Last Updated : January 14, 2009
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Form 1040-NR

U.S. Nonresident Alien Income Tax Return

Taxpayer can use Form 1040NR, if any of the following apply;

  1. Taxpayer was a nonresident alien engaged in a trade or business in the United States during Current year. Taxpayer must file the return, even if…
    • Taxpayer has no income from trade or business conducted in the U.S.
    • Taxpayer has no U.S. source income, or
    • Taxpayer’s income is exempt from U.S. tax under a tax treaty or any section of the Internal Revenue Code.

  2. Taxpayer were a nonresident alien not engaged in a trade or business in the United States during 2006 and;
    • Taxpayer received income from U.S. sources that is reportable on Non Resident Alien return.
    • Not all of the U.S. tax that taxpayer owe was withheld from that income.

  3. Any person represents a deceased person who would have had to file form 1040NR.
  4. Any Person represents an estate or trust that has to file form 1040NR

However, you need not to file Form 1040NR, if;

  1. You only U.S. trade or business was the performance of personal services, and
    • Your wages were less than $3,300; and
    • You have no other need to file a return to claim a refund of over-withheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty, or

  2. Taxpayer was a nonresident alien student, teacher, or trainee who was temporarily present in the United States under “F, J, M, or Q” visa, and you have no income that is subject to tax under section 871.

Dual-Status Tax Year:
A dual-status is one in which taxpayer change status between nonresident and resident alien. Different U.S. income tax rules apply to each status.

Most dual status years are the years of arrival or departure. Before you arrive in the U.S., you are a nonresident alien. After you arrive, may or may not be a resident depending on the circumstances.

If you become a U.S. resident, you stay a resident until you leave the U.S. You may become a nonresident alien when you leave if. After leaving and for the remainder of the calendar year of your departure, you have a closer connection to a foreign country than to U.S., and, during the next calendar year, you are not a U.S. resident under either the green card test or the substantial presence test.

Restrictions for Dual-Status Taxpayer:

Standard Deduction: Taxpayer cannot take the standard deduction even for the part of the year he/she was a resident alien.

Head of Household: Taxpayer cannot use the Head of Household Tax Table column of Section D of the Tax Computation Worksheet.

Joint Return: Taxpayer cannot file a joint return unless you elect to be taxed as a resident alien in lieu of these dual-status taxpayer rules.

Deduction for Exemptions: As a dual-status taxpayer, he/she usually will be entitled to own personal exemption. Subject to the general rules for qualification, taxpayer is allowed exemptions for his/her spouse and dependent in figuring taxable income for the part of the year taxpayer was a resident alien.

Tax Credits: Taxpayer filing Form 1040NR, cannot take the following credit

    • Earned income credit,
    • Credit for elderly of disabled,
    • An education credit unless taxpayer elect to be taxed as a resident alien.

Name, Address & SSN of Taxpayer & Spouse:
Enter this information on General information sheet, and program will flow all this information at here.

Check if Individual or Estate/trust:
The checkbox for Individual is checked by default, as program does not support calculation for Estate or trust.

Filing Status and Exemptions:
Check the filing status which is applied to you on this form.

The checkbox for exemptions for Taxpayer is checked when you check the applicable filing status. But to claim the taxpayer’s exemptions, the taxpayer should not be claimed on any other person’s return. So if you have checked the checkbox for “taxpayer can be claimed on other person’s return” on general information sheet, then checkbox does not get checked.

You can claim the spouse exemptions on filing status 3, if you have not checked the checkbox for “spouse can be claimed on other person’s return” on general information sheet.

While on Filing status 4, you are eligible for spouse exemptions if

  • you have not checked the checkbox for “spouse can be claimed on other person’s return” on general information sheet, and
  • if you have not checked the checkbox for “your spouse did not live with you during the entire year” given of Form 1040NR after filing status 4.

Line 7c: Dependents
Enter the dependent information for whom you want to claim exemptions. Only U.S. nationals and residents of Canada, Mexico and the Republic of Korea can claim exemptions for their dependents. If Taxpayer was a U.S. national or resident of Canada or Mexico, could claim exemptions for children and other dependents on the same terms as U.S. citizens.

Line 7c Column 4:
Check the checkbox on this line if you are claiming Child Tax Credit for this child. A qualifying child for child tax credit is a child who;

  • was under age 17 at the end of current year,
  • is taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (e.g., grandchild, nice, on nephew),
  • is a U.S. citizen, a U.S. national, or a resident alien.
  • Lived with taxpayer mort than half of the current year.

Line 8: Wages, Salaries, Tips, etc.
Program transfers the amount of wages, salaries and tips from different forms. Double click on this line to view the links of different forms.

Line 9a: Taxable Interest
Amount on this line comes from Line 4 of Schedule B. Fill up Schedule B and program transfers the amount on this line from line 4 of Schedule B.

Line 9b: Tax-exempt Interest
Amount on this line comes from Schedule B if any exempt interest is there.

Line 10a: Ordinary Dividends
Amount on this line comes from line 6 of Schedule B.

Line 10b: Qualified Dividends
Amount on this line comes from Schedule B if any qualified dividend is there.

Line 11: Taxable refunds, credits or offsets of state and local income taxes:
Enter on this line manually amount of refund, Credit or offset of state or local income taxes received in 2006.If the refund is for the tax you paid in 2005 and you deducted state or local income taxes on line 5 of 2005 schedule A, the use the worksheet to know the taxable refund.
If worksheet is added then amount will come from 1040Wkst refund line 7.

Line 12: Scholarship and fellowship grants
The amount on this line flow from line 3 of Additional earned income worksheet.

Line 13: Business income or (loss)
If the taxpayer operated a business or participated in a profession as a sole proprietor, then report the income and expenses on Schedule C or C-EZ and net profit or loss is transferred on this line by the program itself.

Line 14: Capital Gain or (loss)
Amount on this line comes from schedule D. If the taxpayer has a capital Gain or loss, including any capital gain distributions or a capital loss carryover from 2005, then the taxpayer should file Schedule D.
The taxpayer need not file Schedule D if (1)he has only capital gain distributions from Form 1099-DIV to be reported on schedule D. (2)he has no unrecaptured section 1250 gain, or section 1202 gain, or collectibles 28% gain. In such case he need not file Schedule D but enter manually the amounts on this line.

Line 15: Other gains or (losses)
If form 4797 is added then the program transfers the gain or loss from FORM 4797.If form 4684 is added then the program transfers the gain or loss from FORM 4684 and in the adjacent field Literal “FORM4684” is written by the program itself.

Line 16a: IRA Distribution
The program transfers amount on this line from Form 1099-R, line 1, if checkbox on line 7 is checked.

Line 16b: Taxable Amount of IRA distribution
Amount on this line comes form line 2a of Form 1099-R and Line 15 or Line 18 or Line 24 of Form 8606. If line 2a of Form 1099-R is not filled, program enter the amount here from line 1 of Form 1099-R.

Line 17a: Pensions and annuities
The program transfers amount on this line from Form 1099-R, line 1, if checkbox on line 7 is not checked and code on line 7 is selected.

Line 17b: Taxable amount of Pensions and Annuities
The program transfers amount on this line from Form 1099-R, line 2, if checkbox on line 7 is not checked and code on line 7 is selected
Pensions and annuities amount are fully taxable if the taxpayer did not contribute to the cost of his pension or annuity or the taxpayer gets his entire cost back tax free before 2006.
Example of fully taxable amount is the military retirement pay got by the employees of Military.

Line 18: Rental Real Estate, Royalties, Partnerships, S corporations, Trusts etc.
The amount on this line comes from Schedule E. If the taxpayer has one or more K-1s from Partnerships, S corporations, Estates or trusts then the taxpayer should complete first the
K-1s and then schedule E.
If the taxpayer has rental or royalty income reported on Form 1099-M then includes this income on schedule E.

Line 19: Farm Income or (loss)
Enter the farm income or loss on schedule F and the program itself transfers the net income or loss from schedule F.

Line 20: Unemployment compensation received
The amount on this line comes from line 1 of Form 1099-G. Taxpayer should receive a form 1099-G showing the total unemployment compensation received in 2006.

If taxpayer received an overpayment of unemployment compensation in 2006 and repaid any of it in 2006, enter this amount on row 2 of line 19. Program deducts this amount from row 1 and enters the result in outer column.

Include on line 19 any amount received for Alaska permanent fund dividends.

Line 21: Other Income
Enter on this line any income not reported elsewhere on the return or other schedules. List the type of the item and amount of income on this line.

Adjusted Gross Income:
Line 24: Archer MSA Deduction
Amount on this line comes from Form 8853.

Line 25: Health Savings Account Deduction
Amount on this line comes from FORM 8889.

Line 26: Moving Expenses
Amount on this line comes from FORM 3903.

Line 27: One Half of self-employment tax
If the taxpayer is self-employed and owes self-employment tax, amount on this line comes from Schedule SE.

Line 28: Self-employed Health insurance deduction
Amount on this line comes from Wkst health Insurance deduction line 14.

Line 29: Penalty on early withdrawal of savings
Amount on this line comes from schedule B interest part total of all lines of column “early penalty”.

Line 30: Scholarship and fellowship grants excluded
Enter on this line manually, if any exclusion amount of scholarship and fellowship grants.

Line 31: IRA Deduction
Amount on this line come form IRA Worksheet Line 10 (Traditional IRA).

If taxpayer made contribution to a traditional IRA for 2006, he/she may be able to take an IRA deduction.

Line 32: Student Loan Interest Deduction
Amount on this line comes from line 16 of student loan interest deduction worksheet.

However, taxpayer can take this deduction only if all of the following apply;

  • Taxpayer paid interest in 2006 on a qualified student loan,
  • Taxpayer’s filing status is not married filing separately,& Modified AGI is less than $65,000;
  • Taxpayer, or spouse (if filing jointly), are not claimed as a dependent on someone’s 2006 tax return.

Line 33: Domestic production Activities
The taxpayer may be able to deduct up to 3% of his Qualified Production activities income.
Amount on this line comes from FORM 8903 if added. Otherwise the user has to manually enter the amount of deduction.

Line 34: Total Adjustments
The program by itself does the total of amounts entered on lines 23 to line 35.

Other adjustments:
Enter on this line the amount of expenses that cannot be deducted elsewhere but on appropriate lines as per description specified in that part.

Tax Credits, and payments:

Line 37: Itemized Deduction
Program transfers the itemized deduction from Schedule A, page 3 of form 1040NR. However, if taxpayer is a student or business apprentice from India, then he/she can claim standard deduction instead of itemized deduction. If your filing status is 2 or 5 and if you want to claim standard deduction, then check the checkbox after line 37 on form 1040NR Page 2. The program calculates the standard deduction eligible for the taxpayer.

Line 39: Exemptions
Taxpayer can claim exemptions only to the extent of his/her income that is effectively connected with a U.S. trade or business. For further information please check the IRS information.

Line 44: Foreign Tax credit
If the taxpayer has paid income tax to a foreign country, he or she may be able to take this credit by filing FORM 1116.

Line 45: Credit for Child and dependent expenses
Program transfers amount on this line form line 11 of FORM 2441 if taxpayer fulfills the requirement for child and dependent expenses.

Line 46: Retirement savings contributions credit
Amount on this line come form Line 14 of Form 8880. Fill up form 8880 to claim this credit.

Line 47: Residential Energy Credit
Amount on this line comes form Line 31 of Form 5695. Fill up form 5695 to claim this credit.

Line 48: Child tax Credit
Amount on this line comes from CTC wkst line 13.

Line 49: Credits from FORM 8396, FORM 8839, FORM 8859
The program calculates this credit on forms 8396 (Mortgage interest credit), 8839 (Qualified adoption Expenses), 8859 (District of Columbia First time homebuyer credit) and transfers on this line if the forms are added.

Line 50: Other Credits
The program calculates the credit if any of the forms have been added as below.

  • Credit for prior year minimum tax. If the taxpayer paid AMT in a prior year then refer form 8801.
  • Qualified Electric vehicle credit. Refer form 8834.
  • General business credit. Refer form 3800.
  • Empowerment Zone and renewal community employment credit. Refer form 8844.
  • Credit for alcohol used as fuel. Refer form 6478.
  • Alternative Motor Vehicle Credit. Refer form 8910.
  • Renewable Electricity, Refined Coal and Indian Coal Production Credit Refer form 8835.

Line 54: Social Security and Medicare tax on tip income not reported
If the taxpayer has received tips of $20 or more in any month and did not report the full amount to his or her employer then the taxpayer should figure the social security and Medicare tax on unreported tips by filing FORM 4137.if form 4137 is added then the program transfers the amount of tax calculated on form 4137 on this line.

Line 55: Additional Tax on IRAs and other qualified plans
The taxpayer needs to file Form 5329 to figure his additional tax on IRA’s and other plans and if form 5329 is added then the program transfers the amount on this line.

Line 57: Household Employment taxes
The program transfers the amount of Household employment tax on this line from
Schedule H if added. For details regarding to file Schedule H refer instruction PDF.

Line 59: Federal Income Tax Withheld
The amount on this line comes from number of forms. Double click on this line to view the links for different forms. Program will make the total of the amount of withheld from all the forms and enter it on this line.

Line 60: Estimated tax payments
Enter on this line amount of estimated taxes paid during the year 2006.

Line 61: Excess social security and Tier 1 RRTA tax withheld.
If the taxpayer, or the spouse if filing a joint return, had more than one employer for 2006 and total wages of more than $94200, too much Social Security or tier 1 RRTA tax may be withheld. On this line the taxpayer can take a credit on this line for the amount withheld in excess of $5840. The program calculates this amount by itself from FORM W-2 Or W-2GU added.

Line 62: Additional Child Tax Credit
This credit is for certain people who have at least one qualifying child. The additional child tax credit may give a refund even if taxpayer does not owe any tax.

Amount on this line transferred from line 13 of Form 8812.

Line 63: Amount paid with extension to file
Amount on this line come form estimated tax payment worksheet. Enter in estimated tax worksheet, any amount paid with extension request and program will transfer that amount on this line.

Line 64: Other payments
On this line the program calculates the amount from the below forms if they are added.

  • Form 2439, Undistributed Long term Capital Gains.
  • Form 4136, Fuel tax credit.
  • Form 8885, Health coverage tax credit.
  • Form 8689, Income tax to Virgin Islands.

Line 69: Credit for Federal Telephone Excise Tax Paid:
This is the new credit which is included from tax year 2006. You can decide whether you want to take standard amount of credit or accrual amount of credit. The checkbox is given on row 1 and row 2 of this line.

If you select the checkbox on row 1 i.e. standard amount of credit then program will calculate the standard amount of credit based on number of exemptions claimed on line 7d. E.g. if number of exemptions is claimed on line 7d is 1, then your standard amount will be $30.

If you have checked checkbox on row 2 i.e. accrual amount credit, then you are required to attach and fill up form 8913, and amount on this line will come from form 8913.

Third Party Designee:
You are not required to fill up all these information at here. Once you fill up all these information on main information sheet program will transfer it at here.

Form 1040NR Page 3: Schedule A – Itemized Deductions

State & Local Income Taxes (Line 1 through 3)
You can deduct state and local income taxes you paid or that were withheld from your salary during current year on income connected with a U.S. trade or business.

Gifts to Charity

Contributions you can deduct:

  • Contributions can be in cash (keep canceled checks, receipts, or Other reliable written records showing the name of the organization and the date and amount given), property, or out of pocket expenses a person paid to do volunteer work. If he or she drove to and from the volunteer work, he or she can take the actual cost of gas and oil or 14 cents a mile.
  • Gifts of $250 or more can be deducted only if the taxpayer has a statement of charitable organization showing the amount contributed and the value of estimated benefits received in return in the form of goods or services.
  • For contributions which cannot be deducted refer the instructions of schedule A.

Line 4 - Gifts by cash or check:

  • Enter on this line the total of gifts made by the taxpayer in cash or in check (including out of pocket expenses).
  • If the taxpayer’s charitable contributions are more than 20% of his or her AGI ( form 1040NR line 36) the deductible amount may be limited. The taxpayer has to take care of it.

Line 5 – Gifts Other than by cash or check

  • Enter your contributions of property. If the taxpayer gave used items, such as clothing or furniture, deduct the fair market value of the thing at the time you gave them. For more details on determining the value of donated property see publication 561.
  • If the taxpayer made non cash contributions of $500 or more the taxpayer must complete Form 8283.
  • For deduction of contributions on clothing will be allowed only if the items are in good used condition or better. For more details refer instructions of Form 8283.
  • If the taxpayer’s charitable contributions are more than 20% of his or her AGI ( form 1040NR line 36) the deductible amount may be limited. The taxpayer has to take care of it.

Line 6 – Carryover from Prior Year
Enter any carryover of contributions that the taxpayer could not deduct in an earlier year because they exceeded the adjusted Gross income. For more information refer publication 526.

Line 8 – Casualty and theft losses

  • If the taxpayer reports his casualty and theft losses on Form 4684 then depending upon the checkboxes checked on line 18 the package transfers the value from Form 4684 line 18 or line 21. Otherwise the taxpayer has to manually enter the casualty and theft losses.
  • Deduction of non business casualty losses can be made only to the extent that :

  • The amount of each separate casualty or theft loss is more than $100, and
  • The total amount of all losses during the year (reduced by the $100 limit as given above) is more than 10% of the amount on Form 1040NR line 36.

Job Expenses and certain other miscellaneous deductions:
 A person can deduct only the part of these expenses that exceeds 2% of the amount on
 Form 1040 line 38.

Line 9 – Unreimbursed Employee Business Expenses

  • Enter on this line the total and necessary job expenses the taxpayer paid for which he or she was not reimbursed. An ordinary expense is one that is common and accepted in the taxpayer’s business. A necessary expense is one that is helpful and appropriate for the business.
  • If the taxpayer has filed Form 2106 or Form 2106EZ then the package enters the amount from Form 2106 line 10 or Form 2106EZ line 6 if these forms are present in the list. Otherwise the user has to enter manually the expenses and the type of expenses.

Note: Form 2106 / Form 2106EZ expenses are not transferred on this line if they are related to Armed Forces Reservist travel, Qualified performing Artist, A fee Based state or local Official, or Impairment related work expenses. They are then reported on form 1040NR pg-1
Line 24.
For More details refer instructions of schedule A.

Line 10 – Tax preparation Fees
Enter on this line the fees paid for preparation of your tax return including fees paid for filing your return electronically. If any of these expenses was deducted on another form, such as schedule C or schedule E, then do not include them here.

Line 11 – Other Expenses

  • Enter the total amount paid by you to produce or collect taxable income and manage or protect property held for earning income. But do not include any personal expenses.
  • Enter in the space provided the type of expenses and their amounts the package will carry the total to the outer total of the form.
  • The examples of expenses to include on this line are legal and accounting fees, clerical help and office rent, custodial fees, share of investment expenses etc.

Line 16 - Other Miscellaneous deductions

  • Enter in the space provided any of the further expenses which the taxpayer has left to report or take a deduction on other forms. These expenses may be as under:
  • If any of these expenses are reported on their respective forms from where they are transferred by the package on this line the taxpayer need not enter manually value will flow from the lines specified.
  • Gambling losses that you enter on Form W-2G, bur not more than the amount of gambling winnings reported in box of form W-2G.
  • Casualty and theft losses of income –producing  property from Form 4684 line 35 and line 41b, or Form 4797 line 18a.
  • Federal estate tax on income in respect of a descendant from K-1E/T worksheet line 10.
  • Other deductions, portfolio, from the partners and shareholders K-1P/S worksheet line 13P code K.
  • Impairment related work expenses of a disabled person from Form 2106 or Form 2106EZ.

For more details and other deductions which are not subject to limit of 2% refer publication 529 and instructions of schedule A.

Line 17 – Total Itemized Deductions

  • The package by itself calculates the value to be entered on this line and the checkboxes are also checked by the package itself. The user need not enter any amounts.
  • The package calculates the total of itemized deductions and carries the amount on Form 1040NR pg-2 if it is larger than the standard deduction.
  • If the taxpayer’s AGI is more than $150500 ( $75250 if filing status is married filing separately) the package by itself uses the worksheet given named Itemized deduction worksheet on schedule A to calculate the allowable itemized deduction amount and transfers the amount on schedule A , line 17.

Form 1040NR Page 4:

Tax on Income Not Effectively Connected With a U.S. Trade or Business

Page 4 of Form 1040NR is used to report income NOT effectively connected with a U.S. trade or business. Enter on line 76 to line 85 any income which is not effectively connected with U.S. Trade or Business.

Tax on income not effectively connected with a U.S. Trade or business is calculated on line 89 of page 4, which is reported on Line 53 of Page 2.

Capital Gains and Losses From Sales or Exchanges of Property

On Line 90 enter sales and exchange of property, if any. You are required to enter the description of property, date acquired, date sold, sales price and cost or other basis. On this base program calculates loss or gain on such sales or exchange, which will be reported on Line 84 of Form 1040NR, Page 4.

Form 1040NR Page 5:
Other Information:

Give the answer of the questions given on this page if applicable to you.

Item M:
If the taxpayer is a resident of a treaty country (that is, he or she qualifies as a resident of that country within the meaning of the tax treaty between the United States and that country), you must know the terms of that tax treaty to properly complete this line. You can download the text of most U.S. tax treaties at the IRS web site.

If the taxpayer is claiming treaty benefits on Form 1040NR, he or she must provide all of the information requested on this line.

Item P:
Select the "yes" box if the taxpayer expatriated, see Special Rules for Former U.S. Long-Term Residents beginning on page 6 for details on how to answer the question on this line and for information that must be included in the annual information statement, if required.  If the taxpayer is a former U.S. long-term resident filing a dual-status return for his or her last year of U.S. residency, you must attach Form 8854.  See Dual-Status Taxpayers on page 5.

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