Who Needs to File Form 1040-NR? | US Nonresident Tax

Who Needs to File a Form 1040-NR? A Plain-English Guide for Non-US Citizens with American Income

Every year, a familiar type of letter lands on desks in London, Zurich, Dubai and Madrid. It is from the Internal Revenue Service, it is addressed to somebody who has never lived in the United States, and it concerns a tax return they did not know existed.

The return is Form 1040-NR, the US Nonresident Alien Income Tax Return. It is the filing that connects a person who is not American, and does not live in America, to the American tax system. If you own a condominium in Florida, hold shares in a US brokerage account, receive royalties from a US publisher, are a partner in a Delaware LLC, won money in Las Vegas, inherited a US retirement account, or spent a stretch of working days in New York, this form may already be your responsibility.

This guide sets out, precisely and without jargon, who needs to file a Form 1040-NR, who genuinely does not, what the deadlines are, and what it costs to get it wrong. It is written from the perspective of a practice that files these returns every week for clients across the United Kingdom, Europe, and the Gulf.

What Form 1040-NR Actually Is

Form 1040-NR is the US federal income tax return used by individuals who are not US citizens and who are not treated as US tax residents, but who have a US filing obligation. It reports two very different categories of income under one cover: income that is effectively connected with a US trade or business, which is taxed at graduated rates after deductions, and US-source investment income, which is generally taxed at a flat rate on the gross amount with no deductions at all.

That split is the single most important structural fact about the form, and it explains most of the outcomes that surprise people. Two individuals can receive exactly the same amount of money from the same American property and pay wildly different amounts of tax, purely because one made an election and the other did not.

It is also worth saying what the form is not. It is not a return for US citizens living abroad, who file Form 1040 wherever in the world they live. It is not a substitute for a UK Self Assessment return or a European domestic filing; it sits alongside them, and the interaction between the two is where planning either saves money or fails to. And it is not optional simply because tax was already withheld at source.

Before You Ask “Do I File”, Ask “Am I a Nonresident”

The 1040-NR is for nonresident aliens. So the first question is a status question, and it is answered by rules, not by feelings, passports, or where you consider home to be.

You are a US tax resident, and therefore file Form 1040 rather than 1040-NR, if you meet either of two tests.

The green card test

If you are a lawful permanent resident of the United States at any time during the calendar year, you are a US tax resident. This holds even if you have not set foot in the country for years. A green card that has been quietly ignored does not quietly expire for tax purposes; it must be formally abandoned. A great many people who left the United States a decade ago and assumed the matter closed are still, in the eyes of the IRS, filing Form 1040 on their worldwide income.

The substantial presence test

This is the one that catches business travellers. You are treated as a US tax resident for a calendar year if you were physically present in the United States for at least 31 days in the current year, and for a total of at least 183 days over a three-year window, counted as follows:

• every day of presence in the current year counts as a full day

• every day of presence in the first preceding year counts as one third of a day

• every day of presence in the second preceding year counts as one sixth of a day

An example makes it concrete. A Dubai-based executive spends 130 days in the United States in 2026, 120 days in 2025 and 120 days in 2024. The calculation is 130 + 40 + 20, which equals 190 days. That exceeds 183, and she is a US tax resident for 2026, taxable on her worldwide income, despite never having held a visa allowing her to live there.

Three important takeaways from that result exist:

Exempt individuals. Days of presence are not counted at all for certain people: students on F, J, M or Q visas within their first five calendar years, teachers and trainees on J or Q visas within two of the preceding six years, professional athletes competing in charitable sports events, and individuals holding a diplomatic or consular status. These individuals are not exempt from tax; they are exempt from day-counting. Most of them must still file Form 8843 each year to claim the exclusion, even where they have no income at all.

The closer connection exception. If you were present for fewer than 183 days in the current year alone, maintained a tax home in another country, and had a closer connection to that country, you may remain a nonresident by filing Form 8840. This is a claim that must be made; it does not apply automatically.

The treaty tie-breaker. Where you are resident in both the United States and a treaty country under domestic rules, the residence article of the treaty resolves it by reference to permanent home, centre of vital interests, habitual abode and nationality. A treaty tie-breaker position is disclosed on Form 8833 and filed with a 1040-NR.

There is also a middle category. If you become or cease to be a US resident partway through the year, you file a dual-status return, which is a 1040 and a 1040-NR working together for the two parts of the year. Dual-status returns cannot be filed electronically and cannot use the standard deduction, and the ordering of elections in the year of arrival or departure is one of the more consequential planning points in this area.

Who Needs to File a Form 1040-NR

Assuming you are a nonresident, you must file a Form 1040-NR if any of the following apply. This is the practical list, in the order we see it in practice.

1. You were engaged in a US trade or business

If you carried on a trade or business in the United States at any point during the year, you must file, and the obligation stands even if you made no profit, made a loss, or had no US-source income at all in that year. This is the broadest category on the list and the most commonly overlooked. Performing services in the United States, operating through a US partnership or a US LLC treated as a partnership, or running an American business through an agent can all put you inside it.

2. You own US rental property

Rent from American real estate is, by default, taxed at a flat 30 per cent on the gross rent received, with no deduction for mortgage interest, property taxes, insurance, agent’s fees, repairs or depreciation. That default is punitive, and almost nobody should accept it. By making an election under section 871(d), you elect to treat the rental as income effectively connected with a US trade or business, which allows the full schedule of deductions and graduated rates. In a typical case, the difference is the difference between a tax bill and a tax refund. Anyone acting as a foreign landlord with a US rental property should confirm that the election is on file before the second year of ownership, not after.

3. You sold, or are selling, US real estate

The Foreign Investment in Real Property Tax Act, universally called FIRPTA, requires the buyer to withhold a percentage of the gross sale price when the seller is a foreign person. Note the word gross. The withholding is calculated on the sale price, not on the profit, so it is entirely possible to sell a property at a loss and still have a substantial sum sent to the IRS.

Sale price	Buyer will use the property as a residence	Standard rate
Up to USD 300,000	Exempt from withholding	15 per cent
USD 300,001 to USD 1,000,000	10 per cent	15 per cent
Over USD 1,000,000	15 per cent	15 per cent

The withheld amount is not the tax. It is a deposit against the tax. The actual liability is computed on the 1040-NR, and any excess is refunded. Where the expected liability is clearly lower than the withholding, an application for a withholding certificate on Form 8288-B can be made before or at closing to reduce the amount withheld in the first place, which is far better than lending the money to the IRS for eighteen months. The rules on FIRPTA withholding exceptions and Form 8288-B reward early advice; once the closing has happened, the options narrow considerably. Our dedicated guidance on FIRPTA and the sale of US property sets out the process end to end.

4. You received a Form 1042-S

Form 1042-S is the statement issued by an American payer showing US-source income paid to a foreign person and the tax withheld from it. If one has arrived, the US system has your name on file. Dividends, interest, royalties, scholarship and fellowship grants, prize money, honoraria, pension distributions and payments for services all travel on this form.

Withholding at 30 per cent is the default, and it is frequently more than the correct amount, either because a treaty rate applies or because the payer had no valid Form W-8BEN on file and applied the maximum. A 1040-NR is how the excess comes back. The mechanics of Form 1042-S withholding and the section 871(d) election are worth understanding before the next payment date, because prevention through a correctly completed W-8BEN is cheaper than recovery.

5. You are a foreign partner in a US partnership or LLC

If you hold an interest in a US partnership, LLP or multi-member LLC that carries on a US trade or business, the partnership is required to withhold tax on your allocable share of effectively connected income and report it on Form 8805. You will receive a Schedule K-1. You are engaged in a US trade or business through the partnership, and a 1040-NR is required. The K-1 arriving in August, long after the deadline, is one of the most common reasons nonresident partners fall into late filing.

6. You performed services in the United States

Wages, salary, director’s fees, consultancy income, honoraria and appearance fees for work physically performed on US soil are US-source income regardless of where the payer sits or where the money is paid. Treaty relief may apply, and there is a narrow de minimis exception for very small amounts of compensation, but the starting position for the visiting consultant, the speaker at a Boston conference, and the non-executive director attending US board meetings is that a filing obligation exists.

Athletes and entertainers sit in a category of their own. Appearance income, prize money, endorsement income attributable to US performances and image rights are all within the American net, often subject to central withholding agreements, and the relevant treaty article is usually a narrow one that does not exempt them.

7. You are an airline pilot, a seafarer or work in international transport

Crew members are a specialist case with genuinely favourable rules in some circumstances and hard traps in others, particularly around days of presence, the source of compensation for international flights and voyages, and the interaction with the substantial presence test. Anyone flying or sailing to and from the United States regularly should have their position reviewed rather than assumed.

8. You are a student, scholar, researcher or trainee

Students and academics on F, J, M and Q visas are nonresidents for a defined number of years, and while they usually owe little or no tax, the filing obligations are real. Form 8843 is required even with no income. Where there is income, a 1040-NR is generally required, and treaty articles covering students, teachers, and researchers can exempt part or all of it. Getting this right early matters more than it looks, because a wrongly filed Form 1040 in a student’s first year creates a residency claim that has to be unwound.

9. You are reclaiming US tax that was over-withheld

This is the largest single category of clients who come to us not because they must file, but because filing pays. If 30 per cent was deducted from a payment that a treaty says should have been taxed at 15 per cent, nil, or not at all, the only way to recover the difference is to file a 1040-NR and claim it. That covers casino and gambling winnings for residents of treaty countries such as the United Kingdom, royalties for authors and musicians, pension and annuity payments, income from unclaimed property, and dividends where a broker applied the statutory rate. To reclaim tax withheld on a Form 1042-S, 8288-A or 1099 you will need a US taxpayer identification number, which brings us to the ITIN question below.

10. You inherited or received a distribution from a US retirement plan or estate

Beneficiaries of a 401(k), an IRA or a US trust or estate are frequently nonresidents who have never had any other American connection. The plan administrator withholds, the beneficiary receives a net figure, and the correct treaty treatment is often materially better than what was applied. The US and UK treaty, for example, treats periodic pension payments and lump sums differently from one another, and the difference is not intuitive.

11. You owe a special US tax or had insufficient withholding

The catch-all: alternative minimum tax, tax on an early distribution from a retirement plan, household employment taxes, recapture provisions, or simply US-source income from which nothing was withheld. Where tax is owed and not collected at source, a return is required.

12. You are the nonresident spouse of a US citizen or resident

There is no filing requirement here in the abstract, but there is a decision to make. A US person married to a nonresident may elect under section 6013(g) to treat the nonresident spouse as a US resident and file jointly, which brings that spouse’s worldwide income into the US net in exchange for joint rates. Whether that election helps or harms depends entirely on the couple’s circumstances, and it requires the nonresident spouse to hold an ITIN. It is an election that is easy to make and awkward to revoke.

13. You are a former US citizen or long-term green card holder

Expatriation does not end the relationship cleanly. In the year of expatriation a dual-status filing is usually required, Form 8854 must be filed, and where the individual is a covered expatriate the exit tax applies. In later years, continuing US-source income means continuing 1040-NR obligations.

Who Does Not Need to File

Fewer people than expected. The genuine exclusions are narrow:

• A nonresident student, teacher, or trainee temporarily present on an F, J, M, or Q visa whose only US income is not taxable under section 871. Form 8843 is still required.

• A nonresident whose only US-source income is investment income on which the correct amount of tax was fully withheld at source, and who has no other filing trigger. Note the two conditions: fully withheld, and correct.

• A nonresident with interest on a US bank deposit, or qualifying portfolio interest, which is exempt from US tax by statute.

• A nonresident partner whose only US income is reportable on Schedule NEC and was fully withheld against.

• A nonresident holding US shares whose only gain is a capital gain on securities, where the individual was present in the United States for fewer than 183 days in the year and the gain is not effectively connected with a US business. Capital gains on US stocks are generally outside the US net for nonresidents. Dividends from those same stocks are not.

The trap sitting inside the second exclusion is worth stating plainly. “Fully withheld” and “correctly withheld” are different tests, and a person who was over-withheld has no obligation to file but every financial reason to. A person who was under-withheld has an obligation and often does not know it.

The Deadlines

Situation	Deadline for the 2025 tax year	Deadline for the 2026 tax year
You received wages subject to US income tax withholding	15 April 2026	15 April 2027
You did not receive wages subject to US withholding	15 June 2026	15 June 2027
Extended deadline, where the original date was 15 April	15 October 2026	15 October 2027
Extended deadline, where the original date was 15 June	15 December 2026	15 December 2027
Estimated tax payments, where required	Quarterly on Form 1040-ES (NR)	Quarterly on Form 1040-ES (NR)

The extension is requested on Form 4868 and must be filed by the original due date. It extends the time to file, never the time to pay; interest and late-payment penalties run from the original date on any unpaid balance.

Two timing points matter more than the deadlines themselves. First, a Form 8288-B application to reduce FIRPTA withholding must be made no later than the date of closing, so the planning window opens when the property goes on the market, not when the completion statement arrives. Second, a refund claim generally has a three-year life. A 1042-S from four years ago is usually a closed matter, and every filing season we see clients discover this a few months too late.

How the Tax Is Actually Calculated

	Effectively connected income	Income not effectively connected
What it covers	US business profits, wages for US work, elected rental income, gains on US real property	Dividends, interest, royalties, rents without an election, prizes, gambling, some pensions
Tax rate	Graduated rates, same brackets as US residents	Flat 30 per cent, or lower treaty rate
Deductions	Allowed against the income	None whatsoever
Reported on	Main body of Form 1040-NR	Schedule NEC
Collection	Payment with the return, or estimated payments	Withheld at source by the payer

The practical lesson is that moving income from the right-hand column to the left-hand one, where the law permits it, is usually the largest single lever available. The section 871(d) election for rental income is the clearest example, but it is not the only one.

Deductions, Credits and the Things You Cannot Claim

Nonresidents cannot take the standard deduction. The only exception, long-standing and specific, is for students and business apprentices from India, who may claim it under Article 21(2) of the US and India treaty; for the 2025 tax year that figure is USD 15,750 for a single filer.

Itemised deductions on Schedule A of the 1040-NR are restricted to state and local income taxes, charitable contributions to US organisations, casualty and theft losses arising in a federally declared disaster area, and a short list of other items. Filing status is limited to single, married filing separately, or qualifying surviving spouse; head of household is not available, and married filing jointly is available only through the elections mentioned earlier. The earned income tax credit is not available. Child-related credits are available only in narrow circumstances and depend on the child’s own status and identification number.

Against that, the deductions attaching to effectively connected income are generous and are the reason the elections matter. A US rental property with a mortgage, depreciation and running costs frequently produces a taxable loss on a properly prepared return, and those losses carry forward against future US rental profits and against the eventual gain on sale.

Treaties: Why Your Country of Residence Changes the Answer

The United States has income tax treaties with more than sixty countries, and the treaty is often worth more than any planning done after the fact.

For United Kingdom residents, the treaty reduces the rate on portfolio dividends to 15 per cent, generally eliminates US tax on interest and royalties, allocates most pension income to the country of residence, and, through the other income article, removes US tax on gambling winnings altogether. That last point alone is the reason a great many British visitors to Las Vegas file a 1040-NR.

For residents of Ireland, Germany, France, the Netherlands, Spain, Italy, Switzerland, Luxembourg, Belgium, Sweden, Denmark, Norway, Finland, Austria and Portugal, comparable treaties exist with rates and conditions that vary article by article. The differences are not academic. The withholding rate on a dividend, the treatment of a lump sum from a pension plan and the availability of relief for a short business trip all turn on the specific text.

For residents of the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Bahrain, Oman and Monaco, there is no US income tax treaty at all. This is the single most important fact for Gulf-based investors and it is routinely misunderstood. A UAE resident receiving US dividends pays the full 30 per cent with no treaty reduction available, however low their domestic tax rate may be. Structuring, the choice of investment vehicle, the location of the assets and the use of effectively connected treatment are therefore doing all of the work that a treaty would otherwise do.

Where a treaty position is taken, it is disclosed on Schedule OI of the return and, in most cases, on Form 8833. Undisclosed treaty positions carry their own penalty.

What It Costs to Get It Wrong

The late filing penalty is 5 per cent of the unpaid tax for each month or part month the return is late, capped at 25 per cent, with a minimum penalty applying where the return is more than 60 days late. The late payment penalty is 0.5 per cent per month, and interest runs on both.

There is a harsher rule specific to nonresidents, and it deserves more attention than it gets. Deductions and credits are allowed to a nonresident only if a true and accurate return is filed, and the regulations set a window of roughly sixteen months from the due date. Miss it, and the IRS can assess tax on gross income with no deductions at all. For a landlord with a mortgaged property, that turns a loss-making rental into a 30 per cent tax charge on gross rents. It is the most expensive avoidable outcome in this entire area of tax.

Two further consequences are worth noting. An unfiled 1040-NR keeps the statute of limitations open indefinitely, so the exposure never ages out. And a refund not claimed within three years is simply gone.

Where a return has already been filed, and the position was wrong, it is usually possible to amend it on Form 1040-X rather than leave the error standing.

The ITIN Question

Almost none of this works without a US taxpayer identification number. A nonresident who is not eligible for a Social Security Number needs an Individual Taxpayer Identification Number, obtained on Form W-7, and the IRS will not process a 1040-NR, a FIRPTA refund claim or a treaty-based reclaim without one.

The obstacle is documentary. The IRS requires either the original passport or a copy certified by the issuing authority, and posting an original passport to Austin, Texas for several months is not an acceptable proposition for most people. There are three legitimate ways to satisfy the requirement:

1. Certification by your national passport issuing authority. In the United Kingdom, this means a certified copy obtained through His Majesty’s Passport Office. Equivalent routes exist across Europe and the Gulf.

2. Certification at a US Embassy or Consulate. Available in most countries by appointment, for a fee.

3. Verification by an IRS Certifying Acceptance Agent, who is authorised to inspect the passport in person or by approved video interview and certify it to the IRS, so the document never leaves your possession.

Our own IRS Acceptance Agent agreement is currently in an administrative renewal and regulatory transition phase, and we therefore do not sign Forms W-7 as an acceptance agent at present. That changes nothing about the substance of the work we do on an ITIN, which is where applications are actually won or lost: establishing the correct exception category, evidencing it properly, completing the W-7 without the errors that trigger a CP567 rejection, and pairing the application with the right tax return. Our ITIN preparation and advisory service runs on two pathways. Under the first, we audit your documents, prepare the application and you obtain certification yourself through your passport authority or a US Embassy and submit it. Under the second, we do identical preparation work and then introduce you to a fully active Certifying Acceptance Agent within our professional network who handles the identity verification and submission, so you still get an end-to-end service. Our ITIN expert service page sets out what each pathway involves.

Two operational points. An ITIN that is not used on a federal return at least once in three consecutive years expires, and expired ITINs cause refunds to be held and returns to be treated as incomplete. And a W-7 filed with the tax return, rather than separately, is usually the correct route for a first-time applicant with a filing obligation.

Two Points for 2026 Specifically

The remittance transfer excise tax. From 1 January 2026, a 1 per cent federal excise tax applies to certain remittance transfers sent from the United States, where the transfer is funded with cash, a money order, a cashier’s cheque or similar physical instruments. Transfers funded from a US bank account or by a US-issued debit or credit card are outside it. The tax is collected by the transfer provider. It is not an income tax and does not appear on the 1040-NR, but it changes the arithmetic for anyone routinely moving funds out of the United States and it is worth reviewing how those transfers are funded.

The estate tax threshold. This one belongs in every conversation with a European or Gulf investor holding US assets. A nonresident who is not domiciled in the United States has an exemption of just USD 60,000 against US estate tax on US-situs assets, against rates rising to 40 per cent. US-situs assets include US real estate and shares in US corporations, and shares held through a foreign brokerage account are still US-situs. A UK investor with USD 800,000 of Apple and Microsoft stock has an exposure that most of them have never been told about. The US and UK estate and gift tax treaty provides meaningful relief for UK-domiciled individuals; the Gulf states have no such treaty. The planning is straightforward when done in advance and impossible afterwards.

How We Handle 1040-NR Engagements

Tax and Accounting Hub is a UK-registered practice led by Kader Ameen, an IRS Enrolled Agent and member of the Association of Accounting Technicians, with more than two decades in US and UK personal taxation including eleven years at Ernst & Young. An Enrolled Agent is licensed by the US Treasury and admitted to practise before the Internal Revenue Service on the same footing as a US attorney or CPA, which means we can represent you before the IRS directly. We work from UK offices with colleagues and partners in India, Singapore, the United Arab Emirates, Qatar, Saudi Arabia and Belgium.

A typical engagement runs as follows:

1. A short scoping call, at no charge, to establish whether a filing obligation exists and which years are open.

2. A fixed fee quotation before any work begins. No hourly billing surprises.

3. ITIN advisory and Form W-7 preparation, with document certification handled either by you through your passport authority or a US Embassy, or by a fully active Certifying Acceptance Agent in our partner network.

4. Preparation of the Form 1040-NR with the correct elections, treaty positions and disclosures, and any state return required.

5. Filing, IRS correspondence handling, and refund tracking through to the money arriving.

6. A forward-looking note on what to do differently next year, including W-8BEN positioning and, where relevant, estate tax exposure.

We act for private individuals and for businesses. On the B2B side we work regularly with UK and European accountancy practices, family offices, wealth managers, immigration solicitors, US real estate agents and relocation firms who need a US-qualified partner for their nonresident clients but do not want to hand over the relationship. White-label and referral arrangements are both available.

If you have received an IRS notice, a Form 1042-S, a Form 8288-A, or a Schedule K-1 and are not sure what it means, speak to our team. Our US and UK personal tax service covers both sides of the Atlantic, which matters because the credit position in your home country is part of the same problem.

Telephone +44 (0)20 8221 1154 or +44 (0)1234 607151. Email info@taxandaccountinghub.com. Offices at 11 Holbeach Avenue, Shortstown, Bedford MK42 0EG, United Kingdom.