations, partnerships, and its agent and can be transferred both by • not more than a total of 90 days during the other entities. For details, see Nondeducti- surrender and reissuance and through a tax year. ble Loss in chapter 2 of Pub. 544. book entry system. 3. Your pay for these services is not more An obligation that would otherwise be con- Exception for existing debt. Contingent than $3,000. sidered to be in registered form is not consid- interest does not include interest paid or ac- ered to be in registered form as of a particular crued on any debt with a fixed term that was is- If you do not meet all three conditions, your in- time if it can be converted at any time in the fu- sued: come from personal services performed in the ture into an obligation that is not in registered • On or before April 7, 1993; or United States is U.S. source income and is form. For more information on whether obliga- • After April 7, 1993, pursuant to a written taxed according to the rules in chapter 4. tions are considered to be in registered form, binding contract in effect on that date and If your pay for these services is more than see the discussion of portfolio interest under at all times thereafter before that debt was $3,000, the entire amount is income from a Withholding on Specific Income in Pub. 515. issued. trade or business within the United States. To find if your pay is more than $3,000, do not in- Obligations not in registered form. For Dividend Income clude any amounts you get from your employer obligations issued before March 19, 2012, inter- for advances or reimbursements of business est on an obligation that is not in registered form travel expenses, if you were required to and did (bearer obligation) is portfolio interest if the obli- The following dividend income is exempt from account to your employer for those expenses. If gation is foreign targeted. A bearer obligation is the 30% tax. the advances or reimbursements are more than foreign targeted if: your expenses, include the excess in your pay • There are arrangements to ensure that the Certain dividends paid by foreign corpora- for these services. tions. There is no 30% tax on U.S. source divi- obligation will be sold, or resold in connec- A “day” means a calendar day during any dends you receive from a foreign corporation. tion with the original issue, only to a person part of which you are physically present in the See Exception under Dividends in chapter 2 for who is not a U.S. person; United States. • Interest on the obligation is payable only how to figure the amount of U.S. source divi- dends. This exemption does not apply to divi- outside the United States and its posses- Example 1. During 2020, Henry Smythe, a dend equivalent payments. sions; and nonresident alien from a nontreaty country, • The face of the obligation contains a state- worked for an overseas office of a U.S. partner- Certain interest-related dividends. There is ment that any U.S. person who holds the ship. Henry, who uses the calendar year as his no 30% tax on interest-related dividends from obligation will be subject to limits under the tax year, was temporarily present in the United sources within the United States that you re- U.S. income tax laws. States for 60 days during 2020 performing per- ceive from a mutual fund or other regulated in- sonal services for the overseas office of the Documentation is not required for interest on vestment company. The mutual fund will desig- partnership. That office paid him a total gross bearer obligations to qualify as portfolio interest. nate in writing which dividends are salary of $2,800 for those services. During In some cases, however, you may need docu- interest-related dividends. mentation for purposes of Form 1099 reporting 2020, he was not engaged in a trade or busi- ness in the United States. The salary is not con- and backup withholding. Certain short-term capital gain dividends. sidered U.S. source income and is exempt from There may not be any 30% tax on certain U.S. tax. Interest that does not qualify as portfolio short-term capital gain dividends from sources interest. Payments to certain persons and within the United States that you receive from a payments of contingent interest do not qualify mutual fund or other regulated investment com- as portfolio interest. You must withhold at the pany. The mutual fund will designate in writing

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Example 2. The facts are the same as in 90% or more of the employees for whom 2. You use the scholarship or fellowship to Example 1, except that Henry's total gross sal- contributions or benefits are provided un- pay qualified education expenses. ary for the services performed in the United der the annuity plan (or under the plan of States during 2020 was $4,500. He received which the trust is a part) are U.S. citizens Candidate for a degree. You are a candidate $2,875 in 2020, and $1,625 in 2021. During or residents. for a degree if you: 2020, he was engaged in a trade or business in 1. Attend a primary or secondary school or the United States because the compensation If the annuity qualifies under condition (1) are pursuing a degree at a college or uni- for his personal services in the United States but not condition (2) above, you do not have to versity, or was more than $3,000. Henry's salary is U.S. include the amount in income if: source income and is taxed under the rules in • You are a resident of a country that gives a 2. Attend an accredited educational institu- chapter 4. substantially equal exclusion to U.S. citi- tion that is authorized to provide: zens and residents, or a. A program that is acceptable for full Crew members. Compensation for services • You are a resident of a beneficiary devel- credit toward a bachelor's or higher performed by a nonresident alien in connection oping country under Title V of the Trade degree, or with the individual's temporary presence in the Act of 1974. United States as a regular crew member of a If you are not sure whether the annuity is b. A program of training to prepare stu- foreign vessel (for example, a boat or ship) en- from a qualified annuity plan or qualified trust, dents for gainful employment in a rec- gaged in transportation between the United ask the person who made the payment. ognized occupation. States and a foreign country or U.S. possession is not U.S. source income and is exempt from Income affected by treaties. Income of any Eligible educational institution. An eligible U.S. tax. This exemption does not apply to kind that is exempt from U.S. tax under a treaty educational institution is one that maintains a compensation for services performed on foreign to which the United States is a party is excluded regular faculty and curriculum and normally has aircraft. from your gross income. Income on which the a regularly enrolled body of students in attend- tax is only limited by treaty, however, is inclu- ance at the place where it carries on its educa- Students and exchange visitors. Nonresi- ded in gross income. See chapter 9. tional activities. dent alien students and exchange visitors present in the United States under “F,” “J,” or Qualified education expenses. These are “Q” visas can exclude from gross income pay Gambling Winnings From expenses for: received from a foreign employer. Dog or Horse Racing • Tuition and fees required to enroll at or at- This group includes bona fide students, tend an eligible educational institution; and scholars, trainees, teachers, professors, re- You can exclude from your gross income win- • Course-related expenses, such as fees, search assistants, specialists, or leaders in a nings from legal wagers initiated outside the books, supplies, and equipment that are field of specialized knowledge or skill, or per- United States in a pari-mutuel pool with respect required for the courses at the eligible edu- sons of similar description. It also includes the to a live horse or dog race in the United States. cational institution. These items must be alien's spouse and minor children if they come required of all students in your course of in- with the alien or come later to join the alien. struction. A nonresident alien temporarily present in Gain From the Sale However, in order for these to be qualified edu- the United States under a “J” visa includes an of Your Main Home cation expenses, the terms of the scholarship or alien individual entering the United States as an fellowship cannot require that it be used for exchange visitor under the Mutual Educational other purposes, such as room and board, or and Cultural Exchange Act of 1961. If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale specify that it cannot be used for tuition or course-related expenses. Foreign employer. A foreign employer is: of your home. If you are married and file a joint • A nonresident alien individual, foreign part- return, you may be able to exclude up to Expenses that do not qualify. Qualified nership, or foreign corporation; or $500,000. For information on the requirements education expenses do not include the cost of: • An office or place of business maintained for this exclusion, see Pub. 523. • Room and board, in a foreign country or in a U.S. possession This exclusion does not apply if you are • Travel, by a U.S. corporation, a U.S. partnership, subject to the expatriation tax rules dis- • Research, or an individual who is a U.S. citizen or res- ! CAUTION cussed in chapter 4. • Clerical help, or ident. • Equipment and other expenses that are The term “foreign employer” does not in- not required for enrollment in or attend- clude a foreign government. Pay from a foreign ance at an eligible educational institution. government that is exempt from U.S. income Scholarships and This is true even if the fee must be paid to the tax is discussed in chapter 10. Fellowship Grants institution as a condition of enrollment or at- tendance. Scholarship or fellowship amounts Income from certain annuities. Do not in- If you are a candidate for a degree, you may be used to pay these costs are taxable. clude in income any annuity received under a able to exclude from your income part or all of qualified annuity plan or from a qualified trust the amounts you receive as a qualified scholar- Amounts used to pay expenses that do not exempt from U.S. income tax if you meet both ship. The rules discussed here apply to both qualify. A scholarship amount used to pay any of the following conditions. resident and nonresident aliens. expense that does not qualify is taxable, even if 1. You receive the annuity only because: the expense is a fee that must be paid to the in- If a nonresident alien receives a grant stitution as a condition of enrollment or attend- a. You performed personal services out- TIP that is not from U.S. sources, it is not ance. side the United States while you were subject to U.S. tax. See Scholarships, a nonresident alien; or Grants, Prizes, and Awards in chapter 2 to de- Payment for services. You cannot exclude termine whether your grant is from U.S. sour- b. You performed personal services in- from income the portion of any scholarship, fel- ces. side the United States while you were lowship, or tuition reduction that represents a nonresident alien and you met the payment for past, present, or future teaching, A scholarship or fellowship is excludable three conditions, described earlier, research, or other services. This is true even if from income only if: under Employees of foreign persons, all candidates for a degree are required to per- form the services as a condition for receiving organizations, or offices. 1. You are a candidate for a degree at an eli- the degree. gible educational institution, and 2. At the time the first amount is paid as an annuity under the plan (or by the trust),

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Example. On January 7, Maria Gomez is worldwide income is subject to U.S. tax and States. To be eligible, you must have been tem- notified of a scholarship of $2,500 for the spring must be reported on their U.S. tax return. In- porarily present in the United States while per- semester. As a condition for receiving the come of resident aliens is subject to the gradu- forming these activities, and but for COVID-19, scholarship, Maria must serve as a part-time ated tax rates that apply to U.S. citizens. Resi- you would not have performed these activities teaching assistant. Of the $2,500 scholarship, dent aliens use the Tax Table or Tax in the United States. You were temporarily $1,000 represents payment for her services. Computation Worksheets located in the Instruc- present in the United States if, in 2020, you Assuming that Maria meets all other conditions, tions for Forms 1040 and 1040-SR, which apply were a nonresident alien (taking into account she can exclude no more than $1,500 from in- to U.S. citizens. the COVID-19 Medical Condition Travel Excep- come as a qualified scholarship. tion), or a U.S. citizen or lawful permanent resi- dent who had a tax home outside the United Nonresident Aliens States in 2019 and reasonably expected to have a tax home outside the United States in A nonresident alien's income that is subject to 2020. Your income earned during this 60-day U.S. income tax must be divided into two cate- period will not be subject to the 30% tax dis- gories. cussed later in this chapter solely because you 4. were not treated as having a U.S. trade or busi- 1. Income that is effectively connected with a ness. For more information, see FAQs for Non- trade or business in the United States, and resident Alien Individuals and Foreign Busi- 2. Income that is not effectively connected nesses with Employees or Agents Impacted by How Income of with a trade or business in the United COVID-19 Emergency Travel Disruptions, avail- States (discussed under The 30% Tax, able at IRS.gov/newsroom/FAQs-for- later). Nonresdient-Alien-Individuals-and-Foreign- Aliens Is Taxed Businesses-with-Employees-or-Agents- The difference between these two catego- Impacted-by-COVID-19-Emergency-Travel- ries is that effectively connected income, after Disruptions. Also see, Personal Services under allowable deductions, is taxed at graduated Tax Treaty Benefits in chapter 9, later. Introduction rates. These are the same rates that apply to Resident and nonresident aliens are taxed in U.S. citizens and residents. Income that is not Other Trade or Business Activities different ways. Resident aliens are generally effectively connected is taxed at a flat 30% (or taxed in the same way as U.S. citizens. Nonres- lower treaty) rate. Other examples of being engaged in a trade or ident aliens are taxed based on the source of If you were formerly a U.S. citizen or business in the United States follow. their income and whether or not their income is resident alien, these rules may not ap- effectively connected with a U.S. trade or busi- ! CAUTION ply. See Expatriation Tax, later in this Students and trainees. If you are temporarily ness. The following discussions will help you chapter. present in the United States as a nonimmigrant determine if income you receive during the tax under an “F,” “J,” “M,” or “Q” visa, and not other- year is effectively connected with a U.S. trade wise engaged in a trade or business, you are or business and how it is taxed. Trade or Business considered to be engaged in a trade or busi- in the United States ness in the United States if you have taxable in- Topics come from participation in a scholarship or fel- This chapter discusses: Generally, you must be engaged in a trade or lowship described in section 1441(b). The business during the tax year to be able to treat taxable part of any scholarship or fellowship • Income that is effectively connected with a income received in that year as effectively con- grant that is U.S. source income is treated as U.S. trade or business, nected with that trade or business. Whether you effectively connected with a trade or business in • Income that is not effectively connected are engaged in a trade or business in the United the United States. with a U.S. trade or business, States depends on the nature of your activities. Note. A nonresident alien temporarily • Interrupted period of residence, and The discussions that follow will help you deter- present in the United States under a “J” visa in- • Expatriation tax. mine whether you are engaged in a trade or cludes a nonresident alien individual admitted business in the United States. to the United States as an exchange visitor un- Useful Items der the Mutual Educational and Cultural Ex- You may want to see: Personal Services change Act of 1961.

Publication If you perform personal services in the United Business operations. If you own and operate States at any time during the tax year, you usu- a business in the United States selling services, 544 544 Sales and Other Dispositions of ally are considered engaged in a trade or busi- products, or merchandise, you are, with certain Assets ness in the United States. exceptions, engaged in a trade or business in the United States. 1212 1212 List of Original Issue Discount Certain compensation paid to a non- Instruments TIP resident alien by a foreign employer is not included in gross income. For more Partnerships. If you are a member of a part- Form (and Instructions) information, see Services Performed for For- nership that at any time during the tax year is eign Employerin chapter 3. engaged in a trade or business in the United 6251 6251 Alternative Minimum States, you are considered to be engaged in a Tax—Individuals trade or business in the United States. COVID-19 relief for certain nonresident

Schedule D (Form 1040) Schedule D (Form 1040) Capital Gains alien individuals temporarily performing Beneficiary of an estate or trust. If you are and Losses services or other activities in the United the beneficiary of an estate or trust that is en- See chapter 12 for information about getting States. Due to COVID-19, you may be eligible gaged in a trade or business in the United these publications and forms. to choose an uninterrupted period of up to 60 States, you are treated as being engaged in the calendar days, beginning on or after February same trade or business. 1, 2020. and on or before April 1, 2020, during Resident Aliens which your services or other activities conduc- Trading in stocks, securities, and commodi- ted in the United States will not be taken into ties. If your only U.S. business activity is trad- account in determining whether you were en- ing in stocks, securities, or commodities (includ- Resident aliens are generally taxed in the same gaged in a trade or business in the United ing hedging transactions) through a U.S. way as U.S. citizens. This means that their

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resident broker or other agent, you are not en- • Timber, coal, or domestic iron ore a U.S. trade or business is effectively connec- gaged in a trade or business in the United with a retained economic interest. ted with a U.S. trade or business. Income re- States. • Patents, copyrights, and similar prop- ceived in a year other than the year you per- For transactions in stocks or securities, this erty on which you receive contingent formed the services is also effectively applies to any nonresident alien, including a payments after October 4, 1966. connected if it would have been effectively con- dealer or broker in stocks and securities. • Patents transferred before October 5, nected if received in the year you performed the For transactions in commodities, this applies 1966. services. Personal service income includes wa- to commodities that usually are traded on an or- • Original issue discount obligations. ges, salaries, commissions, fees, per diem al- lowances, and employee allowances and bo- ganized commodity exchange and to transac- 3. Capital gains (and losses). tions that usually are carried out at such an ex- nuses. The income may be paid to you in the form of cash, services, or property. change. Use the two tests, described next, to deter- This discussion does not apply if you have a mine whether an item of U.S. source income If you are engaged in a U.S. trade or busi- U.S. office or other fixed place of business at falling in one of the three categories above and ness only because you perform personal serv- any time during the tax year through which, or received during the tax year is effectively con- ices in the United States during the tax year, in- by the direction of which, you carry out your nected with your U.S. trade or business. If the come and gains from assets, and gains and transactions in stocks, securities, or commodi- tests indicate that the item of income is effec- losses from the sale or exchange of capital as- ties. tively connected, you must include it with your sets, are generally not effectively connected other effectively connected income. If the item Trading for a nonresident alien's own with your trade or business. However, if there is of income is not effectively connected, include it account. You are not engaged in a trade or a direct economic relationship between your with all other income discussed under The 30% business in the United States if trading for your holding of the asset and your trade or business Tax, later, in this chapter. own account in stocks, securities, or commodi- of performing personal services, the income, ties is your only U.S. business activity. This ap- gain, or loss is effectively connected. Asset-use test. This test usually applies to in- plies even if the trading takes place while you come that is not directly produced by trade or are present in the United States or is done by Pensions. If you performed personal services business activities. Under this test, if an item of your employee or your broker or other agent. in the United States after 1986, and in a later income is from assets (property) used in, or This does not apply to trading for your own tax year, you receive pension or retirement dis- held for use in, the trade or business in the Uni- account if you are a dealer in stocks, securities, tributions attributable to these services when ted States, it is considered effectively connec- or commodities. This does not necessarily you are a nonresident alien, such distributions ted. mean, however, that as a dealer you are con- are effectively connected income to the extent An asset is used in, or held for use in, the sidered to be engaged in a trade or business in attributable to contributions. This is true trade or business in the United States if the as- the United States. Determine that based on the whether or not you are engaged in a U.S. trade set is: facts and circumstances in each case or under or business in the year you receive the pension Held for the principal purpose of promoting the rules given above in Trading in stocks, se- • or retirement distributions. the conduct of a trade or business in the curities, and commodities. United States; • Acquired and held in the ordinary course of Transportation Income Effectively the trade or business conducted in the Uni- Connected Income ted States (for example, an account receiv- Transportation income (defined in chapter 2) is able or note receivable arising from that effectively connected if you meet both of the fol- trade or business); or lowing conditions. If you are engaged in a U.S. trade or business, Otherwise held to meet the present needs all income, gain, or loss for the tax year that you • 1. You had a fixed place of business in the of the trade or business in the United get from sources within the United States (other United States involved in earning the in- States and not its anticipated future needs. than certain investment income) is treated as come. effectively connected income. This applies Generally, stock of a corporation is not treated 2. At least 90% of your U.S. source transpor- whether or not there is any connection between as an asset used in, or held for use in, a trade or tation income is attributable to regularly the income and the trade or business being car- business in the United States. scheduled transportation. ried on in the United States during the tax year. Business-activities test. This test usually ap- “Fixed place of business” generally means a Two tests, described under Investment In- plies when income, gain, or loss comes directly place, site, structure, or other similar facility come, later, determine whether certain items of from the active conduct of the trade or busi- through which you engage in a trade or busi- investment income (such as interest, dividends, ness. The business-activities test is most impor- ness. “Regularly scheduled transportation” and royalties) are treated as effectively connec- tant when: means that a ship or aircraft follows a published ted with that business. • Dividends or interest are received by a schedule with repeated sailings or flights at reg- dealer in stocks or securities, ular intervals between the same points for voy- In limited circumstances, some kinds of for- • Royalties are received in the trade or busi- ages or flights that begin or end in the United eign source income may be treated as effec- ness of licensing patents or similar prop- States. This definition applies to both scheduled tively connected with a trade or business in the erty, or and chartered air transportation. United States. For a discussion of these rules, • Service fees are earned by a servicing see Foreign Income, later. business. If you do not meet the two conditions above, the income is not effectively connected and is Under this test, if the conduct of the U.S. trade taxed at a 4% rate. See Transportation Tax, Investment Income or business was a material factor in producing later in this chapter. the income, the income is considered effec- Investment income from U.S. sources that may tively connected. or may not be treated as effectively connected Business Profits and Losses with a U.S. trade or business generally falls into Personal Service Income and Sales Transactions the following three categories. All profits or losses from U.S. sources that are You usually are engaged in a U.S. trade or busi- 1. Fixed or determinable income (interest, from the operation of a business in the United ness when you perform personal services in the dividends, rents, royalties, premiums, an- States are effectively connected with a trade or United States. Personal service income you re- nuities, etc.). business in the United States. For example, ceive in a tax year in which you are engaged in 2. Gains (some of which are considered cap- ital gains) from the sale or exchange of the following types of property.

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profit from the sale in the United States of in- chooses to be treated as a domestic corpora- a. Any class of stock of such other QIE ventory property purchased either in this coun- tion. is regularly traded on an established try or in a foreign country is effectively connec- securities market, or ted trade or business income. A share of U.S. Qualified investment entities. Special rules b. Such other QIE is a RIC that issues source profits or losses of a partnership that is apply to qualified investment entities (QIEs). A certain redeemable securities. engaged in a trade or business in the United QIE is any real estate investment trust (REIT) or States is also effectively connected with a trade any regulated investment company (RIC) that is Notwithstanding the above, the stock or business in the United States. treated as a U.S. real property holding corpora- of the QIE will be treated as held by a U.S. tion (after applying certain rules in section person if such other QIE is domestically Real Property Gain or Loss 897(h)(4)(A)(ii)). See U.S. Real Property Inter- controlled. est in Pub. 515 for more information. 3. Stock in a QIE held by any other QIE not Gains and losses from the sale or exchange of Look-through rule for QIEs. In most ca- described above will be treated as held by U.S. real property interests (whether or not they ses, any distribution from a QIE to a nonresi- a U.S. person in proportion to the stock of are capital assets) are taxed as if you are en- dent alien, foreign corporation, or other QIE that such other QIE that is (or is treated as) gaged in a trade or business in the United is attributable to the QIE’s gain from the sale or held by a U.S. person. States. You must treat the gain or loss as effec- exchange of a U.S. real property interest is trea- tively connected with that trade or business. ted as gain recognized by the nonresident alien, Wash sale. If you dispose of an interest in foreign corporation, or other QIE from the sale a domestically controlled QIE in an applicable U.S. real property interest. This is any inter- or exchange of a U.S. real property interest. wash sale transaction, special rules apply. An est in real property located in the United States Certain exceptions apply to the look-through applicable wash sale transaction is one in which or the U.S. Virgin Islands or any interest (other rule for distributions by QIEs. A distribution by a you: than as a creditor) in a domestic corporation QIE with respect to stock regularly traded on an 1. Dispose of an interest in the domestically that is a U.S. real property holding corporation. established securities market in the United controlled QIE during the 30-day period Real property includes the following. States is not treated as gain from the sale or ex- before the ex-dividend date of a distribu- 1. Land and unsevered natural products of change of a U.S. real property interest if the tion that you would (but for the disposition) the land, such as growing crops and tim- shareholder owns 5% or less of that stock (or have treated as gain from the sale or ex- ber, and mines, wells, and other natural 10% or less of that stock in the case of a REIT) change of a U.S. real property interest; deposits. at any time during the 1-year period ending on and the date of the distribution. 2. Improvements on land, including build- A distribution made by a REIT is generally 2. Acquire, or enter into a contract or option ings, other permanent structures, and their not treated as gain from the sale or exchange of to acquire, a substantially identical interest structural components. a U.S. real property interest if the shareholder is in that entity during the 61-day period that began on the first day of the 30-day pe- 3. Personal property associated with the use a qualified shareholder (as described in section riod. of real property, such as equipment used 897(k)(3)). in farming, mining, forestry, or construction A distribution that you do not treat as gain If this occurs, you are treated as having a gain or property used in lodging facilities or ren- from the sale or exchange of a U.S. real prop- from the sale or exchange of a U.S. real prop- ted office space, unless the personal prop- erty interest may be included in your gross in- erty interest in an amount equal to the distribu- erty is: come as a regular dividend. tion that would have been treated as such gain. a. Disposed of more than one year be- Disposition of REIT stock. Dispositions of This also applies to any substitute dividend pay- fore or after the disposition of the real stock in a REIT that is held directly (or indirectly ment. property, or through one or more partnerships) by a quali- A transaction is not treated as an applicable fied shareholder will not be treated as a U.S. wash sale transaction if: b. Separately sold to persons unrelated real property interest. See sections 897(k)(2) • You actually receive the distribution from either to the seller or to the buyer of through (4) for more information. the domestically controlled QIE related to the real property. the interest disposed of, or acquired, in the Domestically controlled QIE. The sale of transaction, or U.S. real property holding corporation. an interest in a domestically controlled QIE is You dispose of any class of stock in a QIE A corporation is a U.S. real property holding • not the sale of a U.S. real property interest. The that is regularly traded on an established corporation if the fair market value of the corpo- entity is domestically controlled if at all times securities market in the United States but ration's U.S. real property interests are at least during the testing period less than 50% in value only if you did not own more than 5% of 50% of the total fair market value of: of its stock was held, directly or indirectly, by that class of stock at any time during the • The corporation's U.S. real property inter- foreign persons. The testing period is the 1-year period ending on the date of the dis- ests, plus shorter of the: tribution. • The corporation's interests in real property • 5-year period ending on the date of dispo- located outside the United States, plus sition, or Alternative minimum tax. There may be a • The corporation's other assets that are • Period during which the entity was in exis- minimum tax on your net gain from the disposi- used in, or held for use in, a trade or busi- tence. tion of U.S. real property interests. Figure the ness. For the purpose of determining whether a amount of this tax, if any, on Form 6251. Stock in any domestic corporation is treated QIE is domestically controlled, the following as stock in a U.S. real property holding corpora- Withholding of tax. If you dispose of a U.S. rules apply. tion unless you establish that the corporation is real property interest, the buyer may have to not a U.S. real property holding corporation. 1. A person holding less than 5% of any withhold tax. See the discussion of tax withheld class of stock of the QIE, which is regularly on real property sales in chapter 8. Publicly traded exception. A U.S. real traded on an established securities market property interest does not include a class of in the United States at all times during the Gain or Loss of Foreign Persons stock of a corporation that is regularly traded on testing period, would be treated as a U.S. an established securities market, unless you From the Sale or Exchange of person unless the QIE has actual knowl- Certain Partnership Interests hold more than 5% of the fair market value of edge that such person is not a U.S. per- that class of stock (or more than 10% of that son. stock in the case of real estate investment If you are a direct or indirect foreign partner in a trusts). An interest in a foreign corporation own- 2. Any stock in a QIE that is held by another U.S. or foreign partnership that is engaged (or ing U.S. real property is generally not a U.S. QIE will be treated as held by a foreign is treated as engaged) in a trade or business real property interest unless the corporation person if: within the United States and you directly or indi- rectly dispose of that interest, then the gain or

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loss from the disposition of that partnership in- b. Property that would be included in in- effectively connected. See Income From Real terest may affect your federal tax liability. Under ventory if on hand at the end of the tax Property, later in this chapter. section 864(c)(8), your gain or loss from the year, or sale, exchange, or other disposition of that part- c. Property held primarily for sale to cus- nership interest is treated as effectively connec- The 30% Tax tomers in the ordinary course of busi- ted with the conduct of a trade or business ness. within the United States (“effectively connected Tax at a 30% (or lower treaty) rate applies to gain” or “effectively connected loss”). However, Item (3) will not apply if you sold the certain items of income or gains from U.S. sour- the amount of effectively connected gain or ef- property for use, consumption, or disposi- ces but only if the items are not effectively con- fectively connected loss is limited to the portion tion outside the United States and an of- nected with your U.S. trade or business. of what your distributive share of effectively fice or other fixed place of business in a connected gain or loss would have been had foreign country was a material factor in the Fixed or Determinable Income the partnership sold all of its assets at fair mar- sale. ket value as of the date of the disposition. The 30% (or lower treaty) rate applies to the Any foreign source income that is equivalent gross amount of U.S. source fixed or determi- Section 864(c)(8) applies to sales, ex- to any item of income described above is trea- nable annual or periodic gains, profits, or in- changes, or other dispositions occurring on or ted as effectively connected with a U.S. trade or come. after November 27, 2017. On November 6, business. For example, foreign source interest 2020, final regulations under section 864(c)(8) and dividend equivalents are treated as U.S. ef- Income is fixed when it is paid in amounts were issued applicable to transfers occurring on fectively connected income if the income is de- known ahead of time. Income is determinable or after December 26, 2018. rived by a foreign person in the active conduct whenever there is a basis for figuring the of a banking, financing, or similar business amount to be paid. Income can be periodic if it Foreign Income within the United States. is paid from time to time. It does not have to be paid annually or at regular intervals. Income can You must treat three kinds of foreign source in- Tax on Effectively be determinable or periodic even if the length of come as effectively connected with a trade or Connected Income time during which the payments are made is in- business in the United States if: creased or decreased. • You have an office or other fixed place of Income you receive during the tax year that is business in the United States to which the effectively connected with your trade or busi- Items specifically included as fixed or deter- income can be attributed, ness in the United States is, after allowable de- minable income are interest (other than original • That office or place of business is a mate- ductions, taxed at the rates that apply to U.S. issue discount), dividends, dividend equivalent rial factor in producing the income, and citizens and residents. payments (defined in chapter 2), rents, premi- • The income is produced in the ordinary ums, annuities, salaries, wages, and other com- course of the trade or business carried on Generally, you can receive effectively con- pensation. A substitute dividend or interest pay- through that office or other fixed place of nected income only if you are a nonresident ment received under a securities lending business. alien engaged in a trade or business in the Uni- transaction or a sale–repurchase transaction is ted States during the tax year. However, if you treated the same as the amounts received on An office or other fixed place of business is receive payments from the sale or exchange of the transferred security. Other items of income, a material factor if it significantly contributes to, property, the performance of services, or any such as royalties, also may be subject to the and is an essential economic element in, the other transaction during a tax year in which you 30% tax. earning of the income. are not engaged in a U.S. trade or business, but Some fixed or determinable income such payments would have been treated as ef- TIP may be exempt from U.S. tax. See The three kinds of foreign source income fectively connected income in the year the chapter 3 if you are not sure whether are listed below. transaction took place or you performed the the income is taxable. services, then they are treated as effectively 1. Rents and royalties for the use of, or for connected income in the tax year you received Original issue discount (OID). If you sold, the privilege of using, intangible personal them. property located outside the United States exchanged, or received a payment on a bond or other debt instrument that was issued at a dis- or from any interest in such property. In- Example. Ted Richards entered the United count, all or part of the original issue discount cluded are rents or royalties for the use, or States in August 2019 to perform personal serv- (OID) (other than portfolio interest) may be sub- for the privilege of using, outside the Uni- ices in the U.S. office of his overseas employer. ject to the 30% tax. The amount of OID is the ted States, patents, copyrights, secret pro- He worked in the U.S. office until December 25, difference between the stated redemption price cesses and formulas, goodwill, trade- 2019, but did not leave this country until Janu- at maturity and the issue price of the debt in- marks, trade brands, franchises, and ary 11, 2020. On January 8, 2020, he received strument. The 30% tax applies in the following similar properties if the rents or royalties his final paycheck for services performed in the circumstances. are from the active conduct of a trade or United States during 2019. All of Ted's income business in the United States. during his stay here is U.S. source income. 1. You received a payment on a debt instru- 2. Dividends, interest, or amounts received During 2019, Ted was engaged in the trade ment. In this case, the amount of OID sub- for the provision of a guarantee of indebt- or business of performing personal services in ject to tax is the OID that accrued while edness issued after September 27, 2010, the United States. Therefore, all amounts paid you held the debt instrument minus the from the active conduct of a banking, fi- to him in 2019 for services performed in the Uni- OID previously taken into account. But the nancing, or similar business in the United ted States during 2019 are effectively connec- tax on the OID cannot be more than the States. A substitute dividend or interest ted with that trade or business during 2019. payment minus the tax on the interest pay- payment received under a securities lend- The salary payment Ted received in January ment on the debt instrument. 2020 is U.S. source income to him in 2020. It is ing transaction or a sale–repurchase 2. You sold or exchanged the debt instru- effectively connected income because he per- transaction is treated the same as the ment. The amount of OID subject to tax is formed the services that earned the income in amounts received on the transferred se- the OID that accrued while you held the the United States in 2019 and, therefore, he curity. debt instrument minus the amount already would have been treated as engaged in a trade taxed in (1) above. 3. Income, gain, or loss from the sale outside or business in the United States during 2019. the United States, through the U.S. office Report on your return the amount of OID or other fixed place of business, of: Real property income. You may be able to shown on Form 1042-S if you bought the debt a. Stock in trade, choose to treat all income from real property as instrument at original issue. However, you must

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recompute your proper share of OID shown on • Certain copyrights, literary or musical or ar- • Exclusion for gain from the sale or ex- Form 1042-S if any of the following apply. tistic compositions, letters or memoranda, change of qualified small business stock • You bought the debt instrument at a pre- or similar property; (section 1202 exclusion). mium or paid an acquisition premium. • Certain U.S. government publications; • Losses from the sale or exchange of prop- • The debt instrument is a stripped bond or a • Certain commodities derivative financial in- erty held for personal use. However, los- stripped coupon (including zero coupon in- struments held by a commodities deriva- ses resulting from casualties or thefts at- struments backed by U.S. Treasury securi- tives dealer; or tributable to a federally declared disaster ties). • Hedging transactions. may be deductible on Schedule A (Form • The debt instrument is a contingent pay- 1040-NR). See Itemized Deductions in ment or inflation-indexed debt instrument. A capital gain is a gain on the sale or ex- chapter 5. For the definition of premium and acquisition change of a capital asset. A capital loss is a If you are not engaged in a trade or business premium and instructions on how to recompute loss on the sale or exchange of a capital asset. in the United States and have not established a OID, see Pub. 1212. tax year for a prior period, your tax year will be If the sale is in foreign currency, for the pur- the calendar year for purposes of the 183-day pose of determining gain, the cost and selling Gambling Winnings rule. Also, you must file your tax return on a cal- price of the property should be expressed in endar-year basis. U.S. currency at the rate of exchange prevailing If you were in the United States for less than In general, nonresident aliens are subject to the as of the date of the purchase and date of the 183 days during the tax year, capital gains 30% tax on the gross proceeds from gambling sale, respectively. won in the United States if that income is not ef- (other than gains listed earlier) are tax exempt fectively connected with a U.S. trade or busi- unless they are effectively connected with a You can use Pub. 544 to determine what is ness and is not exempted by treaty. However, trade or business in the United States during a sale or exchange of a capital asset, or what is no tax is imposed on nonbusiness gambling in- your tax year. treated as such. Specific tax treatment that ap- come a nonresident alien wins playing black- plies to U.S. citizens or residents generally jack, baccarat, craps, roulette, or big-6 wheel in Reporting. Report your gains and losses from does not apply to you. the United States. the sales or exchanges of capital assets that are not effectively connected with a trade or The following gains are subject to the 30% Nonresident aliens are taxed at graduated business in the United States on Schedule NEC (or lower treaty) rate without regard to the rates on net gambling income won in the United (Form 1040-NR). Report gains and losses from 183-day rule, discussed later. States that is effectively connected with a U.S. sales or exchanges of capital assets (including trade or business. 1. Gains on the disposal of timber, coal, or real property) that are effectively connected domestic iron ore with a retained eco- with a trade or business in the United States on Social Security Benefits nomic interest. a separate Schedule D (Form 1040), Form 4797, or both. Attach them to Form 1040-NR. 2. Gains on contingent payments received A nonresident alien must include 85% of any from the sale or exchange of patents, U.S. social security benefit (and the social se- copyrights, and similar property after Oc- Income From Real Property curity equivalent part of a tier 1 railroad retire- tober 4, 1966. ment benefit) in U.S. source fixed or determina- If you have income from real property located in ble annual or periodic income. Social security 3. Gains on certain transfers of all substantial the United States that you own or have an inter- benefits include monthly retirement, survivor, rights to, or an undivided interest in, pat- est in and hold for the production of income, and disability benefits. This income is exempt ents if the transfers were made before Oc- you can choose to treat all income from that under some tax treaties. See Table 1 in the Tax tober 5, 1966. property as income effectively connected with a Treaty Tables, available at IRS.gov/Individuals/ 4. Gains on the sale or exchange of original trade or business in the United States. The International-Taxpayers/Tax-Treaty-Tables for issue discount obligations. choice applies to all income from real property a list of tax treaties that exempt U.S. social se- located in the United States and held for the curity benefits from U.S. tax. For more informa- Gains in (1) are not subject to the 30% (or production of income and to all income from tion, see Pub. 915. lower treaty) rate if you choose to treat the any interest in such property. This includes in- gains as effectively connected with a U.S. trade come from rents, royalties from mines, oil or Sales or Exchanges or business. See Income From Real Property, gas wells, or other natural resources. It also in- of Capital Assets later. cludes gains from the sale or exchange of tim- ber, coal, or domestic iron ore with a retained These rules apply only to those capital gains 183-day rule. If you were in the United States economic interest. and losses from sources in the United States for 183 days or more during the tax year, your that are not effectively connected with a trade or net gain from sales or exchanges of capital as- You can make this choice only for real prop- business in the United States. They apply even sets is taxed at a 30% (or lower treaty) rate. For erty income that is not otherwise effectively if you are engaged in a trade or business in the purposes of the 30% (or lower treaty) rate, net connected with your U.S. trade or business. United States. These rules do not apply to the gain is the excess of your capital gains from If you make the choice, you can claim de- sale or exchange of a U.S. real property interest U.S. sources over your capital losses from U.S. ductions attributable to the real property income or to the sale of any property that is effectively sources. This rule applies even if any of the and only your net income from real property is connected with a trade or business in the Uni- transactions occurred while you were not in the taxed. ted States. See Real Property Gain or Loss, United States. earlier, under Effectively Connected Income. To determine your net gain, consider the This choice does not treat a nonresident amount of your gains and losses that would be alien, who is not otherwise engaged in a U.S. A capital asset is everything you own ex- recognized and taken into account only if, and trade or business, as being engaged in a trade cept: to the extent that, they would be recognized or business in the United States during the year. • Inventory; and taken into account if you were in a U.S. • Business accounts or notes receivable; trade or business during the year and the gains Example. You are a nonresident alien and • Depreciable property used in a trade or and losses were effectively connected with that are not engaged in a U.S. trade or business. business; trade or business during the tax year. You own a single-family house in the United • Real property used in a trade or business; In arriving at your net gain, do not take the States that you rent out. Your rental income for • Supplies regularly used in a trade or busi- following into consideration. the year is $10,000. This is your only U.S. ness; • The four types of gains listed earlier. source income. As discussed earlier under The • The deduction for a capital loss carryover. 30% Tax, the rental income is subject to a tax at • Capital losses in excess of capital gains. a 30% (or lower treaty) rate. You received a

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Form 1042-S showing that your tenants prop- return that includes the following information (if third calendar year (2020) beginning after the erly withheld this tax from the rental income. applicable). end of his first period of residence (August 1, You do not have to file a U.S. tax return (Form • Your name, taxpayer identification number, 2017). Therefore, he is subject to tax under the 1040-NR) because your U.S. tax liability is sat- and tax year. special rule for the period of nonresidence (Au- isfied by the withholding of tax. • A description of the types of services per- gust 2, 2017, through October 4, 2020) if it is If you make the choice discussed earlier, formed (whether on or off board). more than the tax that would normally apply to you can offset the $10,000 income by certain • Names of vessels or registration numbers him as a nonresident alien. rental expenses. (See Pub. 527.) Any resulting of aircraft on which you performed the net income is taxed at graduated rates. services. Reporting requirements. If you are subject If you make this choice, report the rental in- • Amount of U.S. source transportation in- to this tax for any year in the period you were a come and expenses on Schedule E (Form come derived from each type of service for nonresident alien, you must file Form 1040-NR 1040). Enter the net rental income or loss from each vessel or aircraft for the calendar for that year. The return is due by the due date Schedule E (Form 1040) on Schedule 1 (Form year. (including extensions) for filing your U.S. in- 1040), Part I, line 5. Attach Schedule 1 (Form • Total amount of U.S. source transportation come tax return for the year that you again be- 1040), and Schedule E (Form 1040) to Form income derived from all types of services come a U.S. resident. If you already filed re- 1040-NR. For the first year you make the for the calendar year. turns for that period, you must file amended choice, also attach the statement discussed returns. You must attach a statement to your re- next. This 4% tax applies to your U.S. source turn that identifies the source of all of your U.S. gross transportation income. This only includes and foreign gross income and the items of in- Making the choice. Make the initial choice by transportation income that is treated as derived come subject to this special rule. attaching a statement to your return, or amen- from sources in the United States if the trans- ded return, for the year of the choice. Include portation begins or ends in the United States. the following in your statement. For transportation income from personal serv- Expatriation Tax • That you are making the choice. ices, the transportation must be between the • Whether the choice is under Internal Reve- United States and a U.S. possession. For per- The expatriation tax provisions apply to U.S. nue Code section 871(d) (explained ear- sonal services of a nonresident alien, this only citizens who have renounced their citizenship lier) or a tax treaty. applies to income derived from, or in connec- and long-term residents (LTRs) who have • A complete list of all your real property, or tion with, an aircraft. ended their residency. The following section de- any interest in real property, located in the scribes the expatriation rules under section United States. Give the legal identification 877A, which applies to individuals who expatri- of U.S. timber, coal, or iron ore in which Interrupted Period ated on or after June 17, 2008. See Expatriation you have an interest. After June 16, 2008, later. If you expatriated be- • The extent of your ownership in the prop- of Residence fore June 17, 2008, refer to Expatriation After erty. June 3, 2004, and Before June 17, 2008, in • The location of the property. You are subject to tax under a special rule if you chapter 4 of the 2018 Pub. 519, and the 2018 • A description of any major improvements interrupt your period of U.S. residence with a Instructions for Form 8854. to the property. period of nonresidence. The special rule ap- • The dates you owned the property. plies if you meet all of the following conditions. If you renounced your citizenship or terminated your long-term residency • Your income from the property. 1. You were a U.S. resident for a period that ! CAUTION after June 3, 2004, and before June • Details of any previous choices and revo- includes at least 3 consecutive calendar cations of the real property income choice. 17, 2008, you will still be considered a U.S. citi- years. zen or a U.S. resident for tax purposes until you This choice stays in effect for all later tax 2. You were a U.S. resident for at least 183 notify the Department of State or Department of years unless you revoke it. days in each of those years. Homeland Security (as applicable) of your ex- patriation and file Form 8854 with the IRS. Revoking the choice. You can revoke the 3. You ceased to be treated as a U.S. resi- choice without IRS approval by filing Form dent. 1040-X for the year you made the choice and Long-term resident (LTR) defined. You are 4. You then again became a U.S. resident for later tax years. You must file Form 1040-X an LTR if you were a lawful permanent resident before the end of the third calendar year within 3 years from the date your return was of the United States in at least 8 of the last 15 after the end of the period described in (1) filed or 2 years from the time the tax was paid, tax years ending with the year your residency above. whichever is later. If this time period has ex- ends. In determining if you meet the 8-year re- pired for the year of choice, you cannot revoke Under this special rule, you are subject to quirement, do not count any year that you are the choice for that year. However, you may re- tax on your U.S. source gross income and gains treated as a resident of a foreign country under voke the choice for later tax years only if you on a net basis at the graduated rates applicable a tax treaty and do not waive treaty benefits. have IRS approval. For information on how to to individuals (with allowable deductions) for the get IRS approval, see Regulations section period you were a nonresident alien, unless you Expatriation After 1.871-10(d)(2). would be subject to a higher tax under section June 16, 2008 871 (rules that normally apply to taxation of a Note. You can file your Form 1040-X elec- nonresident alien’s income, discussed earlier) Expatriation date. Your expatriation date is tronically beginning with the 2019 tax year. For after taking into account any applicable treaty the date you relinquish U.S. citizenship (in the more information, see IR-2020-107. benefit. For information on how to figure the case of a former citizen) or terminate your special tax, see Expatriation Tax, later. long-term residency (in the case of a former Transportation Tax U.S. resident). Example. John Willow, a citizen of New A 4% tax rate applies to transportation income Zealand, entered the United States on April 1, Former U.S. citizen. You are considered that is not effectively connected because it 2015, as a lawful permanent resident. On Au- to have relinquished your U.S. citizenship on does not meet the two conditions listed earlier gust 1, 2017, John ceased to be a lawful per- the earliest of the following dates. manent resident and returned to New Zealand. under Transportation Income. If you receive 1. The date you renounced U.S. citizenship During his period of residence, he was present transportation income subject to the 4% tax, before a diplomatic or consular officer of in the United States for at least 183 days in you should figure the tax and show it on line 23c the United States (provided that the volun- each of 3 consecutive years (2015, 2016, and of Form 1040-NR. Attach a statement to your tary renouncement was later confirmed by 2017). He returned to the United States on Oc- the issuance of a certificate of loss of na- tober 5, 2020, as a lawful permanent resident. tionality). He became a resident before the close of the

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2. The date you furnished to the State De- j. $165,000 if you expatriated or termi- Gains arising from deemed sales must be partment a signed statement of voluntary nated residency in 2018. taken into account for the tax year of the relinquishment of U.S. nationality confirm- deemed sale without regard to other U.S. Inter- k. $168,000 if you expatriated or termi- ing the performance of an expatriating act nal Revenue laws. Losses from deemed sales nated residency in 2019. (provided that the voluntary relinquish- must be taken into account to the extent other- ment was later confirmed by the issuance l. $171,000 if you expatriated or termi- wise provided under U.S. Internal Revenue of a certificate of loss of nationality). nated residency in 2020. laws. However, Internal Revenue Code section 1091 (relating to the disallowance of losses on 3. The date the State Department issued a 2. Your net worth is $2 million or more on the wash sales of stock and securities) does not certificate of loss of nationality. date of your expatriation or termination of residency. apply. The net gain that you otherwise must in- 4. The date that a U.S. court canceled your clude in your income is reduced (but not below certificate of naturalization. 3. You fail to certify on Form 8854 that you zero) by: have complied with all U.S. federal tax ob- Former LTR. You are considered to have ligations for the 5 years preceding the date 1. $600,000 if you expatriated or terminated terminated your long-term residency on the ear- of your expatriation or termination of resi- residency before January 1, 2009. liest of the following dates. dency. 2. $626,000 if you expatriated or terminated 1. The date you voluntarily relinquished your residency in 2009. lawful permanent resident status by filing Relief procedures for certain former citi- zens. If you were a U.S. citizen who expatri- 3. $627,000 if you expatriated or terminated Department of Homeland Security Form residency in 2010. I-407 with a U.S. consular or immigration ated after March 18, 2010, you may be eligible officer. for certain relief procedures that provide an al- 4. $636,000 if you expatriated or terminated ternative means for satisfying the tax compli- residency in 2011. 2. The date you became subject to a final ad- ance certification process. For more informa- ministrative order that you abandoned tion, see Relief Procedures for Certain Former 5. $651,000 if you expatriated or terminated your lawful permanent resident status (or, Citizens, available at IRS.gov/Individuals/ residency in 2012. if such order has been appealed, the date International-Taxpayers/Relief-Procedures-for- 6. $668,000 if you expatriated or terminated of a final judicial order issued in connec- Certain-Former-Citizens. residency in 2013. tion with such administrative order). 7. $680,000 if you expatriated or terminated 3. The date you became subject to a final ad- Exception for dual-citizens and certain mi- residency in 2014. ministrative order for your removal from nors. Certain dual-citizens and certain minors the United States under the Immigration (defined next) are not subject to the expatriation 8. $690,000 if you expatriated or terminated and Nationality Act. tax even if they meet (1) or (2) above. However, residency in 2015. they still must provide the certification required 4. If you were a dual resident of the United in (3) above. 9. $693,000 if you expatriated or terminated States and a country with which the United residency in 2016. States has an income tax treaty, the date Certain dual-citizens. You may qualify for 10. $699,000 if you expatriated or terminated you began to be treated as a resident of the exception described above if both of the fol- residency in 2017. that country under the provisions of the lowing apply. treaty and notified the IRS of that treat- • You became at birth a U.S. citizen and a 11. $711,000 if you expatriated or terminated ment on Forms 8833 and 8854. See Effect citizen of another country and, as of the ex- residency in 2018. of Tax Treaties in chapter 1 for more infor- patriation date, you continue to be a citizen 12. $725,000 if you expatriated or terminated mation about dual residents. of, and are taxed as a resident of, that other country. residency in 2019. Covered expatriate. If you expatriated after • You have been a resident of the United 13. $737,000 if you expatriated or terminated June 16, 2008, you are treated as a covered ex- States for not more than 10 years during residency in 2020. patriate, and the expatriation rules under sec- the 15-year tax period ending with the tax tion 877A apply to you if you meet any of the fol- year during which the expatriation occurs. Exceptions. The mark-to-market tax does not lowing conditions. For the purpose of determining U.S. resi- apply to the following. dency, use the substantial presence test 1. Your average annual net income tax for described in chapter 1. 1. Eligible deferred compensation items. the 5 years ending before the date of ex- 2. Ineligible deferred compensation items. patriation or termination of residency is Certain minors. You may qualify for the more than: exception described earlier if you meet both of 3. Interests in nongrantor trusts. the following requirements. a. $139,000 if you expatriated or termi- 4. Specified tax deferred accounts. You expatriated before you were 181/2. nated residency in 2008. • • You have been a resident of the United Instead, items (1) and (3) may be subject to b. $145,000 if you expatriated or termi- States for not more than 10 tax years be- withholding at source. In the case of item (2), nated residency in 2009 or 2010. fore the expatriation occurs. For the pur- you are treated as receiving the present value pose of determining U.S. residency, use c. $147,000 if you expatriated or termi- of your accrued benefit as of the day before the substantial presence test described in nated residency in 2011. your expatriation date. In the case of item (4), chapter 1. you are treated as receiving a distribution of d. $151,000 if you expatriated or termi- your entire interest in the account on the day nated residency in 2012. How To Figure the before your expatriation date. See Notice e. $155,000 if you expatriated or termi- Expatriation Tax if You 2009-85 and the Instructions for Form 8854 for nated residency in 2013. Are a Covered Expatriate more information. f. $157,000 if you expatriated or termi- In the year you expatriate, you are subject to in- nated residency in 2014. Expatriation Tax Return come tax on the net unrealized gain (or loss) in g. $160,000 if you expatriated or termi- your property as if the property had been sold You must file an initial Form 8854 in the year nated residency in 2015. for its fair market value on the day before your you relinquish your U.S. citizenship or terminate expatriation date (“mark-to-market tax”). This your long-term residency, even if you are not a h. $161,000 if you expatriated or termi- applies to most types of property interests you covered expatriate. In addition, you must file a nated residency in 2016. held on the date of relinquishment of citizenship Form 8854 annually after you expatriate if you i. $162,000 if you expatriated or termi- or termination of residency. But see Exceptions, are a covered expatriate and you: nated residency in 2017. later.

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1. Deferred the payment of mark-to-market Topics tax (see Deferral of payment of This chapter discusses: mark-to-market tax), later, Identification Number • Identification numbers, 2. Have an item of eligible deferred compen- A taxpayer identification number must be fur- • Filing status, sation, or nished on returns, statements, and other tax-re- • Deductions, lated documents. For an individual, this is a so- 3. Have an interest in a nongrantor trust. • Dependents, cial security number (SSN). If you do not have • Itemized Deductions, and are not eligible to get an SSN, you must ap- Deferral of payment of mark-to-market tax. • Tax credits and payments, and ply for an individual taxpayer identification num- You can make an irrevocable election to defer • Special rules for bona fide residents of ber (ITIN). An employer identification number payment of the mark-to-market tax imposed on American Samoa and Puerto Rico. the deemed sale of property. If you make this (EIN) is required if you are engaged in a trade election, the following rules apply. or business as a sole proprietor and have em- Useful Items ployees or a qualified retirement plan. 1. You can make the election on a prop- You may want to see: erty-by-property basis. You must furnish a taxpayer identification number if you are: 2. The deferred tax attributable to a particular Publication An alien who has income effectively con- property is due on the return for the tax •

463 nected with the conduct of a U.S. trade or year in which you dispose of the property. 463 Travel, Gift, and Car Expenses business at any time during the year;

3. Interest is charged for the period the tax is 501 501 Dependents, Standard Deduction, • An alien who has a U.S. office or place of deferred. and Filing Information business at any time during the year; • A nonresident spouse treated as a resi-

4. The due date for the payment of the defer- 521 521 Moving Expenses dent, as discussed in chapter 1; or red tax cannot be extended beyond the Any other alien who files a tax return, an

526 • earlier of the following dates. 526 Charitable Contributions amended return, or a refund claim (but not

a. The due date of the return required for 535 535 Business Expenses information returns). the year of death.

597 597 Information on the United States– Social security number (SSN). Generally, b. The time that the security provided for Canada Income Tax Treaty you can get an SSN if you have been lawfully the property fails to be adequate. See admitted to the United States for permanent item (6) below. Form (and Instructions) residence or under other immigration catego- 5. You make the election on Form 8854. ries that authorize U.S. employment. W-7 W-7 Application for IRS Individual To apply for a new SSN, you must submit 6. You must provide adequate security (such Taxpayer Identification Number Form SS-5 and the required documents in per- as a bond).

1040 1040 U.S. Individual Income Tax Return son at your local Social Security Administration 7. You must make an irrevocable waiver of (SSA) office. You can download Form SS-5 at

any right under any treaty of the United 1040-SR 1040-SR U.S. Tax Return For Seniors SSA.gov/forms, call the SSA at 800-772-1213 States that would preclude assessment or or go to your local SSA office. For more infor-

1040-NR 1040-NR U.S. Nonresident Alien Income collection of the mark-to-market tax. mation, go to Social Security Number and Tax Return Card . For more information about the deferral of payment, see the Instructions for Form 8854. 2106 2106 Employee Business Expenses International students. If you have an F-1, M-1, or J-1 visa, see SSA Pub. 05-10181, avail- 3903 3903 Moving Expenses able at SSA.gov/Pubs/10181.html, for more in-

4563 4563 Exclusion of Income for Bona Fide formation about the documents you must pro- Residents of American Samoa vide to prove your immigrant status.

7202 7202 Credits for Sick Leave and Family Individual taxpayer identification number 5. Leave for Certain Self-Employed (ITIN). If you already have an ITIN, enter it Individuals wherever an SSN is required on your tax return. If you do not have and are not eligible to get an

8959 8959 Additional Medicare Tax SSN, you must apply for an ITIN. For details on how to do so, see Form W-7 and its instruc- Figuring 8990 8990 Limitation on Business Interest Expense Under Section 163(j) tions. If you qualify for an ITIN and your application Your Tax See chapter 12 for information about getting is complete, you will receive a letter from the these publications and forms. IRS assigning your tax identification number usually within 7 weeks. If you have not received Introduction your ITIN or other correspondence 7 weeks af- Tax Year ter applying, call the IRS toll-free number at After you have determined your alien status, the 800-829-1040 to request the status of your ap- source of your income, and if and how that in- You must figure your income and file a tax re- plication if you are in the United States. If you come is taxed in the United States, your next turn on the basis of an annual accounting pe- are outside the United States, call step is to figure your tax. The information in this riod called a “tax year.” If you have not previ- 267-941-1000 (not a toll-free number). chapter is not as comprehensive for resident ously established a fiscal tax year, your tax year An ITIN is for tax use only. It does not entitle aliens as it is for nonresident aliens. Resident is the calendar year. A calendar year is 12 con- you to social security benefits or change your aliens should get publications, forms, and in- secutive months ending on December 31. If you employment or immigration status under U.S. structions for U.S. citizens because the informa- have previously established a regular fiscal year law. tion for filing returns for resident aliens is gener- (12 consecutive months ending on the last day In addition to those aliens who are required ally the same as for U.S. citizens. of a month other than December or a 52-53 to furnish a taxpayer identification number and If you are both a nonresident alien and a week year) and are considered to be a U.S. res- are not eligible for an SSN, a Form W-7 must be resident alien in the same tax year, see chap- ident for any calendar year, you will be treated filed for alien spouses or dependents who qual- ter 6 for a discussion of dual-status aliens. as a U.S. resident for any part of your fiscal year ify for an allowable tax benefit and are not eligi- that falls within that calendar year. ble for an SSN.

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Additional information on obtaining an ITIN discussed in chapter 1 under Nonresident Note. Even if your spouse is considered un- is available in the Instructions for Form W-7 and Spouse Treated as a Resident. married for head of household purposes be- at IRS.gov/ITIN. cause you are a nonresident alien, your spouse Note. Even if you are considered unmarried may still be considered married for purposes of Expired ITIN. Some ITINs must be re- for head of household purposes because you the earned income credit. In that case, your newed. The following ITINs expired at the end are married to a nonresident alien, you may still spouse will not be entitled to the credit. See of 2020 and must be renewed if you need to file be considered married for purposes of the Pub. 596 for more information. a federal tax return in 2021. earned income credit. In that case, you will not • An ITIN that hasn’t been used on a federal be entitled to the credit. See Pub. 596 for more Estates and trusts. A nonresident alien estate tax return at least once in the last 3 years. information. or trust using Form 1040-NR must use the Tax • An ITIN that has the middle digits 88 (for Rate Schedule W in the Form 1040-NR instruc- example, 9NN-88-NNNN). tions when determining the tax on income effec- • An ITIN that has the middle digits 90, 91, Nonresident Aliens tively connected with a U.S. trade or business. 92, 94, 95, 96, 97, 98, or 99 (for example, If you are a nonresident alien filing Form 9NN-95-NNNN) and was assigned before Special rules for aliens from certain U.S. 1040-NR, you may be able to use one of the fil- 2013. possessions. A nonresident alien who is a ing statuses discussed, later. You do not need to renew your ITIN if you do bona fide resident of American Samoa or Pu- erto Rico for the entire tax year and who is tem- not need to file a federal tax return. To renew Married nonresident alien. Married nonresi- porarily working in the United States should see your ITIN, see Form W-7 and its instructions at dent aliens who are not married to U.S. citizens Bona Fide Residents of American Samoa or IRS.gov/FormW7. For more information, go to or residents must generally use the Tax Table Puerto Rico, at the end of this chapter, for infor- IRS.gov/ITIN. column or the Tax Computation Worksheet for mation about special rules. married filing separate returns when determin- Employer identification number (EIN). An ing the tax on income effectively connected with individual may use an SSN (or ITIN) for individ- a U.S. trade or business. ual taxes and an EIN for business taxes. To ap- Reporting Your Income ply for an EIN, file Form SS-4 with the IRS. Exceptions. Married nonresident aliens normally cannot use the Tax Table column or You must report each item of income that is tax- the Tax Computation Worksheet for single indi- able according to the rules in chapters 2, 3, and Filing Status viduals. However, you may be able to file as 4. For resident aliens, this includes income from single if you lived apart from your spouse during sources both within and outside the United The amount of your tax depends on your filing the last 6 months of the year and you are a mar- States. For nonresident aliens, this includes status. Your filing status is important in deter- ried resident of Canada, Mexico, or South Ko- both income that is effectively connected with a mining whether you can take certain deductions rea, or are a married U.S. national. See the In- trade or business in the United States (subject and credits. The rules for determining your filing structions for Form 1040-NR to see if you to graduated tax rates) and income from U.S. status are different for resident aliens and non- qualify. “U.S. national” is defined later in this sources that is not effectively connected (sub- resident aliens. section. ject to a flat 30% tax rate or lower tax treaty A nonresident alien generally cannot file as rate). married filing jointly. However, a nonresident Resident Aliens alien who is married to a U.S. citizen or resident can choose to be treated as a resident and file a Deductions Resident aliens can use the same filing sta- joint return on Form 1040 or 1040-SR. For infor- tuses available to U.S. citizens. See your form mation on these choices, see chapter 1. If you Resident and nonresident aliens can claim simi- instructions or Pub. 501 for more information on do not make the choice to file jointly, file Form lar deductions on their U.S. tax returns. How- filing status. 1040-NR and use the Tax Table column or the ever, nonresident aliens can generally claim Tax Computation Worksheet for married indi- only deductions related to income that is effec- Married filing jointly. Generally, you can file viduals filing separately. tively connected with their U.S. trade or busi- as married filing jointly only if both you and your ness. spouse were U.S. citizens or resident aliens for U.S. national. An individual who, although the entire tax year, or if you choose to be a non- not a U.S. citizen, owes his or her allegiance to resident spouse treated as a resident, as dis- the United States, is considered a U.S. national. Resident Aliens cussed in chapter 1. Also, U.S. nationals include American Samoans and Northern Mariana Islanders who choose to You can claim the same deductions allowed to Qualifying widow(er). If your spouse died in become U.S. nationals instead of U.S. citizens. U.S. citizens if you are a resident alien for the 2018 or 2019 and you did not remarry before entire tax year. While the discussion under the end of 2020, you may qualify to file as a Qualifying widow(er). You may be eligible to Nonresident Aliens, later, contains some of the qualifying widow(er) and use the joint return tax file as a qualifying widow(er) and use the joint same general rules and guidelines that apply to rates. This applies only if you could have filed a return tax rates. you, it is specifically directed toward nonresi- joint return with your spouse for the year your For more information on the qualifying dent aliens. You should get the Instructions for spouse died. widow(er) filing status, see Qualifying widow(er) Forms 1040 and 1040-SR for more information For more information on the qualifying under Filing Status in the 2020 Instructions for on how to claim your allowable deductions. widow(er) filing status, see Qualifying Form 1040-NR. Widow(er) under Filing Status in the 2020 In- Nonresident Aliens structions for Forms 1040 and 1040-SR. Head of household. You cannot file as head of household if you are a nonresident alien at You can claim deductions to figure your effec- Head of household. You can qualify as head any time during the tax year. However, if you tively connected taxable income. You generally of household if you are unmarried or considered are married, your spouse can qualify as a head cannot claim deductions related to income that unmarried on the last day of the year and you of household if: is not connected with your U.S. business activi- pay more than half the cost of keeping up a • Your spouse is a resident alien or U.S. citi- ties. Except for certain itemized deductions, dis- home for you and a qualifying person. You must zen for the entire tax year, cussed later, you can claim deductions only to be a resident alien for the entire tax year. • You do not choose to be treated as a resi- dent alien, and the extent they are connected with your effec- You are considered unmarried for this pur- Your spouse meets the other requirements tively connected income. pose if your spouse was a nonresident alien at • for this filing status, as discussed earlier any time during the year and your spouse under Resident Aliens. Ordinary and necessary business expen- doesn’t choose to be treated as a resident, as ses. You can deduct all ordinary and

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necessary expenses in the operation of your ment, your IRA deduction may be reduced or U.S. trade or business to the extent they relate eliminated. But you can still make contributions to income effectively connected with that trade to a traditional IRA even if you cannot deduct Dependents or business. For information about other busi- them. If you made nondeductible contributions ness expenses, see Pub. 535. to a traditional IRA for 2020, you must report Resident aliens can claim their dependents in them on Form 8606. the same way as U.S. citizens. However, only Qualified business income deduction. If you For more information, see Pub. 590-A. nonresident aliens who are U.S. nationals; resi- have income effectively connected with a U.S. dents of Canada, Mexico, and South Korea; or trade or business, you may be able to deduct Moving expenses. The deduction for moving residents of India who were students or busi- up to 20% of your qualified business income expenses is only available if you are a member ness apprentices can have a qualifying depend- from your qualified trade or business, plus 20% of the U.S. Armed Forces on active duty and, ent. See Nonresident Aliens, later. of your qualified REIT dividends and qualified due to a military order, you move because of a In general, a dependent is a qualifying publicly traded partnership (PTP) income. For permanent change of station. For more informa- child or a qualifying relative. However, the more information, see Line 13a in the Instruc- tion, see Pub. 3. If you qualify, use Form 3903 following exceptions apply. tions for Form 1040-NR. to figure the amount to deduct. For more information on the qualified busi- 1. An individual who is a dependent of a tax- ness income deduction, see Form 8995, Form Services or reimbursements provided by payer is treated as having no dependents. 8995-A, and its schedules, and the related in- government to members of the U.S. Armed 2. An individual who files a joint return is not structions for the forms and schedules. Forces. Do not include in income the value of moving and storage services provided by the a dependent if the individual files a joint re- Losses. You can deduct losses resulting from government because of a move pursuant to a turn, unless the joint return is filed only to transactions that you entered into for profit and military order incident to a permanent change of claim a refund of estimated or withheld that you were not reimbursed for by insurance, station. Similarly, do not include in income taxes. etc., to the extent that they relate to income that amounts received as a dislocation allowance, 3. An individual claimed as a dependent is effectively connected with a trade or business temporary lodging expense, temporary lodging must be a citizen, national, or resident of in the United States. allowance, or move-in housing allowance. For the United States, or a resident of Canada more information, see Pub. 3. or Mexico. Note. For tax years 2018, 2019, and 2020, the CARES Act repealed the limitation on busi- Self-employed SEP, SIMPLE, and qualified You must show the SSN (or ITIN) of any de- ness losses under section 461(l) of the Internal retirement plans. If you are self-employed, pendent you list in the Dependents section of Revenue Code. There is generally no limit on you may be able to deduct contributions to a your Form 1040-NR. the deduction of your business losses for 2020. SEP, SIMPLE, or qualified retirement plan that If you do not show the dependent's If you filed a 2018 or 2019 tax return with a limi- provides retirement benefits for yourself and ! SSN (or ITIN) when required or if you tation on your business losses, you can file an your common-law employees, if any. To make CAUTION show an incorrect SSN, certain tax amended tax return to use the losses to reduce deductible contributions for yourself, you must benefits may be disallowed. See Identification your income. have net earnings from self-employment that Number, earlier. Beginning in 2021, and before 2026, you are effectively connected with your U.S. trade may not deduct excess business losses. For or business. 2021, an excess business loss is the amount of Get Pub. 560 for further information. Resident Aliens losses from trades or businesses of a noncor- porate taxpayer that is more than the threshold Penalty on early withdrawal of savings. You If you are a resident alien, a qualifying depend- amount of $262,000 ($524,000 for married tax- must include in income all effectively connected ent includes your qualifying child or qualifying payers filing a joint return). interest income you receive or that is credited to relative. Five tests must be met for a child to be your account during the year. Do not reduce it your qualifying child. Four tests must be met for Educator expenses. If you were an eligible by any penalty you must pay on an early with- a person to be your qualifying relative. For more educator in 2020, you can deduct as an adjust- drawal from a time savings account. However, if information, see the Instructions for Forms 1040 ment to income up to $250 in unreimbursed the interest income is effectively connected with and 1040-SR. qualified expenses you paid or incurred during your U.S. trade or business during the year, you 2020 for certain professional development cour- can deduct on line 17 of Schedule 1 (Form You must show the SSN (or ITIN) of any de- ses, and for books, supplies (other than nonath- 1040) the amount of the early withdrawal pen- pendent you list in the Dependents section of letic supplies for courses of instruction in health alty that the banking institution charged. Attach your Form 1040 or 1040-SR. or physical education), computer equipment (in- Schedule 1 (Form 1040) to your Form 1040-NR. cluding related software and services), and If you do not show the dependent's SSN (or ITIN) when required or if you other supplementary equipment and materials Student loan interest deduction. If you paid show an incorrect SSN, certain tax you use in the classroom. For more information, interest in 2020 on a qualified student loan, you benefits may be disallowed. See Identification see your tax form instructions. may be able to deduct up to $2,500 of the inter- Number, earlier. est you paid. Generally, you can claim the de- Qualified expenses include amounts duction, if all the requirements are met. TIP paid or incurred after March 12, 2020, for personal protective equipment, dis- The deduction is taken on line 20 of Sched- Nonresident Aliens infectant, and other supplies used for the pre- ule 1 (Form 1040). Attach Schedule 1 (Form 1040) to your Form 1040-NR. vention of the spread of Coronavirus. See Pub. 501 for more information. To figure the deduction, see the Instructions for Form 1040-NR. For more information, see Residents of Mexico or Canada, or U.S. na- Individual retirement arrangement (IRA). If Pub. 970. you made contributions to a traditional IRA for tionals. If you are a resident of Mexico or Can- 2020, you may be able to take an IRA deduc- ada, or a national of the United States, you can Charitable contributions. If you are a stu- claim each of your dependents who meet cer- tion. But you must have taxable compensation dent or business apprentice from India who is effectively connected with a U.S. trade or busi- tain tests. Residents of Mexico or Canada, or eligible to claim the standard deduction under nationals of the United States, must use the ness to do so. A Form 5498 should be sent to Article 21(2) of the United States–India Income you by June 1, 2021, that shows all contribu- same rules as U.S. citizens to determine who is Tax Treaty, you may be able to take a charita- a dependent. See Pub. 501 for these rules. tions to your traditional IRA for 2020. If you were ble contribution deduction, of up to $300 for covered by a retirement plan (qualified pension, 2020. For more details, see the instructions for Residents of South Korea. A nonresident profit-sharing (including 401(k)), annuity, SEP, line 10b of Form 1040 or Form 1040-NR. SIMPLE, etc.) at work or through self-employ- alien who is a resident of South Korea (other than an employee of the South Korean

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government) may be able to claim his or her Use Worksheet 5-1 to figure your standard income-producing property not connected with child as a qualifying dependent. In addition to deduction for 2020. If you are married and your a U.S. trade or business. The property must be using the same rules as U.S. citizens to deter- spouse files a return and itemizes deductions, located in the United States at the time of the mine who is a dependent, under the income tax you cannot take the standard deduction. casualty or theft. You can deduct theft losses treaty with South Korea, the child must have only in the year in which you discover the loss. lived with the nonresident alien in the United Disaster tax relief. If you are a student or Use Form 4684 and its instructions to figure States at some time during the tax year. business apprentice eligible for the benefits of your deductible casualty and theft losses. For Article 21(2) of the United States-India Income more information, see Pub. 547. Students and business apprentices from In- Tax Treaty who was affected by certain major dia. Students and business apprentices who federally declared disasters in 2020 (see Other itemized deductions. You may be al- are eligible for the benefits of Article 21(2) of the IRS.gov/DisasterTaxRelief and FEMA.gov/ lowed to deduct some other itemized deduc- United States-India Income Tax Treaty can disasters), you may be able to elect to increase tions not discussed earlier. These include the claim their dependents if they meet the same your standard deduction by any qualified disas- following. rules that apply to U.S. citizens. ter-related personal casualty losses on your • Net qualified disaster losses. 2020 tax return. Use Worksheet 5-1 to calculate • Casualty and theft losses of income-pro- your standard deduction for 2020. See the 2020 ducing property. Itemized Deductions Form 4684 and its instructions for more infor- • Deduction for repayment of amounts under mation on the tax benefits for qualified disas- a claim of right if over $3,000. See Pub. ter-related personal casualty losses. Nonresident aliens can claim some of the same 525 for details. itemized deductions that resident aliens can • Certain unrecovered investment in a pen- State and local income taxes. You can de- sion. claim. However, nonresident aliens can claim duct state and local income taxes you paid on itemized deductions only if they have income • Impairment-related work expenses of a income that is effectively connected with a trade disabled person. effectively connected with their U.S. trade or or business in the United States. Your deduc- business. tion is limited to a combined, total deduction of For more information, see the instructions There may be limitations that impact the $10,000 ($5,000 if married filing separately). If for line 7 under Instructions for Schedule A, amount of itemized deductions you can claim you received a refund or rebate in 2020 of taxes Itemized Deduction in the Instructions for Form on Schedule A. See the instructions for Sched- you paid in an earlier year, do not reduce your 1040-NR. Also see Pub. 529. ule A (Form 1040) or Instructions for Sched- deduction by that amount. Instead, you must in- Net qualified disaster losses. See the In- ule A, Itemized Deductions in the Instructions clude the refund or rebate in income if you de- structions for Form 4684 for more information for Form 1040-NR. ducted the taxes in the earlier year and the de- on net qualified disaster losses. To determine if duction reduced your tax. See Recoveries in you were affected by a major federally declared Resident Aliens Pub. 525 for details on how to figure the amount disaster, go to IRS.gov/DisasterTaxRelief. to include in income. You can claim the same itemized deductions as Losses from income-producing prop- Charitable contributions. You can deduct U.S. citizens using Schedule A (Form 1040). erty. These losses are not subject to the limi- your charitable contributions or gifts to qualified See the Instructions for Schedule A (Form tations that apply to personal use property. Use organizations subject to certain limits. Qualified 1040) for more information. Section B of Form 4684 to figure your deduction organizations include organizations that are reli- for these losses. If you do not itemize your deductions, you gious, charitable, educational, scientific, or liter- can claim the standard deduction for your par- ary in nature, or that work to prevent cruelty to ticular filing status. For further information, see children or animals. Certain organizations that Tax Credits the Instructions for Forms 1040 and 1040-SR. promote national or international amateur sports competition are also qualified organiza- and Payments Nonresident Aliens tions. For more information on deducting charita- This discussion covers tax credits and pay- You can deduct certain itemized deductions if ble contributions, see Gifts to U.S. Charities un- ments for resident aliens, followed by a discus- you receive income effectively connected with der Instructions for Schedule A, Itemized De- sion of the credits and payments for nonresi- your U.S. trade or business. You can generally ductions in the Instructions for Form 1040-NR. dent aliens. only include deductions and losses that are Foreign organizations. Contributions properly allocated and apportioned to income made directly to a foreign organization are not Resident Aliens effectively connected with a U.S. trade or busi- deductible. However, you can deduct contribu- ness. You cannot include deductions and/or tions to a U.S. organization that transfers funds Resident aliens generally claim tax credits and losses that relate to exempt income or to in- to a charitable foreign organization if the U.S. report tax payments, including withholding, us- come that is not effectively connected with a organization controls the use of the funds or if ing the same rules that apply to U.S. citizens. U.S. trade or business. However, you can de- the foreign organization is only an administra- duct certain charitable contributions and casu- tive arm of the U.S. organization. The following items are some of the credits alty and theft losses even if they do not relate to Under a limited number of income tax trea- you may be able to claim. your effectively connected income. Use Sched- ties, you may be eligible to deduct contributions ule A (Form 1040-NR) to claim itemized deduc- to a charitable foreign organization. See Pub. Foreign tax credit. You can claim a credit, tions. See the Instructions for Form 1040-NR for 526 for details. subject to certain limits, for income tax you paid more information. or accrued to a foreign country on foreign Casualty and theft losses. You may be able source income. You cannot claim a credit for Standard deduction. Nonresident aliens can- to deduct casualty and theft losses on your tax taxes paid or accrued on excluded foreign not claim the standard deduction. However, return. earned income. To claim a credit for income there is a special rule, described next, for cer- taxes paid or accrued to a foreign country, you tain nonresident aliens from India. You can only deduct a nonbusiness will generally file Form 1116 with your Form casualty or theft loss if it is attributable ! 1040 or 1040-SR. Students and business apprentices from CAUTION to a federally declared disaster. India. A special rule applies to students and For more information, see Pub. 514. business apprentices who are eligible for the If your casualty or theft loss is attributable to benefits of Article 21(2) of the United States-In- a federally declared disaster, you can deduct Child and dependent care credit. You may dia Income Tax Treaty. You can claim the your loss even though your property is not con- be able to take this credit if you pay someone to standard deduction provided you do not claim nected with a U.S. trade or business. The prop- care for your dependent qualifying child who is itemized deductions. erty can be personal use property or under age 13, or your disabled dependent or

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Worksheet 5-1. 2020 Standard Deduction Worksheet for Students and Business Apprentices From India Keep for Your Records

Caution. If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. You cannot take the standard deduction even if you were born before January 2, 1956, or are blind.

1. Enter the amount shown below for your filing status. • Single or married filing separately—$12,400 • Qualifying widow(er)—$24,800 ...... 1. 2. Can you be claimed as a dependent on someone else's U.S. income tax return? No. Enter the amount from line 1 on line 4. Skip line 3 and go to line 5. Yes. Go to line 3. 3. Is your earned income* more than $750? Yes. Add $350 to your earned income. Enter the total. No. Enter $1,100 ...... 3. 4. Enter the smaller of line 1 or line 3 ...... 4. 5. If born before January 2, 1956, OR blind, enter $1,300 ($1,650 if single). If born before January 2, 1956, AND blind, enter $2,600 ($3,300 if single). Otherwise, enter -0- ...... 5. 6. Enter any net disaster loss from the 2020 Form 4684, line 15 ...... 6. 7. Add lines 4, 5, and 6. Enter the total here and on Form 1040-NR, line 12. Print “Standard Deduction Allowed Under U.S.–India Income Tax Treaty” in the space to the left of these lines. This is your standard deduction for 2020 ...... 7. *Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income. Generally, your earned income is the total of the amount(s) you reported on Form 1040-NR, lines 1a and 1b, plus Schedule 1 (Form 1040), lines 3 and 6, minus Form 1040-NR, line 10c, and Schedule 1 (Form 1040), line 14. disabled spouse, so that you can work or look For more information, see new Form 7202, Part and meet other requirements. The maximum for work. I, and its instructions. amount of the credit per qualifying child is For more information, see Form 2441 and $2,000. Up to $1,400 of the credit may be re- Credit for family leave for certain Pub. 503. fundable for each qualifying child as the addi- self-employed individuals. You may be enti- tional child tax credit. A refundable tax credit Credit for the elderly or the disabled. You tled to claim the credit for family leave if you may give you a refund even if you do not owe may qualify for this credit if you are 65 or older were unable to perform services as a self-em- any tax. ployed individual because of certain coronavi- or if you retired on permanent and total disabil- “Qualifying child,” for purposes of the child rus-related care you provided to a son or ity. For more information on this credit, see Pub. tax credit and the additional child tax credit, is a daughter under the age of 18. For more infor- 524 and Schedule R (Form 1040). child who: mation, see new Form 7202, Part II, and its in- • Was under age 17 at the end of 2020; structions. Credits for certain self-employed individu- • Is your son, daughter, stepchild, eligible als. You may be eligible for certain income tax foster child, brother, sister, stepbrother, Education credits. You may qualify for these credits if you are self-employed and were un- stepsister, half brother, half sister, or a de- credits if you paid qualified education expenses able to work from April 1, 2020, through Decem- scendant of any of them (for example, your for yourself, your spouse, or your dependent. ber 31, 2020, due to COVID-19. Both credits grandchild, niece, or nephew); There are two education credits: the American are calculated and reported on the new Form Is a U.S. citizen, U.S. national, or resident Opportunity Credit and the Lifetime Learning • 7202. alien; Credit. You cannot claim these credits if you are Did not provide over half of his or her own married filing separately. Use Form 8863 to fig- • Note. The COVID-related Tax Relief Act of support for 2020; ure the credit. For more information, see Pub. 2020 amended the FFCRA to extend the peri- Lived with you more than half of 2020 970. • ods of leave for which employers may continue (temporary absences, such as for school, to claim tax credits for providing such leave Nonresident aliens, see Education credits vacation, or medical care, count as time starting from January 1, 2021, through March under Nonresident Aliens, later. lived in the home); 31, 2021, although the requirement that em- • Is claimed as a dependent on your return; Retirement savings contributions credit. ployers provide the leave still expired on De- and You may qualify for this credit (also known as cember 31, 2020. • Does not file a joint return for the year (or the “saver's credit”) if you made eligible contri- files it only to claim a refund of withheld in- Credit for sick leave for certain self-em- butions to an employer-sponsored retirement come tax or estimated tax paid). ployed individuals. You may be entitled to plan or to an individual retirement arrangement claim the credit for sick leave if you were unable (IRA) in 2020. Use Form 8880 and its instruc- An adopted child is always treated as your to perform services as a self-employed individ- tions to figure the credit. For more information own child. An adopted child includes a child ual because of certain coronavirus-related care: about the requirements to claim the credit, see lawfully placed with you for legal adoption. Pub. 590-A. If you did not have an SSN (or ITIN) issued 1. You required, and/or on or before the due date of your 2020 return 2. You provided to another. Child tax credit and the additional child tax (including extensions), you cannot claim the credit. You may be able to take these credits if child tax credit on either your original or an you have a qualifying child under the age of 17 amended 2020 return.

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If your child did not have an SSN valid for to issue a new social security card without the not claim the education credits. However, you employment issued before the due date of the legend. may be able to claim an education credit under 2020 return (including extensions), you cannot the following circumstances. To find out if you are eligible for EIC, go to claim the child tax credit for this child but may IRS.gov/EITCAssistant. 1. You are married and choose to file a joint be able to claim the credit for other dependents return with a U.S. citizen or resident for this child. See Credit for other dependents, Election to use prior year earned in- spouse as discussed under Nonresident discussed below. come. You may elect to use your 2019 earned Spouse Treated as a Resident in chap- Use the Child Tax Credit and Credit for income to figure your EIC if your 2019 earned ter 1. Other Dependents Worksheet in the Instruc- income is more than your 2020 earned income. tions for Forms 1040 and 1040-SR, and Sched- See the Instructions for Forms 1040 and 2. You are a dual-status alien, and choose to ule 8812 (Form 1040) to figure the credits. For 1040-SR and Pub. 596 for more information. be treated as a U.S. resident for the entire more information, see Pub. 972. year. See Choosing Resident Alien Status Other information. There are other eligibil- in chapter 1. Election to use prior year earned in- ity rules that are not discussed here. For more come. You may elect to use your 2019 earned information, see Pub. 596. Additional information on the American op- income to figure your additional child tax credit portunity tax credit is available at IRS.gov/ if your 2019 earned income is more than your AOTC. 2020 earned income. See the Instructions for Nonresident Aliens Forms 1040 and 1040-SR, and the Instructions Retirement savings contributions credit. for Schedule 8812 for more information. You can claim some of the same credits that You may qualify for this credit (also known as resident aliens can claim. You can also report the “saver's credit”) if you made eligible contri- Credit for other dependents. The credit for certain taxes you paid, are considered to have butions to an employer-sponsored retirement other dependents is for people who have de- paid, or that were withheld from your income. plan or to an individual retirement arrangement pendents who cannot be claimed for the child (IRA) in 2020. You cannot claim this credit if: tax credit. The qualifying dependent must be a Credits • You were born after January 1, 2003, U.S. citizen, U.S. national, or U.S. resident alien • You were a full-time student, and must have an SSN, ITIN, or ATIN issued on Credits are allowed only if you receive effec- • You were claimed as a dependent on or before the due date of your 2020 return (in- tively connected income. You may be able to someone else's 2020 tax return, or cluding extensions). See the Child Tax Credit claim some of the following credits. • Your adjusted gross income is more than and Credit for Other Dependents Worksheet in $32,500. the Instructions for Forms 1040 and 1040-SR. Foreign tax credit. If you receive foreign Use Form 8880 to figure the credit. For more in- source income that is effectively connected with formation, see Pub. 590-A. Adoption credit. You may qualify to take a tax a trade or business in the United States, you credit of up to $14,300 for qualifying expenses can claim a credit for any income taxes paid or Child tax credit and the additional child tax paid to adopt an eligible child. This amount may accrued to any foreign country or U.S. posses- credit. You may be able to take these credits if be allowed for the adoption of a child with spe- sion on that income. you have a qualifying child under the age of 17 cial needs regardless of whether you have qual- If you do not have foreign source income ef- and meet other requirements. The maximum ifying expenses. To claim the adoption credit, fectively connected with a U.S. trade or busi- amount of the credit per qualifying child is file Form 8839 with your Form 1040 or ness, you cannot claim credits against your $2,000. Up to $1,400 of the credit may be re- 1040-SR. U.S. tax for taxes paid or accrued to a foreign fundable for each qualifying child as the addi- country or U.S. possession. tional child tax credit. A refundable tax credit Earned income credit (EIC). The EIC, or You cannot take any credit for taxes im- may give you a refund even if you do not owe earned income tax credit (EITC), is a benefit for posed by a foreign country or U.S. possession any tax. working people with low to moderate income. on your U.S. source income if those taxes were Only nonresident aliens who are U.S. To qualify for the EIC, you must have earned in- imposed only because you are a citizen or resi- nationals; residents of Canada, Mex- come from working for someone or from run- dent of the foreign country or possession. ning or owning a business or farm and meet ba- ico, or South Korea; or students and If you claim a foreign tax credit, you will gen- sic rules. Also, you must either meet additional business apprentices from India who qualify for erally have to attach to your return a Form 1116. rules for workers without a qualifying child or benefits under Article 21(2) of the income tax See Pub. 514 for more information. have a child that meets all the qualifying child treaty with India can claim the child tax credit. rules. The EIC reduces the amount of tax you Child and dependent care credit. You may “Qualifying child,” for purposes of the child owe and may give you a refund. For more infor- qualify for this credit if you pay someone to care tax credit and the additional child tax credit, is a mation, go to IRS.gov/EIC. for your dependent qualifying child who is under child who: If you did not have an SSN issued on or be- age 13, or your disabled dependent or disabled • Was under age 17 at the end of 2020; fore the due date of the 2020 return (including spouse, so that you can work or look for work. • Is your son, daughter, stepchild, eligible extensions), you cannot claim the EIC on either For definitions of these terms, see Pub. 503. foster child, brother, sister, stepbrother, your original or an amended 2020 return. Also, Married nonresident aliens can claim the stepsister, half brother, half sister, or a de- if a child did not have an SSN issued on or be- credit only if they choose to file a joint return scendant of any of them (for example, your fore the due date of your return (including ex- with a U.S. citizen or resident spouse as dis- grandchild, niece, or nephew); tensions), you cannot count that child as a qual- cussed in How To Make the Choice in chap- • Is a U.S. citizen, U.S. national, or resident ifying child in figuring the EIC on either your ter 1, or if they qualify as certain married individ- alien; original or an amended 2020 return. uals living apart (see Joint Return Test in Pub. • Did not provide over half of his or her own If a social security card has a legend 503). support for 2020; ! that says “Not Valid for Employment” The amount of your child and dependent • Lived with you more than half of 2020 CAUTION and the number was issued so that you care expense that qualifies for the credit in any (temporary absences, such as for school, (or your spouse or your qualifying child) could tax year cannot be more than your earned in- vacation, or medical care, count as time receive a federally funded benefit, you cannot come from the United States for that tax year. lived in the home); claim the EIC. An example of a federally funded Earned income generally means wages, salar- • Is claimed as a dependent on your return; benefit is Medicaid. If a card has this legend ies, and professional fees for personal services and and the individual's immigration status has performed. • Does not file a joint return for the year (or changed so that the individual is now a U.S. citi- For more information, see Pub. 503. files it only to claim a refund of withheld in- zen or lawful permanent resident, ask the SSA come tax or estimated tax paid). Education credits. If you are a nonresident alien for any part of the year, you generally can-

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An adopted child is always treated as your joint return with a U.S. citizen or resident Tax Withheld own child. An adopted child includes a child spouse as discussed in Nonresident Spouse lawfully placed with you for legal adoption. Treated as a Resident in chapter 1, you may be You can claim the tax withheld during the year If you did not have an SSN (or ITIN) issued eligible for the credit. as a payment against your U.S. tax. You claim it on or before the due date of your 2020 return You and your spouse (if filing a joint return) on lines 25a through 25g of Form 1040-NR. The (including extensions), you may not claim the and any qualifying child must have valid SSNs tax withheld reduces any tax you owe with Form child tax credit on either your original or an to claim the EIC. You cannot claim the EIC us- 1040-NR. amended tax return. ing an ITIN. If your child did not have an SSN valid for If you did not have an SSN issued on or be- Withholding from wages. Any federal income employment issued before the due date of the fore the due date of the 2020 return (including tax withheld from your wages during the tax 2020 return (including extensions), you cannot extensions), you cannot claim the EIC on either year while you were a nonresident alien is al- claim the child tax credit for this child but may your original or an amended 2020 return. Also, lowed as a payment against your U.S. income be able to claim the credit for other dependents if a child did not have an SSN issued on or be- tax liability for the same year. You can claim the for this child. See Credit for other dependents, fore the due date of your return (including ex- income tax withheld whether or not you were discussed below. tensions), you cannot count that child as a qual- engaged in a trade or business in the United Use the Child Tax Credit and Credit for ifying child in figuring the EIC on either your States during the year, and whether or not the Other Dependents Worksheet in the Instruc- original or an amended 2020 return. wages (or any other income) were connected with a trade or business in the United States. tions for Forms 1040 and 1040-SR, and Sched- If a social security card has a legend ule 8812 (Form 1040) to figure the credits. For that says Not Valid for Employment more information, see Pub. 972. Excess social security tax withheld. If you and the number was issued so that you have two or more employers, you may be able Election to use prior year earned in- (or your spouse or your qualifying child) could to claim a credit against your U.S. income tax li- come. You may elect to use your 2019 earned receive a federally funded benefit, you cannot ability for social security tax withheld in excess income to figure your additional child tax credit claim the EIC. An example of a federally funded of the maximum required. See Social Security if your 2019 earned income is more than your benefit is Medicaid. If a card has this legend and Medicare Taxes in chapter 8 for more infor- 2020 earned income. See the Instructions for and the individual's immigration status has mation. Forms 1040 and 1040-SR and the Instructions changed so that the individual is now a U.S. citi- for Schedule 8812 for more information. zen or lawful permanent resident, ask the SSA Additional Medicare Tax. Your employer is to issue a new social security card without the responsible for withholding the 0.9% (0.009) Credit for other dependents. Dependents legend. Additional Medicare Tax on Medicare wages or who cannot be claimed for the child tax credit See Pub. 596 for more information on the RRTA compensation it pays to you in excess of may still qualify you for the credit for other de- credit. $200,000 in 2020. If you do not owe Additional pendents. This is a non-refundable tax credit of Medicare Tax, you can claim a credit for any $500 per qualifying person. The qualifying de- Credits for certain self-employed individu- withheld Additional Medicare Tax against the pendent must be a U.S. citizen, U.S. national, als. Sections 7002 and 7004 of the Families total tax liability shown on your tax return by fil- or U.S. resident alien. See the Child Tax Credit First Coronavirus Response Act created two ing Form 8959. and Credit for Other Dependents Worksheet for credits against income tax for eligible self-em- Form 1040-NR, in the Instructions for Form ployed individuals who were unable to work Tax paid on undistributed long-term capital 1040-NR. To claim the credit for other depend- during the period April 1, 2020, through Decem- gains. If you are a shareholder in a mutual fund ents, your dependent must have an SSN, ITIN, ber 31, 2020, due to conditions related to the (or other regulated investment company (RIC)) or ATIN issued on or before the due date of coronavirus. Both credits are calculated and re- or real estate investment trust (REIT), you can your 2020 return (including extensions). ported on the new Form 7202. claim a credit for your share of any taxes paid by the company on its undistributed long-term Only nonresident aliens who are U.S. capital gains. You will receive information on nationals; residents of Canada, Mex- Note. The COVID related Tax Relief Act of ! 2020 amended the FFCRA to extend the peri- Form 2439, which you must attach to your re- CAUTION ico, or South Korea; or students and turn. business apprentices from India who qualify for ods of leave for which employers may continue benefits under Article 21(2) of the income tax to claim tax credits for providing such leave starting from January 1, 2021, through March Tax withheld at the source. You can claim as treaty with India can claim the credit for other a payment any tax withheld at the source on in- dependents. 31, 2021, although the requirements that em- ployers provide the leave still expired on De- vestment and other fixed or determinable an- cember 31, 2020. nual or periodic income paid to you. Fixed or Adoption credit. You may qualify to take a tax determinable income includes interest, divi- credit of up to $14,300 for qualifying expenses Credit for sick leave for certain self-em- dend, rental, and royalty income that you do not paid to adopt an eligible child. This amount may ployed individuals. You may be entitled to claim to be effectively connected income. Wage be allowed for the adoption of a child with spe- claim the credit for sick leave if you were unable or salary payments can be fixed or determina- cial needs regardless of whether you have qual- to perform services as a self-employed individ- ble income to you, but usually are subject to ifying expenses. To claim the adoption credit, ual because of certain coronavirus-related care: withholding as discussed above. Taxes on fixed file Form 8839 with your Form 1040-NR. or determinable income are withheld at a 30% 1. You required, and/or Married nonresident aliens can claim the rate or at a lower treaty rate. credit only if they choose to file a joint return 2. You provided to another. with a citizen or resident spouse, as discussed Tax withheld on partnership income. If you For more information, see new Form 7202, Part in Nonresident Spouse Treated as a Residentin are a foreign partner in a partnership, the part- I, and its instructions. chapter 1, or if they qualify as certain married nership will withhold tax on your share of effec- individuals living apart (see Married Persons Credit for family leave for certain tively connected taxable income from the part- Not Filing Jointly in the Form 8839 instructions). self-employed individuals. You may be enti- nership. The partnership will give you a tled to claim the credit for family leave if you statement on Form 8805, showing the tax with- Credit for prior-year minimum tax. If you were unable to perform services as a self-em- held. A partnership that is publicly traded may paid alternative minimum tax in a prior year, get ployed individual because of certain coronavi- withhold on your actual distributions of effec- Form 8801 to see if you qualify for this credit. rus-related care you provided to a son or tively connected income. In this case, the part- daughter under the age of 18. For more infor- nership will give you a statement on Form Earned income credit. If you are a nonresi- mation, see new Form 7202, Part II, and its in- 1042-S. Claim the tax withheld as a payment on dent alien for any part of the tax year, you gen- structions. line 25e or 25g of Form 1040-NR, as appropri- erally cannot get the earned income credit. ate. However, if you are married and choose to file a

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Tax withheld on gain from the sale or ex- Location change of certain partnership interests. If of tax you are a direct or indirect foreign partner in a Form number withheld U.S. or foreign partnership that is engaged (or 6. RRB-1042S ...... Box 13 is treated as engaged) in a trade or business SSA-1042S ...... Box 9 within the United States and you directly or indi- W-2 ...... Box 2 rectly dispose of that interest for a gain, then for W-2c ...... Box 2 transfers occurring after 2017, the transferee 1042-S ...... Box 10 Dual-Status will generally withhold and pay into the IRS on 8805 ...... Line 10 your behalf a tax equal to 10% of the amount re- 8288-A ...... Box 2 Tax Year alized on the sale. The rules for withholding and paying over this amount are similar to sales of U.S. real property interests. You will receive a Bona Fide Residents Form 8288-A reflecting the amount withheld Introduction that you may then claim on line 25f of your Form of American Samoa You have a dual-status tax year when you have 1040-NR as a credit against the tax you owe on or Puerto Rico been both a resident alien and a nonresident the gain. You may be able to provide certain in- alien in the same year. Dual status does not re- formation to the transferee to reduce or elimi- fer to your citizenship; it refers only to your resi- nate withholding. For example, if a nonrecogni- If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for dent status in the United States. In determining tion provision of the Internal Revenue Code your U.S. income tax liability for a dual-status applies to all of the gain realized on a transfer, the entire tax year, you are generally taxed the same as resident aliens. You should file Form tax year, different rules apply for the part of the the transferee does not need to withhold if you year you are a resident of the United States and provide a notice describing the application of a 1040 or 1040-SR and report all income from sources both in and outside the United States. the part of the year you are a nonresident. nonrecognition provision. If you are a transferee The most common dual-status tax years are that failed to withhold, under section 1446(f)(4) However, you can exclude the income dis- cussed in the following paragraphs. the years of arrival and departure. See the partnership may withhold on distributions to Dual-Status Aliens in chapter 1. you. For tax purposes other than reporting in- If you are married and choose to be a non- On November 30, 2020, final regulations un- come, however, you will be treated as a nonres- resident spouse treated as a resident, as ex- der section 1446(f) were issued which are gen- ident alien. For example, you are not allowed plained in chapter 1, the rules of this chapter do erally applicable to transfers of non-PTP inter- the standard deduction, you cannot file a joint not apply to you for that year. ests that occur on or after January 29, 2021. return, and you cannot claim a dependent un- Notice 2018-29 applies to transfers of non-PTP less that person is a citizen or national of the interests that occurred before the applicability Topics United States. There are also limits on what de- This chapter discusses: date of the final regulations, or, under certain ductions and credits are allowed. See Nonresi- circumstances, taxpayers may apply the pro- dent Aliens under Deductions, Itemized Deduc- posed regulations to transfers of non-PTP inter- tions, and Tax Credits and Payments in this • Income subject to tax, ests during this time. The requirements for chapter. • Restrictions for dual-status taxpayers, transfers of PTP interests and withholding un- • How to figure the tax, der section 1446(f)(4) are suspended for trans- Residents of Puerto Rico. If you are a bona • Forms to file, fers occurring before January 1, 2022. For more fide resident of Puerto Rico for the entire year, • When and where to file, and information, see Pub. 515. you can exclude from gross income all income • How to fill out a dual-status return. For more information, see Treasury Deci- from sources in Puerto Rico (other than sion 9926 on page 1602 of I.R.B. 2020-51, amounts for services performed as an em- Useful Items available at IRS.gov/irb/ ployee of the United States or any of its agen- You may want to see: 2020-51_IRB#TD-9926. Also, see the final reg- cies). ulations as published in the Federal Register at If you report income on a calendar year ba- Publication www.govinfo.gov/content/pkg/ sis and you do not have wages subject to with- FR-2020-11-30/pdf/2020-22619.pdf. holding for 2020, file your return and pay your 503 503 Child and Dependent Care Expenses

tax by June 15, 2021. You must also make your 514 514 Foreign Tax Credit for Individuals Tax withheld on dispositions of U.S. real first payment of estimated tax for 2021 by June

575 575 Pension and Annuity Income property interests. You can claim as a pay- 15, 2021. You cannot file a joint income tax re- ment any tax withheld with respect to a disposi- turn or make joint payments of estimated tax. Form (and Instructions) tion of a U.S. real property interest (or income However, if you are married to a U.S. citizen or treated as derived from the disposition of a U.S. resident, see Nonresident Spouse Treated as a 1040 1040 U.S. Individual Income Tax Return real property interest). See Real Property Gain Resident in chapter 1. 1040-SR 1040-SR U.S. Tax Return for Seniors or Loss in chapter 4, earlier. The buyer will give If you earn wages subject to withholding,

1040-C 1040-C U.S. Departing Alien Income Tax you a statement of the amount withheld on your U.S. income tax return is due by April 15, Return Form 8288-A. Claim the tax withheld as a pay- 2021. You must also make your first payment of ment on line 25f of Form 1040-NR. estimated tax for 2021 by April 15, 2021. For in- 1040-ES 1040-ES Estimated Tax for Individuals formation on withholding and estimated tax, see 1040-ES (NR) 1040-ES (NR) U.S. Estimated Tax for Claiming tax withheld on your return. When chapter 8. you fill out your tax return, take extra care to en- Nonresident Alien Individuals ter the correct amount of any tax withheld Residents of American Samoa. If you are a 1040-NR 1040-NR U.S. Nonresident Alien Income shown on your information documents. The fol- bona fide resident of American Samoa for the Tax Return lowing table lists some of the more common in- entire year, you can exclude from gross income 1116 1116 Foreign Tax Credit formation documents and shows where to find all income from sources in American Samoa the amount of tax withheld. (other than amounts for services performed as See chapter 12 for information about getting an employee of the U.S. Government or any of these publications and forms. its agencies). An employee of the American Sa- moan Government is not considered an em- ployee of the U.S. Government or any of its Tax Year agencies for purposes of the exclusion. For more information about this exclusion, see You must file your tax return on the basis of an Form 4563 and Pub. 570. annual accounting period called a “tax year.” If

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you have not previously established a fiscal tax Joint return. You cannot file a joint return. States for your period of nonresidence is sub- year, your tax year is the calendar year. A cal- However, see Choosing Resident Alien Status ject to the flat 30% rate or lower treaty rate. You endar year is 12 consecutive months ending on under Dual-Status Aliens in chapter 1. cannot take any deductions against this in- December 31. If you have previously estab- come. lished a regular fiscal year (12 consecutive Tax rates. If you are married and a nonresi- months ending on the last day of a month other dent of the United States for all or part of the tax Social security and railroad retirement ben- than December, or a 52-53 week year) and are year and you do not choose to file jointly as dis- efits. During the part of the year you are a non- considered to be a U.S. resident for any calen- cussed in chapter 1, you must use the Tax Ta- resident alien, 85% of any U.S. social security dar year, you will be treated as a U.S. resident ble column or Tax Computation Worksheet for benefits (and the equivalent part of tier 1 rail- for any part of your fiscal year that falls within married filing separately to figure your tax on in- road retirement benefits) you receive is subject that calendar year. come effectively connected with a U.S. trade or to the flat 30% tax, unless exempt, or subject to business. You cannot use the Tax Table col- a lower treaty rate. (See The 30% Tax in chap- umn or Tax Computation Worksheet for married ter 4.) Income Subject to Tax filing jointly or single. However, you may be During the part of the year you are a resident able to file as single if you lived apart from your alien, part of the social security and the equiva- For the part of the year you are a resident alien, spouse during the last 6 months of the year and lent part of tier 1 railroad retirement benefits will you are taxed on income from all sources. In- you are a: be taxed at graduated rates if your modified ad- come from sources outside the United States is • Married resident of Canada, Mexico, or justed gross income plus half of these benefits taxable if you receive it while you are a resident South Korea; or is more than a certain base amount. • Married U.S. national. alien. The income is taxable even if you earned Use the Social Security Benefits Worksheet it while you were a nonresident alien or if you See the Instructions for Form 1040-NR to see if in the Instructions for Form 1040 and 1040-SR became a nonresident alien after receiving it you qualify. to help you figure the taxable part of your social and before the end of the year. A U.S. national is an individual who, al- security and equivalent tier 1 railroad retirement though not a U.S. citizen, owes his or her alle- benefits for the part of the year you were a resi- For the part of the year you are a nonresi- giance to the United States. U.S. nationals in- dent alien. dent alien, you are taxed on income from U.S. clude American Samoans and Northern sources and on certain foreign source income Mariana Islanders who chose to become U.S. If you received U.S. social security benefits treated as effectively connected with a U.S. nationals instead of U.S. citizens. while you were a nonresident alien, the Social trade or business. The rules for treating foreign Security Administration will send you Form source income as effectively connected are dis- Tax credits. You cannot claim the education SSA-1042S showing your combined benefits cussed in chapter 4 under Foreign Income. credits, earned income credit, or credit for the for the entire year and the amount of tax with- elderly or the disabled unless: held. You will not receive separate statements Income from sources outside the United You are married; and for the benefits received during your periods of States that is not effectively connected with a • You choose to be a nonresident spouse U.S. residence and nonresidence. Therefore, it trade or business in the United States is not tax- • treated as a resident for all of 2020 by filing is important for you to keep careful records of able if you receive it while you are a nonresident a joint return with your spouse who is a these amounts. You will need this information to alien. The income is not taxable even if you U.S. citizen or resident, as discussed in properly complete your return and figure your earned it while you were a resident alien or if chapter 1. tax liability. you became a resident alien or a U.S. citizen af- ter receiving it and before the end of the year. If you received railroad retirement benefits while you were a nonresident alien, the U.S. Income from U.S. sources is taxable Dependents Railroad Retirement Board (RRB) will send you whether you receive it while a nonresident alien Form RRB-1042S, Statement for Nonresident or a resident alien unless specifically exempt As a dual-status taxpayer, you may be able to Alien Recipients of Payments by the Railroad under the Internal Revenue Code or a tax treaty claim a dependent on your tax return. In gen- Retirement Board, and/or Form RRB-1099-R, provision. Generally, tax treaty provisions apply eral, a dependent is a qualifying child or a quali- Annuities or Pensions by the Railroad Retire- only to the part of the year you were a nonresi- fying relative. You may be entitled to claim addi- ment Board. If your country of legal residence dent. In certain cases, however, treaty provi- tional deductions and credits if you have a changed or your rate of tax changed during the sions may apply while you were a resident qualifying dependent. See the Instructions for tax year, you may receive more than one form. alien. See chapter 9 for more information. Forms 1040 and 1040-SR or Form 1040-NR for more information. When determining what income is taxed in Tax Credits and Payments the United States, you must consider exemp- If you were a U.S. national or a resident of tions under U.S. tax law as well as the reduced Canada or Mexico, you can claim a dependent This discussion covers tax credits and pay- tax rates and exemptions provided by tax trea- on the same terms as U.S. citizens. If you are a ments for dual-status aliens. ties between the United States and certain for- resident of South Korea or India, see chapter 5. eign countries. For a further discussion of tax Credits treaties, see chapter 9. How To Figure Your Tax As a dual-status alien, you can generally claim tax credits using the same rules that apply to Restrictions for When you figure your U.S. tax for a dual-status resident aliens. There are certain restrictions year, you are subject to different rules for the that may apply. These restrictions are dis- Dual-Status Taxpayers part of the year you are a resident and the part cussed here, along with a brief explanation of of the year you are a nonresident. credits often claimed by individuals. The following restrictions apply if you are filing a You cannot claim the education cred- tax return for a dual-status tax year. Income ! its, earned income credit, or credit for CAUTION Standard deduction. You cannot use the the elderly or the disabled unless you standard deduction allowed on Form 1040 or All income for your period of residence and all are married and you choose to be treated as a 1040-SR. However, you can itemize any allow- income that is effectively connected with a trade resident for all of 2020 by filing a joint return able deductions. or business in the United States for your period with your spouse who is a U.S. citizen or resi- of nonresidence, after allowable deductions, is dent, as discussed in chapter 1. Head of household. You cannot use the head added and taxed at the rates that apply to U.S. of household Tax Table column or Tax Compu- citizens and residents. Income that is not con- Foreign tax credit. If you have paid, or are lia- tation Worksheet. nected with a trade or business in the United ble for the payment of, income tax to a foreign

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country on income from foreign sources, you If you did not have an SSN (or ITIN) issued top of the return. Attach a statement to your re- may be able to claim a credit for the foreign on or before the due date of your 2020 return turn to show the income for the part of the year taxes. (including extensions), you may not claim the you are a nonresident. You can use Form If you claim the foreign tax credit, you must child tax credit on either your original or an 1040-NR as the statement, but be sure to write generally file Form 1116 with your income tax amended 2020 return. “Dual-Status Statement” across the top. return. For more information, see the Instruc- If your child did not have an SSN valid for tions for Form 1116 and Pub. 514. employment issued before the due date of the Nonresident at end of year. You must file 2020 return (including extensions), you cannot Form 1040-NR if you are a dual-status taxpayer Child and dependent care credit. You may claim the child tax credit for this child but may who gives up residence in the United States qualify for this credit if you pay someone to care be able to claim the credit for other dependents during the year and who is not a U.S. resident for your dependent qualifying child who is under for this child. See Credit for other dependents, on the last day of the tax year. Write “Dual-Sta- age 13, or your disabled dependent or disabled discussed below. tus Return” across the top of the return. Attach spouse so that you can work or look for work. Use the Child Tax Credit and Credit for a statement to your return to show the income Married dual-status aliens can claim the Other Dependents Worksheet in the Instruc- for the part of the year you are a resident. You credit only if they choose to file a joint return as tions for Forms 1040 and 1040-SR, and Sched- can use Form 1040 or 1040-SR as the state- discussed in chapter 1, or if they qualify as cer- ule 8812 (Form 1040) to figure the credits. For ment, but be sure to mark “Dual-Status State- tain married individuals living apart. more information, see Pub. 972. ment” across the top. The amount of your child and dependent If you expatriated or terminated your resi- care expense that qualifies for the credit in any Credit for other dependents. The credit for dency in 2020, you may be required to file an tax year cannot be more than your earned in- other dependents is for people who have de- expatriation statement (Form 8854) with your come for that tax year. pendents who cannot be claimed for the child tax return. For more information, see Expatria- For more information, see Pub. 503 and tax credit. The qualifying dependent must be a tion Tax in chapter 4. Form 2441. U.S. citizen, U.S. national, or U.S. resident alien and must have an SSN, ITIN, or ATIN issued on Statement. Any statement must have your Retirement savings contributions credit. or before the due date of your 2020 return (in- name, address, and taxpayer identification You may qualify for this credit (also known as cluding extensions). For more information, see number on it. You do not need to sign a sepa- the “saver's credit”) if you made eligible contri- Pub. 972. rate statement or schedule accompanying your butions to an employer-sponsored retirement return because your signature on the return also plan or to an individual retirement arrangement Adoption credit. You may qualify to take a tax applies to the supporting statements and (IRA) in 2020. You cannot claim this credit if: credit of up to $14,300 for qualifying expenses schedules. • You were born after January 1, 2003, paid to adopt an eligible child. This amount may • You were a full-time student, be allowed for the adoption of a child with spe- • You were claimed as a dependent on cial needs regardless of whether you have qual- When and someone else's 2020 tax return, or ifying expenses. To claim the adoption credit, • Your adjusted gross income is more than file Form 8839 with the U.S. income tax return Where To File $32,500. that you file. Married dual-status aliens can claim the If you are a resident alien on the last day of your Use Form 8880 to figure the credit. For more in- credit only if they choose the Nonresident tax year and report your income on a calendar formation, see Pub. 590-A. Spouse Treated as a Resident status as dis- year basis, you must file no later than April 15 of cussed in chapter 1, or if they qualify as certain the year following the close of your tax year (but Child tax credit and the additional child tax married individuals living apart (see Married see the TIP, later). If you report your income on credit. You may be able to take these credits if Persons Not Filing Jointly in the Form 8839 in- other than a calendar year basis, file your return you have a qualifying child under the age of 17 structions). no later than the 15th day of the 4th month fol- and meet other requirements. The maximum lowing the close of your tax year. In either case, amount of the credit per qualifying child is file your return with the address for dual-status $2,000. Up to $1,400 of the credit may be re- Payments aliens shown on the back of the Instructions for fundable for each qualifying child as the addi- Forms 1040 and 1040-SR. tional child tax credit. A refundable tax credit You can report as payments against your U.S. If you are a nonresident alien on the last day may give you a refund even if you do not owe income tax liability certain taxes you paid, are of your tax year and you report your income on any tax. considered to have paid, or that were withheld a calendar year basis, you must file no later “Qualifying child,” for purposes of the child from your income. These include: than April 15 of the year following the close of tax credit and the additional child tax credit, is a • Tax withheld from wages earned in the your tax year if you receive wages subject to child who: United States, withholding. If you report your income on other Was under age 17 at the end of 2020; • Taxes withheld at the source from various • than a calendar year basis, file your return no Is your son, daughter, stepchild, eligible items of income from U.S. sources other • later than the 15th day of the 4th month follow- foster child, brother, sister, stepbrother, than wages, ing the close of your tax year. If you did not re- stepsister, half brother, half sister, or a de- • Estimated tax paid with Form 1040-ES or ceive wages subject to withholding and you re- scendant of any of them (for example, your Form 1040-ES (NR), and port your income on a calendar year basis, you grandchild, niece, or nephew); • Tax paid with Form 1040-C at the time of must file no later than June 15 of the year fol- Is a U.S. citizen, U.S. national, or resident departure from the United States. • lowing the close of your tax year. If you report alien; your income on other than a calendar year ba- Did not provide over half of his or her own • sis, file your return no later than the 15th day of support for 2020; Forms To File the 6th month following the close of your tax Lived with you more than half of 2020 • year. In any case, mail your return to: (temporary absences, such as for school, The U.S. income tax return you must file as a dual-status alien depends on whether you are a vacation, or medical care, count as time Department of the Treasury resident alien or a nonresident alien at the end lived in the home); Internal Revenue Service of the tax year. • Is claimed as a dependent on your return. Austin, TX 73301-0215 • Does not file a joint return for the year (or files it only to claim a refund of withheld in- Resident at end of year. You must file Form come tax or estimated tax paid); and 1040 or 1040-SR if you are a dual-status tax- If enclosing a payment, mail your return to: payer who becomes a resident during the year An adopted child is always treated as your and who is a U.S. resident on the last day of the Internal Revenue Service own child. An adopted child includes a child tax year. Write “Dual-Status Return” across the P.O. Box 1303 lawfully placed with you for legal adoption. Charlotte, NC 28201-1303

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If the regular due date for filing falls on Extensions of time to file. You can get an au- 2. A nonresident alien individual not engaged TIP a Saturday, Sunday, or legal holiday, tomatic 6-month extension (October 15 for cal- in a trade or business in the United States the due date is the next day that is not endar year taxpayers) if, no later than the date with U.S. income on which the tax liability a Saturday, Sunday, or legal holiday. your return is due, you file Form 4868. For more was not satisfied by the withholding of tax information, see Form 4868. at the source. An automatic 6-month extension to file 3. A representative or agent responsible for ! does not extend the time to pay your filing the return of an individual described CAUTION tax. If you do not pay your tax by the in (1) or (2). original due date of your return, you will owe in- 4. A fiduciary for a nonresident alien estate terest on the unpaid tax and may owe penalties. or trust. 7. You are allowed an automatic extension to file until June 15 if your main place of business You must also file if you want to: and the home you live in are outside the United • Claim a refund of overwithheld or overpaid States and Puerto Rico on April 15. If you need tax, or Filing more time by the end of the 2-month period, • Claim the benefit of any deductions or you can get an additional 4 months until Octo- credits. For example, if you have no U.S. Information ber 15 if, no later than June 15, you file Form business activities but have income from 4868. real property that you choose to treat as ef- fectively connected income (discussed in In addition to the 6-month extension, taxpay- chapter 4), you must timely file a true and ers who are out of the country (as defined in the accurate return to take any allowable de- Introduction Instructions for Form 4868) can request a dis- ductions against that income. For informa- cretionary 2-month additional extension of time This chapter provides the basic filing informa- tion on what is timely, see When to file for to file their returns (December 15 for calendar tion that you may need. deductions and credits under When To year taxpayers). To request this extension, you File, later. must send the IRS a letter explaining the rea- Topics sons why you need the additional 2 months. Exceptions. You do not need to file Form This chapter discusses: Send the letter by the extended due date (Octo- 1040-NR if you meet any of the following condi- ber 15 for calendar year taxpayers) to the fol- tions. • Forms aliens must file, lowing address. • When and where to file, The exception that previously allowed • Penalties, and Department of the Treasury nonresident aliens whose only U.S. • Amended returns and claims for refund. Internal Revenue Service Center trade or business was the performance Austin, TX 73301-0215 of personal services and whose wage income Useful Items did not exceed the personal exemption amount You may want to see: You will not receive any notification from the to not file a Form 1040-NR is no longer availa- IRS unless your request is denied for being un- ble. You must meet (1), (2), or (3) below to be exempt from filing a 2020 Form 1040-NR. Forms (and Instructions) timely. The discretionary 2-month additional exten- 1. You were a nonresident alien student, 1040 1040 U.S. Individual Income Tax Return sion is not available to taxpayers who have an teacher, or trainee who was temporarily approved extension of time to file on Form 2350

1040-SR present in the United States under an “F,” 1040-SR U.S. Tax Return for Seniors (for U.S. citizens and resident aliens abroad “J,” “M,” or “Q” visa, and you have no in- who expect to qualify for special tax treatment). 1040-NR 1040-NR U.S. Nonresident Alien Income come that is subject to tax, such as wa- Tax Return If the due date for filing falls on a Satur- ges, tips, scholarship and fellowship day, Sunday, or legal holiday, the due grants, dividends, etc. See chapter 12 for information about getting date is the next day that is not a Satur- 2. You were a student or business appren- these forms. day, Sunday, or legal holiday. tice who was eligible for the benefits of Ar- You may be able to file ticle 21(2) of the United States-India In- What, When, and your return electronically. come Tax Treaty, you are single or a See IRS e-file at IRS.gov. qualifying widow(er), and your gross in- Where To File come for 2020 was less than or equal to $12,400 if single ($24,800 if a qualifying What return you must file as well as when and Nonresident Aliens widow(er)). where you file that return, depends on your sta- 3. You were a partner in a U.S. partnership tus at the end of the tax year as a resident or a Nonresident aliens who are required to file an that was not engaged in a trade or busi- nonresident alien. income tax return should use Form 1040-NR. ness in the United States during 2020 and If you are any of the following, you must file your Schedule K-1 (Form 1065) includes Resident Aliens a return. only income from U.S. sources that is not effectively connected with a U.S. trade or 1. A nonresident alien individual engaged or business. Resident aliens should file Form 1040 or considered to be engaged in a trade or 1040-SR at the address shown in the Instruc- business in the United States during 2020. Even if you have left the United States tions for Forms 1040 and 1040-SR. The due (But see Exceptions, later.) and filed a Form 1040-C on departure, date for filing your return and paying any tax You must file even if: you still must file an annual U.S. in- due is April 15 of the year following the year for come tax return. If you are married and both you which you are filing a return (but see the TIP, a. Your income did not come from a and your spouse are required to file, you must later). trade or business conducted in the each file a separate return. United States, Under U.S. immigration law, a lawful perma- b. You have no income from U.S. sour- nent resident who is required to file a tax return Foreign-owned domestic disregarded enti- ces, or as a resident and fails to do so may be regar- ties. If a foreign person wholly owns a domes- ded as having abandoned status and may lose c. Your income is exempt from income tic disregarded entity (DE), the domestic DE is permanent resident status. tax. treated as a domestic corporation separate

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from its owner (the foreign person) for the limi- Department of the Treasury Where To File ted purposes of the requirements under section Internal Revenue Service Center 6038A that apply to 25% foreign-owned domes- Austin, TX 73301-0215 If you are not enclosing a payment, file tic corporations. The foreign-owned domestic Form 1040-NR at the following ad- dress. DE must file a proforma Form 1120 with Form You will not receive any notification from the 5472 attached by the due date (including exten- IRS unless your request is denied for being un- Department of the Treasury sions) of the return. The only information re- timely. Internal Revenue Service Center quired to be completed on Form 1120 is the Austin, TX 73301-0215 name and address of the foreign-owned do- When to file for deductions and credits. To mestic DE and items B and E on the first part. A get the benefit of any allowable deductions or foreign-owned domestic DE may have had a re- credits, you must timely file a true and accurate porting requirement before 2017 if it had a U.S. return. For this purpose, a return is timely if it is If enclosing a payment, mail your return to: trade or business or other activity that otherwise filed within 16 months of the due date just dis- required reporting. See the Instructions for cussed. However, if you did not file a 2019 tax Internal Revenue Service Form 5472 for additional information and coor- return and 2020 is not the first year for which P.O. Box 1303 dination with Form 5472 filing by the domestic you are required to file one, your 2020 return is Charlotte, NC 28201-1303 DE. Also note that because the domestic DE is timely for this purpose if it is filed by the earlier generally a transparent entity, the foreign per- of: Aliens from the U.S. Virgin Islands. Report son will include (or continue to include) on Form • The date that is 16 months after the due all income from U.S. sources, as well as income 1040-NR any of the domestic DE's tax items date for filing your 2020 return, or from other sources, on your return. For informa- that are subject to reporting. A DE (foreign or • The date the IRS notifies you that your tion on filing U.S. Virgin Islands returns, contact domestic) may also have a separate reporting 2020 return has not been filed and that you the U.S. Virgin Islands Bureau of Internal Reve- requirement related to employment or excise cannot claim certain deductions and cred- nue. taxes. See Regulations section 301.7701-2(c) its. (2)(iv) and (v). If you are a bona fide resident of the The allowance of the following credits is not af- U.S. Virgin Islands during your entire fected by this time requirement. tax year and work temporarily in the When To File • Credit for withheld taxes. United States, you must pay your income taxes • Credit for excise tax on certain uses of to the U.S. Virgin Islands and file your income If you are an employee and you receive wages gasoline and special fuels. tax returns at the following address. subject to U.S. income tax withholding, you will • Credit for tax paid by a mutual fund (or generally file by the 15th day of the 4th month other RIC) or a REIT on undistributed Virgin Islands Bureau of Internal Revenue after your tax year ends. For the 2020 calendar long-term capital gains. 6115 Estate Smith Bay year, file your return by April 15, 2021. Suite 225 Protective return. If your activities in the St. Thomas, VI 00802 If you are not an employee who receives United States were limited and you do not be- wages subject to U.S. income tax withholding, lieve that you had any gross income effectively you must file by the 15th day of the 6th month connected with a U.S. trade or business during after your tax year ends. For the 2020 calendar the year, you can file a protective return (Form Chapter 8 discusses withholding from U.S. wa- year, file your return by June 15, 2021. 1040-NR) by the deadline explained above. By ges of residents of the U.S. Virgin Islands. filing a protective return, you protect your right Extensions of time to file. If you cannot file to receive the benefit of deductions and credits Aliens from Guam or the Commonwealth of your return by the due date, file Form 4868 or in the event it is later determined that some or the Northern Mariana Islands. If you are a use one of the electronic filing options ex- all of your income is effectively connected. You bona fide resident of Guam or the Common- plained in the Instructions for Form 4868. For are not required to report any effectively con- wealth of the Northern Mariana Islands (CNMI) the 2020 calendar year, this will extend the due nected income or any deductions on the protec- during your entire tax year, you must file your date to October 15, 2021. You must file the ex- tive return, but you must give the reason the re- return with, and pay any tax due to, Guam or tension by the regular due date of your return. turn is being filed. the CNMI. Report all income, including income If you believe some of your activities resul- from U.S. sources, on your return. It is not nec- An automatic 6-month extension to file ted in effectively connected income, file your re- essary to file a separate U.S. income tax return. does not extend the time to pay your ! turn reporting that income and related deduc- CAUTION tax. If you do not pay your tax by the Bona fide residents of Guam should file tions by the regular due date. To protect your original due date of your return, you will owe in- their Guam returns at the following ad- right to claim deductions or credits resulting terest on the unpaid tax and may owe penalties. dress. from other activities, attach a statement to that See Form 4868. return explaining that you wish to protect your Department of Revenue and Taxation You are allowed an automatic extension to right to claim deductions and credits if it is later Government of Guam file until June 15 if your main place of business determined that the other activities produced ef- P.O. Box 23607 and the home you live in are outside the United fectively connected income. Barrigada, GU 96921 States and Puerto Rico on April 15. If you need You can follow the same procedure if you more time by the end of the 2-month period, believe you have no U.S. tax liability because of you can get an additional 4 months until Octo- a U.S. tax treaty. Be sure to also complete item Bona fide residents of the CNMI should ber 15 if, no later than June 15, you file Form L on Schedule OI (Form 1040-NR). file their CNMI income tax returns at 4868. Waiver of filing deadline. The IRS may the following address. In addition to the 6-month extension to Octo- waive the filing deadline if you establish that, ber 15, taxpayers whose main place of busi- based on the facts and circumstances, you ac- Department of Finance ness is outside the United States and Puerto ted reasonably and in good faith in failing to file Division of Revenue and Taxation Rico and who live outside those jurisdictions a U.S. income tax return (including a protective Commonwealth of the Northern Mariana can request a discretionary 2-month extension return) and you cooperate with the IRS in deter- Islands of time to file their returns (to December 15 for mining your U.S. income tax liability for the tax P.O. Box 5234 CHRB calendar year taxpayers). To request this exten- year for which you did not file a return. Saipan, MP 96950 sion, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Send the letter by the extended due If you are not a bona fide resident of Guam date (October 15 for calendar year taxpayers) or the CNMI, see Pub. 570 for information on to the following address. where to file your return.

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Amended Returns instrument may be subject to seizure and forfei- Fraud. If your failure to file is due to fraud, ture. the penalty is 15% for each month or part of a and Claims for Refund month that your return is late, up to a maximum More information. The form is available at of 75%. If you find changes in your income, deductions, FINCEN.gov/resources/filing-information. For or credits after you mail your return, file Form more information about BSA E-Filing, see the Return over 60 days late. If you file your 1040-X, Amended U.S. Individual Income Tax E-Filing Section at BSAefiling.fincen.treas.gov/ return more than 60 days after the due date or Return. Also use Form 1040-X if you should main.html. extended due date, the minimum penalty is the have filed Form 1040 or 1040-SR instead of smaller of $435 or 100% of the unpaid tax. Form 1040-NR, or vice versa. Form 8938 Exception. You will not have to pay the If you amend Form 1040-NR or file the cor- penalty if you show that you failed to file on time rect return, print “Amended” across the top, and You may have to file Form 8938 to report the because of reasonable cause and not because attach the corrected return (Form 1040, ownership of specified foreign financial asset(s) of willful neglect. 1040-SR, or 1040-NR) to Form 1040-X. Ordina- if you are one of the following individuals. rily, an amended return claiming a refund must • A resident alien of the United States for Paying tax late. You will have to pay a fail- be filed within 3 years from the date your return any part of the tax year. ure-to-pay penalty of 1/2 of 1% (0.005) of your was filed or within 2 years from the time the tax • A nonresident alien who makes an election unpaid taxes for each month, or part of a month, was paid, whichever is later. A return filed be- to be treated as a resident for purposes of after the due date that the tax is not paid. This fore the final due date is considered to have filing a joint income tax return. See chap- penalty does not apply during the automatic been filed on the due date. ter 1 for information about this election. 6-month extension of time to file period if you • A nonresident alien who is a bona fide resi- paid at least 90% of your actual tax liability on Note. You can file your Form 1040-X elec- dent of American Samoa or Puerto Rico. or before the due date of your return and pay tronically for the 2019 tax year. For more infor- See Pub. 570 for a definition of bona fide the balance when you file the return. mation, see IR-2020-107. resident. The monthly rate of the failure-to-pay pen- Taxpayers with a tax year that began alty is half the usual rate 1/4% (0.0025 instead of ! before 2018 can attach Form 1040-A You must file Form 8938 if the total value of 1/2% (0.005)) if an installment agreement is in CAUTION or 1040-EZ to the amended return those assets exceeds an applicable threshold effect for that month. You must have filed your (even though those forms are no longer used) if (the “reporting threshold”). The reporting return by the due date (including extensions) to either form was filed as the original return. threshold varies depending on whether you live qualify for this reduced penalty. in the United States, are married, or file a joint If a notice of intent to levy is issued, the rate income tax return with your spouse. Specified will increase to 1% at the start of the first month Other Forms You foreign financial assets include any financial ac- beginning at least 10 days after the day that the May Have To File count maintained by a foreign financial institu- notice is issued. If a notice and demand for im- tion and, to the extent held for investment, any mediate payment is issued, the rate will in- You may be required to file information returns stock, securities, or any other interest in a for- crease to 1% at the start of the first month be- to report certain foreign income or assets, or eign entity and any financial instrument or con- ginning after the day that the notice and monetary transactions. tract with an issuer or counterparty that is not a demand is issued. U.S. person. This penalty cannot be more than 25% of FinCEN Form 105, Report of your unpaid tax. You will not have to pay the International Transportation of You may have to pay penalties if you are re- penalty if you can show that you had a good Currency or Monetary Instruments quired to file Form 8938 and fail to do so, or if reason for not paying your tax on time. (CMIR) you have an understatement of tax due to any transaction involving an undisclosed foreign fi- Combined penalties. If both the failure-to-file penalty and the failure-to-pay penalty (dis- FinCEN Form 105 is required by 31 U.S.C. nancial asset. cussed earlier) apply in any month, the 5% (or 5316 and Treasury Department regulations (31 15%) failure-to-file penalty is reduced by the CFR, Chapter X). More information about filing Form 8938 can failure-to-pay penalty. However, if you file your be found in the Instructions for Form 8938. return more than 60 days after the due date or The following persons must file FinCEN extended due date, the minimum penalty is the Form 105. smaller of $435 or 100% of the unpaid tax. 1. Each person who physically transports, Penalties mails, or ships, or causes to be physically Accuracy-related penalty. You may have to transported, mailed, or shipped, currency The law provides penalties for failure to file re- pay an accuracy-related penalty if you under- or other monetary instruments totaling turns or pay taxes as required. pay your tax because: more than $10,000 at one time from the • You show negligence or disregard of rules United States to any place outside the Uni- Civil Penalties or regulations, ted States or into the United States from • You substantially understate your income any place outside the United States; and tax, If you do not file your return and pay your tax by 2. Each person who receives in the United • You claim tax benefits for a transaction that the due date, you may have to pay a penalty. lacks economic substance, or States currency or other monetary instru- You may also have to pay a penalty if you sub- ments totaling more than $10,000 at one • You fail to disclose a foreign financial as- stantially understate your tax, file a frivolous tax set. time from any place outside the United submission, or fail to supply your taxpayer iden- States. tification number. If you provide fraudulent infor- The penalty is equal to 20% of the underpay- ment. The penalty is 40% of any portion of the A transfer of funds through normal banking pro- mation on your return, you may have to pay a civil fraud penalty. underpayment that is attributable to an undis- cedures, which does not involve the physical closed noneconomic substance transaction or transportation of currency or monetary instru- Filing late. If you do not file your return by the an undisclosed foreign financial asset transac- ments, is not required to be reported. due date (including extensions), you may have tion. The penalty will not be figured on any part to pay a failure-to-file penalty. The penalty is of an underpayment on which the fraud penalty, Penalties. Civil and criminal penalties are pro- discussed later, is charged. vided for failing to file a report, filing a report based on the tax not paid by the due date (with- out regard to extensions). The penalty is usually containing material omissions or misstate- Negligence or disregard. The term “negli- 5% for each month or part of a month that a re- ments, or filing a false or fraudulent report. Also, gence” includes a failure to make a reasonable the entire amount of the currency or monetary turn is late, but not more than 25%.

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attempt to comply with the tax law or to exercise A complete and accurate disclosure of a tax when it is required on a return, statement, or ordinary and reasonable care in preparing a re- position on the appropriate year’s Sched- other document. turn. Negligence also includes failure to keep ule UTP, Uncertain Tax Position Statement, will For example, if you have a bank account adequate books and records. You will not have be treated as if the corporation filed a Form that earns interest, you must give your SSN or to pay a negligence penalty if you have a rea- 8275 or Form 8275-R regarding the tax posi- ITIN to the bank. The number must be shown sonable basis for a position you took, or if you tion. The filing of a Form 8275 or Form 8275-R, on the Form 1099-INT or other statement the can show a reasonable cause and acted in a however, will not be treated as if the corporation bank sends you. If you do not give the bank good faith. filed a Schedule UTP. your SSN or ITIN, you will be subject to the $50 The term “disregard” includes any careless, Use Form 8275-R to disclose items or posi- penalty. (You may also be subject to “backup” reckless, or intentional disregard. tions contrary to regulations. withholding of income tax.) Adequate disclosure. You can avoid the Transaction lacking economic sub- You will not have to pay the penalty if you penalty for disregard of rules or regulations if stance. For more information on economic are able to show that the failure was due to rea- you adequately disclose on your return a posi- substance, see section 7701(o). sonable cause and not willful neglect. tion that has at least a reasonable basis. See Disclosure statement, later. Foreign financial asset. For more infor- Criminal Penalties This exception will not apply to an item that mation on undisclosed foreign financial assets, is attributable to a tax shelter. In addition, it will see section 6662(j) or the Instructions for Form 8938. You may be subject to criminal prosecution not apply if you fail to keep adequate books and (brought to trial) for actions such as: records or to substantiate items properly. Reasonable cause. You will not have to 1. Tax evasion; Substantial understatement of income pay a penalty if you show a good reason (rea- tax. You understate your tax if the tax shown sonable cause) for the way you treated an item. 2. Willful failure to file a return, supply infor- on your return is less than the correct tax. The You must also show that you acted in good mation, or pay any tax due; faith. This does not apply to a transaction that understatement is substantial if it is more than 3. Fraud and false statements; or the larger of 10% of the correct tax or $5,000. lacks economic substance. However, the amount of the understatement is 4. Preparing and filing a fraudulent return. reduced to the extent the understatement is due Filing erroneous claim for refund or credit. to: You may have to pay a penalty if you file an er- roneous claim for refund or credit. The penalty 1. Substantial authority, or is equal to 20% of the disallowed amount of the claim, unless you can show that you had rea- 2. Adequate disclosure and a reasonable ba- sonable cause for filing your claim. However, sis. any disallowed amount due to a transaction that 3. Reasonable cause and good faith . lacks economic substance will not be treated as 8. due to reasonable cause. The penalty will not If an item on your return is attributable to a be figured on any part of the disallowed amount tax shelter, there is no reduction for an ade- of the claim that is subject to accuracy-related quate disclosure. However, there is a reduction Paying Tax or fraud penalties. for a position with substantial authority, but only if you reasonably believed that your tax treat- Frivolous tax submission. You may have to Through ment was more likely than not the proper treat- pay a penalty of $5,000 if you file a frivolous tax ment. return or other frivolous submissions. A frivo- Withholding or Substantial authority. Whether there is or lous tax return is one that does not include was substantial authority for the tax treatment of enough information to figure the correct tax or an item depends on the facts and circumstan- that contains information clearly showing that Estimated Tax ces. Consideration will be given to court opin- the tax you reported is substantially incorrect. ions, Treasury regulations, revenue rulings, rev- For more information on frivolous returns, frivo- enue procedures, and notices and lous submissions, and a list of positions that are announcements issued by the IRS and pub- identified as frivolous, see IRS.gov/irb/ Introduction 2010-17_IRB#NOT-2010-33 (or its successor). lished in the Internal Revenue Bulletin that in- This chapter discusses how to pay your U.S. in- volve the same or similar circumstances as You will have to pay the penalty if you filed come tax as you earn or receive income during yours. this kind of return or submission based on a friv- the year. In general, the federal income tax is a olous position or a desire to delay or interfere Disclosure statement. To adequately dis- pay as you go tax. There are two ways to pay with the administration of federal tax laws. This as you go. close the relevant facts about your tax treat- includes altering or striking out the preprinted ment of an item, use Form 8275. You must also language above the space provided for your 1. Withholding. If you are an employee, have a reasonable basis for treating the item signature. your employer probably withholds income the way you did. This penalty is added to any other penalty tax from your pay. Tax may also be with- In cases of substantial understatement, only provided by law. held from certain other income—including items that meet the requirements of IRS.gov/irb/ pensions, bonuses, commissions, and 2020-53_IRB#REV-PROC-2020-54 (or its suc- Fraud. If there is any underpayment of tax on gambling winnings. In each case, the cessor) are considered adequately disclosed your return due to fraud, a penalty of 75% of the amount withheld is paid to the U.S. Treas- on your return. underpayment due to fraud will be added to ury in your name. Revenue Procedure 2020-54 does not take your tax. into account the effect of tax law changes effec- 2. Estimated tax. If you do not pay your tax through withholding, or do not pay enough tive for tax years beginning after December 31, Failure to supply taxpayer identification 2020. If a line referenced in this revenue proce- tax that way, you might have to pay esti- number. If you do not include your social se- mated tax. People who are in business for dure is affected by such a change and requires curity number (SSN) or individual taxpayer additional reporting, a taxpayer may have to file themselves will generally have to pay their identification number (ITIN) or the SSN or ITIN tax this way. You may have to pay estima- Form 8275, Disclosure Statement, or Form of another person where required on a return, 8275-R, Regulation Disclosure Statement, until ted tax if you receive income such as divi- statement, or other document, you may be sub- dends, interest, rent, and royalties. Esti- regulations or other guidance has been issued ject to a penalty of $50 for each failure. You to comply with the requirement. mated tax is used to pay not only income may also be subject to a penalty of $50 if you tax, but self-employment tax and alterna- do not give your SSN or ITIN to another person tive minimum tax as well.

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Topics your compensation is subject to graduated with- Treaty, you may claim an additional withholding This chapter discusses: holding at the same rates as resident aliens or allowance for the standard deduction. U.S. citizens. • How to notify your employer of your alien Household employees. If you work as a If you are a resident alien and you receive household employee, your employer does not status, income other than wages (such as dividends • Income subject to withholding of income have to withhold income tax. However, you may and royalties) from sources within the United agree to voluntarily withhold income tax by filing tax, States, file Form W-9 or similar statement with • Exemptions from withholding, a Form W-4 with your employer. The agreement the withholding agent (generally, the payer of goes into effect when your employer accepts • Social security and Medicare taxes, and the income) so the agent will not withhold tax on • Estimated tax rules. the agreement by beginning the withholding. the income at the 30% (or lower treaty) rate. If You or your employer may end the agreement you receive this type of income as a nonresi- by letting the other know in writing. Useful Items dent alien, file Form W-8BEN with the withhold- You may want to see: ing agent so that the agent will withhold tax at Agricultural workers. If you are an agricul- the 30% (or lower treaty) rate. However, if the tural worker on an H-2A visa, your employer Publication income is effectively connected with a U.S. does not have to withhold income tax. However, trade or business, file Form W-8ECI instead. your employer will withhold income tax only if

515 515 Withholding of Tax on Nonresident you and your employer agree to withhold. In Aliens and Foreign Entities that case, you must provide your employer with

901 901 U.S. Tax Treaties Withholding From a properly completed Form W-4. You can find more information about not having tax withheld Form (and Instructions) Compensation at IRS.gov/ForeignAgriculturalWorkers.

W-4 W-4 Employee's Withholding Allowance The following discussion generally applies only Certificate to nonresident aliens. Tax is withheld from resi- Wages Exempt From Withholding dent aliens in the same manner as U.S. citi- Notice 1392 Notice 1392 Supplemental Form W-4 zens. Wages that are exempt from U.S. income tax Instructions for Nonresident Aliens under an income tax treaty are generally ex-

W-8BEN W-8BEN Certificate of Foreign Status of Wages and other compensation paid to a empt from withholding. For information on how Beneficial Owner for United States nonresident alien for services performed as an to claim this exemption from withholding, see Tax Withholding and Reporting employee are usually subject to graduated with- Income Entitled to Tax Treaty Benefits, later. (Individuals) holding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, Wages paid to aliens who are residents of W-8ECI W-8ECI Certificate of Foreign Person's unless it is specifically excluded from the term American Samoa, Canada, Mexico, Puerto Claim That Income Is Effectively “wages” by law, or is exempt from tax by treaty, Rico, or the U.S. Virgin Islands may be exempt Connected With the Conduct of a is subject to graduated withholding. from withholding. The following paragraphs ex- Trade or Business in the United plain these exemptions. States Withholding on Wages Residents of Canada or Mexico engaged in W-9 W-9 Request for Taxpayer Identification Number and Certification transportation-related employment. Certain If you are an employee and you receive wages residents of Canada or Mexico who enter or

1040-ES (NR) 1040-ES (NR) U.S. Estimated Tax for subject to graduated withholding, you will be re- leave the United States at frequent intervals are Nonresident Alien Individuals quired to fill out a Form W-4. Also fill out Form not subject to withholding on their wages. W-4 for a scholarship or fellowship grant to the These persons either: 8233 8233 Exemption From Withholding on extent it represents payment for past, present, • Perform duties in transportation service Compensation for Independent (and or future services and for which you are not Certain Dependent) Personal between the United States and Canada or claiming a tax treaty withholding exemption on Mexico, or Services of a Nonresident Alien Form 8233 (discussed later under Income Enti- Individual • Perform duties connected to the construc- tled to Tax Treaty Benefits). These are services tion, maintenance, or operation of a water-

8288-B 8288-B Application for Withholding you are required to perform as an employee way, viaduct, dam, or bridge crossed by, or Certificate for Dispositions by Foreign and as a condition of receiving the scholarship crossing, the boundary between the United Persons of U.S. Real Property or fellowship (or tuition reduction). States and Canada or the boundary be- Interests Nonresident aliens must follow the special tween the United States and Mexico.

13930 13930 Application for Central Withholding instructions in Notice 1392 when completing This employment is subject to with- Agreement Form W-4 for compensation paid as employees holding of social security and Medicare performing dependent personal services in the ! See chapter 12 for information about getting CAUTION taxes unless the services are per- United States. Compensation for dependent formed for a railroad. these publications and forms. personal services includes amounts paid as wages, salaries, fees, bonuses, commissions, To qualify for the exemption from withhold- compensatory scholarships, fellowship income, ing during a tax year, a Canadian or Mexican Notification of and similar designations for amounts paid to an resident must give the employer a statement in employee. duplicate with name, address, and identification Alien Status number, certifying that the resident: To see if you need to have your withholding • Is not a U.S. citizen or resident; You must let your employer know whether you increased or decreased, use the IRS Tax • Is a resident of Canada or Mexico, which- are a resident or a nonresident alien so your Withholding Estimator. ever applies; and employer can withhold the correct amount of • Expects to perform duties previously de- tax from your wages. See Withholding on Scholarships and Fel- lowship Grants, later, for how to fill out Form scribed during the tax year in question. If you are a resident alien under the rules W-4 if you receive a U.S. source scholarship or The statement can be in any form, but it discussed in chapter 1, you must file Form W-9 fellowship grant that is not a payment for serv- must be dated and signed by the employee and or a similar statement with your employer. If you ices. must include a written declaration that it is are a nonresident alien under those rules, you made under penalties of perjury. must furnish to your employer Form 8233 or Students and business apprentices from In- Form W-8BEN, establishing that you are a dia. If you are eligible for the benefits of Article foreign person, or Form W-4, establishing that 21(2) of the United States-India Income Tax

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Residents of American Samoa and Puerto agreement reduce taxes withheld to less than from the current tax year or prior tax peri- Rico. If you are a nonresident alien employee the anticipated amount of income tax liability. ods. who is a resident of American Samoa or Puerto Use Form 13930 to apply for a CWA, for a • Any provision of an income tax treaty un- Rico, wages for services performed in Ameri- nonresident alien entertainer or athlete that has der which a partial or complete exemption can Samoa or Puerto Rico are generally not calendar year-to-date U.S. gross income of at from withholding may be claimed, the subject to withholding unless you are an em- least $10,000. Form 13930 must be mailed to country of your residence, and a statement ployee of the United States or any of its agen- the address, listed below. of sufficient facts to justify an exemption cies in American Samoa or Puerto Rico. under the treaty. We have temporarily waived the in- • A statement signed by you, and verified by Residents of the U.S. Virgin Islands. Non- ! come requirement for which form to a declaration that it is made under penal- resident aliens who are bona fide residents of CAUTION use when applying for a CWA. Form ties of perjury, that all the information given the U.S Virgin Islands are not subject to with- 13930-A is currently unavailable. While the is true and that to your knowledge no rele- holding of U.S. tax on income earned while tem- waiver is in effect, individuals with income be- vant information has been omitted. porarily employed in the United States. This is low $10,000 can apply for a CWA using Form If satisfied with the information, the IRS will because those persons pay their income tax to 13930, Instructions on how to apply for a Cen- determine the amount of your tentative income the U.S. Virgin Islands. To avoid having tax tral Withholding Agreement. For more informa- tax for the tax year on gross income effectively withheld on income earned in the United States, tion on how to apply for a CWA, see Form connected with your trade or business in the bona fide residents of the U.S. Virgin Islands 13930. For more information, go to IRS.gov/ United States. Ordinary and necessary busi- should write a letter, in duplicate, to their em- Individuals/International-Taxpayers/Central- ness expenses can be taken into account if pro- ployers, stating that they are bona fide resi- Withholding-Agreements. ven to the satisfaction of the Commissioner or dents of the U.S. Virgin Islands and expect to A request for a CWA must be received by his delegate. pay tax on all income to the U.S. Virgin Islands. the IRS at least 45 days before the agreement The Commissioner or his delegate will send is to take effect to ensure it is in place before you a letter, directed to the withholding agent, Withholding on Pensions the tour begins or the first event occurs, and it showing the amount of the final payment of must contain all supporting documentation compensation that is exempt from withholding If you receive a pension distribution from the specified in the instructions, or no consideration and the amount that can be paid to you be- United States, the payment is generally subject will be given to entering into a CWA. Exceptions cause of the exemption. You must give two cop- to the 30% (or lower treaty) rate of withholding. will be considered on a case-by-case basis. ies of the letter to the withholding agent and You may, however, have tax withheld at gradu- must also attach a copy of the letter to your in- ated rates on the portion of the pension that ari- Central Withholding Agreement Program come tax return for the tax year for which the ses from the performance of services in the Uni- Internal Revenue Service exemption is effective. For more information, ted States after 1986. You must fill out Form 850 Trafalgar Ct., Suite 200 see Pub. 515. W-8BEN or Form 8233 and give it to the with- Maitland, FL 32751-4153 holding agent or payer before the income is Refund of Taxes Withheld in Error paid or credited to you. Final payment exemption. Your final pay- ment of compensation during the tax year for in- Multilevel marketing. If you are a distributor Withholding on Tip Income dependent personal services may be entirely or for a multilevel marketing company who had partly exempt from withholding. This exemption taxes withheld in error, file a U.S. income tax re- is available only once during your tax year and turn (Form 1040-NR or Form 1120-F) or, if a tax Tips you receive during the year for services applies to a maximum of $5,000 of compensa- performed in the United States are subject to return has already been filed, a claim for refund tion. To obtain this exemption, you or your (Form 1040-X or amended Form 1120-F) to re- U.S. income tax. Include them in taxable in- agent must give the following statements and come. In addition, tips received while working cover the amount withheld in error. You must information to the Commissioner or his dele- also attach to the U.S. income tax return or for one employer, amounting to $20 or more in gate. a month, are subject to graduated withholding. claim for refund supporting information that in- • A statement by each withholding agent cludes, but is not limited to, the following items. from whom you have received gross in- • A copy of your Form W-2, Form 1042-S, or Independent Contractors come effectively connected with a trade or Form 1099 to prove the amount of taxes business in the United States during the withheld. If there is no employee–employer relationship tax year, showing the amount of income • A statement explaining why income repor- between you and the person for whom you per- paid and the tax withheld. Each statement ted on your Form W-2, Form 1042-S, or form services, your compensation is subject to must be signed by the withholding agent Form 1099 is not subject to U.S. taxation. the 30% (or lower treaty) rate of withholding. and verified by a declaration that it is made • A statement listing all the dates you en- However, if you are engaged in a trade or busi- under penalties of perjury. tered and left the United States during the ness in the United States during the tax year, • A statement by the withholding agent from taxable year. If the compensation is multi- your compensation for personal services as an whom you expect to receive the final pay- year compensation, the statement must list independent contractor (independent personal ment of compensation, showing the all the dates you entered and left the Uni- services) may be entirely or partly exempt from amount of the payment and the amount of ted States during each of the taxable years withholding if you reach an agreement with the tax that would be withheld if a final pay- to which the compensation is attributable. IRS on the amount of withholding required. An ment exemption were not granted. This • A copy of any documents or records that agreement that you reach with the IRS regard- statement must also be signed by the with- show the number of days you actually ing withholding from your compensation for in- holding agent and verified by a declaration were present in the United States during dependent personal services is effective for that it is made under penalties of perjury. the years listed. payments covered by the agreement after it is • A statement by you that you do not intend • A statement providing (a) the number of agreed to by all parties. You must agree to to receive any other income effectively days (or unit of time less than a day, if ap- timely file an income tax return for the current connected with a trade or business in the propriate) that personal services were per- tax year. United States during the current tax year. formed in the United States in connection • The amount of tax that has been withheld with recruiting, training, and supporting Central withholding agreements (CWA). If or paid under any other provision of the In- your lower-tier distributors; and (b) the total you are a nonresident alien entertainer or ath- ternal Revenue Code or regulations for any number of days (or unit of time less than a lete performing or participating in athletic events income effectively connected with your day, if appropriate) that personal services in the United States, you may be able to enter trade or business in the United States dur- were performed globally in connection with into a CWA with the IRS for reduced withhold- ing the current tax year. recruiting, training, and supporting your ing provided certain requirements are met. Un- • The amount of your outstanding tax liabili- lower-tier distributors. der no circumstances will such a withholding ties, if any, including interest and penalties,

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• Any further relevant document or record Special rules for withholding on partnership transfers of PTP interests and withholding un- supporting your claim that the taxes were income, scholarships, and fellowships are der section 1446(f)(4) are suspended for trans- withheld in error. explained next. fers occurring before January 1, 2022. For more information, see Pub. 515. Refund of taxes withheld in error on social Tax Withheld on For more information, see Treasury Deci- security benefits paid to resident aliens. sion 9926 on page 1602 of I.R.B. 2020-51, Social security benefits paid to a lawful perma- Partnership Income available at IRS.gov/irb/ nent resident (green card holder) are not sub- 2020-51_IRB#TD-9926. Also, see the final reg- ject to 30% withholding. For U.S. income tax If you are a foreign partner in a U.S. or foreign ulations as published in the Federal Register at purposes, green card holders continue to be partnership, the partnership will withhold tax on www.govinfo.gov/content/pkg/ resident aliens until their lawful permanent resi- your share of effectively connected taxable in- FR-2020-11-30/pdf/2020-22619.pdf. dent status under immigration laws is either come (ECTI) from the partnership. Your part- taken away or is administratively or judicially nership may be able to reduce withholding on determined to have been abandoned. See your share of ECTI by considering certain part- Withholding on Scholarships Green Card Test in chapter 1. If you are a green ner-level deductions. Generally, you must sub- and Fellowship Grants card holder and tax was withheld in error on mit Form 8804-C for this purpose. For more in- your social security benefits because you have formation, see the Instructions for Form 8804-C. There is no withholding on a qualified scholar- a foreign address, the withholding tax is refund- ship received by a candidate for a degree. See able by the IRS. To obtain a refund, you must The withholding rate on your share of effec- chapter 3. file a Form 1040 or 1040-SR. To determine if tively connected income is generally the highest you are entitled to a refund, send your return to: rate of tax specified under section 1 of the Code If you are a nonresident alien student or (37%). However, the partnership may withhold grantee with an “F,” “J,” “M,” or “Q” visa and you Department of the Treasury at the highest rate that applies to a particular receive a U.S. source grant or scholarship that Internal Revenue Service Center type of income allocable to you if you gave the is not fully exempt, the withholding agent (usu- Austin, TX 73301 partnership the appropriate documentation. ally the payer of the scholarship) withholds tax Long-term capital gain is an example of a par- at 14% (or lower treaty rate) of the taxable part You must also attach the following to your ticular type of income to which the highest tax of the grant or scholarship that is not a payment Form 1040 or 1040-SR. rate applies. Claim the tax withheld as a credit for services. However, if you are not a candi- • A copy of Form SSA-1042S, Social Secur- on your 2020 Form 1040-NR. date for a degree and the grant does not meet ity Benefit Statement. certain requirements, tax will be withheld at the • A copy of the green card. The partnership will give you a statement on 30% (or lower treaty) rate. • A signed declaration that includes the fol- Form 8805 showing the tax withheld. A partner- lowing statements: The SSA should not ship that is publicly traded will withhold tax on Any part of a scholarship or fellowship grant have withheld income tax from my social your actual distributions of effectively connec- that is a payment for services is subject to grad- security benefits because I am a U.S. law- ted income. In this case, the partnership will uated withholding as discussed earlier under ful permanent resident and my green card give you a statement on Form 1042-S. Withholding on Wages. has been neither revoked nor administra- tively or judicially determined to have been Tax withheld on gain from the sale or ex- Alternate Withholding Procedure abandoned. I am filing a U.S. income tax change of certain partnership interests. If return for the tax year as a resident alien you are a direct or indirect foreign partner in a Your withholding agent may choose to use an reporting all of my worldwide income. I U.S. or foreign partnership that is engaged (or alternate procedure by asking you to fill out have not claimed benefits for the tax year is treated as engaged) in a trade or business Form W-4. See below for items that may reduce under an income tax treaty as the resident within the United States and you directly or indi- your withholding. of a country other than the United States. rectly dispose of that interest for a gain, then for transfers occurring after 2017 the transferee will Expenses. Include expenses that will be de- generally withhold and pay to the IRS on your ductible on your return. These include the IRA Withholding From behalf a tax equal to 10% of the amount real- deduction discussed under Deductions in chap- ized on the sale. The rules for withholding and ter 5. Other Income paying over this amount are similar to the rules for sales of U.S. real property interests. You will Nontaxable grant or scholarship. You can Other income subject to 30% withholding gen- receive a Form 8288-A reflecting the amount exclude the part of your grant or scholarship erally includes fixed or determinable income withheld that you may then claim on line 25f of that is not taxable under U.S. law or under a tax such as interest (other than portfolio interest), your Form 1040-NR as a credit against the tax treaty. dividends, pensions and annuities, and gains you owe on the gain. You may be able to pro- from certain sales and exchanges, discussed in vide certain information to the transferee to re- Standard deduction. If you are a student who chapter 4. It also includes 85% of social security duce or eliminate withholding. For example, if a qualifies under Article 21(2) of the United benefits paid to nonresident aliens. nonrecognition provision of the Internal Reve- States-India Income Tax Treaty, you can take nue Code applies to all of the gain realized on a the standard deduction. The standard deduc- Other income not subject to withholding of transfer, the transferee does not need to with- tion amount for 2020 is $12,400. 30% (or lower treaty) rate. The following in- hold if you provide a notice describing the appli- come is not subject to withholding at the 30% cation of a nonrecognition provision. If you are a Form W-4. Complete the appropriate lines of (or lower treaty) rate if you file Form W-8ECI transferee that failed to withhold, under section Form W-4. Sign and date the form and give it to with the payer of the income. 1446(f)(4) the partnership may withhold on dis- your withholding agent. • Income (other than compensation) that is tributions to you. If you file a Form W-4 to reduce or eliminate effectively connected with your U.S. trade On November 30, 2020, final regulations un- the withholding on your scholarship or grant, or business. der section 1446(f) were issued which are gen- you must file an annual U.S. income tax return • Income from real property that you choose erally applicable to transfers of non-PTP inter- to be allowed any deductions you claimed on to treat as effectively connected with a ests that occur on or after January 29, 2021. that form. If you are in the United States during U.S. trade or business. See Income From Notice 2018-29 applies to transfers of non-PTP more than one tax year, you must attach a Real Property in chapter 4 for details about interests that occurred before the applicability statement to your yearly Form W-4 indicating this choice. date of the final regulations, or, under certain that you have filed a U.S. income tax return for circumstances, taxpayers may apply the pro- the previous year. If you have not been in the posed regulations to transfers of non-PTP inter- United States long enough to be required to file ests during this time. The requirements for a return, you must attach a statement to your

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Form W-4 saying you will file a U.S. income tax If you received a scholarship or fellowship realized does not exceed $1 million, the rate of return when required. grant, as well as personal services income, withholding is 10%. from the same withholding agent, use Form The amount realized is the sum of: After the withholding agent has accepted 8233 to claim an exemption from withholding • The cash paid, or to be paid (principal your Form W-4, tax will be withheld on your based on a tax treaty for both types of income. only); scholarship or grant at the graduated rates that • The fair market value of other property apply to wages. The gross amount of the in- Special events and promotions. Withholding transferred, or to be transferred; and come is reduced by the applicable amount(s) at the full 30% rate is required for payments • The amount of any liability assumed by the on Form W-4, and the withholding tax is figured made to a nonresident alien or foreign corpora- transferee or to which the property is sub- on the remainder. tion for gate receipts (or television or other re- ject immediately before and after the trans- ceipts) from music festivals, boxing promotions, fer. You will receive a Form 1042-S from the and other entertainment or sporting events, un- withholding agent (usually the payer of your less the withholding agent has been specifically If the property transferred was owned jointly grant) showing the gross amount of your taxa- advised otherwise by letter from the IRS. De- by U.S. and foreign persons, the amount real- ble scholarship or fellowship grant less any pending on the calendar year in which the U.S. ized is allocated between the transferors based withholding allowance amount, the tax rate, and gross income is earned, Form 13930 can be on the capital contribution of each transferor. used to request a reduction in withholding. the amount of tax withheld. Use this form to pre- A distribution by a qualified investment entity Withholding may be required even if the income pare your annual U.S. income tax return. to a nonresident alien shareholder that is trea- may be exempt from taxation by provisions of a ted as gain from the sale or exchange of a U.S. tax treaty. One reason for this is that the partial For more information, go to IRS.gov/ real property interest by the shareholder is sub- or complete exemption is usually based on fac- FormW4. ject to withholding at 21%. Withholding is also tors that cannot be determined until after the required on certain distributions and other close of the tax year. transactions by domestic or foreign corpora- For more information, go to IRS.gov/ Income Entitled to tions, partnerships, trusts, and estates. These Individuals/International-Taxpayers/Central- rules are covered in Pub. 515 and in the Instruc- Withholding-Agreements. Tax Treaty Benefits tions for Form 8288. We have temporarily waived the in- If a tax treaty between the United States and For information on the tax treatment of dis- come requirement for which form to your country of residence provides an exemp- ! positions of U.S. real property interests, see CAUTION use when applying for a CWA. Form tion from, or a reduced rate of, tax for certain Real Property Gain or Loss in chapter 4. 13930-A is currently unavailable. While the items of income, you should notify the payer of waiver is in effect, individuals with income be- If you are a partner in a domestic partner- the income (the withholding agent) of your for- low $10,000 can apply for a CWA using Form ship, and the partnership disposes of a U.S. eign status to claim a tax treaty withholding ex- 13930, Instructions on how to apply for a Cen- real property interest at a gain, the partnership emption. Generally, you do this by filing either tral Withholding Agreement. For more informa- will withhold tax on the amount of gain allocable Form W-8BEN or Form 8233 with the withhold- tion on how to apply for a CWA, see Form to its foreign partners. Your share of the income ing agent. 13930. For more information, go to IRS.gov/ and tax withheld will be reported to you on Form File Form W-8BEN for income that is not Individuals/International-Taxpayers/Central- 8805 or Form 1042-S (in the case of a publicly personal services income. File Form 8233 for Withholding-Agreements. traded partnership). personal services income as discussed next. Withholding is not required in the following You will be required to pay U.S. tax at situations. If you qualify for an exemption under a the time of your departure from the Uni- TIP tax treaty but did not submit a Form ted States on any income for which you 1. The property is acquired by the buyer for 8233 to your withholding agent to claim incorrectly claimed a treaty exemption. For use as a residence and the amount real- an exemption from withholding, you can still get more details on treaty provisions that apply to ized is not more than $300,000. the benefit of the exemption by filing a Form compensation, see Pub. 901. 1040-NR. Follow the instructions for line 1a of 2. The property disposed of is an interest in a the Form 1040-NR. domestic corporation if any class of stock COVID-19 Medical Condition Travel Excep- of the corporation is regularly traded on an tion. You may be eligible to claim an exemp- established securities market. However, Employees and independent contractors. If tion from withholding on income from depend- this exception does not apply to certain you perform personal services as an employee ent personal services pursuant to an income tax dispositions of substantial amounts of or as an independent contractor and you can treaty if you claim the COVID-19 Medical Con- nonpublicly traded interests in publicly tra- claim an exemption from withholding on that dition Travel Exception, described earlier. You ded corporations. personal service income because of a tax should provide your employer or withholding 3. The property disposed of is an interest in a treaty, give Form 8233 to each withholding agent with a Form 8233. For more information, U.S. corporation that is not regularly tra- agent from whom amounts will be received. including guidance for withholding agents, see ded on an established market and you Even if you submit Form 8233, the withhold- Revenue Procedure 2020-20, 2020-20 I.R.B. (the seller) give the buyer a copy of a ing agent may have to withhold tax from your in- 801, available at IRS.gov/irb/ statement issued by the corporation certi- come. This is because the factors on which the 2020-20_IRB#REV-PROC-2020-20, and the In- fying that the interest is not a U.S. real treaty exemption is based may not be determi- structions for Form 8233. nable until after the close of the tax year. In this property interest. case, you must file Form 1040-NR to recover 4. You (the seller) give the buyer a certifica- any overwithheld tax and to provide the IRS Tax Withheld on tion stating, under penalties of perjury, that with proof that you are entitled to the treaty ex- you are not a foreign person, and contain- emption. Real Property Sales ing your name, U.S. taxpayer identification number, and home address. Students, teachers, and researchers. If you are a nonresident alien and you disposed You can give the certification to a quali- Students, teachers, and researchers must at- of a U.S. real property interest, the transferee fied substitute. The qualified substitute tach the appropriate statement shown in Ap- (buyer) of the property must generally withhold gives the buyer a statement, under penal- pendix A (for students) or Appendix B (for a tax equal to 15% of the amount realized on ties of perjury, that the certification is in the teachers and researchers) at the end of this the disposition. possession of the qualified substitute. For publication to the Form 8233 and give it to the this purpose, a “qualified substitute” is: withholding agent. For treaties not listed in the However, if the property is acquired by the appendices, attach a statement in a format sim- buyer for use as a residence and the amount a. The person (including any attorney or ilar to those for other treaties. title company) responsible for closing

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the transaction, other than your agent, 2. All of your realized gain is exempt from if social security and Medicare taxes apply to and U.S. tax and you have no unsatisfied with- your wages. You cannot make voluntary pay- holding liability. ments if no taxes are due. b. The buyer's agent. 3. You or the buyer enters into an agreement 5. The buyer receives a withholding certifi- Additional Medicare Tax. In addition to the with the IRS for the payment of tax and cate from the IRS. Medicare tax, a 0.9% (0.009) Additional Medi- provides security for the tax liability. care Tax applies to Medicare wages, Railroad 6. You give the buyer written notice that you Retirement Tax Act (RRTA) compensation, and are not required to recognize any gain or See Pub. 515 and IRS.gov/Individuals/ self-employment income that are more than: loss on the transfer because of a nonre- International-Taxpayers/Withholding- • $250,000 if married filing jointly, cognition provision in the Internal Revenue Certificates for information on procedures to re- • $125,000 if married filing separately, or Code or a provision in a U.S. tax treaty. quest a withholding certificate. • $200,000 for any other filing status. The buyer must file a copy of the notice Credit for tax withheld. The buyer must re- with the Ogden Service Center, P.O. Box There are no special rules for nonresident port and pay over the withheld tax within 20 409101, Ogden, UT 84409. You must ver- aliens for purposes of Additional Medicare Tax. days after the transfer using Form 8288. This ify the notice as true and sign it under pen- Wages, RRTA compensation, and self-employ- form is filed with the IRS with copies A and B of alties of perjury. ment income that are subject to Medicare tax Form 8288-A. Copy B of this statement will be See Regulations section 1.1445-2(d) will also be subject to Additional Medicare Tax if stamped received by the IRS and returned to (2) for more information on the transferor's in excess of the applicable threshold. you (the seller) if the statement is complete and notice of nonrecognition. Your employer is responsible for withholding includes your taxpayer identification number You may not give the buyer a written the 0.9% (0.009) Additional Medicare Tax on (TIN). You must file Copy B with your tax return notice for any of the following transfers: Medicare wages or RRTA compensation it pays to take credit for the tax withheld. to you in excess of $200,000 in the calendar a. The sale of your main home on which A stamped copy of Form 8288-A will not be year. If you intend to file a joint return and you you exclude gain, provided to you if your TIN is not included on anticipate that you and your spouse's individual b. A like-kind exchange that does not that form. The IRS will send you a letter re- wages are not going to be more than $200,000 qualify for nonrecognition treatment in questing the TIN and provide instructions for but your combined wages and self-employment its entirety, or how to get a TIN. When you provide the IRS income are going to be more than $250,000, with a TIN, the IRS will provide you with a stam- you may want to request additional withholding c. A deferred like-kind exchange that ped Copy B of Form 8288-A. on Form W-4 and/or make estimated tax pay- has not been completed at the time ments. the buyer must file Form 8288. If you file Form 1040-NR, you must pay Ad- Instead, you must get a withholding certifi- Social Security and ditional Medicare Tax if the total of your wages cate (described next). and your self-employment income was more Medicare Taxes than $125,000 if married (you checked the Mar- 7. The amount you realize on the transfer of ried filing separately box at the top of page one If you work as an employee in the United a U.S. real property interest is zero. of Form 1040-NR), or $200,000 if single or qual- States, you must pay social security and Medi- 8. The property is acquired by the United ifying widow(er) (you checked the Single or care taxes in most cases. Your payments of States, a U.S. state or possession, a politi- Qualifying widow(er) box at the top of page one these taxes contribute to your coverage under cal subdivision, or the District of Columbia. of Form 1040-NR). the U.S. social security system. Social security See Form 8959 and its instructions to deter- 9. The distribution is from a domestically coverage provides retirement benefits, survi- mine whether you are required to pay Additional controlled qualified investment entity (QIE) vors and disability benefits, and medical insur- Medicare Tax. For more information on Addi- and is treated as a distribution of a U.S. ance (Medicare) benefits to individuals who tional Medicare Tax, go to IRS.gov/ADMT. real property interest only because an in- meet certain eligibility requirements. terest in the entity was disposed of in an Self-employed individuals may also be re- applicable wash sale transaction. For the In most cases, the first $137,700 of taxable quired to pay Additional Medicare Tax. See definition of a QIE, see Qualified invest- wages received in 2020 for services performed Self-Employment Tax, later. ment entities under Real Property Gain or in the United States is subject to social security Loss, earlier. See Wash sale under Real tax. All taxable wages are subject to Medicare Students and Property Gain or Loss in chapter 4. tax. Your employer deducts these taxes from each wage payment. Your employer must de- Exchange Visitors The certifications in (3) and (4) must be dis- duct these taxes even if you do not expect to regarded by the buyer if the buyer or qualified qualify for social security or Medicare benefits. Generally, services performed by you as a non- substitute has actual knowledge, or receives You can claim a credit for excess social security resident alien temporarily in the United States notice from a seller's or buyer's agent (or substi- tax on your income tax return if you have more as a nonimmigrant under subparagraph (F), (J), tute), that they are false. This also applies to the than one employer and the amount deducted (M), or (Q) of section 101(a)(15) of the Immigra- qualified substitute's statement under (4). from your combined wages for 2020 is more tion and Nationality Act are not covered under than $8,537.40. Use the appropriate worksheet the social security program if the services are Withholding certificates. The tax required to in chapter 3 of Pub. 505 to figure your credit. performed to carry out the purpose for which be withheld on a disposition can be reduced or you were admitted to the United States. This eliminated under a withholding certificate is- If any one employer deducted more than means that there will be no withholding of social sued by the IRS. In most cases, either you or $8,537.40, you cannot claim a credit for that security or Medicare taxes from the pay you re- the buyer can request a withholding certificate. amount. Ask your employer to refund the ex- ceive for these services. These types of serv- A withholding certificate can be issued due cess. If your employer does not refund the ex- ices are very limited and generally include only to any of the following. cess, you can file a claim for refund using Form on-campus work, practical training, and eco- 843. nomic hardship employment. 1. The IRS determines that reduced with- holding is appropriate because either: In general, U.S. social security and Medi- Social security and Medicare taxes will be care taxes apply to payments of wages for serv- withheld from your pay for these services if you a. The amount required to be withheld ices performed as an employee in the United are considered a resident alien as discussed in would exceed your maximum tax lia- States, regardless of the citizenship or resi- chapter 1, even though your nonimmigrant clas- bility, or dence of either the employee or the employer. sification (“F,” “J,” “M,” or “Q”) remains the b. Withholding of the reduced amount In limited situations, these taxes apply to wages same. would not jeopardize collection of the for services performed outside the United tax. States. Your employer should be able to tell you

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Services performed by a spouse or minor petitioner through whom the alien obtained the performed in connection with the H-2A visa. child of nonimmigrant aliens with the classifica- “Q” visa. Social security and Medicare taxes are You can find more information about not having tion of “F-2,” “J-2,” “M-2,” and “Q-3” are cov- not withheld from pay for this work unless the tax withheld at IRS.gov/Individuals/ ered under social security. alien is considered a resident alien. International-Taxpayers/Foreign-Agricultural- Workers. Nonresident Alien Students Refund of Taxes Withheld in Error Self-Employment Tax If you are a nonresident alien temporarily admit- If social security or Medicare taxes were with- ted to the United States as a student, you are held in error from pay that is not subject to Self-employment tax is the social security and generally not permitted to work for a wage or these taxes, contact the employer who withheld Medicare taxes for individuals who are self-em- salary or to engage in business while you are in the taxes for a refund. If you are unable to get a ployed. Nonresident aliens are not subject to the United States. In some cases, a student ad- full refund of the amount from your employer, self-employment tax unless an international so- mitted to the United States in “F-1,” “M-1,” or file a claim for refund with the IRS on Form 843. cial security agreement in effect determines that “J-1” status is granted permission to work. So- Attach the following items to Form 843. they are covered under the U.S. social security cial security and Medicare taxes are not with- A copy of your Form W-2 to prove the • system. Residents of the U.S. Virgin Islands, held from pay for the work unless the student is amount of social security and Medicare Puerto Rico, Guam, the Commonwealth of the considered a resident alien. taxes withheld. Northern Mariana Islands, or American Samoa • A copy of your visa. Any student who is enrolled and regu- are considered U.S. residents for this purpose • Form I-94 (or other documentation show- TIP larly attending classes at a school may and are subject to the self-employment tax. You ing your dates of arrival or departure). be exempt from social security and can find more information about international • If you have an F-1 or J-1 visa, documenta- Medicare taxes on pay for services performed social security agreements, later. tion showing permission to work in the Uni- for that school. ted States. Resident aliens must pay self-employment • If you are engaged in optional practical tax under the same rules that apply to U.S. citi- The U.S. Citizenship and Immigration Serv- training or employment due to severe eco- zens. However, a resident alien employed by ices (USCIS) permits on-campus work for stu- nomic necessity, documentation showing an international organization, a foreign govern- dents in “F-1” status if it does not displace a permission to work in the United States. ment, or a wholly owned instrumentality of a for- U.S. resident. “On-campus work” means work • A statement from your employer indicating eign government is not subject to the self-em- performed on the school's premises. On-cam- the amount of the reimbursement your em- ployment tax on income earned in the United pus work includes work performed at an ployer provided and the amount of the States. off-campus location that is educationally affili- credit or refund your employer claimed or ated with the school. On-campus work under you authorized your employer to claim. If Self-employment income you receive while the terms of a scholarship, fellowship, or assis- you cannot obtain this statement from your you are a resident alien is subject to self-em- tantship is considered part of the academic pro- employer, you must provide this informa- ployment tax even if it was paid for services you gram of a student taking a full course of study tion on your own statement and explain performed as a nonresident alien. and is permitted by the USCIS. Social security why you are not attaching a statement from and Medicare taxes are not withheld from pay your employer or on Form 8316 claiming Example. Bill Jones is an author. Bill had for this work unless the student is considered a your employer will not issue the refund. several books published in a foreign country resident alien. • If you were exempt from social security while he was a citizen and resident of that coun- and Medicare tax for only part of the year, try. During 2020, Bill entered the United States If services performed by a nonresident alien pay statements showing the tax paid dur- as a resident alien. After becoming a U.S. resi- student are not considered as performed to ing the period you were exempt. dent, he continued to receive royalties from his carry out the purpose for which the student was foreign publisher. Bill reports his income and admitted to the United States, social security Send Form 843 (with attachments) to: expenses on the cash basis (he reports income and Medicare taxes will be withheld from pay on his tax return when received and deducts for the services unless the pay is exempt under Department of the Treasury expenses when paid). Bill's 2020 self-employ- the Internal Revenue Code. Internal Revenue Service Center ment income includes the royalties received af- Ogden, UT 84201-0038 ter he became a U.S. resident even though the Exchange Visitors books were published while he was a nonresi- . dent alien. This royalty income is subject to Exchange visitors are temporarily admitted to self-employment tax. the United States under section 101(a)(15)(J) of Do not use Form 843 to request a re- the Immigration and Nationality Act. Social se- ! fund of Additional Medicare Tax. If Ad- Reporting self-employment tax. Use Sched- curity and Medicare taxes are not withheld on CAUTION ditional Medicare Tax was withheld ule SE (Form 1040) to report and figure your pay for services of an exchange visitor who has from your pay in error, you can claim a credit for self-employment tax. Then, enter the tax on been given permission to work and who pos- any withheld Additional Medicare Tax against Schedule 2 (Form 1040), line 4. Attach Sched- sesses or obtains a letter of authorization from the total tax liability shown on your tax return by ule SE (Form 1040) to Form 1040, 1040-SR, or the sponsor unless the exchange visitor is con- filing Form 8959 with Form 1040, 1040-SR, or 1040-NR. sidered a resident alien. 1040-NR. If Additional Medicare Tax was with- held in error in a prior year for which you al- Deferral of employment tax deposits and If services performed by an exchange visitor ready filed Form 1040, 1040-SR, or 1040-NR, payments. Section 2302 of the CARES Act are not considered as performed to carry out you must file Form 1040-X for the prior year in permits self-employed individuals to defer pay- the purpose for which the visitor was admitted which the wages or compensation were origi- ment of a portion of their 2020 self-employment to the United States, social security and Medi- nally received to recover the Additional Medi- tax until 2021 and 2022. Specifically, the pay- care taxes are withheld from pay for the serv- care Tax withheld in error. See the Instructions ment of 50% of the social security tax imposed ices unless the pay is exempt under the Internal for Form 1040-X. on net earnings from self-employment earned Revenue Code. during the period beginning on March 27, 2020, and ending December 31, 2020, may be defer- Nonresident aliens temporarily admitted to Agricultural Workers red. Up to half of the maximum amount that can the United States as participants in international be deferred must be paid by December 31, cultural exchange programs under section Agricultural workers temporarily admitted into 2021, and the remaining amount must be paid 101(a)(15)(Q) of the Immigration and National- the United States on H-2A visas are exempt by December 31, 2022. ity Act may be exempt from social security and from social security and Medicare taxes on The deferral is calculated and reported on Medicare taxes. The employer must be the compensation paid to them for services Part III of Schedule SE (Form 1040). For more

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information, see Schedule SE (Form 1040) and only in the country where you are working. appropriate agency of the foreign country. If the its instructions. However, if you are temporarily sent to work for foreign country will not issue the certificate, you the same employer in the United States and should request a statement that your income is Additional Medicare Tax. Self-employed in- your pay would normally be subject to social se- not covered by the U.S. social security system. dividuals must pay a 0.9% (0.009) Additional curity taxes in both countries, most agreements Request it from the U.S. Social Security Admin- Medicare Tax on self-employment income that provide that you remain covered only by the so- istration, at the address given earlier. Attach a exceeds one of the following threshold amounts cial security system of the country from which photocopy of either statement to Form 1040 or (based on your filing status). you were sent. 1040-SR each year you are exempt. Also print • Married filing jointly — $250,000, To establish that your pay is subject only to “Exempt, see attached statement” on the line • Married filing separately — $125,000, or foreign social security taxes and is exempt from for self-employment tax. • Single, Head of household, or Qualifying U.S. social security taxes (including the Medi- widow(er) — $200,000. For questions on the coverage rules of care tax) under an agreement, you or your em- TIP the agreements, call 410-965-0160. If you have both wages and self-employ- ployer should request a certificate of coverage ment income, the threshold amount for applying from the appropriate agency of the foreign the Additional Medicare Tax on the self-employ- country. This will usually be the same agency to ment income is reduced (but not below zero) by which you or your employer pays your foreign Estimated Tax the amount of wages subject to Additional Med- social security taxes. The foreign agency will be icare Tax. A self-employment loss should not able to tell you what information is needed for Form 1040-ES (NR) be considered for purposes of this tax. them to issue the certificate. Your employer should keep a copy of the certificate because it If you file Form 1040-NR, you must pay Ad- You may have income from which no U.S. in- may be needed to show why you are exempt ditional Medicare Tax if the total of your wages come tax is withheld. Or, the amount of tax with- from U.S. social security taxes. Only wages and your self-employment income was more held may be less than the income tax you esti- paid on or after the effective date of the agree- than $125,000 if married (you checked the Mar- mate you will owe at the end of the year. If so, ment can be exempt from U.S. social security ried filing separately box at the top of page one you may have to pay estimated tax. of Form 1040-NR), or $200,000 if single or qual- taxes. ifying widow(er) (you checked the Single or Some of the countries with which the Generally, you must make estimated tax Qualifying widow(er) box at the top of page one United States has agreements will not payments for 2021 if you expect to owe at least of Form 1040-NR). issue certificates of coverage. In this $1,000 in tax and you expect your withholding See Form 8959 and its separate instructions case, either you or your employer should re- and certain refundable credits to be less than to determine whether you are required to pay quest a statement that your wages are not cov- the smaller of: Additional Medicare Tax. For more information ered by the U.S. social security system. Re- 1. 90% (0.90) of the tax to be shown on your on Additional Medicare Tax, go to IRS.gov/ quest the statement from the following address. 2021 income tax return, or ADMT. U.S. Social Security Administration 2. 100% (1.00) of the tax shown on your Deduction for employer-equivalent portion Office of Earnings and International 2020 income tax return (if your 2020 return of self-employment tax. If you must pay Operations covered all 12 months of the year). self-employment tax, you can deduct a portion P.O. Box 17741 If your adjusted gross income for 2020 was of the self-employment tax paid in figuring your Baltimore, MD 21235-7741 adjusted gross income. This deduction is fig- more than $150,000 ($75,000 if your filing sta- ured on Schedule SE (Form 1040). tus for 2021 is Married filing separately), substi- tute 110% (1.10) for 100% (1.00) in (2) above if Note. No portion of the Additional Medicare Self-employed individuals. Under most you are not a farmer or fisherman. Item (2) does Tax is deductible for self-employment tax. agreements, self-employed individuals are cov- not apply if you did not file a 2020 return. ered by the social security system of the coun- More information. See Pub. 334 for more in- try where they reside. However, under some A nonresident alien should use Form formation about self-employment tax. agreements, you may be exempt from U.S. 1040-ES (NR) to figure and pay estimated tax. self-employment tax if you temporarily transfer If you pay by check, make it payable to the "Uni- your business activity to or from the United ted States Treasury." International Social States. Security Agreements If you believe that your self-employment in- How to estimate your tax for 2021. If you come is subject only to U.S. self-employment filed a 2020 return on Form 1040-NR and ex- The United States has entered into social se- tax and is exempt from foreign social security pect your income and total deductions for 2021 curity agreements, commonly referred to as taxes, request a Certificate of Coverage from to be nearly the same, you should use your “Totalization agreements,” with foreign coun- the U.S. Social Security Administration or by 2020 return as a guide to complete the Estima- tries to coordinate social security coverage and writing to the address given earlier. This certifi- ted Tax Worksheet in the Form 1040-ES (NR) taxation of workers employed for part or all of cate will establish your exemption from foreign instructions. If you did not file a return for 2020, their working careers in one of the countries. social security taxes. or if your income, deductions, or credits will be Under these agreements, dual coverage and To request or submit the Certificate of Cov- different for 2021, you must estimate these dual contributions (taxes) for the same work are erage online, go to OPTS.ssa.gov/. You can amounts. Figure your estimated tax liability us- eliminated. The agreements generally make also request a Certificate of Coverage by fax at ing the Tax Rate Schedule in the 2021 Form sure that social security taxes (including 410-966-1861 or by writing to the following ad- 1040-ES (NR) instructions for your filing status. self-employment tax) are paid only to one coun- dress. try. Note. If you expect to be a resident of Pu- erto Rico during the entire year, use Form For a list of current international social se- Social Security Administration 1040-ES or Formulario 1040-ES (PR). curity agreements, go to SSA.gov/international/ Office of Earnings and status.html. As agreements with additional International Operations When to pay estimated tax. Make your first countries enter into force, they will be posted on P.O. Box 17741 estimated tax payment by the due date for filing this website. For more information on interna- Baltimore, MD 21235-7741 the previous year's Form 1040-NR. If you have tional social security agreements, go to wages subject to the same withholding rules SSA.gov/international/ To establish that your self-employment in- that apply to U.S. citizens, you must file Form totalization_agreements.html. come is subject only to foreign social security 1040-NR and make your first estimated tax pay- taxes and is exempt from U.S. self-employment ment by April 15, 2021. If you do not have wa- Employees. Generally, under these agree- tax, request a certificate of coverage from the ges subject to withholding, file your income tax ments, you are subject to social security taxes

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return and make your first estimated tax pay- 8833 8833 Treaty-Based Return Position ment by June 15, 2021. Disclosure Under Section 6114 or If your first estimated tax payment is due 9. 7701(b) April 15, 2021, you can pay your estimated tax See chapter 12 for information about getting in full at that time or in four equal installments by these publications and forms. the dates shown next. Tax Treaty 1st installment ...... April 15, 2021 Treaty Income 2nd installment ...... June 15, 2021 3rd installment ...... Sept. 15, 2021 Benefits 4th installment ...... Jan. 18, 2022 A nonresident alien's treaty income is the gross income on which the tax is limited by a tax If your first payment is not due until June 15, treaty. Treaty income includes, for example, 2021, you can pay your estimated tax in full at Introduction dividends from sources in the United States that that time or: are subject to tax at a tax treaty rate not to ex- A nonresident alien (and certain resident aliens) ceed 15%. Nontreaty income is the gross in- 1 1. /2 of your estimated tax by June 15, 2021; from a country with which the United States has come of a nonresident alien on which the tax is an income tax treaty may qualify for certain ben- 2. 1/4 of the tax by September 15, 2021; and not limited by a tax treaty. efits. Most treaties require that the nonresident 3. 1/4 by January 18, 2022. alien be a resident of the treaty country to qual- Figure the tax on treaty income on each ify in the year the benefit is claimed. However, separate item of income at the reduced rate that You do not have to make the payment in the case of certain students, trainees, teach- applies to that item under the treaty. TIP due January 18, 2022, if you file your ers, or researchers, some treaties only require 2021 Form 1040-NR by January 31, To determine tax on nontreaty income, fig- the nonresident alien to be a resident of the ure the tax at either the flat 30% rate or the 2022, and pay the entire balance due with your treaty country immediately prior to coming to return. graduated rate, depending upon whether or not the United States. the income is effectively connected with your trade or business in the United States. Fiscal year. If your return is not on a calen- Tax treaties tables. You can access the tax dar year basis, your due dates are the 15th day treaty tables by going to IRS.gov/Individuals/ Your tax liability is the sum of the tax on of the 4th, 6th, and 9th months of your fiscal International-Taxpayers/Tax-Treaty-Tables. treaty income plus the tax on nontreaty income, year, and the 1st month of the following fiscal You can access the texts of recently signed but it cannot be more than the tax liability fig- year. If any date falls on a Saturday, Sunday, or U.S. income tax treaties, protocols, and tax in- ured as if the tax treaty had not come into ef- legal holiday, use the next day that is not a Sat- formation exchange agreements (TIEAs) and fect. urday, Sunday, or legal holiday. the accompanying Treasury Department tax treaty technical explanations as they become Example. Arthur Banks is a nonresident Changes in income or deductions. Even if publicly available, as well as the U.S. Model In- alien who is single and a resident of a foreign you are not required to make an estimated tax come Tax Convention, at Treasury.gov/ country that has a tax treaty with the United payment in April or June, your circumstances resource-center/tax-policy/treaties/Pages/ States. He received gross income of $25,900 may change so that you will have to make esti- treaties.aspx. during the tax year from sources within the Uni- mated tax payments later. This can happen if ted States, consisting of the following items. you receive additional income or if any of your Note that treaty and TIEA documents deductions are reduced or eliminated. If so, see are posted on this site after signature ! Dividends on which the tax is limited to a 15% CAUTION and before ratification and entry into the Form 1040-ES (NR) instructions and Pub. rate by the tax treaty ...... $1,400 505 for information on figuring your estimated force. tax. The full text of individual tax treaties is also Compensation for personal services on which 24,500 available at IRS.gov/Businesses/International- the tax is not limited by the tax treaty ...... Amended estimated tax. If, after you have Businesses/United-States-Income-Tax- Total gross income ...... $25,900 made estimated tax payments, you find your Treaties-A-to-Z. For more information about tax estimated tax is substantially increased or de- treaties, go to IRS.gov/Individuals/International- Arthur was engaged in business in the Uni- creased because of a change in your income or Taxpayers/Tax-Treaties. ted States during the tax year. His dividends are exemptions, you should adjust your remaining You can generally arrange to have withhold- not effectively connected with that business. He estimated tax payments. To do this, see the In- ing tax reduced or eliminated on wages and has no deductions. structions for Form 1040-ES (NR) and Pub. other income that are eligible for tax treaty ben- His tax liability, figured as though the tax 505. efits. See Income Entitled to Tax Treaty Bene- treaty had not come into effect, is $3,166 deter- fits in chapter 8. Penalty for failure to pay estimated income mined as follows. tax. You will be subject to a penalty for under- payment of installments of estimated tax except Topics Total compensation ...... $24,500 in certain situations. These situations are ex- This chapter discusses: plained on Form 2210. Less: Deductions ...... 0 • Typical tax treaty benefits, • How to obtain copies of tax treaties, and Taxable income ...... $24,500 • How to claim tax treaty benefits on your tax return. Tax determined by graduated rate (Tax Table column for single taxpayers) ...... $2,746 Useful Items You may want to see: Plus: Tax on gross dividends ($1,400 × 30%) ...... 420

Publication Tax determined as though treaty had not come into effect ...... $3,166

901 901 U.S. Tax Treaties Arthur's tax liability, figured by taking into ac- Form (and Instructions) count the reduced rate on dividend income as

1040-NR 1040-NR U.S. Nonresident Alien Income provided by the tax treaty, is $2,956 determined Tax Return as follows.

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Tax determined by graduated rate (same as account for purposes of determining your eligi- Generally, the teacher or professor must be figured above) ...... $2,746 bility for treaty benefits with respect to income in the United States primarily to teach, lecture, from employment or the performance of de- instruct, or engage in research. A substantial Plus: Tax on gross dividends ($1,400 × pendent personal services in the United States. part of that person's time must be devoted to 15%) ...... 210 For more information, see COVID-19 Medical those duties. The normal duties of a teacher or Condition Travel Exception, earlier. Also see professor include not only formal classroom Tax on compensation and dividends ... $2,956 Revenue Procedure 2020-20, available at work involving regularly scheduled lectures, IRS.gov/irb/2020-20_IRB#REV- demonstrations, or other student-participation His tax liability, therefore, is limited to PROC-2020-20; FAQs for Individuals Claiming activities, but also the less formal method of $2,956, the tax liability figured using the tax the Medical Condition Exception in 2020, avail- presenting ideas in seminars or other informal treaty rate on the dividends. able at IRS.gov/newsroom/FAQs-for- groups and in joint efforts in the laboratory. Individuals-Claiming-the-Medical-Condition- Exception-in-2020; and the instructions for If you entered the United States as a non- Some Typical Tax Forms 8843 and 8233. resident alien, but are now a resident alien, the treaty exemption may still apply. See Students, Treaty Benefits COVID-19 relief for certain nonresident Apprentices, Trainees, Teachers, Professors, alien individuals temporarily performing and Researchers Who Became Resident Ali- The following paragraphs briefly explain the ex- services or other activities in the United ens, later, under Resident Aliens. emptions that are available under tax treaties States. Due to COVID-19, you may be eligible for personal services income, remittances, to choose an uninterrupted period of up to 60 Employees of scholarships, fellowships, and capital gain in- calendar days, beginning on or after February come. The conditions for claiming the exemp- 1, 2020, and on or before April 1, 2020, during Foreign Governments tions vary under each tax treaty. For more infor- which your services or other activities conduc- mation about the conditions under a particular ted in the United States will not be taken into All treaties have provisions for the exemption of tax treaty, download the complete text of most account in determining whether you were en- income earned by certain employees of foreign U.S. tax treaties at IRS.gov/Businesses/ gaged in a trade or business in the United governments. However, a difference exists International-Businesses/United-States- States or have a permanent establishment un- among treaties as to who qualifies for this bene- Income-Tax-Treaties-A-to-Z. Technical explan- der an income tax treaty. For more information, fit. Under many treaties, aliens who are U.S. ations for many of those treaties are also availa- see Personal Services in chapter 4, earlier. Also residents do not qualify. Under most treaties, ble at that site. Also see Pub. 901. see FAQs for Nonresident Alien Individuals and aliens who are not nationals or subjects of the Foreign Businesses with Employees or Agents foreign country do not qualify. Employees of for- Tax treaty benefits also cover income such Impacted by COVID-19 Emergency Travel Dis- eign governments should read the pertinent as dividends, interest, rentals, royalties, pen- ruptions, available at IRS.gov/newsroom/FAQs- treaty carefully to determine whether they qual- sions, and annuities. These types of income for-Nonresident-Alien-Individuals-and-Foreign- ify for benefits. Chapter 10 of this publication may be exempt from U.S. tax or may be subject Businesses-with-Employees-or-Agents- also has information for employees of foreign to a reduced rate of tax. For more information, Impacted-by-COVID-19-Emergency-Travel- governments. see Pub. 901 or the applicable tax treaty. Disruptions. Students, Apprentices, Independent personal services. Some in- Personal Services come tax treaties contain an “independent per- and Trainees sonal services” article, which allows residents Under most income tax treaties, nonresident ali- of the treaty country to exempt income earned Under some income tax treaties, students, ap- ens from treaty countries and dual residents as an independent contractor or as a self-em- prentices, and trainees are exempt from tax on who tie break in favor of the treaty country (see ployed individual from U.S. tax if they are remittances received from abroad for study and chapter 1) who are temporarily present in the present in the United States for a period not ex- maintenance. Also, under some treaties, schol- United States to perform services may be eligi- ceeding a certain number of days and if they do arship and fellowship grants, and a limited ble to exempt some or all of their personal serv- not have a fixed base regularly available to amount of compensation received by students, ices income from U.S. tax if they meet the re- them in the United States. apprentices, and trainees, may be exempt from quirements of the applicable treaty article. tax. Note. Some treaties do not have an inde- If you entered the United States as a non- Income from employment. Most income tax pendent service article. Under these treaties, in- resident alien, but are now a resident alien, the treaties have an “income from employment” ar- come for independent personal services may treaty exemption may still apply. See Students, ticle, sometimes called the “dependent per- be covered by the business profits article. Un- Apprentices, Trainees, Teachers, Professors, sonal services” article, which allows residents der the business profits article, individuals can and Researchers Who Became Resident Ali- of the treaty country to exempt income earned generally exempt their business profits from ens, later, under Resident Aliens. as employees in the United States from U.S. tax U.S. tax unless they have a permanent estab- if they satisfy the following. lishment in the United States to which the busi- • They are present in the United States for a ness profits are attributable. For more informa- Capital Gains period not exceeding 183 days in a tion, including definitions of the terms "fixed 12-month period. base" and "permanent establishment," see Pub. Most treaties provide for the exemption of gains • The income is paid by a foreign employer. 901. from the sale or exchange of personal property. • The income is not borne by a U.S. perma- Generally, gains from the sale or exchange of nent establishment of the foreign em- Teachers, Professors, real property located in the United States are ployer. taxable. Some income tax treaties contain different re- and Researchers quirements, such as a different period of maxi- Resident Aliens mum presence. For more information, see Pub. Under many income tax treaties, nonresident 901. alien teachers or professors who temporarily visit the United States for the primary purpose Resident aliens may qualify for tax treaty bene- COVID-19 Medical Condition Travel Ex- of teaching at a university or other accredited fits in the situations discussed below. ception. If you claim the COVID-19 Medical educational institution are not subject to U.S. in- Condition Travel Exception, described earlier, come tax on compensation received for teach- General Rule for Resident Aliens your 60-day period subject to the exception, ing for the first 2 or 3 years after their arrival in starting on or after February 1, 2020, but no the United States. Many treaties also provide Resident aliens generally do not qualify for tax later than April 1, 2020, is not taken into an exemption for engaging in research. treaty benefits because most tax treaties

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contain a "saving clause" that preserves or Students, Apprentices, Trainees, because his stay in the United States exceeded "saves" the right of the United States to tax its Teachers, Professors, and 5 years. Even though Mr. Yu is now a resident citizens and residents as if the tax treaty had Researchers Who Became alien, the provisions of Article 20 still apply be- not come into effect. However, many tax trea- Resident Aliens cause of the exception to the saving clause in ties have exceptions to the saving clause, paragraph 2 of the Protocol to the U.S.–Peo- which may allow a resident alien to continue to Generally, you must be a nonresident alien stu- ple's Republic of China treaty dated April 30, claim treaty benefits. dent, apprentice, trainee, teacher, professor, or 1984. Mr. Yu should submit Form W-9 and the researcher in order to claim a tax treaty exemp- required statement to the payer. Some exceptions to the saving clause apply tion for remittances from abroad for study and to all resident aliens (for example, under the maintenance in the United States, for scholar- United States-People's Republic of China ship, fellowship, and research grants, and for Reporting Treaty treaty); others apply only to resident aliens who wages or other personal service compensation. are not lawful permanent residents of the United Once you become a resident alien, you can Benefits Claimed States (green card holders). generally no longer claim a tax treaty exemption for this income. If you claim treaty benefits that override or mod- ify any provision of the Internal Revenue Code, In most cases, you will also not need to re- and by claiming these benefits your tax is, or port the income on your Form 1040 or 1040-SR However, if you entered the United States as a nonresident alien, but you are now a resi- might be, reduced, you must attach a fully com- because the income will be exempt from U.S. pleted Form 8833 to your tax return. See Ex- tax under the treaty. However, if the income has dent alien for U.S. tax purposes, the treaty ex- emption will continue to apply if the tax treaty's ceptions below for the situations where you are been reported as taxable income on a Form not required to file Form 8833. W-2, Form 1042-S, Form 1099, or other infor- saving clause (explained earlier) provides an exception for it and you otherwise meet the re- mation return, you should report it on the appro- Form 8833 filing requirement. You must file quirements for the treaty exemption (including priate line of Form 1040 or 1040-SR (for exam- a U.S. tax return and Form 8833 if you claim the any time limit for claiming treaty exemptions, ple, line 1 in the case of wages or salaries). following treaty benefits. explained below). This is true even if you are a Enter the amount for which treaty benefits are You claim a reduction or modification in the nonresident alien electing to file a joint return, • claimed in parentheses on line 8, Schedule 1 taxation of gain or loss from the disposition as explained in chapter 1. (Form 1040). Next to the amount, write “Exempt of a U.S. real property interest based on a income,” the name of the treaty country, and the treaty. treaty article that provides the exemption. Com- If you qualify under an exception to the trea- • You claim a credit for a specific foreign tax bine this amount with the amounts reported on ty's saving clause, you can avoid income tax for which foreign tax credit would not be al- lines 1 through 7 of Schedule 1 (Form 1040), withholding by giving the payer a Form W-9 with lowed by the Internal Revenue Code. Part I, and report the total on line 9. Enter this the statement required by the Form W-9 instruc- • You receive payments or income items to- amount on line 8 of Form 1040 or 1040-SR. tions. taling more than $100,000 and you deter- mine your country of residence under a Also follow the above procedure for income Time limit for claiming treaty exemptions. treaty and not under the rules for residency that is subject to a reduced rate of tax, instead Many treaties limit the number of years you can discussed in chapter 1. of an exemption, under the treaty. Attach a claim a treaty exemption. For students, appren- These are the more common situations for statement to Form 1040 or 1040-SR showing a tices, and trainees, the limit is usually 4–5 which Form 8833 is required. For additional computation of the tax at the reduced rate, the years; for teachers, professors, and research- provisions, see the Form 8833 instructions. name of the treaty country, and the treaty article ers, the limit is usually 2–3 years. Once you that provides for the reduced tax rate. Enter this reach this limit, you can no longer claim the Exceptions. You do not have to file Form 8833 tax on Form 1040 or 1040-SR, line 16. Write treaty exemption. See the treaty or Pub. 901 for for any of the following situations. "Tax from attached statement" on the dotted the time limits that apply. line next to line 16. 1. You claim a reduced rate of withholding How to report income on your tax return. In tax under a treaty on interest, dividends, Example. Jacques Dubois, who is a resi- most cases, you will not need to report the in- rent, royalties, or other fixed or determina- dent of the United States under Article 4 of the come on your Form 1040 or 1040-SR because ble annual or periodic income ordinarily United States-France income tax treaty, re- the income will be exempt from U.S. tax under subject to the 30% rate. ceives French social security benefits. Under the treaty. However, if the income has been re- 2. You claim that a treaty reduces or modifies Article 18(1) of the treaty, French social security ported as taxable income on a Form W-2, Form the taxation of income from dependent benefits are not taxable by the United States. 1042-S, Form 1099, or other information return, personal services, pensions, annuities, so- Benefits conferred by Article 18(1) are excepted you should report it on the appropriate line of cial security and other public pensions, or from the saving clause under Article 29(3) of the Form 1040 or 1040-SR (for example, line 1 in income of artists, athletes, students, train- treaty. Mr. Dubois is not required to file a Form the case of wages, salaries, scholarships, or ees, or teachers. This includes taxable 8833 for his French social security benefits or fellowships). Enter the amount for which treaty scholarship and fellowship grants. report the benefits on Form 1040 or 1040-SR. benefits are claimed in parentheses on line 8 of Schedule 1 (Form 1040). Next to the amount, 3. You claim a reduction or modification of write “Exempt income,” the name of the treaty taxation of income under an International Special Rule for Canadian and country, and the treaty article that provides the German Social Security Benefits Social Security Agreement or a Diplomatic exemption. Combine this amount with the or Consular Agreement. amounts reported on lines 1 through 7 of Under income tax treaties with Canada and Schedule 1 (Form 1040), Part I, and report the 4. You are a partner in a partnership or a Germany, if a U.S. resident receives social se- total on line 9. Enter this amount on line 8 of beneficiary of an estate or trust and the curity benefits from Canada or Germany, those Form 1040 or 1040-SR. partnership, estate, or trust reports the re- benefits are treated for U.S. income tax purpo- quired information on its return. ses as if they were received under the social Example. Mr. Yu, a citizen of the People's 5. The payments or items of income that are security legislation of the United States. If you Republic of China, entered the United States as receive social security benefits from Canada or otherwise required to be disclosed total no a nonresident alien student on January 1, 2016. more than $10,000. Germany, include them on line 1 of your Social He remained a nonresident alien through 2020 Security Benefits Worksheet in the Instructions and was able to exclude his scholarship from 6. You are claiming treaty benefits for for Forms 1040 and 1040-SR, for purposes of U.S. tax in those years under Article 20 of the amounts that are: determining the taxable amount to be reported U.S.–People's Republic of China income tax a. Reported to you on Form 1042-S, and on Form 1040 or 1040-SR, line 6b. You are not treaty. On January 1, 2021, he became a resi- required to file a Form 8833 for those benefits. dent alien under the substantial presence test b. Received by you:

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i. As a related party from a report- 2. The applicable article in a bilateral tax The exemption under U.S. tax law ap- ing corporation within the mean- treaty, if one exists, between the United ! plies only to current foreign govern- ing of Internal Revenue Code States and the foreign country; or CAUTION ment employees and not to former em- section 6038A (relating to infor- ployees. Pensions received by former 3. The requirements for obtaining an exemp- mation returns on Form 5472 filed employees of foreign governments living in the tion from U.S. income tax for foreign gov- by U.S. corporations that are 25% United States do not qualify for the exemption ernment wages provided under U.S. tax owned by a foreign person), or discussed here. law. ii. As a beneficial owner that is a di- This exemption does not apply to inde- rect account holder of a U.S. fi- Employees of international organizations pendent contractors. Common law nancial institution or qualified in- may be able to exempt their wages under a pro- rules apply to determine whether you termediary, or a direct partner, vision, if one exists, in the international agree- are an employee or an independent contractor. beneficiary, or owner of a with- ment creating the international organization, or See Pub. 1779, Independent Contractor or Em- holding foreign partnership or by satisfying the requirements for obtaining an ployee, and Pub. 15-A, Employer’s Supplemen- trust, from that U.S. financial insti- exemption for such wages under U.S. tax law. tal Tax Guide. tution, qualified intermediary, or An “international organization” is an organi- zation designated by the President of the Uni- withholding foreign partnership or Your wages are not eligible for exemp- trust. ted States through Executive Order to qualify for the privileges, exemptions, and immunities tion under U.S. tax law if you are em- The exception described in (6) provided in the International Organizations Im- ployed by a “controlled commercial en- above does not apply to any amounts munities Act. tity” or your services are primarily in connection for which a treaty-based return disclo- The exemption discussed in this chapter ap- with a commercial activity of the foreign govern- sure is specifically required by the plies only to pay received for official services ment (within or outside the United States). A Form 8833 instructions. performed for a foreign government or interna- controlled commercial entity is an entity that is tional organization. Other U.S. source income 50% (0.50) or more owned by a foreign govern- Penalty for failure to provide required infor- received by persons who qualify for this exemp- ment that is engaged in commercial activity mation on Form 8833. If you are required to tion may be fully taxable or given favorable within or outside the United States. report the treaty benefits but do not, you may be treatment under an applicable tax treaty provi- subject to a penalty of $1,000 for each failure. sion. The proper treatment of this kind of in- Requirements. If you are not a U.S. citizen (or come (interest, dividends, etc.) is discussed if you are a U.S. citizen but also a citizen of the Additional information. For additional infor- earlier in this publication. Republic of the Philippines) and you work for a mation, see section 301.6114-1(c) of the In- foreign government in the United States, your come Tax Regulations. foreign government wages are exempt from Employees of Foreign U.S. income tax if: Governments 1. You perform services of a similar charac- ter to those performed by U.S. govern- Exemption under Vienna Conventions or a ment employees in foreign countries, and bilateral consular convention. You should 2. The country of your foreign government 10. first look at the tax exemption provisions under employer grants an equivalent tax exemp- the Vienna Conventions or a bilateral consular tion to U.S. government employees per- convention, if one exists, to see if your wages forming similar services in its country. qualify for exemption from U.S. income tax un- Employees der those provisions. Generally, you are not en- However, see Aliens who keep immigrant (law- titled to the income tax exemption available un- ful permanent resident) status, later, for a spe- der either of the Vienna Conventions or a cial rule that may affect your qualifying for this of Foreign bilateral consular convention if you are a U.S. exemption. citizen or resident alien. For further information To claim the tax exemption, you must be Governments regarding the Vienna Conventions and bilateral able to demonstrate that you satisfy both U.S. consular conventions, email the Department of tax law requirements. State Office of Foreign Missions at and [email protected]. Certification. A Department of State certifica- tion, if one has been issued, is the simplest Exemption under tax treaty. If you do not method to establish that you meet the similar International qualify for the tax exemption provided under the services and equivalent tax exemption require- Vienna Conventions or a bilateral consular con- ments but is not required to qualify for the U.S. Organizations vention but are from a country that has a tax tax law exemption. For information about treaty with the United States, you should look at whether a certification has been issued and the tax treaty to see if there is a provision that whether such certification is currently valid and exempts your wages from U.S. income tax. If applicable to you, email the Department of Introduction you are a U.S. citizen or resident alien working State Office of Foreign Missions at in the United States for a foreign government, [email protected]. Employees of foreign governments (including your wages are usually not exempt. For more Where no valid certification exists, you must foreign political subdivisions) may be able to ex- information, see Wages and Pensions Paid by a establish with other written evidence that you empt their foreign government wages from U.S. Foreign Government in Pub. 901. perform services of a similar character to those income tax if they satisfy the requirements of performed by U.S. Government employees in any one of the following. Exemption under U.S. tax law. Employees foreign countries and that the country of your 1. The applicable article in the multilateral of foreign governments who do not qualify un- foreign government employer grants an equiva- Vienna Convention on Diplomatic Rela- der the tax exemption provisions of either of the lent exemption to U.S. Government employees tions, the multilateral Vienna Convention Vienna Conventions, a bilateral consular con- performing similar services in its country. on Consular Relations, or a bilateral con- vention, or a tax treaty may be able to exempt sular convention, if one exists, between their foreign government wages from U.S. in- the United States and the foreign country; come tax if they satisfy the following require- ments for obtaining an exemption for such wa- ges under U.S. tax law.

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the provisions of U.S. tax law. You do not lose Useful Items the tax exemption if you file the waiver and You may want to see: Employees of meet either of the following conditions. International • You work for a foreign government and are Form (and Instructions) exempt from U.S. tax under an income tax Organizations treaty, consular convention, Vienna Con- 1040-C 1040-C U.S. Departing Alien Income Tax ventions, or any other international agree- Return ment between the United States and your Exemption under international organization 2063 2063 U.S. Departing Alien Income Tax agreement. Many agreements that establish foreign government employer. Statement international organizations contain a provision • You work for an international organization that may exempt your wages from U.S. income and the international organization agree- See chapter 12 for information about getting tax. If you are employed by an international or- ment creating the international organiza- these forms. ganization in the United States, first look to see tion provides that alien employees are ex- if the international agreement establishing the empt from U.S. income tax. Two international organization you work for has such international organizations that have such Aliens Not Required a provision and whether you qualify under it. a provision are the International Monetary Generally, these provisions will not exempt wa- Fund (IMF) and the International Bank for To Obtain Sailing ges of U.S. citizen and resident alien employ- Reconstruction and Development (World or Departure Permits ees. Bank). If you are included in one of the following cate- Exemption under U.S. tax law. If the interna- gories, you do not have to get a sailing or de- tional agreement creating the international or- parture permit before leaving the United States. ganization you work for does not contain a tax exemption provision and you are not a U.S. citi- If you are in one of these categories and do zen (or if you are a U.S. citizen but also a citizen not have to get a sailing or departure permit, of the Republic of the Philippines), you may be 11. you must be able to support your claim for ex- able to exempt your wages under U.S. law. emption with proper identification or give the However, see Aliens who keep immigrant (law- authority for the exemption. ful permanent resident) status, later, for a spe- cial rule that may affect your qualifying for this Departing Aliens Category 1. Representatives of foreign gov- exemption. ernments with diplomatic passports, whether accredited to the United States or other coun- The exemption under U.S. tax law ap- and the Sailing tries, members of their households, and serv- plies only to current international or- ! ants accompanying them. Servants who are CAUTION ganization employees and not to for- leaving, but not with a person with a diplomatic mer employees. Pensions received by former or Departure passport, must get a sailing or departure permit. employees of international organizations living However, they can get a sailing or departure in the United States do not qualify for the ex- Permit permit on Form 2063 without examination of emption discussed here. their income tax liability by presenting a letter from the chief of their diplomatic mission certify- This exemption does not apply to inde- ing that: pendent contractors. Common law Introduction Their name appears on the “White List” (a rules apply to determine whether you • list of employees of diplomatic missions); are an employee or an independent contractor. Before leaving the United States, all aliens (ex- and See Pub. 1779 and Pub. 15-A. cept those listed under Aliens Not Required To Obtain Sailing or Departure Permits) must ob- • They do not owe to the United States any To claim the exemption, you must be able to tain a certificate of compliance. This document, income tax, and will not owe any tax up to demonstrate that you meet the requirements of also popularly known as the “sailing permit” or and including the intended date of depar- either the international organization agreement “departure permit,” is part of the income tax ture. provision or U.S. tax law. You should know the form you must file before leaving. You will re- The statement must be presented to an IRS article number of the international organization ceive a sailing or departure permit after filing a office. agreement tax exemption provision, if one ex- Form 1040-C or Form 2063. These forms are ists, and the number of the Executive Order discussed in this chapter. Category 2. Employees of international organ- designating the organization as an international To find out if you need a sailing or departure izations and foreign governments (other than organization. permit, first read Aliens Not Required To Obtain diplomatic representatives exempt under cate- Sailing or Departure Permits. If you do not fall gory 1) and members of their households: Aliens who keep immigrant (lawful perma- into one of the categories in that discussion, • Whose compensation for official services nent resident) status. If you sign the waiver you must obtain a sailing or departure permit. is exempt under U.S. tax law (described in provided by section 247(b) of the Immigration Read Aliens Required To Obtain Sailing or De- chapter 10), and and Nationality Act (USCIS Form I-508) to keep parture Permits. • Who receive no other income from U.S. your lawful permanent resident status (green sources. card), you no longer qualify for the tax exemp- Topics tion under U.S. tax law from the date of filing the If you are an alien in category (1) or (2) This chapter discusses: waiver. above who filed the waiver under sec- tion 247(b) of the Immigration and Na- If you are an employee of a foreign • Who needs a sailing permit, tionality Act, you must get a sailing or departure government or international organiza- • How to get a sailing permit, and permit. This is true even if your income is ex- tion who holds a green card, to claim • Forms you file to get a sailing permit. empt from U.S. tax because of an income tax the exemption under U.S. tax law you must also treaty, consular agreement, or international be able to demonstrate with written evidence agreement. from USCIS that you have not signed and filed USCIS Form I-508. Category 3. Alien students, industrial train- ees, and exchange visitors, including their Note. The filing of Form I-508 has no effect spouses and children, who enter on an “F-1,” on a tax exemption that is not dependent upon “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only

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and who receive no income from U.S. sources Category 6. Alien residents of Canada or 2. Copies of your U.S. income tax returns while in the United States under those visas Mexico who frequently commute between that filed for the past 2 years. If you were in the other than: country and the United States for employment, United States for less than 2 years, bring • Allowances to cover expenses incident to and whose wages are subject to the withholding the income tax returns you filed for that pe- study or training in the United States, such of U.S. tax. riod. as expenses for travel, maintenance, and 3. Receipts for income taxes paid on these tuition; returns. • The value of any services or food and Aliens Required To lodging connected with this study or train- 4. Receipts, bank records, canceled checks, ing; Obtain Sailing or and other documents that prove your de- • Income from employment authorized by ductions, business expenses, and de- the U.S. Citizenship and Immigration Serv- Departure Permits pendents claimed on your returns. ices (USCIS); or 5. A statement from each employer showing • Interest income on deposits that is not ef- If you do not fall into one of the categories listed wages paid and tax withheld from January fectively connected with a U.S. trade or earlier under Aliens Not Required To Obtain 1 of the current year to the date of depar- business. (See Interest Income in chap- Sailing or Departure Permits, you must obtain a ture if you were an employee. If you were ter 3.) sailing or departure permit. To obtain a permit, file Form 1040-C or Form 2063 (whichever ap- self-employed, you must bring a statement of income and expenses up to the date Category 4. Alien students, including their plies) with your local IRS office before you leave you plan to leave. spouses and children, who enter on an “M-1” or the United States. See Forms To File, later. You “M-2” visa only and who receive no income must also pay all the tax shown as due on Form 6. Proof of estimated tax payments for the from U.S. sources while in the United States un- 1040-C and any taxes due for past years. See past year and this year. der those visas, other than: Paying Taxes and Obtaining Refunds, later. • Income from employment authorized by 7. Documents showing any gain or loss from the U.S. Citizenship and Immigration Serv- the sale of personal property and/or real Getting a Sailing property, including capital assets and mer- ices (USCIS), or or Departure Permit • Interest income on deposits that is not ef- chandise. fectively connected with a U.S. trade or The following discussion covers how to get your 8. Documents relating to scholarship or fel- business. (See Interest Income in chap- sailing permit. lowship grants, including: ter 3.) a. Verification of the grantor, source, and Category 5. Certain other aliens temporarily When and Where To Get a Sailing purpose of the grant. in the United States who have received no taxa- or Departure Permit b. Copies of the application for, and ap- ble income during the tax year up to and includ- proval of, the grant. ing the date of departure or during the preced- To get a certificate of compliance, you must go ing tax year. If the IRS has reason to believe to an IRS office at least 2 weeks before you c. A statement of the amount paid, and that an alien has received income subject to tax leave the United States and file either Form your duties and obligations under the and that the collection of income tax is jeopar- 2063 or Form 1040-C and any other required grant. dized by departure, it may then require the alien tax returns that have not been filed. The certifi- d. A list of any previous grants. to obtain a sailing or departure permit. Aliens in cate may not be issued more than 30 days be- this category are: fore you leave. If both you and your spouse are 9. Documents indicating you qualify for any aliens and both of you are leaving the United special tax treaty benefits claimed. 1. Alien military trainees who enter the Uni- States, both of you must go to the IRS office. ted States for training under the sponsor- 10. Document verifying your date of departure ship of the Department of Defense and from the United States, such as an airline To find an IRS office, go to IRS.gov/Help/ ticket. who leave the United States on official Contact-Your-Local-IRS-Office, click on the military travel orders; Taxpayer Assistance Center Office Locator, 11. Document verifying your U.S. taxpayer 2. Alien visitors for business on a “B-1” visa, and find “Services Provided” at the nearest Tax- identification number, such as a social se- or on both a “B-1” visa and a “B-2” visa, payer Assistance Center (TAC) to see if the curity card or an IRS-issued Notice CP who do not remain in the United States or Alien Clearance (Sailing Permits) service is 565 showing your individual taxpayer a U.S. possession for more than 90 days available at that office. Please note that all identification number (ITIN). during the tax year; TACs operate by appointment. Services are limited and not all services are available at ev- Note. If you are married and reside in a 3. Alien visitors for pleasure on a “B-2” visa; ery TAC office. community property state, also bring the above-listed documents for your spouse. This 4. Aliens in transit through the United States Call 844-545-5640 to schedule an ap- or any of its possessions on a “C-1” visa, applies whether or not your spouse requires a ! pointment. Remember that you must permit. or under a contract, such as a bond agree- CAUTION visit an IRS office at least 2 weeks (but ment, between a transportation line and no more than 30 days) before you leave the the Attorney General; and United States, so make sure you call for an ap- Forms To File 5. Aliens who enter the United States on a pointment well before those time frames. If you must get a sailing or departure permit, border-crossing identification card or for Please be prepared to furnish your anticipated you must file Form 2063 or Form 1040-C. Em- whom passports, visas, and border-cross- date of departure and bring all necessary docu- ployees in the IRS office can assist in filing ing identification cards are not required, if mentation with you. these forms. Both forms have a “certificate of they are: compliance” section. When the certificate of a. Visitors for pleasure, Documents To Submit compliance is signed by an agent of the Field Assistance Area Director, it certifies that your b. Visitors for business who do not re- Getting your sailing or departure permit will go U.S. tax obligations have been satisfied accord- main in the United States or a U.S. faster if you bring to the IRS office documents ing to available information. Your Form 1040-C possession for more than 90 days and papers related to your income and your copy of the signed certificate, or the one de- during the tax year, or stay in the United States. Bring the following re- tached from Form 2063, is your sailing or de- c. In transit through the United States or cords with you if they apply. parture permit. any of its possessions. 1. Your passport and alien registration card or visa.

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Form 2063 departure if the payment of income tax appears to be in jeopardy. This is a short form that asks for certain infor- mation but does not include a tax computation. Joint return on Form 1040-C. Departing 12. The following departing aliens can get their sail- husbands and wives who are nonresident ali- ing or departure permits by filing Form 2063. ens cannot file joint returns. However, if both • Aliens, whether resident or nonresident, spouses are resident aliens, they can file a joint who have had no taxable income for the return on Form 1040-C if: How To Get Tax tax year up to and including the date of de- • Both spouses can reasonably be expected parture and for the preceding year, if the to qualify to file a joint return at the normal Help period for filing the income tax return for close of their tax year, and that year has not expired. • The tax years of the spouses end at the Assistance for overseas taxpayers is available • Resident aliens who have received taxable same time. in the U.S and certain foreign locations. income during the tax year or preceding year and whose departure will not hinder Paying Taxes and the collection of any tax. However, if the IRS has information indicating that the ali- Obtaining Refunds Taxpayer Assistance ens are leaving to avoid paying their in- Inside the United States come tax, they must file a Form 1040-C. You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a If you have questions about a tax issue, need Aliens in either of these categories who bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collec- help preparing your tax return, or want to down- have not filed an income tax return or paid in- load free publications, forms, or instructions, go come tax for any tax year must file the return tion of income tax. You must also pay any taxes due for past years. If the tax computation on to IRS.gov and find resources that can help you and pay the income tax before they can be is- right away. sued a sailing or departure permit on Form Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. 2063. Preparing and filing your tax return. After However, the IRS cannot provide a refund at receiving all your wage and earnings state- the time of departure. If you are due a refund, The sailing or departure permit detached ments (Form W-2, W-2G, 1099-R, 1099-MISC, you must file either Form 1040-NR at the end of from Form 2063 can be used for all departures 1099-NEC, etc.); unemployment compensation the tax year. during the current year. However, the IRS may statements (by mail or in a digital format) or cancel the sailing or departure permit for any other government payment statements (Form later departure if it believes the collection of in- Bond To Ensure Payment 1099-G); and interest, dividend, and retirement come tax is jeopardized by that later departure. statements from banks and investment firms Usually, you must pay the tax shown as due on (Forms 1099), you have several options to Form 1040-C Form 1040-C when you file it. However, if you choose from to prepare and file your tax return. pay all taxes due that you owe for prior years, You can prepare the tax return yourself, see if If you must get a sailing or departure permit and you can furnish a bond guaranteeing payment you qualify for free tax preparation, or hire a tax you do not qualify to file Form 2063, you must instead of paying the income taxes shown as professional to prepare your return. file Form 1040-C. due on the Form 1040-C or the tax return for the preceding year if the period for filing that return Free options for tax preparation. Go to Ordinarily, all income received, or reasona- has not expired. IRS.gov to see your options for preparing and bly expected to be received, during the tax year filing your return online or in your local commun- The bond must equal the tax due plus inter- ity, if you qualify, which include the following. up to and including the date of departure must est to the date of payment as figured by the • Free File. This program lets you prepare be reported on Form 1040-C, and the tax on it IRS. Information about the form of bond and se- and file your federal individual income tax must be paid. When you pay any tax shown as curity on it can be obtained from your IRS office. due on the Form 1040-C, and you file all returns return for free using brand-name tax-prep- and pay all tax due for previous years, you will aration-and-filing software or Free File filla- receive a sailing or departure permit. However, Filing Annual U.S. ble forms. However, state tax preparation the IRS may permit you to furnish a bond guar- Income Tax Returns may not be available through Free File. Go anteeing payment instead of paying the taxes to IRS.gov/FreeFile to see if you qualify for for certain years. See Bond To Ensure Pay- Form 1040-C is not an annual U.S. income tax free online federal tax preparation, e-filing, ment, discussed later. The sailing or departure return. If an income tax return is required by and direct deposit or payment options. permit issued under the conditions in this para- law, that return must be filed even though a • VITA. The Volunteer Income Tax Assis- graph is only for the specific departure for which Form 1040-C has already been filed. Chapter 5 tance (VITA) program offers free tax help it is issued. and chapter 7 discuss filing an annual U.S. in- to people with low-to-moderate incomes, come tax return. The tax paid with Form 1040-C persons with disabilities, and limited-Eng- Returning to the United States. If you fur- should be taken as a credit against the tax liabil- lish-speaking taxpayers who need help nish the IRS with information showing, to the ity for the entire tax year on your annual U.S. in- preparing their own tax returns. Go to satisfaction of the IRS, that you intend to return come tax return. IRS.gov/VITA, download the free IRS2Go to the United States and that your departure app, or call 800-906-9887 for information does not jeopardize the collection of income on free tax return preparation. tax, you can get a sailing or departure permit by • TCE. The Tax Counseling for the Elderly filing Form 1040-C without having to pay the tax (TCE) program offers free tax help for all shown on it. You must, however, file all income taxpayers, particularly those who are 60 tax returns that have not yet been filed as re- years of age and older. TCE volunteers quired, and pay all income tax that is due on specialize in answering questions about these returns. pensions and retirement-related issues Your Form 1040-C must include all income unique to seniors. Go to IRS.gov/TCE, received, and reasonably expected to be re- download the free IRS2Go app, or call ceived, during the entire year of departure. The 888-227-7669 for information on free tax sailing or departure permit issued with this Form return preparation. 1040-C can be used for all departures during the current year. However, the IRS may cancel the sailing or departure permit for any later

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• MilTax. Members of the U.S. Armed pare your tax return, choose that preparer may need. You can also download and view Forces and qualified veterans may use Mil- wisely. A paid tax preparer is: popular tax publications and instructions (in- Tax, a free tax service offered by the De- • Primarily responsible for the overall sub- cluding the Instructions for Forms 1040 and partment of Defense through Military One- stantive accuracy of your return, 1040-SR) on mobile devices as an eBook at Source. • Required to sign the return, and IRS.gov/eBooks. Or you can go to IRS.gov/ Also, the IRS offers Free Fillable • Required to include their preparer tax iden- OrderForms to place an order. Forms, which can be completed online and tification number (PTIN). then filed electronically regardless of in- Access your online account (individual tax- come. Although the tax preparer always signs the payers only). Go to IRS.gov/Account to se- return, you're ultimately responsible for provid- curely access information about your federal tax Using online tools to help prepare your re- ing all the information required for the preparer account. turn. Go to IRS.gov/Tools for the following. to accurately prepare your return. Anyone paid • View the amount you owe, pay online, or • The Earned Income Tax Credit Assistant to prepare tax returns for others should have a set up an online payment agreement. (IRS.gov/EITCAssistant) determines if thorough understanding of tax matters. For • Access your tax records online. you’re eligible for the earned income credit more information on how to choose a tax pre- • Review your payment history. (EIC). parer, go to Tips for Choosing a Tax Preparer • Go to IRS.gov/SecureAccess to review the • The Online EIN Application (IRS.gov/EIN) on IRS.gov. required identity authentication process. helps you get an employer identification number (EIN). Coronavirus. Go to IRS.gov/Coronavirus for Using direct deposit. The fastest way to re- • The Tax Withholding Estimator (IRS.gov/ links to information on the impact of the corona- ceive a tax refund is to file electronically and W4app) makes it easier for everyone to virus, as well as tax relief available for individu- choose direct deposit, which securely and elec- pay the correct amount of tax during the als and families, small and large businesses, tronically transfers your refund directly into your year. The tool is a convenient, online way and tax-exempt organizations. financial account. Direct deposit also avoids the to check and tailor your withholding. It’s possibility that your check could be lost, stolen, more user-friendly for taxpayers, including Tax reform. Tax reform legislation affects indi- or returned undeliverable to the IRS. Eight in 10 retirees and self-employed individuals. The viduals, businesses, and tax-exempt and gov- taxpayers use direct deposit to receive their re- features include the following. ernment entities. Go to IRS.gov/TaxReform for funds. The IRS issues more than 90% of re- – Easy to understand language. information and updates on how this legislation funds in less than 21 days. – The ability to switch between screens, affects your taxes. correct previous entries, and skip Getting a transcript of your return. The screens that don’t apply. Employers can register to use Business quickest way to get a copy of your tax transcript – Tips and links to help you determine if Services Online. The Social Security Adminis- is to go to IRS.gov/Transcripts. Click on either you qualify for tax credits and deduc- tration (SSA) offers online service at SSA.gov/ “Get Transcript Online” or “Get Transcript by tions. employer for fast, free, and secure online W-2 Mail” to order a free copy of your transcript. If – A progress tracker. filing options to CPAs, accountants, enrolled you prefer, you can order your transcript by call- – A self-employment tax feature. agents, and individuals who process Form W-2, ing 800-908-9946. – Automatic calculation of taxable social Wage and Tax Statement, and Form W-2c, security benefits. Corrected Wage and Tax Statement. Reporting and resolving your tax-related identity theft issues. • The First Time Homebuyer Credit Account IRS social media. Go to IRS.gov/SocialMedia • Tax-related identity theft happens when Look-up (IRS.gov/HomeBuyer) tool pro- to see the various social media tools the IRS someone steals your personal information vides information on your repayments and uses to share the latest information on tax to commit tax fraud. Your taxes can be af- account balance. changes, scam alerts, initiatives, products, and fected if your SSN is used to file a fraudu- • The Sales Tax Deduction Calculator services. At the IRS, privacy and security are lent return or to claim a refund or credit. (IRS.gov/SalesTax) figures the amount you paramount. We use these tools to share public can claim if you itemize deductions on information with you. Don’t post your SSN or • The IRS doesn’t initiate contact with tax- Schedule A (Form 1040). other confidential information on social media payers by email, text messages, telephone sites. Always protect your identity when using calls, or social media channels to request Getting answers to your tax ques- personal or financial information. This in- tions. On IRS.gov, you can get any social networking site. The following IRS YouTube channels pro- cludes requests for personal identification up-to-date information on current numbers (PINs), passwords, or similar in- events and changes in tax law. vide short, informative videos on various tax-re- lated topics in English, Spanish, and ASL. formation for credit cards, banks, or other • IRS.gov/Help: A variety of tools to help you • Youtube.com/irsvideos. financial accounts. get answers to some of the most common • Youtube.com/irsvideosmultilingua. • Go to IRS.gov/IdentityTheft, the IRS Iden- tity Theft Central webpage, for information tax questions. • Youtube.com/irsvideosASL. • IRS.gov/ITA: The Interactive Tax Assistant, on identity theft and data security protec- a tool that will ask you questions on a num- Watching IRS videos. The IRS Video portal tion for taxpayers, tax professionals, and ber of tax law topics and provide answers. (IRSVideos.gov) contains video and audio pre- businesses. If your SSN has been lost or • IRS.gov/Forms: Find forms, instructions, sentations for individuals, small businesses, stolen or you suspect you’re a victim of and publications. You will find details on and tax professionals. tax-related identity theft, you can learn 2020 tax changes and hundreds of interac- what steps you should take. tive links to help you find answers to your Online tax information in other languages. • Get an Identity Protection PIN (IP PIN). IP questions. You can find information on IRS.gov/ PINs are six-digit numbers assigned to eli- • You may also be able to access tax law in- MyLanguage if English isn’t your native lan- gible taxpayers to help prevent the misuse formation in your electronic filing software. guage. of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it Free interpreter service. Multilingual assis- prevents someone else from filing a tax re- Need someone to prepare your tax return? tance, provided by the IRS, is available at Tax- turn with your SSN. To learn more, go to There are various types of tax return preparers, payer Assistance Centers (TACs) and other IRS.gov/IPPIN. including tax preparers, enrolled agents, certi- IRS offices. Over-the-phone interpreter service fied public accountants (CPAs), attorneys, and is accessible in more than 350 languages. Checking on the status of your refund. many others who don’t have professional cre- • Go to IRS.gov/Refunds. dentials. If you choose to have someone pre- Getting tax forms and publications. Go to • The IRS can’t issue refunds before IRS.gov/Forms to view, download, or print all of mid-February 2021 for returns that claimed the forms, instructions, and publications you the EIC or the additional child tax credit

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(ACTC). This applies to the entire refund, filed your amended return for it to show up in TAS for Tax Professionals not just the portion associated with these our system, and processing it can take up to 16 credits. weeks. TAS can provide a variety of information for tax • Download the official IRS2Go app to your professionals, including tax law updates and mobile device to check your refund status. Understanding an IRS notice or letter guidance, TAS programs, and ways to let TAS • Call the automated refund hotline at you’ve received. Go to IRS.gov/Notices to know about systemic problems you’ve seen in 800-829-1954. find additional information about responding to your practice. an IRS notice or letter. Making a tax payment. The IRS uses the lat- est encryption technology to ensure your elec- Contacting your local IRS office. Keep in Low Income Taxpayer tronic payments are safe and secure. You can mind, many questions can be answered on Clinics (LITCs) make electronic payments online, by phone, IRS.gov without visiting an IRS Taxpayer Assis- and from a mobile device using the IRS2Go tance Center (TAC). Go to IRS.gov/LetUsHelp LITCs are independent from the IRS. LITCs app. Paying electronically is quick, easy, and for the topics people ask about most. If you still represent individuals whose income is below a faster than mailing in a check or money order. need help, IRS TACs provide tax help when a certain level and need to resolve tax problems Go to IRS.gov/Payments for information on how tax issue can’t be handled online or by phone. with the IRS, such as audits, appeals, and tax to make a payment using any of the following All TACs now provide service by appointment, collection disputes. In addition, clinics can pro- options. so you’ll know in advance that you can get the vide information about taxpayer rights and re- • IRS Direct Pay: Pay your individual tax bill service you need without long wait times. Be- sponsibilities in different languages for individu- or estimated tax payment directly from fore you visit, go to IRS.gov/TACLocator to find als who speak English as a second language. your checking or savings account at no the nearest TAC and to check hours, available Services are offered for free or a small fee for cost to you. services, and appointment options. Or, on the eligible taxpayers. To find a clinic near you, visit • Debit or Credit Card: Choose an approved IRS2Go app, under the Stay Connected tab, www.TaxpayerAdvocate.IRS.gov/about-us/ payment processor to pay online, by choose the Contact Us option and click on “Lo- Low-Income-Taxpayer-Clinics-LITC/ or see IRS phone, or by mobile device. cal Offices.” Pub. 4134, Low Income Taxpayer Clinic List. • Electronic Funds Withdrawal: Offered only when filing your federal taxes using tax re- The Taxpayer Advocate turn preparation software or through a tax Taxpayer Assistance professional. Service (TAS) Is Here To • Electronic Federal Tax Payment System: Help You Outside the United Best option for businesses. Enrollment is What Is TAS? States required. • Check or Money Order: Mail your payment TAS is an independent organization within the If you are outside the United States, to the address listed on the notice or in- IRS that helps taxpayers and protects taxpayer you can call 267-941-1000 (Eng- structions. rights. Their job is to ensure that every taxpayer lish-speaking only). This number is not • Cash: You may be able to pay your taxes is treated fairly and that you know and under- toll free. with cash at a participating retail store. stand your rights under the Taxpayer Bill of If you wish to write instead of calling, • Same-Day Wire: You may be able to do Rights. same-day wire from your financial institu- please address your letter to: tion. Contact your financial institution for availability, cost, and cut-off times. What Can TAS Do For You? Internal Revenue Service What if I can’t pay now? Go to IRS.gov/ TAS can help you resolve problems that you International Accounts Payments for more information about your op- can’t resolve with the IRS. And their service is Philadelphia, PA 19255-0725 tions. free. If you qualify for their assistance, you will U.S.A. • Apply for an online payment agreement be assigned to one advocate who will work with (IRS.gov/OPA) to meet your tax obligation you throughout the process and will do every- thing possible to resolve your issue. TAS can in monthly installments if you can’t pay Additional contacts for taxpayers who live out- help you if: your taxes in full today. Once you complete side the United States are available at • Your problem is causing financial difficulty the online process, you will receive imme- IRS.gov/uac/Contact-My-Local-Office- for you, your family, or your business; diate notification of whether your agree- Internationally. ment has been approved. • You face (or your business is facing) an immediate threat of adverse action; or • Use the Offer in Compromise Pre-Qualifier Taxpayer Advocate Service. If you live out- You’ve tried repeatedly to contact the IRS to see if you can settle your tax debt for • side the United States, you can call the Tax- but no one has responded, or the IRS less than the full amount you owe. For payer Advocate at (787) 522-8601 in English or hasn’t responded by the date promised. more information on the Offer in Compro- (787) 522-8600 in Spanish. You can contact the mise program, go to IRS.gov/OIC. Taxpayer Advocate at: How Can You Reach TAS? Filing an amended return. You can now file Internal Revenue Service Form 1040-X electronically with tax filing soft- TAS has offices in every state, the District of Taxpayer Advocate Service ware to amend 2019 Forms 1040 and 1040-SR. Columbia, and Puerto Rico. Your local advo- City View Plaza, 48 Carr 165, To do so, you must have e-filed your original cate’s number is in your local directory and at Guaynabo, P.R. 00968-8000 2019 return. Amended returns for all prior years TaxpayerAdvocate.IRS.gov/Contact-Us. You must be mailed. See Tips for taxpayers who can also call them at 877-777-4778. You can call the Taxpayer Advocate toll-free need to file an amended tax return and go to at 877-777-4778. For more information on the IRS.gov/Form1040X for information and up- How Else Does TAS Help Taxpayer Advocate Service and contacts if you dates. Taxpayers? are outside of the United States go to IRS.gov/ Advocate/Local-Taxpayer-Advocate/Contact- Checking the status of your amended re- TAS works to resolve large-scale problems that Your-Local-Taxpayer-Advocate. turn. Go to IRS.gov/WMAR to track the status affect many taxpayers. If you know of one of of Form 1040-X amended returns. Please note these broad issues, please report it to them at that it can take up to 3 weeks from the date you IRS.gov/SAMS.

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Frequently Asked Questions

This section answers tax-related I am a nonresident alien with no must apply for an individual tax- income tax liability for a dual-status questions commonly asked by ali- dependents. I am working tem- payer identification number (ITIN). tax year, see chapter 6. ens. porarily for a U.S. company. If you are a U.S. citizen or resi- What return do I file? I am a nonresident alien and in- dent and you choose to treat your What is the difference between a vested money in the U.S. stock nonresident spouse as a resident resident alien and a nonresident market through a U.S. brokerage You must file Form 1040-NR if you and file a joint tax return, your non- alien for tax purposes? company. Are the dividends and are engaged in a trade or business resident spouse needs an SSN or the capital gains taxable? If yes, in the United States, or have any an ITIN. Alien spouses who are how are they taxed? For tax purposes, an alien is an indi- other U.S. source income on which claimed as dependents are also re- vidual who is not a U.S. citizen. Ali- tax was not fully paid by the amount quired to furnish an SSN or ITIN. ens are classified as resident aliens withheld. The following rules apply if the divi- and nonresident aliens. Resident See Identification Number in dends and capital gains are not ef- aliens are taxed on their worldwide I came to the United States on chapter 5 for more information. fectively connected with a U.S. income, the same as U.S. citizens. June 30th of last year. I have an trade or business. Nonresident aliens are taxed only H-1B visa. What is my tax status, I am a nonresident alien. Can I • Capital gains are generally not on their U.S. source income and resident alien or nonresident ali- file a joint return with my taxable if you were in the Uni- certain foreign source income that is en? What tax return do I file? spouse? ted States for less than 183 effectively connected with a U.S. days during the year. See trade or business. You were a dual-status alien last Generally, you cannot file as mar- Sales or Exchanges of Capital year. As a general rule, because ried filing jointly if either spouse was Assets in chapter 4 for more in- What is the difference between you were in the United States for a nonresident alien at any time dur- formation and exceptions. the taxation of income that is ef- 183 days or more, you have met the ing the tax year. • Dividends are generally taxed fectively connected with a trade substantial presence test and you However, nonresident aliens at a 30% (or lower treaty) rate. or business in the United States are taxed as a resident. However, married to U.S. citizens or residents The brokerage company or and income that is not effectively for the part of the year that you were can choose to be treated as U.S. payer of the dividends should connected with a trade or busi- not present in the United States, you residents and file joint returns. For withhold this tax at source. If ness in the United States? are a nonresident. File Form 1040 more information on this choice, see tax is not withheld at the cor- or 1040-SR. Print “Dual-Status Re- Nonresident Spouse Treated as a rect rate, you must file Form The difference between these two turn” across the top. Attach a state- Resident in chapter 1. 1040-NR to receive a refund or categories is that effectively con- ment showing your U.S. source in- pay any additional tax due. nected income, after allowable de- come for the part of the year you I have an H-1B visa and my hus- If the capital gains and dividends ductions, is taxed at graduated were a nonresident. You may use band has an F-1 visa. We both are effectively connected with a rates. These are the same rates that Form 1040-NR as the statement. lived in the United States all of U.S. trade or business, they are apply to U.S. citizens and residents. Print “Dual-Status Statement” last year and had income. What taxed according to the same rules Income that is not effectively con- across the top. See First Year of kind of form should we file? Do and at the same rates that apply to nected is taxed at a flat 30% (or Residency in chapter 1 for rules on we file separate returns or a joint U.S. citizens and residents. lower treaty) rate. determining your residency starting return? date. I am a nonresident alien. I re- I am a student with an F-1 visa. I Assuming both of you had these vi- ceive U.S. social security bene- was told that I was an exempt in- When is my Form 1040-NR due? sas for all of last year, you are a res- fits. Are my benefits taxable? dividual. Does this mean I am ex- ident alien. Your husband is a non- empt from paying U.S. tax? If you are an employee and you re- resident alien if he has not been in If you are a nonresident alien, 85% ceive wages subject to U.S. income the United States as a student for of any U.S. social security benefits The term “exempt individual” does tax withholding, you must generally more than 5 years. You and your (and the equivalent portion of tier 1 not refer to someone exempt from file by the 15th day of the 4th month husband can file a joint tax return on railroad retirement benefits) you re- U.S. tax. You were referred to as an after your tax year ends. If you file Form 1040 or 1040-SR if he makes ceive is subject to the flat 30% tax, exempt individual because as a stu- for the 2020 calendar year, your re- the choice to be treated as a resi- unless exempt, or subject to a lower dent temporarily in the United turn is due April 15, 2021. dent for the entire year. See Non- treaty rate. See The 30% Tax in States on an F visa, you do not have resident Spouse Treated as a Resi- chapter 4. to count the days you were present If you are not an employee who dent in chapter 1. If your husband in the United States as a student receives wages subject to U.S. in- does not make this choice, you Do I have to pay taxes on my during the first 5 years in determin- come tax withholding, you must file must file a separate return on Form scholarship? ing if you are a resident alien under by the 15th day of the 6th month af- 1040 or 1040-SR. Your husband the substantial presence test. See ter your tax year ends. For the 2020 must file Form 1040-NR. chapter 1. calendar year, file your return by If you are a nonresident alien and June 15, 2021. For more informa- Is a “dual-resident taxpayer” the the scholarship is not from U.S. I am a resident alien. Can I claim tion on when to file and where to file, same as a “dual-status taxpay- sources, it is not subject to U.S. tax. any treaty benefits? see chapter 7. er”? See Scholarships, Grants, Prizes, and Awards in chapter 2 to deter- mine whether your scholarship is Generally, you cannot claim tax My spouse is a nonresident ali- No. A dual-resident taxpayer is one from U.S. sources. treaty benefits as a resident alien. en. Does he need a social securi- who is a resident of both the United However, there are exceptions. See ty number? States and another country under If your scholarship is from U.S. Effect of Tax Treaties in chapter 1. each country's tax laws. See Effect sources or you are a resident alien, See also Resident Aliens under A social security number (SSN) of Tax Treaties in chapter 1. You are your scholarship is subject to U.S. Some Typical Tax Treaty Benefits in must be furnished on returns, state- a dual-status alien when you are tax according to the following rules. chapter 9. ments, and other tax-related docu- both a resident alien and a nonresi- • If you are a candidate for a de- ments. If your spouse does not have dent alien in the same year. For in- gree, you may be able to ex- and is not eligible to get an SSN, he formation on determining the U.S. clude from your income the

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part of the scholarship you use Nonresident aliens can claim some See Nonresident Spouse Treated Do not use Form 843 to request a to pay for tuition, fees, books, of the same itemized deductions as a Resident in chapter 1. refund of Additional Medicare Tax. supplies, and equipment re- that resident aliens can claim. How- See Refund of Taxes Withheld in quired by the educational insti- ever, nonresident aliens can claim I am a nonresident alien, tempo- Error in chapter 8. tution. However, the part of the itemized deductions only if they rarily working in the U.S. under a scholarship you use to pay for have income effectively connected J visa. Am I subject to social se- I am an alien who will be leaving other expenses, such as room with their U.S. trade or business. curity and Medicare taxes? the United States. What forms do and board, is taxable. See See Itemized Deductions in chap- I have to file before I leave? Scholarships and Fellowship ter 5. Generally, services you perform as Grants in chapter 3 for more in- a nonresident alien temporarily in Before leaving the United States, formation. I am single with a dependent the United States as a nonimmigrant aliens must generally obtain a certif- • If you are not a candidate for a child. I was a dual-status alien in under subparagraph (F), (J), (M), or icate of compliance. This document, degree, your scholarship is tax- 2020. Can I claim the earned in- (Q) of section 101(a)(15) of the Im- also popularly known as the “sailing able. come credit on my 2020 tax re- migration and Nationality Act are not permit” or “departure permit,” is part turn? covered under the social security of the income tax form you must file I am a nonresident alien. Can I program if you perform the services before leaving. You will receive a claim the standard deduction? If you are a nonresident alien for any to carry out the purpose for which sailing or departure permit after fil- part of the year, you cannot claim you were admitted to the United ing a Form 1040-C or Form 2063. Nonresident aliens cannot claim the the earned income credit. See States. See Social Security and These forms are discussed in chap- standard deduction. However, see chapter 6 for more information on Medicare Taxes in chapter 8. ter 11. Students and business apprentices dual-status aliens. from India, under Itemized Deduc- I am a nonresident alien student. I filed a Form 1040-C when I left tions in chapter 5, for an exception. I am a nonresident alien student. Social security taxes were with- the United States. Do I still have Can I claim an education credit held from my pay in error. How to file an annual U.S. tax return? I am a dual-status taxpayer. Can on my Form 1040-NR? do I get a refund of these taxes? I claim the standard deduction? Form 1040-C is not an annual U.S. If you are a nonresident alien for any If social security or Medicare taxes income tax return. If an income tax You cannot claim the standard de- part of the year, you generally can- were withheld in error from pay that return is required by law, you must duction allowed on Form 1040 or not claim the education credits. is not subject to these taxes, contact file that return even though you al- 1040-SR. However, you can itemize However, if you are married and the employer who withheld the ready filed a Form 1040-C. Chap- any allowable deductions. choose to file a joint return with a taxes for a refund. If you are unable ter 5and chapter 7 discuss filing an U.S. citizen or resident spouse, you to get a full refund of the amount annual U.S. income tax return. I am filing Form 1040-NR. Can I may be eligible for these credits. from your employer, file a claim for claim itemized deductions? refund with the IRS on Form 843.

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Appendix A—Tax Treaty Exemption Procedure for Students

This appendix contains the state- securing training to practice a 2. I am temporarily present in or, I am temporarily present in ments nonresident alien students profession or professional the United States for the pri- the United States as a recipi- and trainees must file with Form specialty. mary purpose of studying at ent of a grant, allowance, or 8233 to claim a tax treaty exemp- [insert the name of award from [insert 3. I will receive compensation tion from withholding of tax on the university or other recog- the name of the nonprofit or- for personal services per- compensation for dependent per- nized educational institution ganization or government in- formed in the United States. sonal services. For treaty countries at which you study]. stitution providing the grant, This compensation qualifies not listed, attach a statement in a allowance, or award]. for exemption from withhold- 3. I will receive compensation format similar to those for other ing of federal income tax un- for personal services per- 3. I will receive compensation treaties. See chapter 8 for more in- der the tax treaty between the formed in the United States. for services performed in the formation on withholding. United States and Bulgaria in This compensation qualifies United States. This compen- an amount not in excess of for exemption from withhold- sation qualifies for exemption Belgium $9,000 for any tax year. ing of federal income tax un- from withholding of federal in- der the tax treaty between the come tax under the tax treaty 4. I arrived in the United States United States and Cyprus in between the United States 1. I was a resident of Belgium on on [insert the date an amount not in excess of and [Insert the the date of my arrival in the of your last arrival in the Uni- $2,000 ($10,000 if you are a name of the country] in the United States. I am not a U.S. ted States before beginning participant in a government amount not in excess of citizen. I have not been law- study or training]. The treaty sponsored program of study $5,000 ($10,000 if you are a fully accorded the privilege of exemption for training is avail- not exceeding 1 year) for any participant in a government residing permanently in the able only for compensation tax year. I have not previously sponsored program of study United States as an immi- paid during a period of 2 claimed an income tax ex- not exceeding 1 year) for any grant. years. emption under that treaty for tax year. 2. I am present in the United income received as a student 4. I arrived in the United States States for the purpose of my before the date of my arrival China, People's on [insert the date education or training. in the United States. Republic of of your last arrival in the Uni- 3. I will receive compensation 4. I arrived in the United States ted States before beginning for personal services per- 1. I was a resident of the Peo- on [insert the date study at the U.S. educational formed in the United States. ple's Republic of China on the of your last arrival in the Uni- institution]. The $5,000 treaty This compensation qualifies date of my arrival in the Uni- ted States before beginning exemption is available only for exemption from withhold- ted States. I am not a U.S. study at the U.S. educational for compensation paid during ing of federal income tax un- citizen. institution]. The $2,000 treaty a period of 5 tax years begin- der the tax treaty between the exemption is available only ning with the tax year that in- 2. I am present in the United United States and Belgium in for compensation paid during cludes my arrival date. an amount not in excess of States solely for the purpose a period of 5 tax years begin- of my education or training. $9,000 for any tax year. ning with the tax year that in- Egypt 4. I arrived in the United States 3. I will receive compensation cludes my arrival date, and for personal services per- for such additional period of on [insert the date 1. I was a resident of Egypt on formed in the United States. time as is necessary to com- of your last arrival in the Uni- the date of my arrival in the This compensation qualifies plete, as a full-time student, ted States before beginning United States. I am not a U.S. for exemption from withhold- educational requirements as study or training]. For a citizen. I have not been law- ing of federal income tax un- a candidate for a postgradu- trainee who is temporarily fully accorded the privilege of der the tax treaty between the ate or professional degree present in the United States residing permanently in the United States and the Peo- from a recognized educa- for the purpose of securing United States as an immi- ple's Republic of China in an tional institution. training required to practice a grant. profession or professional amount not in excess of specialty, the treaty exemp- $5,000 for any tax year. Czech Republic, 2. I am temporarily present in the United States for the pri- tion is available only for com- 4. I arrived in the United States Estonia, Latvia, mary purpose of studying at pensation paid during a pe- on [insert the date Lithuania, and [insert the name of riod of 2 years. of your last arrival in the Uni- the university or other recog- ted States before beginning Slovak Republic nized educational institution study or training]. I am claim- Bulgaria at which you study]. ing this exemption only for 1. I was a resident of [insert the name of the coun- such period of time as is rea- 3. I will receive compensation 1. I was a resident of Bulgaria try under whose treaty you sonably necessary to com- for personal services per- on the date of my arrival in the claim exemption] on the date plete the education or train- formed in the United States. United States. I am not a U.S. of my arrival in the United ing. This compensation qualifies citizen. I have not been law- States. I am not a U.S. citi- for exemption from withhold- fully accorded the privilege of zen. I have not been lawfully ing of federal income tax un- residing permanently in the Cyprus accorded the privilege of re- der the tax treaty between the United States as an immi- siding permanently in the Uni- United States and Egypt in an grant. ted States as an immigrant. 1. I was a resident of Cyprus on amount not in excess of 2. I am temporarily present in the date of my arrival in the 2. I am temporarily present in $3,000 ($10,000 if you are a the United States for the pri- United States. I am not a U.S. the United States for the pri- participant in a government mary purpose of studying at citizen. I have not been law- mary purpose of studying or sponsored program of study [insert the name of fully accorded the privilege of training at [insert the not exceeding 1 year) for any the university or other recog- residing permanently in the name of the university or tax year. I have not previously nized educational institution United States as an immi- other recognized educational claimed an income tax ex- at which you study] or grant. institution at which you study]; emption under that treaty for

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income received as a Germany at which you study]; or, I am tax year, provided such serv- teacher, researcher, or stu- temporarily present in the ices are performed in connec- dent before the date of my ar- United States to obtain pro- tion with my studies or are 1. I was a resident of Germany rival in the United States. fessional training or to study necessary for my mainte- on the date of my arrival in the or do research as a recipient nance. 4. I arrived in the United States United States. I am not a U.S. of a grant, allowance, or on [insert the date citizen. I have not been law- 4. I arrived in the United States award from [insert of your last arrival in the Uni- fully accorded the privilege of on [insert the date the name of the nonprofit or- ted States before beginning residing permanently in the of your last arrival in the Uni- ganization or government in- study at the U.S. educational United States as an immi- ted States before beginning stitution providing the grant, institution]. The $3,000 treaty grant. study at the U.S. educational allowance, or award]. exemption is available only institution]. The treaty exemp- 2. I am temporarily present in for compensation paid during 3. I will receive compensation tion is available only for com- the United States as a stu- a period of 5 tax years begin- for services performed in the pensation paid during a pe- dent or business apprentice ning with the tax year that in- United States. This compen- riod of 5 tax years beginning for the purpose of full-time cludes my arrival date, and sation qualifies for exemption with the tax year that includes study or training at for such period of time as is from withholding of federal in- my arrival date. [insert the name of the ac- necessary to complete, as a come tax under the tax treaty credited university, college, full-time student, educational between the United States school or other educational requirements as a candidate and Iceland in the amount not Israel, Philippines, institution]; or, I am tempora- for a postgraduate or profes- in excess of $9,000 for any and Thailand rily present in the United sional degree from a recog- tax year. States as a recipient of a nized educational institution. 1. I was a resident of the grant, allowance, or award 4. I arrived in the United States [insert the name of from [insert the on [insert the date the country under whose France name of the nonprofit organi- of your last arrival in the Uni- treaty you claim exemption] zation or government institu- ted States before beginning on the date of my arrival in the 1. I was a resident of France on tion providing the grant, al- study at the U.S. educational United States. I am not a U.S. the date of my arrival in the lowance, or award]. institution]. The treaty exemp- citizen. I have not been law- tion is available only for com- United States. I am not a U.S. 3. I will receive compensation fully accorded the privilege of pensation paid during a pe- citizen. I have not been law- for dependent personal serv- residing permanently in the riod of 5 tax years beginning fully accorded the privilege of ices performed in the United United States as an immi- with the tax year that includes residing permanently in the States. This compensation grant. United States as an immi- my arrival date. qualifies for exemption from 2. I am temporarily present in grant. withholding of federal income the United States for the pri- 2. I am temporarily present in tax under the tax treaty be- Indonesia mary purpose of studying at the United States for the pri- tween the United States and [insert the name of mary purpose of studying at Germany in an amount not in 1. I was a resident of Indonesia the university or other recog- [insert the name of excess of $9,000 for any tax on the date of my arrival in the nized educational institution the accredited university, col- year, provided that such serv- United States. I am not a U.S. at which you study]. lege, school or other educa- ices are performed for the citizen. I have not been law- 3. I will receive compensation tional institution]. purpose of supplementing fully accorded the privilege of funds otherwise available for residing permanently in the for personal services per- 3. I will receive compensation my maintenance, education, United States as an immi- formed in the United States. for personal services per- or training. grant. This compensation qualifies formed in the United States. for exemption from withhold- This compensation qualifies 4. I arrived in the United States 2. I am temporarily present in ing of federal income tax un- for exemption from withhold- on [insert the date the United States solely for der the tax treaty between the ing of federal income tax un- of your last arrival in the Uni- the purpose of study at United States and der the tax treaty between the ted States before beginning [insert the name of [insert the name of the coun- United States and France in study at the U.S. educational the university or other ac- try under whose treaty you an amount not in excess of institution]. The treaty exemp- credited educational institu- claim exemption] in an $5,000 for any taxable year. I tion is available only for com- tion at which you study]; or, I amount not in excess of have not previously claimed pensation paid during a pe- am temporarily present in the $3,000 for any tax year. I an income tax exemption un- riod of 4 tax years beginning United States as a recipient of have not previously claimed der this treaty for income re- with the tax year that includes a grant, allowance or award an income tax exemption un- ceived as a teacher, re- my arrival date. from [insert the der that treaty for income re- searcher, or student before name of the nonprofit organi- ceived as a teacher, re- the date of my arrival in the Iceland zation or government institu- searcher, or student before United States. tion providing the grant, al- the date of my arrival in the lowance, or award] for the United States. 4. I will be present in the United 1. I was a resident of Iceland on primary purpose of study, re- States only for such period of the date of my arrival in the search, or training. 4. I arrived in the United States time as may be reasonably or United States. I am not a U.S. on [insert the date customarily required to effec- citizen. I have not been law- 3. I will receive compensation of your last arrival in the Uni- tuate the purpose of this visit. fully accorded the privilege of for services performed in the ted States before beginning residing permanently in the United States. This compen- study at the U.S. educational 5. I arrived in the United States United States as an immi- sation qualifies for exemption institution]. The treaty exemp- on [insert the date grant. from withholding of federal in- tion is available only for com- of your last arrival in the Uni- come tax under the tax treaty pensation paid during a pe- ted States before beginning 2. I am temporarily present in between the United States riod of 5 tax years beginning study at the U.S. educational the United States for the pri- and Indonesia in an amount with the tax year that includes institution]. The treaty exemp- mary purpose of studying at not in excess of $2,000 for my my arrival date. tion is available only for com- [insert the name of pensation paid during a pe- the university or other recog- riod of 5 tax years. nized educational institution

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Korea, Norway, 3. I will receive compensation Pakistan study at the U.S. educational Poland, and Romania for personal services per- institution]. The treaty exemp- formed in the United States. 1. I am a resident of Pakistan. I tion is available only for com- This compensation qualifies pensation paid during a pe- 1. I was a resident of am not a U.S. citizen. I have for exemption from withhold- riod of 5 tax years beginning [insert the name of the coun- not been lawfully accorded ing of federal income tax un- with the tax year that includes try under whose treaty you the privilege of residing per- der the tax treaty between the my arrival date. claim exemption] on the date manently in the United States United States and Morocco in of my arrival in the United as an immigrant and would an amount not in excess of States. I am not a U.S. citi- not otherwise be considered $2,000 for any tax year. I Slovenia and zen. I have not been lawfully a resident alien for the rele- have not previously claimed Venezuela accorded the privilege of re- vant tax year. an income tax exemption un- siding permanently in the Uni- der that treaty for income re- 2. I am temporarily present in 1. I was a resident of ted States as an immigrant. ceived as a student before the United States solely as a [insert the name of the coun- 2. I am temporarily present in the date of my arrival in the student at [insert try under whose treaty you the United States for the pri- United States. the name of the recognized claim exemption] on the date mary purpose of studying at university, college, or school of my arrival in the United 4. I arrived in the United States [insert the name of in the United States at which States. I am not a U.S. citi- on [insert the date the university or other recog- you study]. zen. I have not been lawfully of your last arrival in the Uni- accorded the privilege of re- nized educational institution 3. I will receive compensation ted States before beginning siding permanently in the Uni- at which you study]. for personal services per- study at the U.S. educational ted States as an immigrant. 3. I will receive compensation institution]. The treaty exemp- formed in the United States. for personal services per- tion is available only for com- This compensation qualifies 2. I am temporarily present in formed in the United States. pensation paid during a pe- for exemption from withhold- the United States for the pri- This compensation qualifies riod of 5 tax years, beginning ing of federal income tax un- mary purpose of studying or for exemption from withhold- with the tax year that includes der the tax treaty between the training at [insert the ing of federal income tax un- my arrival date. United States and Pakistan in name of the university or der the tax treaty between the an amount not in excess of other accredited educational United States and $5,000 for any tax year. institution at which you study [insert the name of the coun- Netherlands or train]. try under whose treaty you 1. I was a resident of the Nether- Portugal and Spain 3. I will receive compensation claim exemption] in an lands on the date of my arrival for services performed in the amount not in excess of in the United States. I am not 1. I was a resident of United States. This compen- $2,000 for any tax year. I a U.S. citizen. I have not been [insert the name of the coun- sation qualifies for exemption have not previously claimed lawfully accorded the privi- try under whose treaty you from withholding of federal in- an income tax exemption un- lege of residing permanently claim exemption] on the date come tax under the tax treaty der this treaty for income re- in the United States as an im- of my arrival in the United between the United States ceived as a teacher, re- migrant. States. I am not a U.S. citi- and [insert the searcher, or student before zen. I have not been lawfully name of the country under the date of my arrival in the 2. I am temporarily present in accorded the privilege of re- whose treaty you claim ex- United States. the United States for the pri- siding permanently in the Uni- emption] in an amount not in mary purpose of full time 4. I arrived in the United States ted States as an immigrant. excess of $5,000 for any tax study at [insert the on [insert the date year. name of the recognized uni- 2. I am temporarily present in of your last arrival in the Uni- versity, college, or school in the United States for the pri- 4. I arrived in the United States ted States before beginning the United States at which mary purpose of studying or on [insert the date study at the U.S. educational you study]. training at [insert the of your last arrival in the Uni- institution]. The treaty exemp- name of the university or ted States before beginning tion is available only for com- 3. I will receive compensation other recognized educational study at the U.S. educational pensation paid during a pe- for personal services per- institution at which you study]; institution]. The treaty exemp- riod of 5 tax years beginning formed in the United States. or, I am temporarily present in tion is available only for com- with the tax year that includes This compensation qualifies the United States as a recipi- pensation paid during a pe- my arrival date. for exemption from withhold- ent of a grant, allowance, or riod of five tax years ing of federal income tax un- award from [insert beginning with the taxable Morocco der the tax treaty between the the name of the nonprofit or- year that includes my arrival United States and the Nether- ganization or government in- date, and for such period of lands in an amount not in ex- 1. I was a resident of Morocco stitution providing the grant, time as is necessary to com- cess of $2,000 for any tax on the date of my arrival in the allowance, or award]. plete, as a full-time student, year. educational requirements as United States. I am not a U.S. 3. I will receive compensation a candidate for a postgradu- citizen. I have not been law- 4. I arrived in the United States for services performed in the ate or professional degree fully accorded the privilege of on [insert the date United States. This compen- from a recognized educa- residing permanently in the of your last arrival in the Uni- sation qualifies for exemption tional institution. United States as an immi- ted States before beginning from withholding of federal in- grant. study at the U.S. educational come tax under the tax treaty institution]. I am claiming this 2. I am temporarily present in between the United States Trinidad and Tobago exemption only for such pe- the United States for the pri- and [Insert the riod of time as is reasonably mary purpose of studying at name of the country] in the 1. I was a resident of Trinidad necessary to complete my [insert the name of amount not in excess of and Tobago on the date of my education. the university or other recog- $5,000 for any tax year. arrival in the United States. I am not a U.S. citizen. I have nized educational institution 4. I arrived in the United States not been lawfully accorded at which you study]. on [insert the date of your last arrival in the Uni- ted States before beginning

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the privilege of residing per- specialty, not in excess of Tunisia United States. This compen- manently in the United States $5,000) for any taxable year. I sation qualifies for exemption as an immigrant. have not previously claimed 1. I was a resident of Tunisia on from withholding of federal in- an income tax exemption un- come tax under the tax treaty 2. I am temporarily present in the date of my arrival in the der this treaty for income re- between the United States the United States for the pri- United States. I am not a U.S. ceived as a teacher, re- and Tunisia in an amount not mary purpose of studying at citizen. I have not been law- searcher, or student before in excess of $4,000 for any [insert the name of fully accorded the privilege of the date of my arrival in the tax year. the university or other ac- residing permanently in the United States. credited educational institu- United States as an immi- 4. I arrived in the United States tion at which you study]. 4. I will be present in the United grant. on [insert the date States only for such period of of your last arrival in the Uni- 3. I will receive compensation 2. I am temporarily present in time as may be reasonably or ted States before beginning for personal services per- the United States for the pur- customarily required to effec- study at the U.S. educational formed in the United States. pose of full-time study, train- tuate the purpose of this visit. institution]. The treaty exemp- This compensation qualifies ing, or research at tion is available only for com- for exemption from withhold- 5. I arrived in the United States [insert the name of the univer- pensation paid during a pe- ing of federal income tax un- on [insert the date sity or other accredited edu- riod of 5 tax years beginning der the tax treaty between the of your last arrival in the Uni- cational institution at which with the tax year that includes United States and Trinidad ted States before beginning you study, train, or perform my arrival date. and Tobago in an amount not study at the U.S. educational research]. in excess of $2,000 (or, if you institution]. The treaty exemp- 3. I will receive compensation are securing training required tion is available only for com- for services performed in the to qualify you to practice a pensation paid during a pe- profession or a professional riod of 5 tax years.

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Appendix B—Tax Treaty Exemption Procedure for Teachers and Researchers

This appendix contains the state- 2. I am visiting the United States United States and the Peo- for the period from to ments nonresident alien teachers for the purpose of teaching or ple's Republic of China. I ) qualifies for exemp- and researchers must file with conducting research at have not previously claimed tion from withholding of fed- Form 8233 to claim a tax treaty ex- [insert the name of an income tax exemption un- eral tax under the tax treaty emption from withholding of tax on the university, college, or der that treaty for income re- between the United States compensation for dependent per- other recognized educational ceived as a teacher, lecturer, and the former Union of So- sonal services. For treaty countries or research institution]. I will researcher, or student before viet Socialist Republics. I not listed, attach a statement in a receive compensation for my the date of my arrival in the have not previously claimed format similar to those for other teaching or research activi- United States. an income tax exemption un- treaties. See chapter 8 for more in- ties. der that treaty for income re- 4. Any research I perform will be formation on withholding. ceived as a teacher, re- 3. The teaching or research undertaken in the public inter- searcher, conference compensation received dur- est and not primarily for the participant, or student before ing the entire tax year (or dur- private benefit of a specific Belgium the date of my arrival in the ing the period from person or persons. United States. to ) for these activi- 1. I am a resident of Belgium. I 5. I arrived in the United States ties qualifies for exemption 4. Any research I perform will am not a U.S. citizen. I have on [insert the date from withholding of federal not be undertaken primarily not been lawfully accorded of your last arrival in the Uni- tax under the tax treaty be- for the benefit of a private the privilege of residing per- ted States before beginning tween the United States and person or commercial enter- manently in the United States your teaching, lecturing, or re- Bulgaria. prise of the United States or a as an immigrant. search activities]. The treaty foreign trade organization of 4. Any research I perform will be exemption is available only 2. I am visiting the United States [insert the name of undertaken in the public inter- for compensation received for the purpose of teaching or country], unless the research est and not primarily for the during a maximum aggregate engaging in research at is conducted on the basis of private benefit of a specific period of 2 years. [insert the name of intergovernmental agree- person or persons. the educational or research ments on cooperations. institution at which you teach 5. I arrived in the United States Commonwealth of 5. I arrived in the United States or perform research] for a pe- on [insert the date Independent States on [insert the date riod not exceeding 2 years. I of your last arrival into the of your last arrival in the Uni- will receive compensation for United States before begin- The treaty with former Union of So- ted States before beginning my teaching or research ac- ning the services for which viet Socialist Republics remains in the teaching or research serv- tivities. the exemption is claimed]. effect for the following countries: ices for which exemption is The treaty exemption is avail- 3. The teaching or research Armenia, Azerbaijan, Belarus, claimed]. The treaty exemp- able only for compensation compensation received dur- Georgia, Kyrgyzstan, Moldova, Ta- tion is available only for com- paid during a period of 2 ing the entire tax year (or dur- jikistan, Turkmenistan, and Uzbeki- pensation received during a years beginning on that date. ing the period from stan. period of 2 years beginning to ) for these activi- on that date. ties qualifies for exemption China, People's 1. I am a resident of from withholding of federal [insert the name of country]. I tax under the tax treaty be- Republic of am not a U.S. citizen. Czech Republic and tween the United States and 2. I have accepted an invitation Slovak Republic 1. I was a resident of the Peo- Belgium. by a governmental agency or ple's Republic of China on the 1. I was a resident of the 4. Any research I perform will be institution in the United date of my arrival in the Uni- [insert the name of undertaken in the public inter- States, or by an educational ted States. I am not a U.S. the country under whose est and not primarily for the or scientific research institu- citizen. treaty you claim exemption] private benefit of a specific tion in the United States, to on the date of my arrival in the person or persons. 2. I am visiting the United States come to the United States for for the primary purpose of the primary purpose of teach- United States. I am not a U.S. 5. I arrived in the United States teaching, giving lectures, or ing, engaging in research, or citizen. I have not been law- on [insert the date conducting research at participating in scientific, fully accorded the privilege of of your last arrival in the Uni- [insert the name of technical, or professional residing permanently in the ted States before beginning the educational institution or conferences at [in- United States as an immi- the teaching or research for scientific research institution sert the name of governmen- grant. which exemption is claimed]. at which you teach, lecture, or tal agency or institution, edu- 2. I am visiting the United States The treaty exemption is avail- conduct research], which is cational or scientific for the primary purpose of able only for compensation an accredited educational in- institution, or organization teaching or conducting re- received during a period of 2 stitution or scientific research sponsoring professional con- search at [insert the years beginning on that date. institution. I will receive com- ference], which is a govern- name of the educational or pensation for my teaching, mental agency or institution, scientific institution], which is Bulgaria lecturing, or research activi- an educational or scientific in- an accredited educational or ties. stitution, or an organization research institution. I will re- sponsoring a professional 1. I was a resident of Bulgaria 3. The teaching, lecturing, or re- ceive compensation for my conference. I will receive on the date of my arrival in the search compensation re- teaching or research activi- compensation for my teach- United States. I am not a U.S. ceived during the entire tax ties. ing, research, or conference citizen. I have not been law- year (or during the period activities. 3. The teaching or research fully accorded the privilege of from to ) quali- compensation received dur- residing permanently in the fies for exemption from with- 3. The teaching, research or ing the entire tax year (or dur- United States as an immi- holding of federal tax under conference compensation re- ing the period from to grant. the tax treaty between the ceived the entire tax year (or

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) qualifies for exemp- whose treaty you claim ex- of your last arrival in the Uni- paid during a period of 2 tion from withholding of fed- emption]. I have not previ- ted States before beginning years beginning on that date. eral tax under the tax treaty ously claimed an income tax the teaching or research serv- between the United States exemption under this treaty ices for which exemption is and the [insert the for income received as a claimed]. The treaty exemp- Greece name of the country under teacher, researcher, or stu- tion is available only for com- whose treaty you claim ex- dent before the date of my ar- pensation received during a 1. I am a resident of Greece. I emption]. I have not previ- rival in the United States. period of 2 years beginning am not a U.S. citizen. I have ously claimed an income tax on that date. not been lawfully accorded 4. Any research I perform will be exemption under that treaty the privilege of residing per- undertaken in the public inter- for income received as a manently in the United States est and not primarily for the teacher, researcher, or stu- Germany as an immigrant (and would private benefit of a specific dent before the date of my ar- not otherwise be considered person or persons. 1. I am a resident of Germany. I rival in the United States. a resident alien for the rele- am not a U.S. citizen. I have 5. I arrived in the United States vant tax year). 4. Any research I perform will be not been lawfully accorded on [insert the date undertaken in the public inter- the privilege of residing per- 2. I am a professor or teacher of your last arrival in the Uni- est and not primarily for the manently in the United States visiting the United States for ted States before beginning private benefit of a specific as an immigrant. the purpose of teaching at the teaching or research serv- person or persons. [insert the name of ices for which exemption is 2. I am a professor or teacher the other educational institu- 5. I arrived in the United States claimed]. The treaty exemp- visiting the United States for tion at which you teach], on [insert the date tion is available only for com- the purpose of advanced which is an educational insti- of your last arrival in the Uni- pensation received during a study, teaching, or research tution. I will receive compen- ted States before beginning period of 2 years beginning at [insert the name sation for my teaching activi- the teaching, research, or on that date. of the accredited university, ties. conference services for which college, school, or other edu- exemption is claimed]. The cational institution, or a public 3. The teaching compensation treaty exemption is available France research institution or other received during the entire tax only for compensation re- institution engaged in re- year (or during the period 1. I was a resident of France on ceived during a period of 2 search for the public benefit]. from to ) quali- the date of my arrival in the years beginning on that date. I will receive compensation fies for exemption from with- United States. I am not a U.S. for my teaching, research, or holding of federal tax under citizen. I have not been law- study activities. the tax treaty between the Egypt, Hungary, fully accorded the privilege of United States and Greece. I Korea, Philippines, residing permanently in the 3. The compensation received have not previously claimed Poland, and Romania United States as an immi- during the entire tax year (or an income tax exemption un- grant. during the period from der that treaty for income re- to ) for 2. I have accepted an invitation ceived as a teacher or stu- 1. I was a resident of these activities qualifies for by the U.S. government, or by dent before the date of my [insert the name of the coun- exemption from withholding a university or other recog- arrival in the United States. try under whose treaty you of federal tax under the tax nized educational or research claim exemption] on the date treaty between the United 4. I arrived in the United States institution in the United States of my arrival in the United States and Germany. I have on [insert the date for the primary purpose of States. I am not a U.S. citi- not previously claimed an in- of your last arrival in the Uni- teaching or engaging in re- zen. I have not been lawfully come tax exemption under ted States before beginning search at [insert the accorded the privilege of re- that treaty for income re- the teaching services for name of the educational or re- siding permanently in the Uni- ceived as a student, appren- which exemption is claimed]. search institution]. I will re- ted States as an immigrant. tice, or trainee during the im- The treaty exemption is avail- ceive compensation for my mediately preceding period. able only for compensation 2. I have accepted an invitation teaching or research activi- (If, however, following the pe- received during a period of 3 by the U.S. government (or by ties. a political subdivision or local riod in which the alien years beginning on that date. authority thereof), or by a uni- 3. The teaching or research claimed benefits as a student, versity or other recognized compensation received dur- apprentice, or trainee, that India educational institution in the ing the entire tax year (or for person returned to Germany the portion of the year from and resumed residence and United States for a period not 1. I was a resident of India on expected to exceed 2 years to ) qualifies for physical presence before re- exemption from withholding turning to the United States the date of my arrival in the for the purpose of teaching or United States. I am not a U.S. engaging in research at of federal tax under the tax as a teacher or researcher, treaty between the United that person may claim the citizen. I have not been law- [insert the name of fully accorded the privilege of the educational institution], States and France. I have not benefits of this treaty.) previously claimed an income residing permanently in the which is a recognized educa- 4. Any research I perform will be tax exemption under this United States as an immi- tional institution. I will receive undertaken in the public inter- treaty for income received as grant. compensation for my teach- est and not primarily for the a teacher, researcher, or stu- ing or research activities. private benefit of a specific 2. I am visiting the United States dent before the date of my ar- person or persons. for the purpose of teaching or 3. The teaching or research rival in the United States. conducting research at compensation received dur- 5. I arrived in the United States 4. Any research I perform will be [insert the name of ing the entire tax year (or for on [insert the date undertaken in the public inter- the university, college, or the portion of the year from of your last arrival into the est and not primarily for the other recognized educational to ) qualifies for United States before begin- private benefit of a specific institution]. I will receive com- exemption from withholding ning the services for which person or persons. pensation for my teaching or of federal tax under the tax the exemption is claimed]. research activities. treaty between the United 5. I arrived in the United States The treaty exemption is avail- States and [insert on [insert the date able only for compensation 3. The teaching or research the name of the country under compensation received

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during the entire tax year (or period of 2 years beginning Italy name of the educational insti- during the period from on that date. tution at which you teach or to ) for conduct research], which is a 5. Any research I perform will be 1. I was a resident of Italy on the these activities qualifies for recognized educational insti- undertaken in the public inter- date of my arrival in the Uni- exemption from withholding tution. I will receive compen- est and not primarily for the ted States. I am not a U.S. of federal tax under the tax sation for my teaching or re- private benefit of a specific citizen. I have not been accor- treaty between the United search activities. person or persons. ded the privilege of residing States and India. permanently in the United 3. The teaching or research 4. Any research I perform will be States as an immigrant. compensation received dur- undertaken in the public inter- Israel ing the entire tax year (or dur- 2. I am a professor or teacher est and not primarily for the ing the period from to 1. I was a resident of Israel on visiting the United States for private benefit of a specific ) qualifies for exemp- the date of my arrival in the the purpose of teaching or person or persons. tion from withholding of fed- United States. I am not a U.S. performing research at eral tax under the tax treaty 5. I arrived in the United States citizen. I have not been law- [insert the name of between the United States on [insert the date fully accorded the privilege of the educational institution or and Jamaica. I have not pre- of your last arrival into the residing permanently in the medical facility at which you viously claimed an income tax United States before begin- United States as an immi- teach or perform research], exemption under that treaty ning the services for which grant. which is a recognized educa- for income received as a the exemption is claimed]. tional institution or a medical 2. I have accepted an invitation teacher, researcher, or stu- The treaty exemption is avail- facility primarily funded from by the U.S. government (or by dent before the date of my ar- able only for compensation governmental sources. I will a political subdivision or local rival in the United States. paid during a period of 2 receive compensation for my authority thereof), or by a uni- years beginning on that date. teaching or research activi- 4. I arrived in the United States versity or other recognized ties. on [insert the date educational institution in the of your last arrival in the Uni- United States, to come to the 3. The compensation received Indonesia ted States before beginning United States for a period not during the entire tax year (or the teaching or research serv- expected to exceed 2 years during the period from 1. I was a resident of Indonesia ices for which exemption is for the purpose of teaching or to ) qualifies for ex- on the date of my arrival in the claimed]. The treaty exemp- engaging in research at emption from withholding of United States. I am not a U.S. tion is available only for com- [insert the name of federal tax under the tax citizen. I have not been law- pensation paid during a pe- the educational institution], treaty between the United fully accorded the privilege of riod of 2 years beginning on which is a recognized educa- States and Italy. I have not residing permanently in the that date. United States as an immi- tional institution. I will receive previously claimed an income grant. compensation for my teach- tax exemption under that ing or research activities. treaty for income received as Luxembourg 2. I have accepted an invitation a teacher, researcher, or stu- 3. The teaching or research by [insert the name dent before the date of my ar- 1. I am a resident of Luxem- compensation received dur- of the university, college, rival in the United States. bourg. I am not a U.S. citizen. ing the entire tax year (or for school, or other similar edu- I have not been lawfully ac- the portion of the year from 4. Any research I perform will be cational institution] to come to corded the privilege of resid- to ) qualifies for undertaken in the general in- the United States solely for ing permanently in the United exemption from withholding terest and not primarily for the the purpose of teaching or en- States as an immigrant. gaging in research at that ed- of federal tax under the tax private benefit of a specific ucational institution. I will re- treaty between the United person or persons. 2. I have accepted an invitation States and Israel. I have not by [insert the name ceive compensation for my 5. I arrived in the United States previously claimed an income of the educational institution teaching or research activi- on [insert the date tax exemption under this at which you teach or perform ties. of your last arrival in the Uni- treaty for income received as research], which is a recog- ted States before beginning 3. The teaching or research a teacher, researcher, or stu- nized educational institution, the teaching or research serv- compensation received dur- dent before the date of my ar- to come to the United States ices for which exemption is ing the entire tax year (or dur- rival in the United States. for the purpose of teaching or claimed]. The treaty exemp- ing the period from engaging in research at that 4. Any research I perform will be tion is available only for com- to ) qualifies for ex- institution. I will receive com- undertaken in the public inter- pensation received during a emption from withholding of pensation for my teaching or est and not primarily for the period of 2 years beginning federal tax under the tax research activities. treaty between the United private benefit of a specific on that date. States and Indonesia. I have person or persons. 3. The teaching or research compensation received dur- not previously claimed an in- 5. I arrived in the United States Jamaica ing the entire tax year (or dur- come tax exemption under on [insert the date ing the period from to that treaty for income re- of your last arrival in the Uni- 1. I was a resident of Jamaica ) qualifies for exemp- ceived as a teacher or re- ted States before beginning on the date of my arrival in the tion from withholding of fed- searcher before the date the teaching or research serv- United States. I am not a U.S. eral tax under the tax treaty specified in the next para- ices for which exemption is citizen. I have not been law- between the United States graph. claimed]. The treaty exemp- fully accorded the privilege of and Luxembourg. I have not tion is available only for com- 4. I arrived in the United States residing permanently in the previously claimed an income pensation received during a on [insert the date United States as an immi- tax exemption under that period of 2 years beginning of your arrival into the United grant. treaty for income received as on that date. States before beginning the a teacher, researcher, or stu- teaching or research services 2. I am visiting the United States for the purpose of teaching or dent before the date of my ar- for which the exemption is rival in the United States. claimed]. The treaty exemp- conducting research for a pe- tion is available only for com- riod not expected to exceed 2 pensation paid during a years at [insert the

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4. Any research I perform will Norway recognized educational insti- 5. I arrived in the United States not be carried on for the ben- tution. I will receive compen- on [insert the date efit of any person using or 1. I was a resident of Norway on sation for my teaching activi- of your arrival into the United disseminating the results for the date of my arrival in the ties. States before beginning the purposes of profit. teaching or research services United States. I am not a U.S. 3. The teaching compensation for which the exemption is 5. I arrived in the United States citizen. I have not been law- received during the entire tax claimed]. The treaty exemp- on [insert the date fully accorded the privilege of year (or during the period tion is available only for com- of your last arrival into the residing permanently in the from to ) quali- pensation paid during a pe- United States before begin- United States as an immi- fies for exemption from with- riod of 2 years beginning on ning the teaching services for grant. holding of federal tax under that date. which exemption is claimed]. 2. I have accepted an invitation the tax treaty between the The treaty exemption is avail- by the U.S. government, or by United States and Pakistan. I able only for compensation a university or other recog- have not previously claimed Slovenia and received during a period of nized educational institution an income tax exemption un- Venezuela two years beginning on that in the United States for a pe- der this treaty for income re- date. ceived as a teacher or stu- riod not expected to exceed 1. I was a resident of dent before the date of my two years for the purpose of [insert the name of the coun- arrival in the United States. Netherlands teaching or engaging in re- try under whose treaty you search at [insert the 4. I arrived in the United States claim exemption] on the date 1. I am a resident of the Nether- name of the educational insti- on [insert the date of my arrival in the United lands. I am not a U.S. citizen. tution], which is a recognized of your last arrival into the States. I am not a U.S. citi- I have not been lawfully ac- educational institution. I will United States before begin- zen. I have not been lawfully corded the privilege of resid- receive compensation for my ning the teaching services for accorded the privilege of re- ing permanently in the United teaching or research activi- which exemption is claimed]. siding permanently in the Uni- States as an immigrant. ties. The treaty exemption is avail- ted States as an immigrant. able only for compensation 2. I am visiting the United States 3. The teaching or research 2. I am temporarily present in paid during a period of 2 for the purpose of teaching or compensation qualifies for the United States for the pur- years beginning on that date. engaging in research at exemption from withholding pose of teaching or carrying [insert the name of of federal tax under the tax on research at [in- the educational institution at treaty between the United Portugal sert the name of the educa- which you teach or perform States and Norway. I have tional or research institution], not previously claimed an in- research] for a period not ex- 1. I was a resident of Portugal which is a recognized educa- come tax exemption under ceeding two years. I will re- on the date of my arrival in the tional or research institution. I this treaty for income re- ceive compensation for my United States. I am not a U.S. will receive compensation for ceived as a teacher, re- teaching or research activi- citizen. I have not been law- my teaching or research ac- searcher, or student before ties. fully accorded the privilege of tivities. the date of my arrival in the residing permanently in the 3. The compensation received United States. 3. The teaching or research during the entire tax year (or United States as an immi- compensation received dur- during the period from 4. Any research I perform will grant. ing the entire tax year (or dur- not be undertaken primarily to ) for these activities 2. I have accepted an invitation ing the period from to for the private benefit of a qualifies for exemption from by [insert the name ) qualifies for exemp- specific person or persons. withholding of federal tax un- of the university, college, tion from withholding of fed- der the tax treaty between the 5. I arrived in the United States school, or other similar edu- eral tax under the tax treaty United States and the Nether- on [insert the date cational institution] to come to between the United States lands. I have not previously of your last arrival in the Uni- the United States solely for and [insert the claimed an income tax ex- ted States before beginning the purpose of teaching or en- name of the country under emption under that treaty for the teaching or research serv- gaging in research at that ed- whose treaty you claim ex- income received as a ices for which exemption is ucational institution. I will re- emption]. I have not previ- teacher, researcher, or stu- claimed]. The treaty exemp- ceive compensation for my ously claimed an income tax dent before the date of my ar- tion is available only for com- teaching or research activi- exemption under this treaty rival in the United States. pensation received during a ties. for income received as a teacher, researcher, or stu- 4. Any research I perform will be period of 2 years beginning 3. The teaching or research dent before the date of my ar- undertaken in the public inter- on that date. compensation received dur- rival in the United States. est and not primarily for the ing the entire tax year (or dur- benefit of a specific person or Pakistan ing the period from 4. Any research I perform will be persons. to ) qualifies for ex- undertaken in the general in- terest and not primarily for the 5. I arrived in the United States 1. I am a resident of Pakistan. I emption from withholding of private benefit of a specific on [insert the date am not a U.S. citizen. I have federal tax under the tax person or persons. of your last arrival into the not been lawfully accorded treaty between the United United States before begin- the privilege of residing per- States and Portugal. I have 5. I arrived in the United States ning the teaching or research manently in the United States not previously claimed an in- on [insert the date services for which exemption as an immigrant and would come tax exemption under of your last arrival in the Uni- is claimed]. The treaty ex- not otherwise be considered that treaty for income re- ted States before beginning emption is available for com- a resident alien for the rele- ceived as a teacher or re- the teaching or research serv- pensation received during a vant tax year. searcher before the date ices for which exemption is specified in paragraph 5. period of two years beginning 2. I am a professor or teacher claimed]. The treaty exemp- on that date only if my visit visiting the United States for 4. Any research I perform will be tion is available only for com- does not exceed 2 years. the purpose of teaching at undertaken in the public inter- pensation received during a [insert the name of est and not primarily for the period of two years beginning the educational institution at private benefit of a specific on that date. In no event have which you teach], which is a person or persons. I claimed an exemption under

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this treaty for income re- 5. I arrived in the United States the period from to teaching or engaging in re- ceived as a teacher or re- on [insert the date ) qualifies for exemp- search at [insert the searcher for more than 5 of your last arrival into the tion from withholding of fed- name of the educational insti- years. United States before begin- eral tax under the tax treaty tution], which is a recognized ning the teaching or research between the United States educational institution. I will services for which exemption and Trinidad and Tobago. I receive compensation for my Thailand is claimed]. The treaty ex- have not previously claimed teaching or research activi- emption is available only for an income tax exemption un- ties. 1. I was a resident of Thailand compensation received dur- der that treaty for income re- on the date of my arrival in the 3. The teaching or research ing a period of 2 years begin- ceived as a teacher, re- United States. I am not a U.S. compensation received dur- ning on that date. searcher, or student before citizen. I have not been law- ing the entire tax year (or dur- the date of my arrival in the fully accorded the privilege of ing the period from to United States. residing permanently in the Trinidad and Tobago ) qualifies for exemp- United States as an immi- 4. Any research I perform will be tion from withholding of fed- grant. 1. I was a resident of Trinidad undertaken in the public inter- eral tax under the tax treaty est and not primarily for the between the United States 2. I am visiting the United States and Tobago on the date of my private benefit of a specific and the United Kingdom. I for the purpose of teaching or arrival in the United States. I person or persons. have not previously claimed engaging in research at am not a U.S. citizen. I have an income tax exemption un- [insert the name of not been lawfully accorded 5. I arrived in the United States der that treaty for income re- the educational or research the privilege of residing per- on [insert the date ceived as a teacher, re- institution at which you teach manently in the United States of your last arrival in the Uni- searcher, or student before or perform research] for a pe- as an immigrant. ted States before beginning the date of my arrival in the riod not exceeding 2 years. I the teaching or research serv- 2. I have accepted an invitation United States. will receive compensation for by the U.S. government, or by ices for which exemption is my teaching or research ac- a university or other educa- claimed]. The treaty exemp- 4. Any research I perform will be tivities. tional institution in the United tion is available only for com- undertaken in the public inter- 3. The compensation received States, to come to the United pensation received during a est and not primarily for the during the entire tax year (or States for the purpose of period of 2 years beginning benefit of any private person during the period from teaching or engaging in re- on that date. or persons. to ) for these activities search at [insert the 5. I arrived in the United States qualifies for exemption from name of the educational insti- United Kingdom on [insert the date withholding of federal tax un- tution], which is an educa- of your last arrival in the Uni- der the tax treaty between the tional institution approved by 1. I was a resident of the United ted States before beginning United States and Thailand. I an appropriate governmental Kingdom on the date of my the teaching or research serv- have not previously claimed education authority. No arrival in the United States. I ices for which exemption is an income tax exemption un- agreement exists between am not a U.S. citizen. I have claimed]. The treaty exemp- der that treaty for income re- the government of the United not been accorded the privi- tion is available only for com- ceived as a teacher, re- States and the government of lege of residing permanently pensation received during a searcher, or student before Trinidad and Tobago for the in the United States as an im- period of 2 years beginning the date of my arrival in the provision of my services. I will migrant. on that date. The entire treaty United States. receive compensation for my exemption is lost retroactively 2. I am a professor or teacher teaching or research serv- if my stay in the United States 4. Any research I perform will be visiting the United States for a ices. exceeds 2 years. undertaken in the public inter- period of not more than 2 est and not primarily for the 3. The teaching or research years for the purpose of benefit of a specific person or compensation received dur- persons. ing the entire tax year (or for

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To help us develop a more useful index, please let us know if you have ideas for index entries. Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Contingent interest 16 Credit for the elderly or the Social security and Medicare 30% Tax 21 Coronavirus 5, 53 disabled 33 taxes 43 Credits 2 Earned income credit 33 Exclusions from gross Credits, Self-employed 31 Education credit 33 income 15 A Family Leave 29, 31 Foreign tax credit 33 Annuities 17 Accuracy-related penalties 37 Foreign earned Income Forms to file 34 Compensation from a foreign Additional Medicare Tax 43, 45 Exclusion 2, 15 Head of household. 33 employer 17 Adoption credit: Medical Travel Exception 2, 42 Income subject to tax 33 Gambling winnings, dog or Dual-status alien 34 Performing Services 3, 18 Joint return 33 horse racing 17 Nonresident alien 31 Self-employed 2, 29, 31 Residency ending date 7 Students and exchange Resident alien 30 Sick Leave 29, 31 Residency starting date 7 visitors 17 Agricultural workers 39, 44 Tax Treaty Benefits 47 Restrictions 33 Treaty income 17, 46 Alien: Travel exception 5 Standard deduction 33 Exempt individual 5 Nonresident 4, 11, 18 What’s New 2 Tax rates 33 Exemption from withholding: Resident 4, 11, 18 COVID-19 2, 3, 5, 15, 18, 42, 47 When and where to file 34 Employees 42 Alien status, employer Medical Condition 3 Independent contractors 42 notification of 39 Performing Services 47 Students, teachers, and Amended returns 37 Retirement funds 14 E researchers 42 American Samoa, residents Credit for the elderly or the Earned income credit: Expatriation tax: of 10, 26, 32 disabled: Dual-status alien 33 Certain dual-citizens 24 Annuities: Dual-status alien 33 Nonresident alien 31 Certain minors 24 Income 17 Resident alien 29 Resident alien 30 Covered expatriate 24 Source rule 14 Credits against tax: Education credits: Deferral of payment of Assistance (See Tax help) Child and dependent care Dual-status alien 33 mark-to-market tax 25 Athletes, professional 6 credit 30, 34 Nonresident alien 30 Exception for dual-citizens and Awards 14 Child tax credit 29, 30, 34 Resident alien 29 certain minors 24 Credit for the elderly or the Effectively connected Exceptions. 24 disabled 33 income 19 Expatriation After June 16, B Dual-status alien 33 Alternative minimum tax 20 2008 23 Basis of property 14 Earned income credit 31, 33 Asset-use test 19 Expatriation date. 23 Beneficiary of estate or trust 18 Education credits 29, 30, 33 Business-activities test 19 Expatriation Tax Return 24 Business, U.S. 18 Excess social security tax Business profits and losses and Former LTR 24 Business expenses, ordinary withheld 31 sales transactions 19 Former U.S. citizen. 23 and necessary 26 Foreign tax credit 30, 33 Direct economic How To Figure the Expatriation Business operations 18 Hope credit 29, 30 relationship 19 Tax If You Are a Covered Lifetime learning credit 29, 30 Disposition of REIT stock. 20 Expatriate (If You Expatriate Retirement savings Domestically controlled After June 16, 2008) 24 C contributions 29, 30, 34 QIE. 20 Long-term resident (LTR) Canada: Tax paid on undistributed Foreign income 21 defined 23 Commuters 4 long-term capital gains 31 Gain or Loss of Foreign Dependents 33 Tax withheld at source 31 Persons from the Sale or Qualifying widow filing Tax withheld on partnership Exchange of Certain F status 26 income 31 Partnership Interests 20 Family Leave credit: Social security benefits 48 Withholding from wages 31 Investment income 19 Cornonavirus 29 Transportation-related Crew members: Look-through rule for QIEs. 20 Self-employed 29 employment 39 Alien status 5 Pensions 19 Fellowship grant: Capital assets, sales or Compensation 17 Publicly traded exception 20 Excludable 17 exchanges 22 Currency, transporting 37 Qualified investment entity 20 Source rule 14 Casualty and theft losses 28 Real property gain or loss 20 Withholding tax 41 Central withholding Real property income Filing requirements 35 agreements 40 D choice 22 Filing returns 25 Charitable contributions 28 Days of presence: Tax on 21 Amended returns 37 Child and dependent care Coronavirus 4 Transportation income 19 Claims for refund 37 credit: Deductions 26, 28 U.S. real property holding Commonwealth of the Northern Dual-status alien 34 De minimis presence 9 corporation 20 Mariana Islands 36 Nonresident alien 30 Dependents: U.S. real property interest 20 Dual-status taxpayer 34 Resident alien 28 Dual-status taxpayer 33 Wash sale 20 Estimated tax 45 Child tax credit: Nonresident alien 27 Withholding of tax 20 Form 1040-C 52 Dual-Staus alien 34 Resident alien 27 Employees, household 39 Form 1040-NR 25, 35 Nonresident alien 30 Depreciable property 14 Employees, withholding Form 1040-NR-EZ 25 Resident alien 29 Diplomats (See Foreign exemption under tax Form 2063 52 Claims for refund 37 government employees) treaty 42 Guam 36 Closer connection 6 Disclosure statement 38 Employer identification Nonresident alien 25 Commodities, trading in 18 Dividends, U.S. source number 26 U.S. Virgin Islands 36 Community income 15 income 12 Estate, beneficiary 18 Who must file 35 Commuters from Canada or Dual-status aliens 7 Estimated tax 38, 45 Filing status 26 Mexico 4 Dual-status tax year 7, 32 Excess social security tax 31 First-year choice 8 Compensation for labor or Child care credit 34 Exchange visitors 44 Fixed or determinable personal services: Computation of tax 33 Income from foreign income 21 Geographical basis 13 employer 17 Foreign country 7

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Foreign earned income Effectively connected 19 Tax withheld at source 31 exclusion: Exclusions 15 M Withholding from partnership COVID-19 relief 15 Fixed or determinable 21 Married filing jointly: income 31 Foreign employer 16, 17 Foreign 21 Nonresident alien 26 Withholding tax 38 Foreign government From real property 22 Resident alien 26 Nonresident alien dependents: employees 49 Income affected by treaties 17 Medical condition: Canada, Mexico. South Korea, Alien status 5 Interest 15 Travel exception 5 Residents of India 27 Exempt from U.S. tax 49 Investment 19 Medicare tax 43 Nonresident spouse treated as Tax treaty exemption 47 Personal services 19 Mexico: a resident 10 Foreign income subject to U.S. Reporting 26 Commuters 4 tax 21 Sale of home 17 Dependents 33 Foreign tax credit: Tip 40 Qualifying widow filing O Dual-status alien 33 Income code: status 26 Obligations: Nonresident alien 30 28 22 Transportation-related Not in registered form 16 Resident alien 28 Income from U.S. sources 11 employment 39 Registered 16 Form 8833 7 Dividends 12 Monetary instruments, Original issue discount 21 Form 8840 7 Interest 11 transporting 37 Forms 6 Pensions and annuities 14 Moving expenses 27 1040-C 52 Personal property 14 Services or reimbursements P 1040-ES(NR) 45 Personal services 12 provided by government to Partnership Income, tax 1040-NR 35 Real property 14 members of the U.S. Armed withheld on 41 1040-X 37 Rents or royalties 14 Forces 27 Partnerships 18 1042-S 42 Independent contractors: Multi-level marketing 12, 40 Payment against U.S. tax 34 1116 28, 30, 33 Withholding exemption under Municipal bonds 15 Tax withheld at the source 31 2063 52 tax treaty 42 Withholding from wages 31 2210 46 Withholding rules 40 Penalties 37 3903 27 India, students and business N Accuracy-related 37 4563 32 apprentices from: National of the United States 33 Failure to file 37 4790 (See FinCEN 105) Standard deduction 28 Natural resources (See Real Failure to pay 37 8233 42 Withholding allowances 39 property) Failure to supply taxpayer 8275 38 Individual retirement Non-registered obligations 16 identification number 38 8288 43 arrangement (IRA) 27 Nonresident alien 4 Fraud 38 8288-A 43 Individual taxpayer Annuity income 17 Frivolous tax submission 38 8288-B 43 identification number Business expenses 26 Negligence 37 8801 31 (ITIN) 25 Casualty and theft losses 28 Substantial understatement of 8805 41, 42 Intangible property 14 Charitable contributions 28 income tax 38 8833 47 Interest: Child care credit 30 Penalty for failure to pay 8843 6 Portfolio 15, 16 Child tax credit and the estimated income tax 46 FinCEN 105 37 Interest income: additional child tax Penalty on early withdrawal of W-4 39, 41 Contingent 16 credit 30 savings 27 W-7 25 Excludable 15 Credit for excess social security Pensions: W-8BEN 42 Source rule 11 tax withheld 31 COVID-19 relief 14 W-8ECI 40 International organization Credit for income tax Disaster tax relief 14 W-9 39 employees 50 withheld 31 Source rule 14 Forms to file: Alien status 5 Credit for other dependents 31 Withholding on 40 Dual-status alien 34 Exempt from U.S. tax 49 Credit for prior-year minimum Personal property 14 Nonresident aliens 35 International social security tax 31 Personal services income: Resident alien 35 agreements 45 Defined 4 Connected with U.S. Sailing permits 51 Interrupted period of Earned income credit 31 business 19 Frequently Asked Questions 55 residence 23 Education credits 30 Paid by foreign employer 16 Inventory 14 Effectively connected income, Source rule 12 Investment income 19 tax on 21 Tax treaty exemption 47 G Itemized deductions 28 Filing Form 1040-NR 25 Withholding on wages 39 Gambling winnings, dog or Filing Form 1040-NR-EZ 25 Portfolio interest 15, 16 horse racing 17 Foreign tax credit 30 Prizes 14 German social security K Gambling winnings, dog or Professional athletes 6 benefits 48 Korea, South: horse racing 17 Property: Green card test 4 Dependents 33 Head of household 26 Depreciable 14 Married filing separately 26 How income is taxed 18 Intangible 14 Qualifying widow filing Individual retirement Inventory 14 H status 26 arrangement (IRA) 27 Personal 14 Head of household: Interest income 11 Real 14, 20 Nonresident alien 26 Losses 27 Protective return 36 Resident alien 26 L Married filing jointly 26 Publications (See Tax help) Home, sale of 17 Last year of residency 9 Qualified business income Puerto Rico, residents of 10, Household employees 39 Long-term U.S. resident: deduction. 27 26, 32, 40 Defined 23 Qualifying widow(er) 26 Expatriation tax 23 Standard deduction 28 I Losses: State and local income Q Identification number, taxpayer: Capital Assets 22 taxes 28 Qualified business income Defined 25 Casualty and theft 28 Students 44 deduction. 27 Penalty for failure to supply 38 Of nonresident aliens 27 Tax paid on undistributed Income: Real property 20 long-term capital gains 31 Community 15

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When and Where To Get a Students and business Transportation income: R Sailing or Departure apprentices from India 28, Connected with U.S. Railroad retirement Permit. 51 39 business 19 benefits 22, 33 Salary (See Personal services Substantial presence test 4 Source rule 13 Real estate (See Real property) income) Transportation of currency or Real property: Sale of home, income from 17 monetary instruments 37 Definition 14 Sales or exchanges, capital T Transportation-related Income from 22 assets 22 Tax, transportation 23 employment, residents of Natural resources 14 Scholarship: Tax credits and payments: Canada or Mexico 39 Sale or exchange of 20 Excludable 17 Nonresident aliens 30 Transportation tax 23 Source rule 14 Source rule 14 Resident aliens 28 Treaties, income affected by 17 Tax withheld on sale of 42 Withholding tax 41 Tax help 52 Treaty benefits, reporting Real property income 21 Securities, trading in 18 Tax home 7, 14 benefits claimed 48 Refunds, claims for 37 Self-employed retirement Tax paid on undistributed Treaty benefits for resident Registered obligations 16 plans 27 long-term capital gains 31 aliens 47 Rents 14 Self-employment tax 44 Taxpayer identification number: Trust, beneficiary 18 Researchers, wage withholding Sick Leave credit: Defined 25 exemption under tax Coronavirus 29 Penalty for failure to supply 38 treaty 42, 61 Social security benefits: Tax Treaties: U Residence, interrupted 23 Dual-status alien 33 Tax treaties: U.S. Armed Forces: Residency: Nonresident alien 22 Benefits 46, 47 Moving expenses 27 First year 7 Social security number 25 Capital gains 47 U.S. national 33 Last year 9 Social security tax: Effect of 7 U.S. Virgin Islands, residents of: Starting date 8 Credit for excess tax Employees of foreign Where to file 36 Termination date 9 withheld 43 governments 47 U.S Virgin Islands, residents of: Tests 4 Excess withheld 31 Exclusions from income 17 Withholding on wages 40 Resident alien 4 Foreign students and exchange Income affected by 17 Child tax credit 34 visitors 43 Income entitled to benefits 42 Child tax credit and the International agreements 45 Reporting benefits claimed 48 W additional child tax Self-employment tax 44 Teachers and professors 47 Wages (See Personal services credit 29 Totalization agreements 45 Trainees, students, and income) Credit for other dependents 30 Withheld in error 44 apprentices 47 Wages, withholding on 39 Defined 4 Source of compensation for Tax withheld on gain from the Wages exempt from Education credits 29 labor or personal services: sale or exchange of certain withholding 39 Head of household 26 Alternative basis 13 partnership interests 32 Waiver of filing deadline 36 Married filing jointly 26 Multi-year compensation 12 Tax year 25, 32 When to file 36 Qualifying widow(er) 26 Time basis 12 Teachers: Where to file 36 Resident aliens: Source of income 11 Alien status 6 Who must file 35 Dependents 27 Standard deduction 28 Tax treaty exemption 47 Withholding 38, 41 Resident alien status, State and local income Wage withholding exemption Withholding tax: choosing 9 taxes 28 under tax treaty 42, 61 Central withholding Retirement savings Stocks, trading in 18 Tie-breaker rule 7 agreements 40 contributions credit: Student loan interest Tip income 40 Notification of alien status 39 Dual-status alien 34 deduction 27 Totalization agreements 45 Pensions 40 Nonresident alien 30 Students: Trade or business, U.S. 18 Puerto Rico, residents of 40 Resident alien 29 Alien status 6 Beneficiary of estate or Real property sales 42 Royalties 14 Engaged in U.S. business 18 trust 18 Scholarships and grants 41 Fellowship grant 14, 41 Business operations 18 Social security taxes 43 Income from foreign Coronavirus relief 18 Tax treaty benefits 42 S employer 17 Income from U.S. sources 19 Tip income 40 Sailing permits, departing Scholarship 14, 41 Partnerships 18 U.S. Virgin Islands, residents aliens: Social security and Medicare Personal services 18 of 40 Aliens not requiring 50 taxes 43 Students and trainees 18 Wages 39 Bond furnished, insuring tax Tax treaty exemption 47 Trading in stocks, securities, Wages exempt from 39 payment 52 Wage withholding exemption and commodities 18 Where to report on the Form 1040-C 52 under tax treaty 42, 57 Trading in stocks, securities, return 31 Form 2063 52 and commodities 18 Withholding from Forms to file 51 Trainees 6, 18 compensation 39

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