Form 1040-NR is the return filed by a nonresident alien. It is not a simplified version of Form 1040 and it is not an alternative you may choose between. Which form you file is decided by your residency status for tax purposes, and that is settled before you pick up either one.
The differences are not cosmetic. A 1040-NR taxes a different set of income, allows a much narrower set of deductions, restricts filing status, and in many cases is not even due on the same date.
Which form, decided by status and not by visa
You file a Form 1040 if you are a resident for tax purposes, and a Form 1040-NR if you are a nonresident. That status comes from the green card test and the substantial presence test, not from what visa you hold, and it is worked through in resident, nonresident, or dual status in your first year.
Settle that question first. Everything below follows from it, and choosing a form before you have answered it is how people end up amending.
Two kinds of income, taxed two different ways
A resident is taxed on worldwide income at graduated rates. A nonresident is generally taxed only on US source income, and that income is split into two categories that behave very differently.
Effectively connected income is income connected with a US trade or business, which for most people means wages or self employment earnings. It is taxed at the same graduated rates that apply to citizens and residents, and deductions can be taken against it.
FDAP income is fixed or determinable annual or periodical income, which in practice usually means dividends, interest, and royalties. It is taxed at a flat 30 percent, or a lower rate if a treaty provides one, and no deductions are allowed against it at all. It is reported on Schedule NEC rather than in the main body of the return.
That second category surprises people. A nonresident with US dividends does not net anything off them and does not get graduated rates on them. Thirty percent, or whatever the treaty says, on the gross.
No standard deduction, with one exception that matters
A nonresident filing Form 1040-NR cannot claim the standard deduction. Deductions have to be itemised if they are to be claimed at all, and the itemised deductions available on a 1040-NR are themselves narrower than those on a 1040.
This is usually the largest single difference in money terms, and it is why somebody who filed a 1040 in error and then corrects it sees their refund shrink sharply.
The exception is important here and is missed constantly. Students and business apprentices eligible for the benefits of Article 21(2) of the United States to India income tax treaty can claim a standard deduction on a Form 1040-NR. It is a genuine treaty entitlement. If it applies to you, it is worth confirming before you file, because it is the difference between the ordinary nonresident outcome and something much closer to a resident one. The amount is an annual figure, so take it from the current instructions rather than from any article about it, including this one.
Filing status is restricted
A nonresident filing Form 1040-NR cannot use married filing jointly, and cannot use head of household. A married nonresident files as married filing separately.
For a married couple who both arrived recently, this is often the second largest difference after the standard deduction, because separate filing is generally the least favourable treatment available. Elections exist in some circumstances that allow a nonresident spouse to be treated as a resident, but they are elections with consequences, including bringing worldwide income into charge, and they are not a default.
Credits are limited, and by country
Most of the credits a resident takes for granted are unavailable or restricted on a 1040-NR. The instructions are explicit that certain benefits are available in full only to residents of Canada and Mexico, and to a limited extent to residents of India and South Korea.
So the answer to whether a given credit is available is frequently “it depends which country you are a resident of”, which is not how credits work on a 1040 and is not something people expect to have to ask.
The deadline is not always April
This catches people every year, in both directions.
- If you were an employee receiving wages subject to US income tax withholding, or you had an office or place of business in the United States, the return is due on the 15th day of the 4th month after the tax year ends. For a calendar year, that is generally 15 April.
- If neither applies, the return is due on the 15th day of the 6th month. For a calendar year, that is generally 15 June.
A student with no US wages, filing because of investment income or to claim a refund, is generally on the June date. Somebody who worked on campus with tax withheld from their pay is on the April one.
Assuming April when June applies is harmless. Assuming June when April applies is not.
Why the wrong form gets filed so often
The most common route to a wrong return is not carelessness, it is software.
Consumer filing products are built for residents. Most of them default to a Form 1040 and either do not ask the residency question at all or ask it in a way that is easy to answer wrongly. A student enters their details, the software produces a 1040, the refund looks generous because it includes a standard deduction they were never entitled to, and nothing flags it.
The refund is the tell. If a nonresident’s refund looks like a resident’s refund, the wrong form has probably been filed.
Fixing it
If a Form 1040 was filed when a Form 1040-NR was owed, the fix is an amended return, and it is worth doing promptly rather than waiting to be contacted. The correction usually means repaying part of what was refunded, and the amount does not improve with time.
Filing correctly late is a better position than filing incorrectly on time, and a correction you initiate is a better position than one that starts with a letter.
Before you file
Settle residency, then choose the form. Check whether the India treaty standard deduction applies to you. Work out which of the two deadlines you are on. If you are an exempt individual, Form 8843 is filed as well, and it is filed even in a year with no income and no other return due.
If you want the residency determination made properly and the right return prepared the first time, that is where the international work starts.