U.S. Departing Alien Income Tax Statement

Publication 519

Contents

U.S. Tax Guide
for Aliens

Introduction . . . . . . . . . . . . . . . . . . 1

Cat. No. 15023T
Department
of the
Treasury
Internal
Revenue
Service

For use in preparing

2015 Returns

What's New

.................. 2

Reminders . . . . . . . . . . . . . . . . . . . 3
Chapter 1. Nonresident Alien or
Resident Alien? . . . . . . . . . . . . . 3
Chapter 2. Source of Income . . . . . . 10
Chapter 3. Exclusions From Gross
Income . . . . . . . . . . . . . . . . . 14
Chapter 4. How Income of Aliens Is
Taxed . . . . . . . . . . . . . . . . . . 17
Chapter 5. Figuring Your Tax . . . . . . 25
Chapter 6. Dual-Status Tax Year . . . . 32
Chapter 7. Filing Information . . . . . . 34
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 . . . . . . . . . . . . . 50
Chapter 11. Departing Aliens and
the Sailing or Departure
Permit . . . . . . . . . . . . . . . . . . 50
Chapter 12. How To Get Tax Help . . . 53
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 www.irs.gov/
pub519.

Introduction

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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 generally
are 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
with the conduct of a trade or business in the
United States.

The information in this publication is not as
comprehensive for resident aliens as it is for
nonresident aliens. Resident aliens are generally treated the same as U.S. citizens and can
find more information in other IRS publications.

Table A, Where To Find What You Need To
Know About U.S. Taxes, provides a list of questions and the chapter or chapters in this publication where you will find the related discussion.

Answers to frequently asked questions are
presented in the back of the publication.

Table A. Where To Find What You Need To Know About U.S. Taxes
Commonly Asked Questions
Am I a nonresident alien or resident alien?

Where To Find The Answer
See chapter 1.

Can I be a nonresident alien and a resident alien in the same
year?

See Dual-Status Aliens in chapter 1.

I am a resident alien and my spouse is a nonresident alien. Are
there special rules for us?

See Nonresident Spouse Treated as a Resident
in chapter 1.
See Community Income in chapter 2.

Is all my income subject to U.S. tax?

See chapter 2.

See chapter 6.

See chapter 3.
Is my scholarship subject to U.S. tax?

See Scholarship Grants, Prizes, and Awards in chapter 2.
See Scholarship 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
expenses on my U.S. return?

See Deductions in chapter 5.

Can I claim exemptions for my spouse and children?

See Exemptions in chapter 5.

I pay income taxes to my home country. Can I get credit for these See Tax Credits and Payments in chapter 5.
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
organizations exempt from U.S. tax?
Is there anything special I have to do before leaving the United
States?
Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can send us comments from
www.irs.gov/formspubs. Click on “More Information” and then on “Give us feedback.”
Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone.
Therefore, it would be helpful if you would include your daytime phone number, including
the area code, in your correspondence.
Page 2

See chapter 10.
See chapter 11.
See Expatriation Tax in chapter 4.

Although we cannot respond individually to
each comment received, we do appreciate your
feedback and will consider your comments as
we revise our tax products.
Ordering forms and publications. Visit
www.irs.gov/formspubs to download forms and
publications. Otherwise, you can go to
www.irs.gov/orderforms to order current and
prior-year forms and instructions. Your order
should arrive within 10 business days.
Tax questions. If you have a tax question
not answered by this publication, check
IRS.gov and How To Get Tax Help at the end of
this publication.

What's New
Premium tax credit. You may be eligible to
claim the premium tax credit if you, your
spouse, or a dependent enrolled in health insurance through the Health Insurance Marketplace. See Form 8962 and the Instructions for
Form 8962 for more information.
Advance payments of the premium tax
credit. Advance payments of the premium tax
credit may have been made to the health insurer to help pay for the insurance coverage of
you, your spouse, or your dependent. If advance payments of the premium tax credit were
made, you must file a 2015 tax return and Form
8962. If you enrolled someone who is not
Publication 519 (2015)

claimed as a dependent on your tax return or for
more information, see the Instructions for Form
8962.
Form 1095-A. If you, your spouse, or a dependent enrolled in health insurance through
the Marketplace, you should have received a
Form 1095-A. If you receive a Form 1095-A for
2015, save it. It will help you figure your premium tax credit. If you did not receive a Form
1095-A, contact the Marketplace.
U.S. real property interest. The Protecting
Americans from Tax Hikes Act 2015 (PL
114-113) made substantial changes to the
treatment of dispositions and distributions of
U.S. real property interests. Some of these
changes are effective for dispositions or distributions made after December 17, 2015 (see
Real Property Gain or Loss, later); others are
effective for dispositions and distributions made
after February 16, 2016 (see Tax Withheld on
Real Property Sales, later).
Personal exemption increased. For tax
years beginning in 2015, the personal exemption amount is increased to $4,000.
Qualified investment entities. Generally, the
treatment of a regulated investment company
(RIC) as a qualified investment entity (QIE),
which was scheduled to expire at the end of
2014, has been extended permanently. For
more information, see Qualified investment entities under U.S. Real Property Interest, later.
Interest-related dividends and short-term
capital gain dividends received from mutual
funds. The exemption from withholding on certain interest-related dividends and short-term
capital gain dividends paid by a mutual fund or
other regulated investment company, which
was scheduled to expire at the end of 2014, has
been extended permanently for tax years beginning after December 31, 2014. For more information, see Dividend Income under Nonresident Aliens in chapter 3.

Reminders
Multi-level marketing. Clarification regarding
the characterization and source of income received from multi-level marketing companies by
distributors (upper-tier distributors) that are
based on the sales or purchases of persons
whom they have recruited and sponsored
(lower-tier distributors) is provided. See
Multi-level marketing under Personal Services
in chapter 2.
Additional Medicare Tax. You may be required to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more information, see Additional Medicare Tax under Social Security and Medicare Taxes and Self-Employment Tax in chapter 8. For more
information on Additional Medicare Tax, go to
IRS.gov and enter “Additional Medicare Tax” in
the search box.
Refunds of certain withholding tax delayed.
Refund requests for tax withheld and reported
on Form 1042-S, Form 8288-A, or Form 8805
may require additional time for processing. Allow up to 6 months for these refunds to be issued.

Third-party designee. You can check the
“Yes” box in the “Third-Party Designee” area of
your return to authorize the IRS to discuss your
return with a friend, family member, or any other
person you choose. This allows the IRS to call
the person you identified as your designee to
answer any questions that may arise during the
processing of your return. It also allows your
designee to perform certain actions such as
asking the IRS for copies of notices or transcripts related to your return. Also, the authorization can be revoked. See your income tax return instructions for details.
Change of address. If you change your mailing address, be sure to notify the IRS using
Form 8822.
Photographs of missing children. The IRS is
a proud partner with the National Center for
Missing and Exploited Children. Photographs of
missing children selected by the Center may
appear in this publication on pages that would
otherwise be blank. You can help bring these
children home by looking at the photographs
and calling 1-800-THE-LOST (1-800-843-5678)
if you recognize a child.

1.

Introduction
You should first determine whether, for income
tax purposes, you are a nonresident alien or a
resident alien.
If you are both a nonresident and resident in
the same year, you have a dual status. Dual
status is explained later. Also explained later
are a choice to treat your nonresident spouse
as a resident and some other special situations.

Topics

This chapter discusses:
How to determine if you are a nonresident,
resident, or dual-status alien, and
How to treat a nonresident spouse as a
resident alien.

Useful Items

You may want to see:
Form (and Instructions)
1040 U.S. Individual Income Tax Return
1040A U.S. Individual Income Tax Return

Chapter 1

8840 Closer Connection Exception
Statement for Aliens
8843 Statement for Exempt Individuals
and Individuals With a Medical
Condition
See chapter 12 for information about getting
these forms.

Nonresident Aliens
If you are an alien (not a U.S. citizen), you are
considered a nonresident alien unless you meet
one of the two tests described next under Resident Aliens.

Resident Aliens
You are a resident alien of the United States for
tax purposes if you meet either the green card
test or the substantial presence test for calendar year 2015 (January 1–December 31). Even
if you do not meet either of these tests, you may
be able to choose to be treated as a U.S. resident for part of the year. See First-Year Choice
under Dual-Status Aliens, later.

Green Card Test

Nonresident
Alien or
Resident Alien?

1040NR U.S. Nonresident Alien Income
Tax Return

8833 Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b)

You are a resident for tax purposes if you are a
lawful permanent resident of the United States
at any time during calendar year 2015. (However, see Dual-Status Aliens, later.) This is
known as the “green card” test. You are a lawful
permanent resident of the United States at any
time if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant.
You generally have this status if the U.S. Citizenship and Immigration Services (USCIS) (or
its predecessor organization) has issued you an
alien registration card, also known as a “green
card.” You continue to have resident status under this test unless the status is taken away
from you or is administratively or judicially determined to have been abandoned.
Resident status taken away. Resident status
is considered to have been taken away from
you if the U.S. government issues you a final
administrative or judicial order of exclusion or
deportation. A final judicial order is an order that
you may no longer appeal to a higher court of
competent jurisdiction.
Resident status abandoned. An administrative or judicial determination of abandonment of
resident status may be initiated by you, the USCIS, or a U.S. consular officer.
If you initiate the determination, your resident status is considered to be abandoned
when you file either of the following with the USCIS or U.S. consular officer.
Your application for abandonment.
Your Alien Registration Receipt Card attached to a letter stating your intent to
abandon your resident status.

Nonresident Alien or Resident Alien?

Page 3

You must file the letter by certified mail, return
receipt requested. You must keep a copy of the
letter and proof that it was mailed and received.
Until you have proof your letter was received, you remain a resident alien for
CAUTION
tax purposes even if the USCIS would
not recognize the validity of your green card because it is more than ten years old or because
you have been absent from the United States
for a period of time.

!

If the USCIS or U.S. consular officer initiates
this determination, your resident status will be
considered to be abandoned when the final administrative order of abandonment is issued. If
you are granted an appeal to a federal court of
competent jurisdiction, a final judicial order is
required.
Under U.S. immigration law, a lawful permanent resident who is required to file a tax return
as a resident and fails to do so may be regarded as having abandoned status and may lose
permanent resident status.
A long-term resident who ceases to be
a lawful permanent resident may be
CAUTION
subject to special reporting requirements and tax provisions. See Expatriation Tax
in chapter 4.

!

Termination of residency after June 3,
2004, and before June 17, 2008. If you terminated your residency after June 3, 2004, and
before June 17, 2008, you will still be considered a U.S. resident for tax purposes until you
notify the Secretary of Homeland Security and
file Form 8854.
Termination of residency after June 16,
2008. For information on your residency termination date, see Former long-term resident under Expatriation After June 16, 2008, in chapter 4.

Substantial Presence Test
You will be considered a U.S. resident for tax
purposes if you meet the substantial presence
test for calendar year 2015. To meet this test,
you must be physically present in the United
States on at least:
1. 31 days during 2015, and
2. 183 days during the 3-year period that includes 2015, 2014, and 2013, counting:
a. All the days you were present in 2015,
and
b.

1

c.

1

3 of the days you were present in
2014, and
6 of the days you were present in
2013.

Example. You were physically present in
the United States on 120 days in each of the
years 2013, 2014, and 2015. To determine if
you meet the substantial presence test for
2015, count the full 120 days of presence in
2015, 40 days in 2014 (1 3 of 120), and 20 days
in 2013 (1 6 of 120). Because the total for the
3-year period is 180 days, you are not considered a resident under the substantial presence
test for 2015.
Page 4

Chapter 1

The term United States includes the following areas.
All 50 states and the District of Columbia.
The territorial waters of the United States.
The seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United
States has exclusive rights under international law to explore and exploit natural resources.
The term does not include U.S. possessions
and territories or U.S. airspace.

Days of Presence
in the United States
You are treated as present in the United States
on any day you are physically present in the
country at any time during the day. However,
there are exceptions to this rule. Do not count
the following as days of presence in the United
States for the substantial presence test.
Days you commute to work in the United
States from a residence in Canada or Mexico if you regularly commute from Canada
or Mexico.
Days you are in the United States for less
than 24 hours when you are in transit between two places outside the United
States.
Days you are in the United States as a
crew member of a foreign vessel.
Days you are unable to leave the United
States because of a medical condition that
arose while you are in the United States.
Days you are an exempt individual.
The specific rules that apply to each of these
categories are discussed next.
Regular commuters from Canada or Mexico. Do not count the days on which you commute to work in the United States from your residence in Canada or Mexico if you regularly
commute from Canada or Mexico. You are considered to commute regularly if you commute to
work in the United States on more than 75% of
the workdays during your working period.
For this purpose, “commute” means to travel
to work and return to your residence within a
24-hour period. “Workdays” are the days on
which you work in the United States or Canada
or Mexico. “Working period” means the period
beginning with the first day in the current year
on which you are physically present in the United States to work and ending on the last day in
the current year on which you are physically
present in the United States to work. If your
work requires you to be present in the United
States only on a seasonal or cyclical basis, your
working period begins on the first day of the
season or cycle on which you are present in the
United States to work and ends on the last day
of the season or cycle on which you are present
in the United States to work. You can have
more than one working period in a calendar
year, and your working period can begin in one
calendar year and end in the following calendar
year.
Example. Maria Perez lives in Mexico and
works for Compañía ABC in its office in Mexico.

Nonresident Alien or Resident Alien?

She was assigned to her firm's office in the United States from February 1 through June 1. On
June 2, she resumed her employment in Mexico. On 69 days, Maria commuted each morning from her home in Mexico to work in Compañía ABC's U.S. office. She returned to her home
in Mexico on each of those evenings. On 7
days, she worked in her firm's Mexico office.
For purposes of the substantial presence test,
Maria does not count the days she commuted
to work in the United States because those
days equal more than 75% of the workdays during the working period (69 workdays in the United States divided by 76 workdays in the working period equals 90.8%).
Days in transit. Do not count the days you are
in the United States for less than 24 hours and
you are in transit between two places outside
the United States. You are considered to be in
transit if you engage in activities that are substantially related to completing travel to your foreign destination. For example, if you travel between airports in the United States to change
planes en route to your foreign destination, you
are considered to be in transit. However, you
are not considered to be in transit if you attend
a business meeting while in the United States.
This is true even if the meeting is held at the airport.
Crew members. Do not count the days you
are temporarily present in the United States as
a regular crew member of a foreign vessel (boat
or ship) engaged in transportation between the
United States and a foreign country or a U.S.
possession. However, this exception does not
apply if you otherwise engage in any trade or
business in the United States on those days.
Medical condition. Do not count the days you
intended to leave, but could not leave the United States because of a medical condition or
problem that arose while you were in the United
States. Whether you intended to leave the United States on a particular day is determined
based on all the facts and circumstances. For
example, you may be able to establish that you
intended to leave if your purpose for visiting the
United States could be accomplished during a
period that is not long enough to qualify you for
the substantial presence test. However, if you
need an extended period of time to accomplish
the purpose of your visit and that period would
qualify you for the substantial presence test,
you would not be able to establish an intent to
leave the United States before the end of that
extended period.
In the case of an individual who is judged
mentally incompetent, proof of intent to leave
the United States can be determined by analyzing the individual's pattern of behavior before he
or she was judged mentally incompetent.
If you qualify to exclude days of presence
because of a medical condition, you must file a
fully completed Form 8843 with the IRS. See
Form 8843, later.
You cannot exclude any days of presence in
the United States under the following circumstances.
You were initially prevented from leaving,
were then able to leave, but remained in

the United States beyond a reasonable
period for making arrangements to leave.
You returned to the United States for treatment of a medical condition that arose during a prior stay.
The condition existed before your arrival in
the United States and you were aware of
the condition. It does not matter whether
you needed treatment for the condition
when you entered the United States.
Exempt individual. Do not count days for
which you are an exempt individual. The term
“exempt individual” does not refer to someone
exempt from U.S. tax, but to anyone in the following categories.
An individual temporarily present in the
United States as a foreign government-related individual under an “A” or “G” visa,
other than individuals holding “A-3” or
“G-5” class visas.
A teacher or trainee temporarily present in
the United States under a “J” or “Q” visa,
who substantially complies with the requirements of the visa.
A student temporarily present in the United
States under an “F,” “J,” “M,” or “Q” visa,
who substantially complies with the requirements of the visa.
A professional athlete temporarily in the
United States to compete in a charitable
sports event.
The specific rules for each of these four categories (including any rules on the length of
time you will be an exempt individual) are discussed next.
Foreign government-related individuals.
A foreign government-related individual is an individual (or a member of the individual's immediate family) who is temporarily present in the
United States:
As a full-time employee of an international
organization,
By reason of diplomatic status, or
By reason of a visa (other than a visa that
grants lawful permanent residence) that
the Secretary of the Treasury determines
represents full-time diplomatic or consular
status.
Note. You are considered temporarily
present in the United States regardless of the
actual amount of time you are present in the
United States.
An international organization is any public
international organization that the President of
the United States has designated by Executive
Order as being entitled to the privileges, exemptions, and immunities provided for in the International Organizations Act. An individual is a
full-time employee if his or her work schedule
meets the organization's standard full-time work
schedule.
An individual is considered to have full-time
diplomatic or consular status if he or she:
Has been accredited by a foreign government that is recognized by the United
States,
Intends to engage primarily in official activities for that foreign government while in the
United States, and

Has been recognized by the President,
Secretary of State, or a consular officer as
being entitled to that status.
Members of the immediate family include
the individual's spouse and unmarried children
(whether by blood or adoption) but only if the
spouse's or unmarried children's visa statuses
are derived from and dependent on the exempt
individual's visa classification. Unmarried children are included only if they:
Are under 21 years of age,
Reside regularly in the exempt individual's
household, and
Are not members of another household.
Note. Generally, if you are present in the
United States under an “A” or “G” class visa you
are considered a foreign government-related individual (with full-time diplomatic or consular
status). None of your days count for purposes
of the substantial presence test.
Household staff exception. If you are
present in the United States under an “A-3” or
“G-5” visa as a personal employee, attendant,
or domestic worker for either a foreign government or international organization official you
are not considered a foreign government-related individual and must count all your days of
presence in the United States for purposes of
the substantial presence test.
Teachers and trainees. A teacher or
trainee is an individual, other than a student,
who is temporarily in the United States under a
“J” or “Q” visa and substantially complies with
the requirements of that visa. You are considered to have substantially complied with the
visa requirements if you have not engaged in
activities that are prohibited by U.S. immigration
laws and could result in the loss of your visa
status.
Also included are immediate family members of exempt teachers and trainees. See the
definition of immediate family, earlier, under
Foreign government-related individuals.
You will not be an exempt individual as a
teacher or trainee in 2015 if you were exempt
as a teacher, trainee, or student for any part of 2
of the 6 preceding calendar years. However,
you will be an exempt individual if all of the following conditions are met.
You were exempt as a teacher, trainee, or
student for any part of 3 (or fewer) of the 6
preceding calendar years,
A foreign employer paid all of your compensation during 2015,
You were present in the United States as a
teacher or trainee in any of the 6 prior
years, and
A foreign employer paid all of your compensation during each of the preceding 6
years you were present in the United
States as a teacher or trainee.
A foreign employer includes an office or place
of business of an American entity in a foreign
country or a U.S. possession.
If you qualify to exclude days of presence as
a teacher or trainee, you must file a fully completed Form 8843 with the IRS. See Form 8843,
later.

Chapter 1

Example. Carla was temporarily in the United States during the year as a teacher on a “J”
visa. Her compensation for the year was paid
by a foreign employer. Carla was treated as an
exempt teacher for the previous 2 years but her
compensation was not paid by a foreign employer. She will not be considered an exempt
individual for the current year because she was
exempt as a teacher for at least 2 of the past 6
years.
If her compensation for the past 2 years had
been paid by a foreign employer, she would be
an exempt individual for the current year.
Students. A student is any individual who
is temporarily in the United States on an “F,” “J,”
“M,” or “Q” visa and who substantially complies
with the requirements of that visa. You are considered to have substantially complied with the
visa requirements if you have not engaged in
activities that are prohibited by U.S. immigration
laws and could result in the loss of your visa
status.
Also included are immediate family members of exempt students. See the definition of
immediate family, earlier, under Foreign government-related individuals.
You will not be an exempt individual as a
student in 2015 if you have been exempt as a
teacher, trainee, or student for any part of more
than 5 calendar years unless you meet both of
the following requirements.
You establish that you do not intend to reside permanently in the United States.
You have substantially complied with the
requirements of your visa.
The facts and circumstances to be considered
in determining if you have demonstrated an intent to reside permanently in the United States
include, but are not limited to, the following.
Whether you have maintained a closer
connection to a foreign country (discussed
later).
Whether you have taken affirmative steps
to change your status from nonimmigrant
to lawful permanent resident as discussed
later under Closer Connection to a Foreign
Country.
If you qualify to exclude days of presence as
a student, you must file a fully completed Form
8843 with the IRS. See Form 8843, later.
Professional athletes. A professional athlete who is temporarily in the United States to
compete in a charitable sports event is an exempt individual. A charitable sports event is one
that meets the following conditions.
The main purpose is to benefit a qualified
charitable organization.
The entire net proceeds go to charity.
Volunteers perform substantially all the
work.
In figuring the days of presence in the United States, you can exclude only the days on
which you actually competed in a sports event.
You cannot exclude the days on which you
were in the United States to practice for the
event, to perform promotional or other activities
related to the event, or to travel between
events.

Nonresident Alien or Resident Alien?

Page 5

If you qualify to exclude days of presence as
a professional athlete, you must file a fully completed Form 8843 with the IRS. See Form 8843
next.
Form 8843. If you exclude days of presence in
the United States because you fall into any of
the following categories, you must file a fully
completed Form 8843.
You were unable to leave the United
States as planned because of a medical
condition or problem.
You were temporarily in the United States
as a teacher or trainee on a “J” or “Q” visa.
You were temporarily in the United States
as a student on an “F,” “J,” “M,” or “Q” visa.
You were a professional athlete competing
in a charitable sports event.
Attach Form 8843 to your 2015 income tax
return. If you do not have to file a return, send
Form 8843 to the Department of the Treasury,
Internal Revenue Service Center, Austin, TX
73301-0215, by the due date for filing Form
1040NR or Form 1040NR-EZ. The due date for
filing is discussed in chapter 7.
If you do not timely file Form 8843, you cannot exclude the days you were present in the
United States as a professional athlete or because of a medical condition that arose while
you were in the United States. This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and
significant steps to comply with those requirements.

Closer Connection
to a Foreign Country
Even if you meet the substantial presence test,
you can be treated as a nonresident alien if you:
Are present in the United States for less
than 183 days during the year,
Maintain a tax home in a foreign country
during the year, and
Have a closer connection during the year
to one foreign country in which you have a
tax home than to the United States (unless
you have a closer connection to two foreign countries, discussed next).
Closer connection to two foreign countries.
You can demonstrate that you have a closer
connection to two foreign countries (but not
more than two) if you meet all of the following
conditions.
You maintained a tax home beginning on
the first day of the year in one foreign
country.
You changed your tax home during the
year to a second foreign country.
You continued to maintain your tax home
in the second foreign country for the rest of
the year.
You had a closer connection to each foreign country than to the United States for
the period during which you maintained a
tax home in that foreign country.
You are subject to tax as a resident under
the tax laws of either foreign country for the
entire year or subject to tax as a resident in
both foreign countries for the period during
Page 6

Chapter 1

which you maintained a tax home in each
foreign country.
Tax home. Your tax home is the general area
of your main place of business, employment, or
post of duty, regardless of where you maintain
your family home. Your tax home is the place
where you permanently or indefinitely work as
an employee or a self-employed individual. If
you do not have a regular or main place of business because of the nature of your work, then
your tax home is the place where you regularly
live. If you do not fit either of these categories,
you are considered an itinerant and your tax
home is wherever you work.
For determining whether you have a closer
connection to a foreign country, your tax home
must also be in existence for the entire current
year, and must be located in the same foreign
country to which you are claiming to have a
closer connection.
Foreign country. In determining whether you
have a closer connection to a foreign country,
the term “foreign country” means:
Any territory under the sovereignty of the
United Nations or a government other than
that of the United States,
The territorial waters of the foreign country
(determined under U.S. law),
The seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over
which the foreign country has exclusive
rights under international law to explore
and exploit natural resources, and
Possessions and territories of the United
States.
Establishing a closer connection. You will
be considered to have a closer connection to a
foreign country than the United States if you or
the IRS establishes that you have maintained
more significant contacts with the foreign country than with the United States. In determining
whether you have maintained more significant
contacts with the foreign country than with the
United States, the facts and circumstances to
be considered include, but are not limited to,
the following.
1. The country of residence you designate on
forms and documents.
2. The types of official forms and documents
you file, such as Form W-9, Form
W-8BEN, or Form W-8ECI.
3. The location of:
a. Your permanent home,
b. Your family,
c. Your personal belongings, such as
cars, furniture, clothing, and jewelry,
d. Your current social, political, cultural,
professional, or religious affiliations,
e. Your business activities (other than
those that constitute your tax home),
f. The jurisdiction in which you hold a
driver's license,
g. The jurisdiction in which you vote, and
h. Charitable organizations to which you
contribute.

Nonresident Alien or Resident Alien?

It does not matter whether your permanent
home is a house, an apartment, or a furnished
room. It also does not matter whether you rent
or own it. It is important, however, that your
home be available at all times, continuously,
and not solely for short stays.
When you cannot have a closer connection.
You cannot claim you have a closer connection
to a foreign country if either of the following applies:
You personally applied, or took other steps
during the year, to change your status to
that of a permanent resident, or
You had an application pending for adjustment of status during the current year.
Steps to change your status to that of a permanent resident include, but are not limited to, the
filing of the following forms.
Form I-508, Waiver of Rights, Privileges,
Exemptions and Immunities
Form I-485, Application to Register Permanent Residence or Adjust Status
Form I-130, Petition for Alien Relative, on
your behalf
Form I-140, Immigrant Petition for Alien
Worker, on your behalf
Form ETA-750, Application for Alien Employment Certification, on your behalf
Form DS-230, Application for Immigrant
Visa and Alien Registration
Form 8840. You must attach a fully completed
Form 8840 to your income tax return to claim
you have a closer connection to a foreign country or countries.
If you do not have to file a return, send the
form to the Department of the Treasury, Internal
Revenue
Service
Center,
Austin,
TX
73301-0215, by the due date for filing Form
1040NR or Form 1040NR-EZ. The due date for
filing is discussed later in chapter 7.
If you do not timely file Form 8840, you cannot claim a closer connection to a foreign country or countries. This does not apply if you can
show by clear and convincing evidence that you
took reasonable actions to become aware of
the filing requirements and significant steps to
comply with those requirements.

Effect of Tax Treaties
The rules given here to determine if you are a
U.S. resident do not override tax treaty definitions of residency. If you are a dual-resident
taxpayer, you can still claim the benefits under
an income tax treaty. A dual-resident taxpayer
is one who is a resident of both the United
States and another country under each country's tax laws. The income tax treaty between
the two countries must contain a provision that
provides for resolution of conflicting claims of
residence (tie-breaker rule). If you are treated
as a resident of a foreign country under a tax
treaty, you are treated as a nonresident alien in
figuring your U.S. income tax. For purposes
other than figuring your tax, you will be treated
as a U.S. resident. For example, the rules discussed here do not affect your residency time
periods as discussed later under Dual-Status
Aliens.

Information to be reported. If you are a
dual-resident taxpayer and you claim treaty
benefits, you must file a return by the due date
(including extensions) using Form 1040NR or
Form 1040NR-EZ, and compute your tax as a
nonresident alien. You must also attach a fully
completed Form 8833 if you determine your
residency under a tax treaty and receive payments or income items totaling more than
$100,000. You may also have to attach Form
8938 (discussed in chapter 7). See Reporting
Treaty Benefits Claimed in chapter 9 for more
information on reporting treaty benefits.

Dual-Status Aliens
You can be both a nonresident alien and a resident alien during the same tax year. This usually occurs in the year you arrive in or depart
from the United States. Aliens who have dual
status should see chapter 6 for information on
filing a return for a dual-status tax year.

First Year of Residency
If you are a U.S. resident for the calendar year,
but you were not a U.S. resident at any time
during the preceding calendar year, you are a
U.S. resident only for the part of the calendar
year that begins on the residency starting date.
You are a nonresident alien for the part of the
year before that date.
Residency starting date under substantial
presence test. If you meet the substantial
presence test for a calendar year, your residency starting date is generally the first day you
are present in the United States during that calendar year. However, you do not have to count
up to 10 days of actual presence in the United
States if on those days you establish that:
You had a closer connection to a foreign
country than to the United States, and
Your tax home was in that foreign country.
See Closer Connection to a Foreign Country,
earlier.
In determining whether you can exclude up
to 10 days, the following rules apply.
You can exclude days from more than one
period of presence as long as the total
days in all periods are not more than 10.
You cannot exclude any days in a period of
consecutive days of presence if all the
days in that period cannot be excluded.
Although you can exclude up to 10 days of
presence in determining your residency
starting date, you must include those days
when determining whether you meet the
substantial presence test.
Example. Ivan Ivanovich is a citizen of Russia. He came to the United States for the first
time on January 6, 2015, to attend a business
meeting and returned to Russia on January 10,
2015. His tax home remained in Russia. On
March 1, 2015, he moved to the United States
and resided here for the rest of the year. Ivan is
able to establish a closer connection to Russia
for the period January 6–10. Thus, his residency starting date is March 1.

Statement required to exclude up to 10
days of presence. You must file a statement
with the IRS if you are excluding up to 10 days
of presence in the United States for purposes of
your residency starting date. You must sign and
date this statement and include a declaration
that it is made under penalties of perjury. The
statement must contain the following information (as applicable).
Your name, address, U.S. taxpayer identification number (if any), and U.S. visa
number (if any).
Your passport number and the name of the
country that issued your passport.
The tax year for which the statement applies.
The first day that you were present in the
United States during the year.
The dates of the days you are excluding in
figuring your first day of residency.
Sufficient facts to establish that you have
maintained your tax home in and a closer
connection to a foreign country during the
period you are excluding.
Attach the required statement to your income tax return. If you are not required to file a
return, send the statement to the Department of
the Treasury, Internal Revenue Service Center,
Austin, TX 73301-0215, on or before the due
date for filing Form 1040NR or Form
1040NR-EZ. The due date for filing is discussed in chapter 7.
If you do not file the required statement as
explained above, you cannot claim that you
have a closer connection to a foreign country or
countries. Therefore, your first day of residency
will be the first day you are present in the United
States. This does not apply if you can show by
clear and convincing evidence that you took
reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements.
Residency starting date under green card
test. If you meet the green card test at any time
during a calendar year, but do not meet the
substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United
States as a lawful permanent resident.
If you meet both the substantial presence
test and the green card test, your residency
starting date is the earlier of the first day during
the year you are present in the United States
under the substantial presence test or as a lawful permanent resident.
Residency during the preceding year. If you
were a U.S. resident during any part of the preceding calendar year and you are a U.S. resident for any part of the current year, you will be
considered a U.S. resident at the beginning of
the current year. This applies whether you are a
resident under the substantial presence test or
green card test.
Example. Robert Bach is a citizen of Switzerland. He came to the United States as a U.S.
resident for the first time on May 1, 2014, and
remained until November 5, 2014, when he returned to Switzerland. Robert came back to the
United States on March 5, 2015, as a lawful
permanent resident and still resides here. In
Chapter 1

calendar year 2015, Robert's U.S. residency is
deemed to begin on January 1, 2015, because
he qualified as a resident in calendar year 2014.

First-Year Choice
If you do not meet either the green card test or
the substantial presence test for 2014 or 2015
and you did not choose to be treated as a resident for part of 2014, but you meet the substantial presence test for 2014, you can choose to
be treated as a U.S. resident for part of 2015.
To make this choice, you must:
1. Be present in the United States for at least
31 days in a row in 2015, and
2. Be present in the United States for at least
75% of the number of days beginning with
the first day of the 31-day period and ending with the last day of 2015. For purposes
of this 75% requirement, you can treat up
to 5 days of absence from the United
States as days of presence in the United
States.
When counting the days of presence in (1)
and (2) above, do not count the days you were
in the United States under any of the exceptions
discussed earlier under Days of Presence in the
United States.
If you make the first-year choice, your residency starting date for 2015 is the first day of
the earliest 31-day period (described in (1)
above) that you use to qualify for the choice.
You are treated as a U.S. resident for the rest of
the year. If you are present for more than one
31-day period and you satisfy condition (2)
above for each of those periods, your residency
starting date is the first day of the first 31-day
period. If you are present for more than one
31-day period but you satisfy condition (2)
above only for a later 31-day period, your residency starting date is the first day of the later
31-day period.
Note. You do not have to be married to
make this choice.
Example 1. Juan DaSilva is a citizen of the
Philippines. He came to the United States for
the first time on November 1, 2015, and was
here on 31 consecutive days (from November 1
through December 1, 2015). Juan returned to
the Philippines on December 1 and came back
to the United States on December 17, 2015. He
stayed in the United States for the rest of the
year. During 2016, Juan was a resident of the
United States under the substantial presence
test. Juan can make the first-year choice for
2015 because he was in the United States in
2015 for a period of 31 days in a row (November 1 through December 1) and for at least 75%
of the days following (and including) the first
day of his 31-day period (46 total days of presence in the United States divided by 61 days in
the period from November 1 through December
31 equals 75.4%). If Juan makes the first-year
choice, his residency starting date will be November 1, 2015.
Example 2. The facts are the same as in
Example 1, except that Juan was also absent
from the United States on December 24, 25, 29,

Nonresident Alien or Resident Alien?

Page 7

30, and 31. He can make the first-year choice
for 2015 because up to 5 days of absence are
considered days of presence for purposes of
the 75% requirement.

This includes situations in which both you and
your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

Statement required to make the
first-year choice for 2015. You must attach a
statement to Form 1040 to make the first-year
choice for 2015. The statement must contain
your name and address and specify the following.
That you are making the first-year choice
for 2015.
That you were not a resident in 2014.

Note. If you are single at the end of the
year, you cannot make this choice.

That you are a resident under the substantial presence test in 2016.
The number of days of presence in the
United States during 2016.
The date or dates of your 31-day period of
presence and the period of continuous
presence in the United States during 2015.
The date or dates of absence from the United States during 2015 that you are treating as days of presence.
You cannot file Form 1040 or the statement until
you meet the substantial presence test for
2016. If you have not met the test for 2016 as of
April 18, 2016, you can request an extension of
time for filing your 2015 Form 1040 until a reasonable period after you have met that test. To
request an extension to file until October 15,
2016, use Form 4868. You can file the paper
form or use one of the electronic filing options
explained in the Form 4868 instructions. You
should pay with this extension the amount of tax
you expect to owe for 2015 figured as if you
were a nonresident alien the entire year. You
can use Form 1040NR or Form 1040NR-EZ to
figure the tax. Enter the tax on Form 4868. If
you do not pay the tax due, you will be charged
interest on any tax not paid by the regular due
date of your return, and you may be charged a
penalty on the late payment.
Once you make the first-year choice, you
may not revoke it without the approval of the
IRS.
If you do not follow the procedures discussed here for making the first-year choice,
you will be treated as a nonresident alien for all
of 2015. However, this does not apply if you can
show by clear and convincing evidence that you
took reasonable actions to become aware of
the filing procedures and significant steps to
comply with the procedures.

Choosing Resident
Alien Status
If you are a dual-status alien, you can choose to
be treated as a U.S. resident for the entire year
if all of the following apply.
You were a nonresident alien at the beginning of the year.
You are a resident alien or U.S. citizen at
the end of the year.
You are married to a U.S. citizen or resident alien at the end of the year.
Your spouse joins you in making the
choice.

If you make this choice, the following rules
apply.
You and your spouse are treated as U.S.
residents for the entire year for income tax
purposes.
You and your spouse are taxed on worldwide income.
You and your spouse must file a joint return for the year of the choice.
Neither you nor your spouse can make this
choice for any later tax year, even if you
are separated, divorced, or remarried.
The special instructions and restrictions for
dual-status taxpayers in chapter 6 do not
apply to you.
Note. A similar choice is available if, at the
end of the tax year, one spouse is a nonresident
alien and the other spouse is a U.S. citizen or
resident. See Nonresident Spouse Treated as a
Resident, later. If you previously made that
choice and it is still in effect, you do not need to
make the choice explained here.
Making the choice. You should attach a statement signed by both spouses to your joint return for the year of the choice. The statement
must contain the following information.
A declaration that you both qualify to make
the choice and that you choose to be
treated as U.S. residents for the entire tax
year.
The name, address, and taxpayer identification number (SSN or ITIN) of each
spouse. (If one spouse died, include the
name and address of the person who
makes the choice for the deceased
spouse.)
You generally make this choice when you
file your joint return. However, you also can
make the choice by filing Form 1040X, Amended U.S. Individual Income Tax Return. Attach
Form 1040, Form 1040A, or Form 1040EZ and
print “Amended” across the top of the corrected
return. If you make the choice with an amended
return, you and your spouse must also amend
any returns that you may have filed after the
year for which you made the choice.
You generally must file the amended joint
return within 3 years from the date you filed
your original U.S. income tax return or 2 years
from the date you paid your income tax for that
year, whichever is later.

Last Year of Residency
If you were a U.S. resident in 2015 but are not a
U.S. resident during any part of 2016, you
cease to be a U.S. resident on your residency
termination date. Your residency termination
date is December 31, 2015, unless you qualify
for an earlier date as discussed next.
Earlier residency termination date. You may
qualify for a residency termination date that is
earlier than December 31. This date is:

Page 8

Chapter 1

Nonresident Alien or Resident Alien?

1. The last day in 2015 that you are physically present in the United States, if you
met the substantial presence test,
2. The first day in 2015 that you are no longer a lawful permanent resident of the United States, if you met the green card test,
or
3. The later of (1) or (2), if you met both tests.
You can use this date only if, for the remainder
of 2015, your tax home was in a foreign country
and you had a closer connection to that foreign
country. See Closer Connection to a Foreign
Country, earlier.
A long-term resident who ceases to be
a lawful permanent resident may be
CAUTION
subject to special reporting requirements and tax provisions. See Expatriation Tax
in chapter 4.

!

Termination of residency. For information
on your residency termination date, see Former
long-term resident under Expatriation After
June 16, 2008, in chapter 4.
De minimis presence. If you are a U.S. resident because of the substantial presence test
and you qualify to use the earlier residency termination date, you can exclude up to 10 days of
actual presence in the United States in determining your residency termination date. In determining whether you can exclude up to 10
days, the following rules apply.
You can exclude days from more than one
period of presence as long as the total
days in all periods are not more than 10.
You cannot exclude any days in a period of
consecutive days of presence if all the
days in that period cannot be excluded.
Although you can exclude up to 10 days of
presence in determining your residency
termination date, you must include those
days when determining whether you meet
the substantial presence test.
Example. Lola Bovary is a citizen of Malta.
She came to the United States for the first time
on March 1, 2015, and resided here until August 25, 2015. On December 12, 2015, Lola
came to the United States for vacation and
stayed here until December 16, 2015, when she
returned to Malta. She is able to establish a
closer connection to Malta for the period December 12–16. Lola is not a U.S. resident for
tax purposes during 2016 and can establish a
closer connection to Malta for the rest of calendar year 2015. Lola is a U.S. resident under the
substantial presence test for 2015 because she
was present in the United States for 183 days
(178 days for the period March 1 to August 25
plus 5 days in December). Lola's residency termination date is August 25, 2015.
Residency during the next year. If you are a
U.S. resident during any part of 2016 and you
are a resident during any part of 2015, you will
be treated as a resident through the end of
2015. This applies whether you have a closer
connection to a foreign country than the United
States during 2015, and whether you are a resident under the substantial presence test or
green card test.

Statement required to establish your residency termination date. You must file a
statement with the IRS to establish your residency termination date. You must sign and date
this statement and include a declaration that it
is made under penalties of perjury. The statement must contain the following information (as
applicable).
Your name, address, U.S. taxpayer identification number (if any), and U.S. visa
number (if any).
Your passport number and the name of the
country that issued your passport.
The tax year for which the statement applies.
The last day that you were present in the
United States during the year.
Sufficient facts to establish that you have
maintained your tax home in, and that you
have a closer connection to, a foreign
country following your last day of presence
in the United States during the year or following the abandonment or rescission of
your status as a lawful permanent resident
during the year.
The date that your status as a lawful permanent resident was abandoned or rescinded.
Sufficient facts (including copies of relevant documents) to establish that your status as a lawful permanent resident has
been abandoned or rescinded.
If you can exclude days under the de minimis presence rule, discussed earlier, include the dates of the days you are excluding and sufficient facts to establish that you
have maintained your tax home in and that
you have a closer connection to a foreign
country during the period you are excluding.
Attach the required statement to your income tax return. If you are not required to file a
return, send the statement to the Department of
the Treasury, Internal Revenue Service Center,
Austin, TX 73301-0215, on or before the due
date for filing Form 1040NR or Form
1040NR-EZ. The due date for filing is discussed in chapter 7.
If you do not file the required statement as
explained above, you cannot claim that you
have a closer connection to a foreign country or
countries. This does not apply if you can show
by clear and convincing evidence that you took
reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements.

Nonresident Spouse
Treated as a Resident
If, at the end of your tax year, you are married
and one spouse is a U.S. citizen or a resident
alien and the other spouse is a nonresident
alien, you can choose to treat the nonresident
spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien
at the beginning of the tax year, but a resident
alien at the end of the year, and the other
spouse is a nonresident alien at the end of the
year.

If you make this choice, you and your
spouse are treated for income tax purposes as
residents for your entire tax year. Neither you
nor your spouse can claim under any tax treaty
not to be a U.S. resident. You are both taxed on
worldwide income. You must file a joint income
tax return for the year you make the choice, but
you and your spouse can file joint or separate
returns in later years.
If you file a joint return under this provision, the special instructions and reCAUTION
strictions for dual-status taxpayers in
chapter 6 do not apply to you.

!

Example. Bob and Sharon Williams are
married and both are nonresident aliens at the
beginning of the year. In June, Bob became a
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
statement to their joint return. Bob and Sharon
must file a joint return for the year they make the
choice, but they can file either joint or separate
returns for later years.

How To Make the Choice
Attach a statement, signed by both spouses, to
your joint return for the first tax year for which
the choice applies. It should contain the following information.
A declaration that one spouse was a nonresident alien and the other spouse a U.S.
citizen or resident alien on the last day of
your tax year, and that you choose to be
treated as U.S. residents for the entire tax
year.
The name, address, and identification
number of each spouse. (If one spouse
died, include the name and address of the
person making the choice for the deceased spouse.)
Amended return. You generally make this
choice when you file your joint return. However,
you can also make the choice by filing a joint
amended return on Form 1040X. Attach Form
1040, Form 1040A, or Form 1040EZ and print
“Amended” across the top of the corrected return. If you make the choice with an amended
return, you and your spouse must also amend
any returns that you may have filed after the
year for which you made the choice.
You generally must file the amended joint
return within 3 years from the date you filed
your original U.S. income tax return or 2 years
from the date you paid your income tax for that
year, whichever is later.

Suspending the Choice
The choice to be treated as a resident alien is
suspended for any tax year (after the tax year
you made the choice) if neither spouse is a U.S.
citizen or resident alien at any time during the
tax year. This means each spouse must file a
separate return as a nonresident alien for that
year if either meets the filing requirements for
nonresident aliens discussed in chapter 7.
Example. Dick Brown was a resident alien
on December 31, 2012, and married to Judy, a
Chapter 1

nonresident alien. They chose to treat Judy as a
resident alien and filed joint 2012 and 2013 income tax returns. On January 10, 2014, Dick
became a nonresident alien. Judy had remained a nonresident alien throughout the period. Dick and Judy could have filed joint or separate returns for 2014 because Dick was a
resident alien for part of that year. However, because neither Dick nor Judy is a resident alien
at any time during 2015, their choice is suspended for that year. If either meets the filing requirements for nonresident aliens discussed in
chapter 7, they must file separate returns as
nonresident aliens for 2015. If Dick becomes a
resident alien again in 2016, their choice is no
longer suspended.

Ending the Choice
Once made, the choice to be treated as a resident applies to all later years unless suspended
(as explained earlier under Suspending the
Choice) or ended in one of the following ways.
If the choice is ended in one of the following
ways, neither spouse can make this choice in
any later tax year.
1. Revocation. Either spouse can revoke
the choice for any tax year, provided he or
she makes the revocation by the due date
for filing the tax return for that tax year.
The spouse who revokes the choice must
attach a signed statement declaring that
the choice is being revoked. The statement must include the name, address, and
identification number of each spouse. (If
one spouse dies, include the name and
address of the person who is revoking the
choice for the deceased spouse.) The
statement also must include a list of any
states, foreign countries, and possessions
that have community property laws in
which either spouse is domiciled or where
real property is located from which either
spouse receives income. File the statement as follows.
a. If the spouse revoking the choice
must file a return, attach the statement to the return for the first year the
revocation applies.
b. If the spouse revoking the choice
does not have to file a return, but
does file a return (for example, to obtain a refund), attach the statement to
the return.
c. If the spouse revoking the choice
does not have to file a return and
does not file a claim for refund, send
the statement to the Internal Revenue
Service Center where you filed the
last joint return.
2. Death. The death of either spouse ends
the choice, beginning with the first tax year
following the year the spouse died. However, if the surviving spouse is a U.S. citizen or resident and is entitled to the joint
tax rates as a surviving spouse, the choice
will not end until the close of the last year
for which these joint rates may be used. If
both spouses die in the same tax year, the

Nonresident Alien or Resident Alien?

Page 9

choice ends on the first day after the close
of the tax year in which the spouses died.
3. Legal separation. A legal separation under a decree of divorce or separate maintenance ends the choice as of the beginning of the tax year in which the legal
separation occurs.
4. Inadequate records. The IRS can end
the choice for any tax year that either
spouse has failed to keep adequate
books, records, and other information necessary to determine the correct income tax
liability, or to provide adequate access to
those records.

Aliens From American
Samoa or Puerto Rico
If you are a nonresident alien in the United
States and a bona fide resident of American Samoa or Puerto Rico during the entire tax year,
you are taxed, with certain exceptions, according to the rules for resident aliens of the United
States. For more information, see Bona Fide
Residents of American Samoa or Puerto Rico in
chapter 5.
If you are a nonresident alien from American
Samoa or Puerto Rico who does not qualify as
a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you are taxed
as a nonresident alien.
Resident aliens who formerly were bona fide
residents of American Samoa or Puerto Rico
are taxed according to the rules for resident aliens.

Source of
Income
Introduction
After you have determined your alien status,
you must determine the source of your income.
This chapter will help you determine the source
of different types of income you may receive
during the tax year. This chapter also discusses
special rules for married individuals who are domiciled in a country with community property
laws.

This chapter discusses:
Income source rules, and
Community income.
Chapter 2

Source of Income

a. The recipient of the interest is related
to the resident alien or domestic corporation. See section 954(d)(3) for the
definition of related person.

A resident alien's income is generally subject to
tax in the same manner as a U.S. citizen. If you
are a resident alien, you must report all interest,
dividends, wages, or other compensation for
services, income from rental property or royalties, and other types of income on your U.S. tax
return. You must report these amounts from
sources within and outside the United States.

Nonresident Aliens
A nonresident alien usually is subject to U.S. income tax only on U.S. source income. Under
limited circumstances, certain foreign source income is subject to U.S. tax. See Foreign Income in chapter 4.
The general rules for determining U.S.
source income that apply to most nonresident
aliens are shown in Table 2-1. The following
discussions cover the general rules as well as
the exceptions to these rules.

TIP

Not all items of U.S. source income
are taxable. See chapter 3.

Interest Income
Generally, U.S. source interest income includes
the following items.
Interest on bonds, notes, or other interest-bearing obligations of U.S. residents or
domestic corporations.
Interest paid by a domestic or foreign partnership or foreign corporation engaged in
a U.S. trade or business at any time during
the tax year.
Original issue discount.

The place or manner of payment is immaterial in determining the source of the income.
A substitute interest payment made to the
transferor of a security in a securities lending
transaction or a sale-repurchase transaction is
sourced in the same manner as the interest on
the transferred security.
Exceptions. U.S. source interest income does
not include the following items.
1. Interest paid by a resident alien or a domestic corporation on obligations issued
before August 10, 2010, if for the 3-year
period ending with the close of the payer's
tax year preceding the interest payment,
at least 80% of the payer's total gross income:
a. Is from sources outside the United
States, and

Topics

Page 10

Resident Aliens

Interest from a state, the District of Columbia, or the U.S. government.

2.

However, the interest will be considered U.S. source interest income if either
of the following apply.

b. Is attributable to the active conduct of
a trade or business by the individual
or corporation in a foreign country or a
U.S. possession.

b. The terms of the obligation are significantly modified after August 9, 2010.
Any extension of the term of the obligation is considered a significant
modification.
2. Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts
with mutual savings banks, cooperative
banks, credit unions, domestic building
and loan associations, and other savings
institutions chartered and supervised as
savings and loan or similar associations
under federal or state law if the interest
paid or credited can be deducted by the
association.
3. Interest on deposits with a foreign branch
of a domestic corporation or domestic
partnership, but only if the branch is in the
commercial banking business.

Dividends
In most cases, dividend income received from
domestic corporations is U.S. source income.
Dividend income from foreign corporations is
usually foreign source income. Exceptions to
both of these rules are discussed below.
A substitute dividend payment made to the
transferor of a security in a securities lending
transaction or a sale-repurchase transaction is
sourced in the same manner as a distribution
on the transferred security.
Dividend equivalent payments. U.S. source
dividends also include all dividend equivalent
payments. Currently, dividend equivalent payments include (1) substitute dividends, and (2)
payments made pursuant to a specified notional principal contract that, directly or indirectly, are contingent on, or determined by reference to, the payment of a dividend from U.S.
sources.
The IRS has issued final and temporary regulations that affect the treatCAUTION
ment of dividend equivalent payments,
specified notional principal contracts, and other
equity derivatives. These regulations generally
do not apply to transactions entered into before
January 1, 2017. You can view these regulations
at
www.irs.gov/irb/2015-41_IRB/
ar07.html .

!

First exception. Dividends received from a
domestic corporation are not U.S. source income if the corporation elects to take the American Samoa economic development credit.
Second exception. Part of the dividends
received from a foreign corporation is U.S.
source income if 25% or more of its total gross
income for the 3-year period ending with the
close of its tax year preceding the declaration of
dividends was effectively connected with a

trade or business in the United States. If the
corporation was formed less than 3 years before the declaration, use its total gross income
from the time it was formed. Determine the part
that is U.S. source income by multiplying the
dividend by the following fraction.
Foreign corporation's gross income
connected with a U.S. trade or business
for the 3-year period
Foreign corporation's gross income from
all sources for that period

Guarantee of Indebtedness
Amounts received directly or indirectly, for the
provision of a guarantee of indebtedness issued after September 27, 2010, are U.S.
source income if they are paid by:
1. A noncorporate resident or U.S. corporation, or
2. Any foreign person if the amounts are effectively connected with the conduct of a
U.S. trade or business.
For more information, see Internal Revenue
Code section 861(a)(9).

Personal Services
All wages and any other compensation for services performed in the United States are considered to be from sources in the United States.
The only exceptions to this rule are discussed in
Employees of foreign persons, organizations, or
offices, and under Crew members.
If you are an employee and receive compensation for labor or personal services performed both inside and outside the United
States, special rules apply in determining the
source of the compensation. Compensation
(other than certain fringe benefits) is sourced on
a time basis. Certain fringe benefits (such as
housing and education) are sourced on a geographical basis.
Or, you may be permitted to use an alternative basis to determine the source of compensation. See Alternative Basis, later.
Multi-level marketing. Certain companies sell
products through a multi-level marketing arrangement, such that an upper-tier distributor,
who has sponsored a lower-tier distributor, is
entitled to a payment from the company based
on certain activities of that lower-tier distributor.
Generally, depending on the facts, payments
from such multi-level marketing companies to
independent (non-employee) distributors (upper-tier distributors) that are based on the sales
or purchases of persons whom they have sponsored (lower-tier distributors) constitute income
for the performance of personal services in recruiting, training, and supporting the lower-tier
distributors. The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year
compensation, with the source of income determined over the period to which such compensation is attributable.

Self-employed
individuals. If you are
self-employed, you determine the source of
compensation for labor or personal services
from self-employment on the basis that most
correctly reflects the proper source of that income under the facts and circumstances of
your particular case. In many cases, the facts
and circumstances will call for an apportionment on a time basis as explained next.

Time Basis
Use a time basis to figure your U.S. source
compensation (other than the fringe benefits
discussed later). Do this by multiplying your total compensation (other than the fringe benefits
discussed later) by the following fraction:
Number of days you performed services
in the United States during the year
Total number of days you performed
services during the year

You can use a unit of time less than a day in
the above fraction, if appropriate. The time period for which the compensation is made does
not have to be a year. Instead, you can use another distinct, separate, and continuous time
period if you can establish to the satisfaction of
the IRS that this other period is more appropriate.
Example 1. Christina Brooks, a resident of
the Netherlands, worked 240 days for a U.S.
company during the tax year. She received
$80,000 in compensation. None of it was for
fringe benefits. Christina performed services in
the United States for 60 days and performed
services in the Netherlands for 180 days. Using
the time basis for determining the source of
compensation, $20,000 ($80,000 × 60 240) is her
U.S. source income.
Example 2. Rob Waters, a resident of
South Africa, is employed by a corporation. His
annual salary is $100,000. None of it is for
fringe benefits. During the first quarter of the
year he worked entirely within the United
States. On April 1, Rob was transferred to Singapore for the remainder of the year. Rob is
able to establish that the first quarter of the year
and the last 3 quarters of the year are two separate, distinct, and continuous periods of time.
Accordingly, $25,000 of Rob's annual salary is
attributable to the first quarter of the year (.25 ×
$100,000). All of it is U.S. source income because he worked entirely within the United
States during that quarter. The remaining
$75,000 is attributable to the last three quarters
of the year. During those quarters, he worked
150 days in Singapore and 30 days in the United States. His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time.
Of this $75,000, $12,500 ($75,000 × 30 180) is
U.S. source income.
Multi-year compensation. The source of
multi-year compensation is generally determined on a time basis over the period to which
the compensation is attributable. Multi-year
compensation is compensation that is included
in your income in one tax year but that is attrib-

utable to a period that includes two or more tax
years.
You determine the period to which the compensation is attributable based on the facts and
circumstances of your case. For example, an
amount of compensation that specifically relates to a period of time that includes several
calendar years is attributable to the entire
multi-year period.
The amount of compensation treated as
from U.S. sources is figured by multiplying the
total multi-year compensation by a fraction. The
numerator of the fraction is the number of days
(or unit of time less than a day, if appropriate)
that you performed labor or personal services in
the United States in connection with the project.
The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal
services in connection with the project.

Geographical Basis
Compensation you receive as an employee in
the form of the following fringe benefits is
sourced on a geographical basis.
Housing.
Education.
Local transportation.
Tax reimbursement.
Hazardous or hardship duty pay as defined
in Regulations section 1.861-4(b)(2)(ii)(D)
(5).
Moving expense reimbursement.
The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence.
Principal place of work. The above fringe
benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based
on your principal place of work. Your principal
place of work is usually the place where you
spend most of your working time. This could be
your office, plant, store, shop, or other location.
If there is no one place where you spend most
of your working time, your main job location is
the place where your work is centered, such as
where you report for work or are otherwise required to “base” your work.
If you have more than one job at any time,
your main job location depends on the facts in
each case. The more important factors to be
considered are:
The total time you spend at each place,
The amount of work you do at each place,
and
How much money you earn at each place.
Housing. The source of a housing fringe benefit is determined based on the location of your
principal place of work. A housing fringe benefit
includes payments to you or on your behalf
(and your family's if your family resides with
you) only for the following.
Rent.
Utilities (except telephone charges).
Real and personal property insurance.
Occupancy taxes not deductible under
section 164 or 216(a).
Chapter 2

Source of Income

Page 11

Nonrefundable fees for securing a leasehold.
Rental of furniture and accessories.
Household repairs.
Residential parking.
Fair rental value of housing provided in
kind by your employer.
A housing fringe benefit does not include:
Deductible interest and taxes (including
deductible interest and taxes of a tenant-stockholder in a cooperative housing
corporation),
The cost of buying property, including principal payments on a mortgage,
The cost of domestic labor (maids, gardeners, etc.),
Pay television subscriptions,
Improvements and other expenses that increase the value or appreciably prolong
the life of property,
Purchased furniture or accessories,
Depreciation or amortization of property or
improvements,
The value of meals or lodging that you exclude from gross income, or
The value of meals or lodging that you deduct as moving expenses.
Education. The source of an education fringe
benefit for the education expenses of your dependents is determined based on the location
of your principal place of work. An education
fringe benefit includes payments only for the following expenses for education at an elementary
or secondary school.
Tuition, fees, academic tutoring, special
needs services for a special needs student, books, supplies, and other equipment.
Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance.
Local transportation. The source of a local
transportation fringe benefit is determined
based on the location of your principal place of
work. Your local transportation fringe benefit is
the amount that you receive as compensation
for local transportation for you or your spouse or
dependents at the location of your principal
place of work. The amount treated as a local
transportation fringe benefit is limited to actual
expenses incurred for local transportation and
the fair rental value of any employer-provided
vehicle used predominantly by you, your
spouse, or your dependents for local transportation. Actual expenses do not include the cost
(including interest) of any vehicle purchased by
you or on your behalf.
Tax reimbursement. The source of a tax reimbursement fringe benefit is determined based
on the location of the jurisdiction that imposed
the tax for which you are reimbursed.
Moving
expense
reimbursement. The
source of a moving expense reimbursement is
generally based on the location of your new
principal place of work. However, the source is
determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of
Page 12

Chapter 2

Source of Income

source is more appropriate under the facts and
circumstances of your case. Sufficient evidence
generally requires an agreement between you
and your employer, or a written statement of
company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to
move to another country. The written statement
or agreement must state that your employer will
reimburse you for moving expenses that you incur to return to your former principal place of
work regardless of whether you continue to
work for your employer after returning to that location. It may contain certain conditions upon
which the right to reimbursement is determined
as long as those conditions set forth standards
that are definitely ascertainable and can only be
fulfilled prior to, or through completion of, your
return move to your former principal place of
work.

Alternative Basis
If you are an employee, you can determine the
source of your compensation under an alternative basis if you establish to the satisfaction of
the IRS that, under the facts and circumstances
of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. If you
use an alternative basis, you must keep (and
have available for inspection) records to document why the alternative basis more properly
determines the source of your compensation.
Also, if your total compensation from all sources
is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and
attach a written statement to your tax return that
sets forth all of the following.
1. Your name and social security number
(written across the top of the statement).
2. The specific compensation income, or the
specific fringe benefit, for which you are
using the alternative basis.
3. For each item in (2), the alternative basis
of allocation of source used.
4. For each item in (2), a computation showing how the alternative allocation was
computed.
5. A comparison of the dollar amount of the
U.S. compensation and foreign compensation sourced under both the alternative
basis and the time or geographical basis
discussed earlier.

Transportation Income
Transportation income is income from the use
of a vessel or aircraft or for the performance of
services directly related to the use of any vessel
or aircraft. This is true whether the vessel or aircraft is owned, hired, or leased. The term “vessel or aircraft” includes any container used in
connection with a vessel or aircraft.
All income from transportation that begins
and ends in the United States is treated as derived from sources in the United States. If the
transportation begins or ends in the United
States, 50% of the transportation income is

treated as derived from sources in the United
States.
For transportation income from personal
services, 50% of the income is U.S. source income if the transportation is between the United
States and a U.S. possession. For nonresident
aliens, this only applies to income derived from,
or in connection with, an aircraft.
For information on how U.S. source transportation income is taxed, see chapter 4.

Scholarships, Grants,
Prizes, and Awards
Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the
residence of the payer regardless of who actually disburses the funds. However, see Activities to be performed outside the United States,
later.
For example, payments for research or
study in the United States made by the United
States, a noncorporate U.S. resident, or a domestic corporation, are from U.S. sources. Similar payments from a foreign government or foreign corporation are foreign source payments
even though the funds may be disbursed
through a U.S. agent.
Payments made by an entity designated as
a public international organization under the International Organizations Immunities Act are
from foreign sources.
Activities to be performed outside the United States. Scholarships, fellowship grants,
targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United
States are not U.S. source income.
These rules do not apply to amounts
paid as salary or other compensation
CAUTION
for services. See Personal Services,
earlier, for the source rules that apply.

!

Pensions and Annuities
If you receive a pension from a domestic trust
for services performed both in and outside the
United States, part of the pension payment is
from U.S. sources. That part is the amount attributable to earnings of the pension plan and
the employer contributions made for services
performed in the United States. This applies
whether the distribution is made under a qualified or nonqualified stock bonus, pension,
profit-sharing, or annuity plan (whether or not
funded).
If you performed services as an employee of
the United States, you may receive a distribution from the U.S. government under a plan,
such as the Civil Service Retirement System,
that is treated as a qualified pension plan. Your
U.S. source income is the otherwise taxable
amount of the distribution that is attributable to
your total U.S. government basic pay other than
tax-exempt pay for services performed outside
the United States.

Table 2-1. Summary of Source Rules for Income of Nonresident Aliens
Item of income

Factor determining source

Salaries, wages, other compensation

Where services performed

Business income:
Personal services
Sale of inventory—purchased
Sale of inventory—produced

Where services performed
Where sold
Allocation

Interest

Residence of payer

Dividends

Whether a U.S. or foreign corporation*

Rents

Location of property

Royalties:
Natural resources
Patents, copyrights, etc.

Location of property
Where property is used

Sale of real property

Location of property

Sale of personal property

Seller's tax home (but see Personal Property,
later, for exceptions)

Pension distributions attributable to
contributions

Where services were performed that earned
the pension

Investment earnings on pension
contributions

Location of pension trust

Sale of natural resources

Allocation based on fair market value of
product at export terminal. For more
information, see section 1.863-1(b) of the
regulations.

*Exceptions include:
a) Dividends paid by a U.S. corporation are foreign source if the corporation elects the
American Samoa economic development credit.
b) Part of a dividend paid by a foreign corporation is U.S. source if at least 25% of the
corporation's gross income is effectively connected with a U.S. trade or business for the
3 tax years before the year in which the dividends are declared.

Rents or Royalties

Personal Property

Your U.S. source income includes rent and royalty income received during the tax year from
property located in the United States or from
any interest in that property.

Personal property is property, such as machinery, equipment, or furniture, that is not real
property.

U.S. source income also includes rents or
royalties for the use of, or for the privilege of using, in the United States, intangible property
such as patents, copyrights, secret processes
and formulas, goodwill, trademarks, franchises,
and similar property.

Real Property
Real property is land and buildings and generally anything built on, growing on, or attached to
land.
Gross income from sources in the United
States includes gains, profits, and income from
the sale or other disposition of real property located in the United States.
Natural resources. The income from the sale
of products of any farm, mine, oil or gas well,
other natural deposit, or timber located in the
United States and sold in a foreign country, or
located in a foreign country and sold in the United States, is partly from sources in the United
States. For information on determining that part,
see section 1.863-1(b) of the regulations.

Gain or loss from the sale or exchange of
personal property generally has its source in the
United States if you have a tax home in the United States. If you do not have a tax home in the
United States, the gain or loss generally is considered to be from sources outside the United
States.
Tax home. Your tax home is the general area
of your main place of business, employment, or
post of duty, regardless of where you maintain
your family home. Your tax home is the place
where you permanently or indefinitely work as
an employee or a self-employed individual. If
you do not have a regular or main place of business because of the nature of your work, then
your tax home is the place where you regularly
live. If you do not fit either of these categories,
you are considered an itinerant and your tax
home is wherever you work.
Inventory property. Inventory property is personal property that is stock in trade or that is
held primarily for sale to customers in the ordinary course of your trade or business. Income
from the sale of inventory that you purchased is
sourced where the property is sold. Generally,

this is where title to the property passes to the
buyer. For example, income from the sale of inventory in the United States is U.S. source income, whether you purchased it in the United
States or in a foreign country.
Income from the sale of inventory property
that you produced in the United States and sold
outside the United States (or vice versa) is
partly from sources in the United States and
partly from sources outside the United States.
For information on making this allocation, see
section 1.863-3 of the regulations.
These rules apply even if your tax home is
not in the United States.
Depreciable property. To determine the
source of any gain from the sale of depreciable
personal property, you must first figure the part
of the gain that is not more than the total depreciation adjustments on the property. You allocate this part of the gain to sources in the United States based on the ratio of U.S.
depreciation adjustments to total depreciation
adjustments. The rest of this part of the gain is
considered to be from sources outside the United States.
For this purpose, “U.S. depreciation adjustments” are the depreciation adjustments to the
basis of the property that are allowable in figuring taxable income from U.S. sources. However, if the property is used predominantly in
the United States during a tax year, all depreciation deductions allowable for that year are
treated as U.S. depreciation adjustments. But
there are some exceptions for certain transportation, communications, and other property
used internationally.
Gain from the sale of depreciable property
that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed
above.
A loss is sourced in the same way as the depreciation deductions were sourced. However,
if the property was used predominantly in the
United States, the entire loss reduces U.S.
source income.
The basis of property usually means the
cost (money plus the fair market value of other
property or services) of property you acquire.
Depreciation is an amount deducted to recover
the cost or other basis of a trade or business
asset. The amount you can deduct depends on
the property's cost, when you began using the
property, how long it will take to recover your
cost, and which depreciation method you use.
A depreciation deduction is any deduction for
depreciation or amortization or any other allowable deduction that treats a capital expenditure
as a deductible expense.
Intangible property. Intangible property includes patents, copyrights, secret processes or
formulas, goodwill, trademarks, trade names, or
other like property. The gain from the sale of
amortizable or depreciable intangible property,
up to the previously allowable amortization or
depreciation deductions, is sourced in the same
way as the original deductions were sourced.
This is the same as the source rule for gain from
the sale of depreciable property. See Depreciable property, earlier, for details on how to apply
this rule.
Chapter 2

Source of Income

Page 13

Gain in excess of the amortization or depreciation deductions is sourced in the country
where the property is used if the income from
the sale is contingent on the productivity, use,
or disposition of that property. If the income is
not contingent on the productivity, use, or disposition of the property, the income is sourced
according to your tax home as discussed earlier. If payments for goodwill do not depend on
its productivity, use, or disposition, their source
is the country in which the goodwill was generated.
Sales through offices or fixed places of
business. Despite any of the earlier rules, if
you do not have a tax home in the United
States, but you maintain an office or other fixed
place of business in the United States, treat the
income from any sale of personal property (including inventory property) that is attributable to
that office or place of business as U.S. source
income. However, this rule does not apply to
sales of inventory property for use, disposition,
or consumption outside the United States if
your office or other fixed place of business outside the United States materially participated in
the sale.
If you have a tax home in the United States
but maintain an office or other fixed place of
business outside the United States, income
from sales of personal property, other than inventory, depreciable property, or intangibles,
that is attributable to that foreign office or place
of business may be treated as U.S. source income. The income is treated as U.S. source income if an income tax of less than 10% of the
income from the sale is paid to a foreign country. This rule also applies to losses if the foreign
country would have imposed an income tax of
less than 10% had the sale resulted in a gain.

Community Income
If you are married and you or your spouse is
subject to the community property laws of a foreign country, a U.S. state, or a U.S. possession,
you generally must follow those laws to determine the income of yourself and your spouse
for U.S. tax purposes. But you must disregard
certain community property laws if:
Both you and your spouse are nonresident
aliens, or
One of you is a nonresident alien and the
other is a U.S. citizen or resident and you
do not both choose to be treated as U.S.
residents as explained in chapter 1.
In these cases, you and your spouse must report community income as explained later.
Earned income. Earned income of a spouse,
other than trade or business income and a partner's distributive share of partnership income, is
treated as the income of the spouse whose
services produced the income. That spouse
must report all of it on his or her separate return.
Trade or business income. Trade or business income, other than a partner's distributive
share of partnership income, is treated as the
income of the spouse carrying on the trade or
business. That spouse must report all of it on
his or her separate return.
Page 14

Chapter 3

Partnership income (or loss). A partner's
distributive share of partnership income (or
loss) is treated as the income (or loss) of the
partner. The partner must report all of it on his
or her separate return.
Separate property income. Income derived
from the separate property of one spouse (and
which is not earned income, trade or business
income, or partnership distributive share income) is treated as the income of that spouse.
That spouse must report all of it on his or her
separate return. Use the appropriate community
property law to determine what is separate
property.
Other community income. All other community income is treated as provided by the applicable community property laws.

3.
Exclusions From
Gross Income
Introduction
Resident and nonresident aliens are allowed
exclusions from gross income if they meet certain conditions. An exclusion from gross income
is generally income you receive that is not included in your U.S. income and is not subject to
U.S. tax. This chapter covers some of the more
common exclusions allowed to resident and
nonresident aliens.

Topics

This chapter discusses:
Nontaxable interest,
Nontaxable dividends,
Certain compensation paid by a foreign
employer,
Gain from sale of home, and
Scholarships and fellowship grants.

Useful Items

You may want to see:
Publication
54

Tax Guide for U.S. Citizens and
Resident Aliens Abroad

523 Selling Your Home
See chapter 12 for information about getting
these publications.

Exclusions From Gross Income

Resident Aliens
Resident aliens may be able to exclude the following items from their gross income.

Foreign Earned Income
and Housing Amount
If you are physically present in a foreign country
or countries for at least 330 full days during any
period of 12 consecutive months, you may qualify for the foreign earned income exclusion. The
exclusion is $100,800 in 2015. In addition, you
may be able to exclude or deduct certain foreign housing amounts. You may also qualify if
you are a bona fide resident of a foreign country
and you are a citizen or national of a country
with which the United States has an income tax
treaty. For more information, see Pub. 54.
Foreign country. A foreign country is any territory under the sovereignty of a government
other than that of the United States.
The term “foreign country” includes the
country's territorial waters and airspace, but not
international waters and the airspace above
them. It also includes the seabed and subsoil of
those submarine areas adjacent to the country's
territorial waters over which it has exclusive
rights under international law to explore and exploit the natural resources.
The term “foreign country” does not include
U.S. possessions or territories. It does not include the Antarctic region.

Nonresident Aliens
Nonresident aliens can exclude the following
items from their gross income.

Interest Income
Interest income that is not connected with a
U.S. trade or business is excluded from income
if it is from:
Deposits (including certificates of deposit)
with persons in the banking business,
Deposits or withdrawable accounts with
mutual savings banks, cooperative banks,
credit unions, domestic building and loan
associations, and other savings institutions
chartered and supervised as savings and
loan or similar associations under federal
or state law (if the interest paid or credited
can be deducted by the association), and
Amounts held by an insurance company
under an agreement to pay interest on
them.
State and local government obligations. Interest on obligations of a state or political subdivision, the District of Columbia, or a U.S. possession, generally is not included in income.
However, interest on certain private activity
bonds, arbitrage bonds, and certain bonds not
in registered form is included in income.
Portfolio interest. Interest and original issue
discount that qualifies as portfolio interest is not

subject to chapter 3 withholding under sections
1441 through 1443 of the Internal Revenue
Code. However, such interest may be subject to
withholding if it is a withholdable payment, and
there is no exception under chapter 4 (sections
1471 through 1474) of the Internal Revenue
Code. For more information, see the discussion
of portfolio interest under Withholding on Specific Income in Pub. 515.
To qualify as portfolio interest, the interest
must be paid on obligations issued after July
18, 1984, and otherwise subject to withholding.
For obligations issued after March 18, 2012,
portfolio interest does not include interest paid
on debt that is not in registered form. Before
March 19, 2012, portfolio interest included interest on certain registered and nonregistered
(bearer) bonds if the obligations meet the requirements described below.
Obligations in registered form. Portfolio
interest includes interest paid on an obligation
that is in registered form, and for which you
have received documentation that the beneficial
owner of the obligation is not a United States
person.
Generally, an obligation is in registered form
if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or
its agent) and any transfer of the obligation may
be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the
right to principal and stated interest with respect
to the obligation may be transferred only
through a book entry system maintained by the
issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest
with the issuer or its agent and can be transferred both by surrender and reissuance and
through a book entry system.
An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular
time if it can be converted at any time in the future into an obligation that is not in registered
form. For more information on whether obligations are considered to be in registered form,
see the discussion of portfolio interest under
Withholding on Specific Income in Pub. 515.
Obligations not in registered form. For
obligations issued before March 19, 2012, interest on an obligation that is not in registered form
(bearer obligation) is portfolio interest if the obligation is foreign targeted. A bearer obligation is
foreign targeted if:
There are arrangements to ensure that the
obligation will be sold, or resold in connection with the original issue, only to a person
who is not a United States person,
Interest on the obligation is payable only
outside the United States and its possessions, and
The face of the obligation contains a statement that any United States person who
holds the obligation will be subject to limits
under the United States income tax laws.
Documentation is not required for interest on
bearer obligations to qualify as portfolio interest.
In some cases, however, you may need documentation for purposes of Form 1099 reporting
and backup withholding.

Interest that does not qualify as portfolio
interest. Payments to certain persons and
payments of contingent interest do not qualify
as portfolio interest. You must withhold at the
statutory rate on such payments unless some
other exception, such as a treaty provision, applies.
Contingent interest. Portfolio interest
does not include contingent interest. Contingent
interest is either of the following:
1. Interest that is determined by reference to:
a. Any receipts, sales, or other cash flow
of the debtor or related person,
b. Income or profits of the debtor or related person,
c. Any change in value of any property
of the debtor or a related person, or
d. Any dividend, partnership distributions, or similar payments made by
the debtor or a related person.
For exceptions, see Internal Revenue
Code section 871(h)(4)(C).
2. Any other type of contingent interest that is
identified by the Secretary of the Treasury
in regulations.
Related persons. Related persons include the following.
Members of a family, including only brothers, sisters, half-brothers, half-sisters,
spouse, ancestors (parents, grandparents,
etc.), and lineal descendants (children,
grandchildren, etc.).
Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules.
Certain corporations, partnerships, and
other entities. For details, see Nondeductible Loss in chapter 2 of Pub. 544.
Exception for existing debt. Contingent
interest does not include interest paid or accrued on any debt with a fixed term that was issued:
On or before April 7, 1993, or
After April 7, 1993, pursuant to a written
binding contract in effect on that date and
at all times thereafter before that debt was
issued.

Dividend Income
The following dividend income is exempt from
the 30% tax.
Certain dividends paid by foreign corporations. There is no 30% tax on U.S. source dividends you receive from a foreign corporation.
See Second exception under Dividends in
chapter 2 for how to figure the amount of U.S.
source dividends.
Certain interest-related dividends. There is
no 30% tax on interest-related dividends from
sources within the United States that you receive from a mutual fund or other regulated investment company in 2015. The mutual fund
will designate in writing which dividends are interest-related dividends.
Chapter 3

Certain short-term capital gain dividends.
There may not be any 30% tax on certain
short-term capital gain dividends from sources
within the United States that you receive from a
mutual fund or other regulated investment company. The mutual fund will designate in writing
which dividends are short-term capital gain dividends. This tax relief will not apply to you if you
are present in the United States for 183 days or
more during your tax year.

Services Performed
for Foreign Employer
If you were paid by a foreign employer, your
U.S. source income may be exempt from U.S.
tax, but only if you meet one of the situations
discussed next.
Employees of foreign persons, organizations, or offices. Income for personal services
performed in the United States as a nonresident
alien is not considered to be from U.S. sources
and is tax exempt if you meet all three of the following conditions.
1. You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged
in a trade or business in the United States;
or you work for an office or place of business maintained in a foreign country or
possession of the United States by a U.S.
corporation, a U.S. partnership, or a U.S.
citizen or resident.
2. You perform these services while you are
a nonresident alien temporarily present in
the United States for a period or periods of
not more than a total of 90 days during the
tax year.
3. Your pay for these services is not more
than $3,000.
If you do not meet all three conditions, your income from personal services performed in the
United States is U.S. source income and is
taxed according to the rules in chapter 4.
If your pay for these services is more than
$3,000, the entire amount is income from a
trade or business within the United States. To
find if your pay is more than $3,000, do not include any amounts you get from your employer
for advances or reimbursements of business
travel expenses, if you were required to and did
account to your employer for those expenses. If
the advances or reimbursements are more than
your expenses, include the excess in your pay
for these services.
A day means a calendar day during any part
of which you are physically present in the United States.
Example 1. During 2015, Henry Smythe, a
nonresident alien from a nontreaty country,
worked for an overseas office of a U.S. partnership. Henry, who uses the calendar year as his
tax year, was temporarily present in the United
States for 60 days during 2015 performing personal services for the overseas office of the
partnership. That office paid him a total gross
salary of $2,800 for those services. During
2015, he was not engaged in a trade or
Exclusions From Gross Income

Page 15

business in the United States. The salary is not
considered U.S. source income and is exempt
from U.S. tax.
Example 2. The facts are the same as in
Example 1, except that Henry's total gross salary for the services performed in the United
States during 2015 was $4,500. He received
$2,875 in 2015, and $1,625 in 2016. During
2015, he was engaged in a trade or business in
the United States because the compensation
for his personal services in the United States
was more than $3,000. Henry's salary is U.S.
source income and is taxed under the rules in
chapter 4.
Crew members. Compensation for services
performed by a nonresident alien in connection
with the individual's temporary presence in the
United States as a regular crew member of a
foreign vessel (for example, a boat or ship) engaged in transportation between the United
States and a foreign country or U.S. possession
is not U.S. source income and is exempt from
U.S. tax. This exemption does not apply to
compensation for services performed on foreign
aircraft.
Students and exchange visitors. Nonresident alien students and exchange visitors
present in the United States under “F,” “J,” or
“Q” visas can exclude from gross income pay
received from a foreign employer.
This group includes bona fide students,
scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a
field of specialized knowledge or skill, or persons of similar description. It also includes the
alien's spouse and minor children if they come
with the alien or come later to join the alien.
A nonresident alien temporarily present in
the United States under a “J” visa includes an
alien individual entering the United States as an
exchange visitor under the Mutual Educational
and Cultural Exchange Act of 1961.
Foreign employer. A foreign employer is:
A nonresident alien individual, foreign partnership, or foreign corporation, or
An office or place of business maintained
in a foreign country or in a U.S. possession
by a U.S. corporation, a U.S. partnership,
or an individual who is a U.S. citizen or resident.
The term “foreign employer” does not include a foreign government. Pay from a foreign
government that is exempt from U.S. income
tax is discussed in chapter 10.
Income from certain annuities. Do not include in income any annuity received under a
qualified annuity plan or from a qualified trust
exempt from U.S. income tax if you meet both
of the following conditions.
1. You receive the annuity only because:
a. You performed personal services outside the United States while you were
a nonresident alien, or
b. You performed personal services inside the United States while you were
a nonresident alien and you met the
three conditions, described earlier,
Page 16

Chapter 3

under Employees of foreign persons,
organizations, or offices.
2. At the time the first amount is paid as an
annuity under the plan (or by the trust),
90% or more of the employees for whom
contributions or benefits are provided under the annuity plan (or under the plan of
which the trust is a part) are U.S. citizens
or residents.
If the annuity qualifies under condition (1)
but not condition (2) above, you do not have to
include the amount in income if:
You are a resident of a country that gives a
substantially equal exclusion to U.S. citizens and residents, or
You are a resident of a beneficiary developing country under Title V of the Trade
Act of 1974.
If you are not sure whether the annuity is
from a qualified annuity plan or qualified trust,
ask the person who made the payment.
Income affected by treaties. Income of any
kind that is exempt from U.S. tax under a treaty
to which the United States is a party is excluded
from your gross income. Income on which the
tax is only limited by treaty, however, is included in gross income. See chapter 9.

Gambling Winnings From
Dog or Horse Racing
You can exclude from your gross income winnings from legal wagers initiated outside the
United States in a parimutuel pool with respect
to a live horse or dog race in the United States.

Gain From the Sale
of Your Main Home
If you sold your main home, you may be able to
exclude up to $250,000 of the gain on the sale
of your home. If you are married and file a joint
return, you may be able to exclude up to
$500,000. For information on the requirements
for this exclusion, see Pub. 523.
This exclusion does not apply to nonresident aliens who are subject to the
CAUTION
expatriation tax rules discussed in
chapter 4.

!

Scholarships and
Fellowship Grants
If you are a candidate for a degree, you may be
able to exclude from your income part or all of
the amounts you receive as a qualified scholarship. The rules discussed here apply to both
resident and nonresident aliens.
If a nonresident alien receives a grant
that is not from U.S. sources, it is not
subject to U.S. tax. See Scholarships,
Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U.S. sources.

TIP

Exclusions From Gross Income

A scholarship or fellowship is excludable
from income only if:
1. You are a candidate for a degree at an eligible educational institution, and
2. You use the scholarship or fellowship to
pay qualified education expenses.
Candidate for a degree. You are a candidate
for a degree if you:
1. Attend a primary or secondary school or
are pursuing a degree at a college or university, or
2. Attend an accredited educational institution that is authorized to provide:
a. A program that is acceptable for full
credit toward a bachelor's or higher
degree, or
b. A program of training to prepare students for gainful employment in a recognized occupation.
Eligible educational institution. An eligible
educational institution is one that maintains a
regular faculty and curriculum and normally has
a regularly enrolled body of students in attendance at the place where it carries on its educational activities.
Qualified education expenses. These are
expenses for:
Tuition and fees required to enroll at or attend an eligible educational institution, and
Course-related expenses, such as fees,
books, supplies, and equipment that are
required for the courses at the eligible educational institution. These items must be
required of all students in your course of instruction.
However, in order for these to be qualified education expenses, the terms of the scholarship or
fellowship cannot require that it be used for
other purposes, such as room and board, or
specify that it cannot be used for tuition or
course-related expenses.
Expenses that do not qualify. Qualified
education expenses do not include the cost of:
Room and board,
Travel,
Research,
Clerical help, or
Equipment and other expenses that are
not required for enrollment in or attendance at an eligible educational institution.
This is true even if the fee must be paid to the
institution as a condition of enrollment or attendance. Scholarship or fellowship amounts
used to pay these costs are taxable.
Amounts used to pay expenses that do not
qualify. A scholarship amount used to pay any
expense that does not qualify is taxable, even if
the expense is a fee that must be paid to the institution as a condition of enrollment or attendance.
Payment for services. You cannot exclude
from income the portion of any scholarship, fellowship, or tuition reduction that represents

payment for past, present, or future teaching,
research, or other services. This is true even if
all candidates for a degree are required to perform the services as a condition for receiving
the degree.
Example. On January 7, Maria Gomez is
notified of a scholarship of $2,500 for the spring
semester. As a condition for receiving the
scholarship, Maria must serve as a part-time
teaching assistant. Of the $2,500 scholarship,
$1,000 represents payment for her services.
Assuming that Maria meets all other conditions,
she can exclude no more than $1,500 from income as a qualified scholarship.

4.
How Income of
Aliens Is Taxed
Introduction
Resident and nonresident aliens are taxed in
different ways. Resident aliens are generally
taxed in the same way as U.S. citizens. Nonresident aliens are taxed based on the source of
their income and whether or not their income is
effectively connected with a U.S. trade or business. The following discussions will help you
determine if income you receive during the tax
year is effectively connected with a U.S. trade
or business and how it is taxed.

Topics

This chapter discusses:
Income that is effectively connected with a
U.S. trade or business.
Income that is not effectively connected
with a U.S. trade or business.
Interrupted period of residence.
Expatriation tax.

Useful Items

You may want to see:
Publication
544 Sales and Other Dispositions of
Assets
1212 List of Original Issue Discount
Instruments
Form (and Instructions)
6251 Alternative Minimum
Tax—Individuals
Schedule D (Form 1040) Capital Gains
and Losses
See chapter 12 for information about getting
these publications and forms.

Resident Aliens
Resident aliens are generally taxed in the same
way as U.S. citizens. This means that their
worldwide income is subject to U.S. tax and
must be reported on their U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens. Resident aliens use the Tax Table or Tax
Computation Worksheets located in the Form
1040 instructions, which apply to U.S. citizens.

Nonresident Aliens
A nonresident alien's income that is subject to
U.S. income tax must be divided into two categories:
1. Income that is effectively connected with a
trade or business in the United States, and
2. Income that is not effectively connected
with a trade or business in the United
States (discussed under The 30% Tax,
later).
The difference between these two categories is that effectively connected income, after
allowable deductions, is taxed at graduated
rates. These are the same rates that apply to
U.S. citizens and residents. Income that is not
effectively connected is taxed at a flat 30% (or
lower treaty) rate.

!

CAUTION

chapter.

If you were formerly a U.S. citizen or
resident alien, these rules may not apply. See Expatriation Tax, later in this

Trade or Business
in the United States
Generally, you must be engaged in a trade or
business during the tax year to be able to treat
income received in that year as effectively connected with that trade or business. Whether you
are engaged in a trade or business in the United
States depends on the nature of your activities.
The discussions that follow will help you determine whether you are engaged in a trade or
business in the United States.

Personal Services
If you perform personal services in the United
States at any time during the tax year, you usually are considered engaged in a trade or business in the United States.
Certain compensation paid to a nonresident alien by a foreign employer is
not included in gross income. For
more information, see Services Performed for
Foreign Employer in chapter 3.

TIP

Other Trade or Business Activities
Other examples of being engaged in a trade or
business in the United States follow.

Chapter 4

Students and trainees. If you are temporarily
present in the United States as a nonimmigrant
under an “F,” “J,” “M,” or “Q” visa, and not otherwise engaged in a trade or business, you are
considered to be engaged in a trade or business in the United States if you have taxable income from participation in a scholarship or fellowship described in section 1441(b). The
taxable part of any scholarship or fellowship
grant that is U.S. source income is treated as
effectively connected with a trade or business in
the United States.
Note. A nonresident alien temporarily
present in the United States under a “J” visa includes a nonresident alien individual admitted
to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961.
Business operations. If you own and operate
a business in the United States selling services,
products, or merchandise, you are, with certain
exceptions, engaged in a trade or business in
the United States.
Partnerships. If you are a member of a partnership that at any time during the tax year is
engaged in a trade or business in the United
States, you are considered to be engaged in a
trade or business in the United States.
Beneficiary of an estate or trust. If you are
the beneficiary of an estate or trust that is engaged in a trade or business in the United
States, you are treated as being engaged in the
same trade or business.
Trading in stocks, securities, and commodities. If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S.
resident broker or other agent, you are not engaged in a trade or business in the United
States.
For transactions in stocks or securities, this
applies to any nonresident alien, including a
dealer or broker in stocks and securities.
For transactions in commodities, this applies
to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange.
This discussion does not apply if you have a
U.S. office or other fixed place of business at
any time during the tax year through which, or
by the direction of which, you carry out your
transactions in stocks, securities, or commodities.
Trading for a nonresident alien's own
account. You are not engaged in a trade or
business in the United States if trading for your
own account in stocks, securities, or commodities is your only U.S. business activity. This applies even if the trading takes place while you
are present in the United States or is done by
your employee or your broker or other agent.
This does not apply to trading for your own
account if you are a dealer in stocks, securities,
or commodities. This does not necessarily
mean, however, that as a dealer you are considered to be engaged in a trade or business in
the United States. Determine that based on the
How Income of Aliens Is Taxed

Page 17

facts and circumstances in each case or under
the rules given above in Trading in stocks, securities, and commodities.

Effectively
Connected Income
If you are engaged in a U.S. trade or business,
all income, gain, or loss for the tax year that you
get from sources within the United States (other
than certain investment income) is treated as
effectively connected income. This applies
whether or not there is any connection between
the income and the trade or business being carried on in the United States during the tax year.
Two tests, described next under Investment
Income, determine whether certain items of investment income (such as interest, dividends,
and royalties) are treated as effectively connected with that business.

An asset is used in, or held for use in, the
trade or business in the United States if the asset is:
Held for the principal purpose of promoting
the conduct of a trade or business in the
United States,
Acquired and held in the ordinary course of
the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that
trade or business), or
Otherwise held to meet the present needs
of the trade or business in the United
States and not its anticipated future needs.
Generally, stock of a corporation is not treated
as an asset used in, or held for use in, a trade or
business in the United States.

Investment Income

Business-activities test. This test usually applies when income, gain, or loss comes directly
from the active conduct of the trade or business. The business-activities test is most important when:
Dividends or interest are received by a
dealer in stocks or securities,
Royalties are received in the trade or business of licensing patents or similar property, or
Service fees are earned by a servicing
business.

Investment income from U.S. sources that may
or may not be treated as effectively connected
with a U.S. trade or business generally falls into
the following three categories.

Under this test, if the conduct of the U.S. trade
or business was a material factor in producing
the income, the income is considered effectively connected.

In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the
United States. For a discussion of these rules,
see Foreign Income, later.

1. Fixed or determinable income (interest,
dividends, rents, royalties, premiums, annuities, etc.).
2. Gains (some of which are considered capital gains) from the sale or exchange of the
following types of property.
a. Timber, coal, or domestic iron ore with
a retained economic interest.
b. Patents, copyrights, and similar property on which you receive contingent
payments after October 4, 1966.
c. Patents transferred before October 5,
1966.
d. Original issue discount obligations.
3. Capital gains (and losses).
Use the two tests, described next, to determine whether an item of U.S. source income
falling in one of the three categories above and
received during the tax year is effectively connected with your U.S. trade or business. If the
tests indicate that the item of income is effectively connected, you must include it with your
other effectively connected income. If the item
of income is not effectively connected, include it
with all other income discussed under The 30%
Tax, later, in this chapter.
Asset-use test. This test usually applies to income that is not directly produced by trade or
business activities. Under this test, if an item of
income is from assets (property) used in, or
held for use in, the trade or business in the United States, it is considered effectively connected.
Page 18

Chapter 4

Personal Service Income
You usually are engaged in a U.S. trade or business when you perform personal services in the
United States. Personal service income you receive in a tax year in which you are engaged in
a U.S. trade or business is effectively connected with a U.S. trade or business. Income received in a year other than the year you performed the services is also effectively
connected if it would have been effectively connected if received in the year you performed the
services. Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. The income may be paid to you in the
form of cash, services, or property.
If you are engaged in a U.S. trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and
losses from the sale or exchange of capital assets are generally not effectively connected with
your trade or business. However, if there is a direct economic relationship between your holding of the asset and your trade or business of
performing personal services, the income, gain,
or loss is effectively connected.
Pensions. If you were a nonresident alien engaged in a U.S. trade or business after 1986
because you performed personal services in
the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected
income in each year you receive them. This is
true whether or not you are engaged in a U.S.

How Income of Aliens Is Taxed

trade or business in the year you receive the retirement pay.

Transportation Income
Transportation income (defined in chapter 2) is
effectively connected if you meet both of the following conditions.
1. You had a fixed place of business in the
United States involved in earning the income.
2. At least 90% of your U.S. source transportation income is attributable to regularly
scheduled transportation.
“Fixed place of business” generally means a
place, site, structure, or other similar facility
through which you engage in a trade or business. “Regularly scheduled transportation”
means that a ship or aircraft follows a published
schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United
States. This definition applies to both scheduled
and chartered air transportation.
If you do not meet the two conditions above,
the income is not effectively connected and is
taxed at a 4% rate. See Transportation Tax,
later in this chapter.

Business Profits and Losses
and Sales Transactions
All profits or losses from U.S. sources that are
from the operation of a business in the United
States are effectively connected with a trade or
business in the United States. For example,
profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. A share of U.S.
source profits or losses of a partnership that is
engaged in a trade or business in the United
States is also effectively connected with a trade
or business in the United States.

Real Property Gain or Loss
Gains and losses from the sale or exchange of
U.S. real property interests (whether or not they
are capital assets) are taxed as if you are engaged in a trade or business in the United
States. You must treat the gain or loss as effectively connected with that trade or business.
U.S. real property interest. This is any interest in real property located in the United States
or the U.S. Virgin Islands or any interest (other
than as a creditor) in a domestic corporation
that is a U.S. real property holding corporation.
Real property includes the following.
1. Land and unsevered natural products of
the land, such as growing crops and timber, and mines, wells, and other natural
deposits.
2. Improvements on land, including buildings, other permanent structures, and their
structural components.
3. Personal property associated with the use
of real property, such as equipment used

in farming, mining, forestry, or construction
or property used in lodging facilities or rented office space, unless the personal property is:
a. Disposed of more than one year before or after the disposition of the real
property, or
b. Separately sold to persons unrelated
either to the seller or to the buyer of
the real property.
U.S. real property holding corporation.
A corporation is a U.S. real property holding
corporation if the fair market value of the corporation's U.S. real property interests are at least
50% of the total fair market value of:
The corporation's U.S. real property interests, plus
The corporation's interests in real property
located outside the United States, plus
The corporation's other assets that are
used in, or held for use in, a trade or business.
Gain or loss on the sale of the stock in any
domestic corporation is taxed as if you are engaged in a U.S. trade or business unless you
establish that the corporation is not a U.S. real
property holding corporation.
Publicly traded exception. A U.S. real
property interest does not include a class of
stock of a corporation that is regularly traded on
an established securities market, unless you
hold more than 5% of the fair market value of
that class of stock (or for dispositions after December 17, 2015, more than 10% of that stock
in the case of real estate investment trusts). An
interest in a foreign corporation owning U.S.
real property generally is not a U.S. real property interest unless the corporation chooses to
be treated as a domestic corporation.
Qualified investment entities. Special rules
apply to qualified investment entities (QIEs). A
QIE is any real estate investment trust (REIT) or
any regulated investment company (RIC) that is
treated as a U.S. real property holding corporation (after applying certain rules in section
897(h)(4)(A)(ii)). See U.S. Real Property Interest in Pub. 515 for more information.
Look-through rule for QIEs. In most cases, any distribution from a QIE to a nonresident alien, foreign corporation, or other QIE that
is attributable to the QIE’s gain from the sale or
exchange of a U.S. real property interest is
treated as gain recognized by the nonresident
alien, foreign corporation, or other QIE from the
sale or exchange of a U.S. real property interest.
Certain exceptions apply to the look-through
rule for distributions by QIEs. A distribution by a
QIE with respect to stock regularly traded on an
established securities market in the United
States is not treated as gain from the sale or exchange of a U.S. real property interest if the
shareholder did not own more than 5% of that
stock (or for distributions after December 17,
2015, did not own more than 10% of that stock
in the case of real estate investment trusts) at
any time during the 1-year period ending on the
date of the distribution. A distribution made after
December 17, 2015, by a REIT generally is not

treated as gain from the sale or exchange of a
U.S. real property interest if the shareholder is a
qualified shareholder (as described in section
897(k)(3)). A distribution that you do not treat as
gain from the sale or exchange of a U.S. real
property interest may be included in your gross
income as a regular dividend.
Disposition of REIT stock. Dispositions of
stock in a REIT after December 17, 2015, that is
held directly (or indirectly through one or more
partnerships) by a qualified shareholder will not
be treated as a U.S. real property interest. See
sections 897(k)(2) through (4) for more information.
Domestically controlled QIE. The sale of
an interest in a domestically controlled QIE is
not the sale of a U.S. real property interest. The
entity is domestically controlled if at all times
during the testing period less than 50% in value
of its stock was held, directly or indirectly, by
foreign persons. The testing period is the
shorter of (a) the 5-year period ending on the
date of disposition, or (b) the period during
which the entity was in existence.
For the purpose of determining whether a
QIE is domestically controlled, the following
rules will apply beginning on December 18,
2015.
1. A person holding less than 5% of any
class of stock of the QIE, which is regularly
traded on an established securities market
in the United States at all times during the
testing period, would be treated as a U.S.
person unless the QIE has actual knowledge that such person is not a U.S. person.
2. Any stock in a QIE that is held by another
QIE will be treated as held by a foreign
person if:
a. Any class of stock of such other QIE
is regularly traded on an established
securities market, or
b. Such other QIE is a RIC that issues
certain redeemable securities. Notwithstanding the above, the stock of
the QIE will be treated as held by a
U.S. person if such other QIE is domestically controlled.
3. Stock in a QIE held by any other QIE not
described above will be treated as held by
a U.S. person in proportion to the stock of
such other QIE that is (or is treated as)
held by a U.S. person.
Wash sale. If you dispose of an interest in
a domestically controlled QIE in an applicable
wash sale transaction, special rules apply. An
applicable wash sale transaction is one in which
you:
1. Dispose of an interest in the domestically
controlled QIE during the 30-day period
before the ex-dividend date of a distribution that you would (but for the disposition)
have treated as gain from the sale or exchange of a U.S. real property interest,
and
2. Acquire, or enter into a contract or option
to acquire, a substantially identical interest
in that entity during the 61-day period that
Chapter 4

began on the first day of the 30-day period.
If this occurs, you are treated as having gain
from the sale or exchange of a U.S. real property interest in an amount equal to the distribution made after June 15, 2006, that would have
been treated as such gain. This also applies to
any substitute dividend payment.
A transaction is not treated as an applicable
wash sale transaction if:
You actually receive the distribution from
the domestically controlled QIE related to
the interest disposed of, or acquired, in the
transaction, or
You dispose of any class of stock in a QIE
that is regularly traded on an established
securities market in the United States but
only if you did not own more than 5% of
that class of stock at any time during the
1-year period ending on the date of the distribution.
Alternative minimum tax. There may be a
minimum tax on your net gain from the disposition of U.S. real property interests. Figure the
amount of this tax, if any, on Form 6251.
Withholding of tax. If you dispose of a U.S.
real property interest, the buyer may have to
withhold tax. See the discussion of Tax Withheld on Real Property Sales in chapter 8.

Foreign Income
You must treat three kinds of foreign source income as effectively connected with a trade or
business in the United States if:
You have an office or other fixed place of
business in the United States to which the
income can be attributed,
That office or place of business is a material factor in producing the income, and
The income is produced in the ordinary
course of the trade or business carried on
through that office or other fixed place of
business.
An office or other fixed place of business is
a material factor if it significantly contributes to,
and is an essential economic element in, the
earning of the income.
The three kinds of foreign source income
are listed below.
1. Rents and royalties for the use of, or for
the privilege of using, intangible personal
property located outside the United States
or from any interest in such property. Included are rents or royalties for the use, or
for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and
similar properties if the rents or royalties
are from the active conduct of a trade or
business in the United States.
2. Dividends, interest, or amounts received
for the provision of a guarantee of indebtedness issued after September 27, 2010,
from the active conduct of a banking, financing, or similar business in the United
States. A substitute dividend or interest
How Income of Aliens Is Taxed

Page 19

payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts
received on the transferred security.
3. Income, gain, or loss from the sale outside
the United States, through the U.S. office
or other fixed place of business, of:
a. Stock in trade,
b. Property that would be included in inventory if on hand at the end of the tax
year, or
c. Property held primarily for sale to customers in the ordinary course of business.
Item (3) will not apply if you sold the
property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a
foreign country was a material factor in the
sale.
Any foreign source income that is equivalent
to any item of income described above is
treated as effectively connected with a U.S.
trade or business. For example, foreign source
interest and dividend equivalents are treated as
U.S. effectively connected income if the income
is derived by a foreign person in the active conduct of a banking, financing, or similar business
within the United States.

Tax on Effectively
Connected Income
Income you receive during the tax year that is
effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U.S.
citizens and residents.
Generally, you can receive effectively connected income only if you are a nonresident
alien engaged in trade or business in the United
States during the tax year. However, income
you receive from the sale or exchange of property, the performance of services, or any other
transaction in another tax year is treated as effectively connected in that year if it would have
been effectively connected in the year the
transaction took place or you performed the
services.
Example. Ted Richards, a nonresident
alien, entered the United States in August 2014,
to perform personal services in the U.S. office
of his overseas employer. He worked in the
U.S. office until December 25, 2014, but did not
leave this country until January 11, 2015. On
January 8, 2015, he received his final paycheck
for services performed in the United States during 2014. All of Ted's income during his stay
here is U.S. source income.
During 2014, Ted was engaged in the trade
or business of performing personal services in
the United States. Therefore, all amounts paid
to him in 2014 for services performed in the United States during 2014 are effectively connected with that trade or business during 2014.
The salary payment Ted received in January
2015 is U.S. source income to him in 2015. It is
effectively connected with a trade or business in
Page 20

Chapter 4

the United States because he was engaged in a
trade or business in the United States during
2014 when he performed the services that
earned the income.
Real property income. You may be able to
choose to treat all income from real property as
effectively connected. See Income From Real
Property, later, in this chapter.

The 30% Tax
Tax at a 30% (or lower treaty) rate applies to
certain items of income or gains from U.S. sources but only if the items are not effectively connected with your U.S. trade or business.

Fixed or Determinable Income
The 30% (or lower treaty) rate applies to the
gross amount of U.S. source fixed or determinable annual or periodic gains, profits, or income.
Income is fixed when it is paid in amounts
known ahead of time. Income is determinable
whenever there is a basis for figuring the
amount to be paid. Income can be periodic if it
is paid from time to time. It does not have to be
paid annually or at regular intervals. Income can
be determinable or periodic even if the length of
time during which the payments are made is increased or decreased.
Items specifically included as fixed or determinable income are interest (other than original
issue discount), dividends, dividend equivalent
payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. A substitute dividend or interest payment received under a securities lending
transaction or a sale-repurchase transaction is
treated the same as the amounts received on
the transferred security. Other items of income,
such as royalties, also may be subject to the
30% tax.
Some fixed or determinable income
may be exempt from U.S. tax. See
chapter 3 if you are not sure whether
the income is taxable.

TIP

Original issue discount (OID). If you sold,
exchanged, or received a payment on a bond or
other debt instrument that was issued at a discount, all or part of the original issue discount
(OID) (other than portfolio interest) may be subject to the 30% tax. The amount of OID is the
difference between the stated redemption price
at maturity and the issue price of the debt instrument. The 30% tax applies in the following
circumstances.
1. You received a payment on a debt instrument. In this case, the amount of OID subject to tax is the OID that accrued while
you held the debt instrument minus the
OID previously taken into account. But the
tax on the OID cannot be more than the
payment minus the tax on the interest payment on the debt instrument.
2. You sold or exchanged the debt instrument. The amount of OID subject to tax is

How Income of Aliens Is Taxed

the OID that accrued while you held the
debt instrument minus the amount already
taxed in (1) above.
Report on your return the amount of OID
shown on Form 1042-S if you bought the debt
instrument at original issue. However, you must
recompute your proper share of OID shown on
Form 1042-S if any of the following apply.
You bought the debt instrument at a premium or paid an acquisition premium.
The debt instrument is a stripped bond or a
stripped coupon (including zero coupon instruments backed by U.S. Treasury securities).
The debt instrument is a contingent payment or inflation-indexed debt instrument.
For the definition of premium and acquisition
premium and instructions on how to recompute
OID, get Pub. 1212.

Gambling Winnings
In general, nonresident aliens are subject to the
30% tax on the gross proceeds from gambling
won in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty. However,
no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in
the United States.
Nonresident aliens are taxed at graduated
rates on net gambling income won in the United
States that is effectively connected with a U.S.
trade or business.

Social Security Benefits
A nonresident alien must include 85% of any
U.S. social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U.S. source fixed or determinable annual or periodic income. Social security
benefits include monthly retirement, survivor,
and disability benefits. This income is exempt
under some tax treaties. See Table 1 in Pub.
901 for a list of tax treaties that exempt U.S. social security benefits from U.S. tax.

Sales or Exchanges
of Capital Assets
These rules apply only to those capital gains
and losses from sources in the United States
that are not effectively connected with a trade or
business in the United States. They apply even
if you are engaged in a trade or business in the
United States. These rules do not apply to the
sale or exchange of a U.S. real property interest
or to the sale of any property that is effectively
connected with a trade or business in the United States. See Real Property Gain or Loss,
earlier, under Effectively Connected Income.
A capital asset is everything you own except:
Inventory.
Business accounts or notes receivable.
Depreciable property used in a trade or
business.

Real property used in a trade or business.
Supplies regularly used in a trade or business.
Certain copyrights, literary or musical or artistic compositions, letters or memoranda,
or similar property.
Certain U.S. government publications.
Certain commodities derivative financial instruments held by a commodities derivatives dealer.
Hedging transactions.
A capital gain is a gain on the sale or exchange of a capital asset. A capital loss is a
loss on the sale or exchange of a capital asset.
If the sale is in foreign currency, for the purpose of determining gain, the cost and selling
price of the property should be expressed in
U.S. currency at the rate of exchange prevailing
as of the date of the purchase and date of the
sale, respectively.
You may want to read Pub. 544. However,
use Pub. 544 only to determine what is a sale or
exchange of a capital asset, or what is treated
as such. Specific tax treatment that applies to
U.S. citizens or residents generally does not apply to you.
The following gains are subject to the 30%
(or lower treaty) rate without regard to the
183-day rule, discussed later.
1. Gains on the disposal of timber, coal, or
domestic iron ore with a retained economic interest.
2. Gains on contingent payments received
from the sale or exchange of patents,
copyrights, and similar property after October 4, 1966.
3. Gains on certain transfers of all substantial
rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966.
4. Gains on the sale or exchange of original
issue discount obligations.
Gains in (1) are not subject to the 30% (or
lower treaty) rate if you choose to treat the
gains as effectively connected with a U.S. trade
or business. See Income From Real Property,
later.
183-day rule. If you were in the United States
for 183 days or more during the tax year, your
net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. For
purposes of the 30% (or lower treaty) rate, net
gain is the excess of your capital gains from
U.S. sources over your capital losses from U.S.
sources. This rule applies even if any of the
transactions occurred while you were not in the
United States.
To determine your net gain, consider the
amount of your gains and losses that would be
recognized and taken into account only if, and
to the extent that, they would be recognized
and taken into account if you were in a U.S.
trade or business during the year and the gains
and losses were effectively connected with that
trade or business during the tax year.

In arriving at your net gain, do not take the
following into consideration.
The four types of gains listed earlier.
The deduction for a capital loss carryover.
Capital losses in excess of capital gains.
Exclusion for gain from the sale or exchange of qualified small business stock
(section 1202 exclusion).
Losses from the sale or exchange of property held for personal use. However, losses resulting from casualties or thefts may
be deductible on Schedule A (Form
1040NR). See Itemized Deductions in
chapter 5.
If you are not engaged in a trade or business
in the United States and have not established a
tax year for a prior period, your tax year will be
the calendar year for purposes of the 183-day
rule. Also, you must file your tax return on a calendar-year basis.
If you were in the United States for less than
183 days during the tax year, capital gains
(other than gains listed earlier) are tax exempt
unless they are effectively connected with a
trade or business in the United States during
your tax year.
Reporting. Report your gains and losses from
the sales or exchanges of capital assets that
are not effectively connected with a trade or
business in the United States on page 4 of
Form 1040NR. Report gains and losses from
sales or exchanges of capital assets (including
real property) that are effectively connected
with a trade or business in the United States on
a separate Schedule D (Form 1040), Form
4797, or both. Attach them to Form 1040NR.

Income From Real Property
If you have income from real property located in
the United States that you own or have an interest in and hold for the production of income,
you can choose to treat all income from that
property as income effectively connected with a
trade or business in the United States. The
choice applies to all income from real property
located in the United States and held for the
production of income and to all income from
any interest in such property. This includes income from rents, royalties from mines, oil or
gas wells, or other natural resources. It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained
economic interest.
You can make this choice only for real property income that is not otherwise effectively
connected with your U.S. trade or business.
If you make the choice, you can claim deductions attributable to the real property income
and only your net income from real property is
taxed.
This choice does not treat a nonresident
alien, who is not otherwise engaged in a U.S.
trade or business, as being engaged in a trade
or business in the United States during the year.
Example. You are a nonresident alien and
are not engaged in a U.S. trade or business.
You own a single-family house in the United
Chapter 4

States that you rent out. Your rental income for
the year is $10,000. This is your only U.S.
source income. As discussed earlier under The
30% Tax, the rental income is subject to a tax at
a 30% (or lower treaty) rate. You received a
Form 1042-S showing that your tenants properly withheld this tax from the rental income.
You do not have to file a U.S. tax return (Form
1040NR) because your U.S. tax liability is satisfied by the withholding of tax.
If you make the choice discussed earlier,
you can offset the $10,000 income by certain
rental expenses. (See Pub. 527 for information
on rental expenses.) Any resulting net income is
taxed at graduated rates. If you make this
choice, report the rental income and expenses
on Schedule E (Form 1040) and attach the
schedule to Form 1040NR. For the first year
you make the choice, also attach the statement
discussed next.
Making the choice. Make the initial choice by
attaching a statement to your return, or amended return, for the year of the choice. Include
the following in your statement.
That you are making the choice.
Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty.
A complete list of all your real property, or
any interest in real property, located in the
United States. Give the legal identification
of U.S. timber, coal, or iron ore in which
you have an interest.
The extent of your ownership in the property.
The location of the property.
A description of any major improvements
to the property.
The dates you owned the property.
Your income from the property.
Details of any previous choices and revocations of the real property income choice.
This choice stays in effect for all later tax
years unless you revoke it.
Revoking the choice. You can revoke the
choice without IRS approval by filing Form
1040X for the year you made the choice and for
later tax years. You must file Form 1040X within
3 years from the date your return was filed or 2
years from the time the tax was paid, whichever
is later. If this time period has expired for the
year of choice, you cannot revoke the choice for
that year. However, you may revoke the choice
for later tax years only if you have IRS approval.
For information on how to get IRS approval, see
Regulation section 1.871-10(d)(2).

Transportation Tax
A 4% tax rate applies to transportation income
that is not effectively connected because it
does not meet the two conditions listed earlier
under Transportation Income. If you receive
transportation income subject to the 4% tax,
you should figure the tax and show it on line 58
of Form 1040NR. Attach a statement to your return that includes the following information (if
applicable).
Your name, taxpayer identification number,
and tax year.
How Income of Aliens Is Taxed

Page 21

A description of the types of services performed (whether on or off board).
Names of vessels or registration numbers
of aircraft on which you performed the
services.
Amount of U.S. source transportation income derived from each type of service for
each vessel or aircraft for the calendar
year.
Total amount of U.S. source transportation
income derived from all types of services
for the calendar year.
This 4% tax applies to your U.S. source
gross transportation income. This only includes
transportation income that is treated as derived
from sources in the United States if the transportation begins or ends in the United States.
For transportation income from personal services, the transportation must be between the
United States and a U.S. possession. For personal services of a nonresident alien, this only
applies to income derived from, or in connection with, an aircraft.

Interrupted Period
of Residence
You are subject to tax under a special rule if you
interrupt your period of U.S. residence with a
period of nonresidence. The special rule applies if you meet all of the following conditions.
1. You were a U.S. resident for a period that
includes at least 3 consecutive calendar
years.
2. You were a U.S. resident for at least 183
days in each of those years.
3. You ceased to be treated as a U.S. resident.
4. You then again became a U.S. resident
before the end of the third calendar year
after the end of the period described in (1)
above.
Under this special rule, you are subject to
tax on your U.S. source gross income and gains
on a net basis at the graduated rates applicable
to individuals (with allowable deductions) for the
period you were a nonresident alien, unless you
would be subject to a higher tax under the 30%
tax (discussed earlier) on income not connected with a U.S. trade or business. For information on how to figure the special tax, see Expatriation Tax below.
Example. John Willow, a citizen of New
Zealand, entered the United States on April 1,
2010, as a lawful permanent resident. On August 1, 2012, John ceased to be a lawful permanent resident and returned to New Zealand.
During his period of residence, he was present
in the United States for at least 183 days in
each of three consecutive years (2010, 2011,
and 2012). He returned to the United States on
October 5, 2015, as a lawful permanent resident. He became a resident before the close of
the third calendar year (2015) beginning after
the end of his first period of residence (August
1, 2012). Therefore, he is subject to tax under
the special rule for the period of nonresidence
(August 2, 2012, through October 4, 2015) if it
Page 22

Chapter 4

is more than the tax that would normally apply
to him as a nonresident alien.

Table 4-1. Inflation-Adjusted Amounts for
Expatriation Actions Before June 4, 2004

Reporting requirements. If you are subject to
this tax for any year in the period you were a
nonresident alien, you must file Form 1040NR
for that year. The return is due by the due date
(including extensions) for filing your U.S. income tax return for the year that you again become a U.S. resident. If you already filed returns for that period, you must file amended
returns. You must attach a statement to your return that identifies the source of all of your U.S.
and foreign gross income and the items of income subject to this special rule.

IF you
expatriated
during . . .

Expatriation Tax
The expatriation tax provisions apply to U.S.
citizens who have renounced their citizenship
and long-term residents who have ended their
residency. The rules that apply are based on
the dates of expatriation, which are described in
the following sections.
Expatriation Before June 4, 2004.
Expatriation After June 3, 2004, and Before June 17, 2008.
Expatriation After June 16, 2008.
Long-term resident defined. You are a
long-term resident if you were a lawful permanent resident of the United States in at least 8 of
the last 15 tax years ending with the year your
residency ends. In determining if you meet the
8-year requirement, do not count any year that
you are treated as a resident of a foreign country under a tax treaty and do not waive treaty
benefits.

Expatriation Before
June 4, 2004
If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U.S.
taxes. Unless you received a ruling from the
IRS that you did not expatriate to avoid U.S.
taxes, you are presumed to have tax avoidance
as a principal purpose if:
1. Your average annual net income tax for
the last 5 tax years ending before the date
of your action to relinquish your citizenship
or terminate your residency was more than
$100,000, or
2. Your net worth on the date of your action
was $500,000 or more.
The amounts above are adjusted for inflation if
your expatriation action is after 1997 (see Table 4-1).

How Income of Aliens Is Taxed

1999
2000
2001
2002
2003
2004
(before
June 4)*

THEN the rules outlined
on this page apply if . . .
Your
5-year
Your net
average
worth
annual net OR equaled or
income tax
exceeded
was more
...
than ...
110,000
112,000
116,000
120,000
122,000
124,000

552,000
562,000
580,000
599,000
608,000
622,000

*If you expatriated after June 3, 2004, see
Expatriation After June 3, 2004, and Before June
17, 2008 or Expatriation After June 16, 2008.

Reporting requirements. If you lost your U.S.
citizenship, you should have filed Form 8854
with a consular office or a federal court at the
time of loss of citizenship. If you ended your
long-term residency, you should have filed
Form 8854 with the IRS when you filed your
dual-status tax return for the year your residency ended.
Your U.S. residency is considered to have
ended when you ceased to be a lawful permanent resident or you began to be treated as a
resident of another country under a tax treaty
and do not waive treaty benefits.
Penalties. If you failed to file Form 8854,
you may have to pay a penalty equal to the
greater of 5% of the expatriation tax or $1,000.
The penalty will be assessed for each year of
the 10-year period beginning on the date of expatriation during which your failure to file continues. The penalty will not be imposed if you can
show that the failure is due to reasonable cause
and not willful neglect.
Expatriation tax. The expatriation tax applies
to the 10-year period following the date of expatriation or termination of residency. It is figured
in the same way as for those expatriating after
June 3, 2004, and before June 17, 2008. See
How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section.

Expatriation After
June 3, 2004, and
Before June 17, 2008
If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply
to you if any of the following statements apply.
1. Your average annual net income tax for
the 5 tax years ending before the date of
expatriation or termination of residency is
more than:

a. $124,000 if you expatriated or terminated residency in 2004.
b. $127,000 if you expatriated or terminated residency in 2005.
c. $131,000 if you expatriated or terminated residency in 2006.
d. $136,000 if you expatriated or terminated residency in 2007.
e. $139,000 if you expatriated or terminated residency in 2008.
2. Your net worth is $2 million or more on the
date of your expatriation or termination of
residency.
3. You fail to certify on Form 8854 that you
have complied with all U.S. federal tax obligations for the 5 tax years preceding the
date of your expatriation or termination of
residency.
Exception for dual-citizens and certain minors. Certain dual-citizens and certain minors
(defined next) are not subject to the expatriation
tax even if they meet (1) or (2) earlier. However,
they still must provide the certification required
in (3).
Certain dual-citizens. You may qualify for
the exception described above if all of the following apply.
You became at birth a U.S. citizen and a
citizen of another country and you continue
to be a citizen of that other country.
You were never a resident alien of the United States (as defined in chapter 1).
You never held a U. S. passport.
You were present in the United States for
no more than 30 days during any calendar
year that is 1 of the 10 calendar years preceding your loss of U. S. citizenship.
Certain minors. You may qualify for the
exception described above if you meet all of the
following requirements.
You became a U.S. citizen at birth.
Neither of your parents was a U.S. citizen
at the time of your birth.
You expatriated before you were 181 2.
You were present in the United States for
not more than 30 days during any calendar
year that is 1 of the 10 calendar years preceding your expatriation.
Tax consequences of presence in the United States. The following rules apply if you do
not meet the exception above for dual-citizens
and certain minors and the expatriation rules
would otherwise apply to you.
The expatriation tax does not apply to any
tax year during the 10-year period if you are
physically present in the United States for more
than 30 days during the calendar year ending in
that year. Instead, you are treated as a U.S. citizen or resident and taxed on your worldwide income for that tax year. You must file Form 1040,
1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms.
When counting the number of days of presence during a calendar year, count any day you
were physically present in the United States at
any time during the day. However, do not count
any days (up to a limit of 30 days) on which you

performed personal services in the United
States for an employer who is not related to you
if either of the following apply.
1. You have ties with other countries. You
have ties with other countries if:
a. You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident
of the country in which you, your
spouse, or either of your parents were
born, and
b. You became fully liable for income tax
in that country.
2. You were physically present in the United
States for 30 days or less during each
year in the 10-year period ending on the
date of expatriation or termination of residency. Do not count any day you were an
exempt individual or were unable to leave
the United States because of a medical
condition that arose while you were in the
United States. See Exempt individual and
Medical condition in chapter 1 under Substantial Presence Test, but disregard the
information about Form 8843.
Related employer. If your employer in the
United States is any of the following, then your
employer is related to you. You must count any
days you performed services in the United
States for that employer as days of presence in
the United States.
Members of your family. This includes only
your brothers and sisters, half-brothers
and half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).
A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest.
A corporation in which you directly or indirectly own more than 50% in value of the
outstanding stock. (See Pub. 550, chapter 4, Constructive ownership of stock, for
how to determine whether you directly or
indirectly own outstanding stock.)
A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method,
by you or by a member of your family,
whether or not this control is legally enforceable.
Date of tax expatriation. For purposes of
U.S. tax rules, the date of your expatriation or
termination of residency is the later of the dates
on which you perform the following actions.
You notify either the Department of State
or the Department of Homeland Security
(whichever is appropriate) of your expatriating act or termination of residency.
You file Form 8854 in accordance with the
form instructions.
Annual return. If the expatriation tax applies to you, you must file Form 8854 each year
during the 10-year period following the date of
expatriation. You must file this form even if you
owe no U.S. tax.

to be shown on the form, or include incorrect information, you may have to pay a penalty of
$10,000. You will not have to pay a penalty if
you show that the failure is due to reasonable
cause and not to willful neglect.

How To Figure the Expatriation
Tax (If You Expatriated Before
June 17, 2008)
If the expatriation tax applies to you, you are
generally subject to tax on your U.S. source
gross income and gains on a net basis at the
graduated rates applicable to individuals (with
allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a
U.S. trade or business.
For this purpose, U.S. source gross income
(defined in chapter 2) includes gains from the
sale or exchange of:
Property (other than stock or debt obligations) located in the United States,
Stock issued by a U.S. domestic corporation, and
Debt obligations of U.S. persons or of the
United States, a state or political subdivision thereof, or the District of Columbia.
U.S. source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or
were considered to own, at any time during the
2-year period ending on the date of expatriation, more than 50% of:
The total combined voting power of all
classes of that corporation's stock, or
The total value of the stock.
The income or gain is considered U.S. source
income only to the extent of your share of earnings and profits earned or accumulated before
the date of expatriation and during the periods
you met the ownership requirements discussed
above.
Any exchange of property is treated as a
sale of the property at its fair market value on
the date of the exchange and any gain is
treated as U.S. source gross income in the tax
year of the exchange unless you enter into a
gain recognition agreement under Notice 97-19.
Other information. For more information on
the expatriation tax provisions, including exceptions to the tax and special U.S. source rules,
see section 877 of the Internal Revenue Code.

Expatriation Tax Return
If you expatriated or terminated your U.S. residency, or you are subject to the expatriation tax,
you must file Form 8854, Initial and Annual Expatriation Statement. Attach it to Form 1040NR
if you are required to file that form. If you are
present in the United States following your expatriation and are subject to tax as a U.S. citizen or resident, file Form 8854 with Form 1040.

Penalty. If you fail to file Form 8854 for any
tax year, fail to include all information required
Chapter 4

How Income of Aliens Is Taxed

Page 23

Expatriation After
June 16, 2008
If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the
following conditions.
1. Your average annual net income tax for
the 5 years ending before the date of expatriation or termination of residency is
more than:
a. $139,000 if you expatriated or terminated residency in 2008.
b. $145,000 if you expatriated or terminated residency in 2009 or 2010.
c. $147,000 if you expatriated or terminated residency in 2011.
d. $151,000 if you expatriated or terminated residency in 2012.
e. $155,000 if you expatriated or terminated residency in 2013.
f. $157,000 if you expatriated or terminated residency in 2014.
g. $160,000 if you expatriated or terminated residency in 2015.
2. Your net worth is $2 million or more on the
date of your expatriation or termination of
residency.
3. You fail to certify on Form 8854 that you
have complied with all U.S. federal tax obligations for the 5 years preceding the date
of your expatriation or termination of residency.
4. You expatriated before 2015 and you:
a. Deferred the payment of tax,
b. Have an item of eligible deferred compensation, or
c. Have an interest in a nongrantor trust.
Exception for dual-citizens and certain minors. Certain dual-citizens and certain minors
(defined next) are not subject to the expatriation
tax even if they meet (1) or (2) above. However,
they still must provide the certification required
in (3) above.
Certain dual-citizens. You may qualify for
the exception described above if both of the following apply.
You became at birth a U.S. citizen and a
citizen of another country and you continue
to be a citizen of, and are taxed as a resident of, that other country.
You have been a resident of the United
States for not more than 10 years during
the 15-year tax period ending with the tax
year during which the expatriation occurs.
For the purpose of determining U.S. residency, use the substantial presence test
described in chapter 1.
Certain minors. You may qualify for the
exception described earlier if you meet both of
the following requirements.
You expatriated before you were 181 2.
You have been a resident of the United
States for not more than 10 tax years before the expatriation occurs. For the
Page 24

Chapter 4

purpose of determining U.S. residency,
use the substantial presence test described in chapter 1.
Expatriation date. Your expatriation date is
the date you relinquish U.S. citizenship (in the
case of a former citizen) or terminate your
long-term residency (in the case of a former
U.S. resident).
Former U.S. citizen. You are considered
to have relinquished your U.S. citizenship on
the earliest of the following dates.
1. The date you renounced U.S. citizenship
before a diplomatic or consular officer of
the United States (provided that the voluntary renouncement was later confirmed by
the issuance of a certificate of loss of nationality).
2. The date you furnished to the State Department a signed statement of voluntary
relinquishment of U.S. nationality confirming the performance of an expatriating act
(provided that the voluntary relinquishment was later confirmed by the issuance
of a certificate of loss of nationality).
3. The date the State Department issued a
certificate of loss of nationality.
4. The date that a U.S. court canceled your
certificate of naturalization.

Gains arising from deemed sales must be
taken into account for the tax year of the
deemed sale without regard to other U.S. internal revenue laws. Losses from deemed sales
must be taken into account to the extent otherwise provided under U.S. internal revenue laws.
However, Internal Revenue Code section 1091
(relating to the disallowance of losses on wash
sales of stock and securities) does not apply.
The net gain that you otherwise must include in
your income is reduced (but not below zero) by:
1. $600,000 if you expatriated or terminated
residency before January 1, 2009.
2. $626,000 if you expatriated or terminated
residency in 2009.
3. $627,000 if you expatriated or terminated
residency in 2010.
4. $636,000 if you expatriated or terminated
residency in 2011.
5. $651,000 if you expatriated or terminated
residency in 2012.
6. $668,000 if you expatriated or terminated
residency in 2013.
7. $680,000 if you expatriated or terminated
residency in 2014.
8. $690,000 if you expatriated or terminated
residency in 2015.

Former long-term resident. You are considered to have terminated your long-term residency on the earliest of the following dates.

Exceptions. The mark-to-market tax does not
apply to the following.

1. The date you voluntarily relinquished your
lawful permanent resident status by filing
Department of Homeland Security Form
I-407 with a U.S. consular or immigration
officer, and the Department of Homeland
Security determined that you have, in fact,
abandoned your lawful permanent resident status.

2. Ineligible deferred compensation items.

2. The date you became subject to a final administrative order for your removal from
the United States under the Immigration
and Nationality Act and you actually left
the United States as a result of that order.
3. If you were a dual resident of the United
States and a country with which the United
States has an income tax treaty, the date
you began to be treated as a resident of
that country and you determined that, for
purposes of the treaty, you are a resident
of the treaty country and notify the IRS of
that treatment on Forms 8833 and 8854.
See Effect of Tax Treaties in chapter 1 for
more information about dual residents.

How To Figure the
Expatriation Tax (If You
Expatriate After June 16, 2008)
In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in
your property as if the property had been sold
for its fair market value on the day before your
expatriation date (“mark-to-market tax”). This
applies to most types of property interests you
held on the date of relinquishment of citizenship
or termination of residency. But see Exceptions,
later.

How Income of Aliens Is Taxed

1. Eligible deferred compensation items.
3. Interests in nongrantor trusts.
4. Specified tax deferred accounts.
Instead, items (1) and (3) may be subject to
withholding at source. In the case of item (2),
you are treated as receiving the present value
of your accrued benefit as of the day before the
expatriation date. In the case of item (4), you
are treated as receiving a distribution of your
entire interest in the account on the day before
your expatriation date. See paragraphs (d), (e),
and (f) of section 877A for more information.

Expatriation Tax Return
If you expatriated or terminated your U.S. residency, or you are subject to the expatriation
rules (as discussed earlier in the first paragraph
under Expatriation After June 16, 2008), you
must file Form 8854. Attach it to Form 1040 or
Form 1040NR if you are required to file either of
those forms.
Deferral of payment of mark-to-market tax.
You can make an irrevocable election to defer
payment of the mark-to-market tax imposed on
the deemed sale of property. If you make this
election, the following rules apply.
1. You can make the election on a property-by-property basis.
2. The deferred tax attributable to a particular
property is due on the return for the tax
year in which you dispose of the property.
3. Interest is charged for the period the tax is
deferred.

4. The due date for the payment of the deferred tax cannot be extended beyond the
earlier of the following dates.
a. The due date of the return required for
the year of death.
b. The time that the security provided for
the property fails to be adequate. See
item (6) below.
5. You make the election on Form 8854.
6. You must provide adequate security (such
as a bond).
7. You must make an irrevocable waiver of
any right under any treaty of the United
States which would preclude assessment
or collection of the mark-to-market tax.
For more information about the deferral of
payment, see the Instructions for Form 8854.

521 Moving Expenses
526 Charitable Contributions
535 Business Expenses
597 Information on the United States–
Canada Income Tax Treaty
Form (and Instructions)
W-7 Application for IRS Individual
Taxpayer Identification Number
1040 U.S. Individual Income Tax Return
1040NR U.S. Nonresident Alien Income
Tax Return
1040NR-EZ U.S. Income Tax Return for
Certain Nonresident Aliens With No
Dependents
2106 Employee Business Expenses
2106-EZ Unreimbursed Employee
Business Expenses
3903 Moving Expenses

5.
Figuring
Your Tax
Introduction
After you have determined your alien status, the
source of your income, and if and how that income is taxed in the United States, your next
step is to figure your tax. The information in this
chapter is not as comprehensive for resident
aliens as it is for nonresident aliens. Resident
aliens should get publications, forms, and instructions for U.S. citizens, because the information for filing returns for resident aliens is
generally the same as for U.S. citizens.
If you are both a nonresident alien and a
resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens.

Topics

This chapter discusses:
Identification numbers,
Filing status,
Deductions,
Exemptions,
Tax credits and payments, and
Special rules for bona fide residents of
American Samoa and Puerto Rico.

Useful Items

You may want to see:
Publication
463 Travel, Entertainment, Gift, and Car
Expenses
501 Exemptions, Standard Deduction,
and Filing Information

4563 Exclusion of Income for Bona Fide
Residents of American Samoa
8959 Additional Medicare Tax
See chapter 12 for information about getting
these publications and forms.

Tax Year
You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. If you have not previously
established a fiscal tax year, your tax year is the
calendar year. A calendar year is 12 consecutive months ending on December 31. If you
have previously established a regular fiscal year
(12 consecutive months ending on the last day
of a month other than December or a 52–53
week year) and are considered to be a U.S. resident for any calendar year, you will be treated
as a U.S. resident for any part of your fiscal year
that falls within that calendar year.

Identification Number
A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. For an individual, this is a social security number (SSN). If you do not have
and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). An employer identification number
(EIN) is required if you are engaged in a trade
or business as a sole proprietor and have employees or a qualified retirement plan.
You must furnish a taxpayer identification
number if you are:
An alien who has income effectively connected with the conduct of a U.S. trade or
business at any time during the year,
An alien who has a U.S. office or place of
business at any time during the year,
A nonresident alien spouse treated as a
resident, as discussed in chapter 1, or
Any other alien who files a tax return, an
amended return, or a refund claim (but not
information returns).

Social security number (SSN). Generally,
you can get an SSN if you have been lawfully
admitted to the United States for permanent
residence or under other immigration categories that authorize U.S. employment.
To apply for this number, get Form SS-5
from your local Social Security Administration
(SSA) office or call the SSA at 1-800-772-1213.
You can also download Form SS-5 from the
SSA's website at www.socialsecurity.gov/
ssnumber/ss5.htm. You must visit an SSA office
in person and submit your Form SS-5 along
with original documentation showing your age,
identity, immigration status, and authority to
work in the United States. Generally, you will receive your card about 2 weeks after the SSA
has all of the necessary information.
F-1 and M-1 visa holders. If you are an
F-1 or M-1 student, you must also show your
Form I-20. For more information, see SSA Pub.
05-10181,
available
online
at
www.socialsecurity.gov/pubs/10181.html.
J-1 visa holders. If you are a J-1 exchange visitor, you will also need to show your
Form DS-2019. For more information, see SSA
Pub.
05-10107,
available
online
at
www.socialsecurity.gov/pubs/10107.html.
Individual taxpayer identification number
(ITIN). If you do not have and are not eligible to
get an SSN, you must apply for an ITIN. For details on how to do so, see Form W-7 and its instructions.
If you qualify for an ITIN and your application
is complete, you will receive a letter from the
IRS assigning your tax identification number
usually within seven weeks. If you have not received your ITIN or other correspondence
seven weeks after applying, call the IRS
toll-free number at 1-800-829-1040 to request
the status of your application if you are in the
United States. If you are outside the United
States, call 267-941-1000 (not a toll-free number).
If you already have an ITIN, enter it wherever an SSN is required on your tax return.
An ITIN is for tax use only. It does not entitle
you to social security benefits or change your
employment or immigration status under U.S.
law.
In addition to those aliens who are required
to furnish a taxpayer identification number and
are not eligible for an SSN, a Form W-7 must be
filed for:
Alien individuals who are claimed as dependents and are not eligible for an SSN,
and
Alien spouses who are claimed as exemptions and are not eligible for an SSN.
Additional information on obtaining an ITIN
is available in the Instructions for Form W-7 and
at
www.irs.gov/Individuals/General-ITINInformation.
Employer identification number (EIN). An
individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. To apply for an EIN, file Form SS-4 with the IRS.

Chapter 5

Figuring Your Tax

Page 25

Filing Status
The amount of your tax depends on your filing
status. Your filing status is important in determining whether you can take certain deductions
and credits. The rules for determining your filing
status are different for resident aliens and nonresident aliens.

Resident Aliens
Resident aliens can use the same filing statuses available to U.S. citizens. See your form
instructions or Pub. 501 for more information on
filing status.
Married filing jointly. Generally, you can file
as married filing jointly only if both you and your
spouse were resident aliens for the entire tax
year, or if you make one of the choices discussed in chapter 1 to treat your spouse as a
resident alien for the entire tax year.
Qualifying widow(er). If your spouse died in
2013 or 2014, you did not remarry before the
end of 2015, and you have a dependent child
living with you, you may qualify to file as a qualifying widow(er) and use the joint return tax
rates. This applies only if you could have filed a
joint return with your spouse for the year your
spouse died.
Head of household. You can qualify as head
of household if you are unmarried or considered
unmarried on the last day of the year and you
pay more than half the cost of keeping up a
home for you and a qualifying person. You must
be a resident alien for the entire tax year.
You are considered unmarried for this purpose if your spouse was a nonresident alien at
any time during the year and you do not make
one of the choices discussed in chapter 1 to
treat your spouse as a resident alien for the entire tax year.

the Tax Computation Worksheet for single individuals. However, you may be able to file as
single if you lived apart from your spouse during
the last 6 months of the year and you are a married resident of Canada, Mexico, South Korea,
or are a married U.S. national. See the instructions for Form 1040NR or Form 1040NR-EZ to
see if you qualify. U.S. national is defined later
in this section under Qualifying widow(er).
A nonresident alien generally cannot file as
married filing jointly. However, a nonresident
alien who is married to a U.S. citizen or resident
can choose to be treated as a resident and file a
joint return on Form 1040, Form 1040A, or Form
1040EZ. For information on these choices, see
chapter 1. If you do not make the choice to file
jointly, file Form 1040NR or Form 1040NR-EZ
and use the Tax Table column or the Tax Computation Worksheet for married individuals filing
separately.
Qualifying widow(er). You may be eligible to
file as a qualifying widow(er) and use the joint
return tax rates if all of the following conditions
apply.

erto Rico for the entire tax year and who is temporarily working in the United States should
read Bona Fide Residents of American Samoa
or Puerto Rico, at the end of this chapter, for information about special rules.

Reporting Your Income
You must report each item of income that is taxable according to the rules in chapters 2, 3, and
4. For resident aliens, this includes income from
sources both within and outside the United
States. For nonresident aliens, this includes
both income that is effectively connected with a
trade or business in the United States (subject
to graduated tax rates) and income from U.S.
sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty
rate).

Deductions

2. Your spouse died in 2013 or 2014 and you
did not remarry before the end of 2015.

Resident and nonresident aliens can claim similar deductions on their U.S. tax returns. However, nonresident aliens generally can claim
only deductions related to income that is effectively connected with their U.S. trade or business.

3. You have a dependent child living with
you.

Resident Aliens

1. You were a resident of Canada, Mexico,
or South Korea, or a U.S. national (defined
later).

See the instructions for Form 1040NR for the
rules for filing as a qualifying widow(er) with a
dependent child.
A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern
Mariana Islanders who chose to become U.S.
nationals instead of U.S. citizens.

You can claim the same deductions allowed to
U.S. citizens if you are a resident alien for the
entire tax year. While the discussion that follows
contains some of the same general rules and
guidelines that apply to you, it is specifically directed toward nonresident aliens. You should
get Form 1040 and instructions for more information on how to claim your allowable deductions.

Head of household. You cannot file as head
of household if you are a nonresident alien at
any time during the tax year. However, if you
are married, your spouse can qualify as a head
of household if:
Your spouse is a resident alien or U.S. citizen for the entire tax year,
You do not choose to be treated as a resident alien, and
Your spouse meets the other requirements
for this filing status, as discussed earlier
under Resident Aliens.

Nonresident Aliens

If you are a nonresident alien filing Form
1040NR, you may be able to use one of the filing statuses discussed later. If you are filing
Form 1040NR-EZ, you can only claim “Single
nonresident alien” or “Married nonresident
alien” as your filing status.

Note. Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your spouse
may still be considered married for purposes of
the earned income credit. In that case, your
spouse will not be entitled to the credit. See
Pub. 596 for more information.

Married nonresident alien. Married nonresident aliens who are not married to U.S. citizens
or residents generally must use the Tax Table
column or the Tax Computation Worksheet for
married filing separate returns when determining the tax on income effectively connected with
a U.S. trade or business.

Estates and trusts. A nonresident alien estate
or trust using Form 1040NR must use Tax Rate
Schedule W in the Form 1040NR instructions
when determining the tax on income effectively
connected with a U.S. trade or business.

Ordinary and necessary business expenses. You can deduct all ordinary and necessary expenses in the operation of your U.S.
trade or business to the extent they relate to income effectively connected with that trade or
business. The deduction for travel expenses
while in the United States is discussed under
Itemized Deductions, later. For information
about other business expenses, see Pub. 535.

Note. Even if you are considered unmarried
for head of household purposes because you
are married to a nonresident alien, you may still
be considered married for purposes of the
earned income credit. In that case, you will not
be entitled to the credit. See Pub. 596 for more
information.

Nonresident Aliens

Exceptions. Married nonresident aliens
normally cannot use the Tax Table column or
Page 26

Chapter 5

Figuring Your Tax

Special rules for aliens from certain U.S.
possessions. A nonresident alien who is a
bona fide resident of American Samoa or Pu-

You can claim deductions to figure your effectively connected taxable income. You generally
cannot claim deductions related to income that
is not connected with your U.S. business activities. Except for personal exemptions, and certain itemized deductions, discussed later, you
can claim deductions only to the extent they are
connected with your effectively connected income.

Losses. You can deduct losses resulting from
transactions that you entered into for profit and
that you were not reimbursed for by insurance,
etc. to the extent that they relate to income that
is effectively connected with a trade or business
in the United States.

Educator expenses. If you were an eligible
educator in 2015, you can deduct as an adjustment to income up to $250 in unreimbursed
qualified expenses you paid or incurred during
2015 for books, supplies (other than nonathletic
supplies for courses of instruction in health or
physical education), computer equipment, and
other equipment and materials used in the
classroom. For more information, see your tax
form instructions.
Individual retirement arrangement (IRA). If
you made contributions to a traditional IRA for
2015, you may be able to take an IRA deduction. But you must have taxable compensation
effectively connected with a U.S. trade or business to do so. A Form 5498 should be sent to
you by May 31, 2016, that shows all contributions to your traditional IRA for 2015. If you were
covered by a retirement plan (qualified pension,
profit-sharing (including 401(k)), annuity, SEP,
SIMPLE, etc.) at work or through self-employment, your IRA deduction may be reduced or
eliminated. But you can still make contributions
to a traditional IRA even if you cannot deduct
them. If you made nondeductible contributions
to a traditional IRA for 2015, you must report
them on Form 8606.
For more information, see Pub. 590.
Moving expenses. If you are a nonresident
alien temporarily in the United States earning
taxable income for performing personal services, you can deduct moving expenses to the
United States if you meet both of the following
tests.
You are a full-time employee for at least 39
weeks during the 12 months right after you
move, or if you are self-employed, you
work full time for at least 39 weeks during
the first 12 months and 78 weeks during
the first 24 months right after you move.
Your new job location is at least 50 miles
farther (by the shortest commonly traveled
route) from your former home than your
former job location was. If you had no former job location, the new job location must
be at least 50 miles from your former
home.
You cannot deduct the moving expense you
have when returning to your home abroad or
moving to a foreign job site.
Figure your deductible moving expenses to
the United States on Form 3903, and deduct
them on line 26 of Form 1040NR.
For more information on the moving expense deduction, see Pub. 521.
Reimbursements. If your employer reimbursed you for allowable moving expenses under an accountable plan, your employer should
have excluded these reimbursements from your
income. You can only deduct allowable moving
expenses that were not reimbursed by your employer or that were reimbursed but the reimbursement was included in your income. For
more information, see Pub. 521.
Moving expense or travel expense. If
you deduct moving expenses to the United
States, you cannot also deduct travel expenses
(discussed later under Itemized Deductions)
while temporarily away from your tax home in a
foreign country. Moving expenses are based on

a change in your principal place of business
while travel expenses are based on your temporary absence from your principal place of
business.

Exemptions

Self-employed SEP, SIMPLE, and qualified
retirement plans. If you are self-employed,
you may be able to deduct contributions to a
SEP, SIMPLE, or qualified retirement plan that
provides retirement benefits for yourself and
your common-law employees, if any. To make
deductible contributions for yourself, you must
have net earnings from self-employment that
are effectively connected with your U.S. trade
or business.
Get Pub. 560 for further information.

Resident Aliens

Penalty on early withdrawal of savings. You
must include in income all effectively connected
interest income you receive or that is credited to
your account during the year. Do not reduce it
by any penalty you must pay on an early withdrawal from a time savings account. However, if
the interest income is effectively connected with
your U.S. trade or business during the year, you
can deduct on line 30 of Form 1040NR the
amount of the early withdrawal penalty that the
banking institution charged.
Student loan interest expense. If you paid
interest on a student loan in 2015, you may be
able to deduct up to $2,500 of the interest you
paid. Generally, you can claim the deduction if
all the following requirements are met.
1. Your filing status is any filing status except
married filing separately.
2. Your modified adjusted gross income is
less than $80,000.
3. No one else is claiming an exemption for
you on his or her 2015 tax return.
4. You paid interest on a loan taken out only
to pay tuition and other qualified higher
education expenses for yourself, your
spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out
except that:
a. The person filed a joint return,
b. The person had gross income that
was equal to or more than the exemption amount for that year ($4,000 for
2015), or
c. You could be claimed as a dependent
on someone else's return.
5. The loan is not from a related person or a
person who borrowed the proceeds under
a qualified employer plan or a contract
purchased under such a plan.
6. The education expenses were paid or incurred within a reasonable period of time
before or after the loan was taken out.
7. The person for whom the expenses were
paid or incurred was an eligible student.
Use the worksheet in the Form 1040NR or Form
1040NR-EZ instructions to figure the deduction.
For more information, see Pub. 970.

Resident aliens can claim personal exemptions
and exemptions for dependents in the same
way as U.S. citizens. However, nonresident aliens generally can claim only a personal exemption for themselves on their U.S. tax return.

You can claim personal exemptions and exemptions for dependents according to the dependency rules for U.S. citizens. You can claim
an exemption for your spouse on a separate return if your spouse had no gross income for
U.S. tax purposes and was not the dependent
of another taxpayer. You can claim this exemption even if your spouse has not been a resident
alien for a full tax year or is an alien who has not
come to the United States.
You can claim an exemption for each person who qualifies as a dependent according to
the rules for U.S. citizens. The dependent must
be a citizen or national (defined earlier) of the
United States or be a resident of the United
States, Canada, or Mexico for some part of the
calendar year in which your tax year begins.
Get Pub. 501 for more information.
Your spouse and each dependent for
whom you claim an exemption must
CAUTION
have either an SSN or an ITIN. See
Identification Number, earlier.

!

Nonresident Aliens
Generally, if you are a nonresident alien engaged in a trade or business in the United
States, you can claim only one personal exemption ($4,000 for 2015). You may be able to
claim an exemption for a spouse and a dependent if you are described in any of the following
discussions.
Your spouse and each dependent for
whom you claim an exemption must
CAUTION
have either an SSN or an ITIN. See
Identification Number, earlier.

!

Residents of Mexico or Canada or U.S. nationals. If you are a resident of Mexico or Canada or a national of the United States (defined
earlier), you can also claim a personal exemption for your spouse if your spouse had no gross
income for U.S. tax purposes and cannot be
claimed as the dependent on another U.S. taxpayer's return. In addition, you can claim exemptions for your dependents who meet certain
tests. Residents of Mexico, Canada, or nationals of the United States must use the same
rules as U.S. citizens to determine who is a dependent and for which dependents exemptions
can be claimed. See Pub. 501 for these rules.
For purposes of these rules, dependents who
are U.S. nationals meet the citizenship test discussed in Pub. 501.
Residents of South Korea. Nonresident aliens who are residents of South Korea may be
able to claim exemptions for a spouse and
Chapter 5

Figuring Your Tax

Page 27

children. The income tax treaty with South Korea imposes two additional requirements on
South Korean residents:
1. The spouse and all children claimed must
live with the alien in the United States at
some time during the tax year, and
2. The additional deduction for the exemptions must be prorated based on the ratio
of the alien's U.S. source gross income effectively connected with a U.S. trade or
business for the tax year to the alien's entire income from all sources during the tax
year.
Example. Mr. Park, a nonresident alien
who is a resident of South Korea, lives temporarily in the United States with his wife and two
children. During the tax year he receives U.S.
compensation of $24,000. He also receives
$8,000 of income from sources outside the United States that is not effectively connected with
his U.S. trade or business. Thus, his total income for the year is $32,000. Mr. Park meets all
requirements for claiming exemptions for his
spouse and two children. The additional deduction for 2015 is $9,000 figured as follows:
$24,000
$32,000

×

$12,000*

=

$9,000

*3 × $4,000 = $12,000

Students and business apprentices from India. Students and business apprentices who
are eligible for the benefits of Article 21(2) of the
United States-India Income Tax Treaty may be
able to claim exemptions for their spouse and
dependents.
You can claim an exemption for your spouse
if he or she had no gross income during the
year and cannot be claimed as a dependent on
another U.S. taxpayer's return.
You can claim exemptions for each of your
dependents not admitted to the United States
on “F-2,” “J-2,” or “M-2” visas if they meet the
same rules that apply to U.S. citizens. See Pub.
501 for these rules.
List your spouse and dependents on line 7c
of Form 1040NR. Enter the total on the appropriate line to the right of line 7c.

Itemized Deductions
Nonresident aliens can claim some of the same
itemized deductions that resident aliens can
claim. However, nonresident aliens can claim
itemized deductions only if they have income
effectively connected with their U.S. trade or
business.

Resident Aliens
You can claim the same itemized deductions as
U.S. citizens, using Schedule A of Form 1040.
These deductions include certain medical and
dental expenses, state and local income taxes,
real estate taxes, interest you paid on a home
mortgage, charitable contributions, casualty
and theft losses, and miscellaneous deductions.
Page 28

Chapter 5

Figuring Your Tax

If you do not itemize your deductions, you
can claim the standard deduction for your particular filing status. For further information, see
Form 1040 and instructions.

Nonresident Aliens
You can deduct certain itemized deductions if
you receive income effectively connected with
your U.S. trade or business. These deductions
include state and local income taxes, charitable
contributions to U.S. organizations, casualty
and theft losses, and miscellaneous deductions. Use Schedule A of Form 1040NR to claim
itemized deductions.
If you are filing Form 1040NR-EZ, you can
only claim a deduction for state or local income
taxes. If you are claiming any other itemized deduction, you must file Form 1040NR.
Standard deduction. Nonresident aliens cannot claim the standard deduction. However, for
a special rule, see next.
Students and business apprentices from
India. A special rule applies to students and
business apprentices who are eligible for the
benefits of Article 21(2) of the United States-India Income Tax Treaty. You can claim the
standard deduction provided you do not claim
itemized deductions.
Use Worksheet 5-1 to figure your standard
deduction. If you are married and your spouse
files a return and itemizes deductions, you cannot take the standard deduction.
State and local income taxes. You can deduct state and local income taxes you paid on
income that is effectively connected with a trade
or business in the United States. If you received
a refund or rebate in 2015 of taxes you paid in
an earlier year, do not reduce your deduction by
that amount. Instead, you must include the refund or rebate in income if you deducted the
taxes in the earlier year and the deduction reduced your tax. See Recoveries in Pub. 525 for
details on how to figure the amount to include in
income.
Charitable contributions. You can deduct
your charitable contributions or gifts to qualified
organizations subject to certain limits. Qualified
organizations include organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty to
children or animals. Certain organizations that
promote national or international amateur
sports competition are also qualified organizations.
Foreign organizations.
Contributions
made directly to a foreign organization are not
deductible. However, you can deduct contributions to a U.S. organization that transfers funds
to a charitable foreign organization if the U.S.
organization controls the use of the funds or if
the foreign organization is only an administrative arm of the U.S. organization.
For more information about organizations
that qualify to receive charitable contributions,
see Pub. 526.
Contributions from which you benefit. If
you receive a benefit as a result of making a

contribution to a qualified organization, you can
deduct only the amount of your contribution that
is more than the value of the benefit you receive.
If you pay more than the fair market value to
a qualified organization for merchandise,
goods, or services, the amount you pay that is
more than the value of the item can be a charitable contribution. For the excess amount to
qualify, you must pay it with the intent to make a
charitable contribution.
Cash contributions. You cannot deduct a
cash contribution, regardless of the amount, unless you keep as a record of the contribution a
bank record (such as a canceled check, a bank
copy of a canceled check, or a bank statement
containing the name of the charity, the date,
and the amount) or a written record from the
charity. The written record must include the
name of the charity, date of the contribution,
and the amount of the contribution.
You may deduct a cash contribution of $250
or more only if you have a written statement
from the charitable organization showing:
1. The amount of any money contributed,
2. Whether the organization gave you any
goods or services in return for your contribution, and
3. A description and estimate of the value of
any goods or services described in (2).
If you received only intangible religious benefits,
the organization must state this, but it does not
have to describe or value the benefit.
Noncash contributions. For contributions
not made in cash, the records you must keep
depend on the amount of your deduction. See
Pub. 526 for details. For example, if you make a
noncash contribution and the amount of your
deduction is more than $500, you must complete and attach to your tax return Form 8283. If
you deduct more than $500 for a contribution of
a motor vehicle, boat, or airplane, you must also
attach a statement from the charitable organization to your return. If your total deduction is over
$5,000, you also may have to get appraisals of
the values of the property. If the donated property is valued at more than $5,000, you must
obtain a qualified appraisal. You generally must
attach to your tax return an appraisal of any
property if your deduction for the property is
more than $500,000. See Form 8283 and its instructions for details.
Contributions of appreciated property. If
you contribute property to a qualified organization, the amount of your charitable contribution
is generally the fair market value of the property
at the time of the contribution. However, if you
contribute property with a fair market value that
is more than your basis in it, you may have to
reduce the fair market value by the amount of
appreciation (increase in value) when you figure
your deduction. Your basis in the property is
generally what you paid for it. If you need more
information about basis, get Pub. 551.
Different rules apply to figuring your deduction, depending on whether the property is:
Ordinary income property, or
Capital gain property.

Worksheet 5-1. 2015 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, 1951, or are blind.

1 Enter the amount shown below for your filing status.
Single or married filing separately—$6,300
Qualifying widow(er)—$12,600 . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 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 $700?
Yes. Add $350 to your earned income. Enter the total.
No. Enter $1,050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4 Enter the smaller of line 1 or line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5 If born before January 2, 1951, OR blind, enter $1,250 ($1,550 if single). If born before January 2,
1951, AND blind, enter $2,500 ($3,100 if single). Otherwise, enter -0- . . . . . . . . . . . . . . . . . . . . . . . .

5.

6 Add lines 4 and 5. Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11).
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 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

*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 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount
on line 8).
For information about these rules, see Pub.
526.
Limit. The amount you can deduct in a tax
year is limited in the same way it is for a citizen
or resident of the United States. For a discussion of limits on charitable contributions and
other information, get Pub. 526.
Casualty and theft losses. You can deduct
your loss from fire, storm, shipwreck, or other
casualty, or theft of property even though your
property is not connected with a U.S. trade or
business. The property can be personal use
property or income-producing property not connected with a U.S. trade or business. The property must be located in the United States at the
time of the casualty or theft. You can deduct
theft losses only in the year in which you discover the loss.
The amount of the loss is the fair market
value of the property immediately before the
casualty or theft less its fair market value immediately after the casualty or theft (but not more
than its cost or adjusted basis) less any insurance or other reimbursement. The fair market
value of property immediately after a theft is
considered zero, because you no longer have
the property.
If your property is covered by insurance, you
should file a timely insurance claim for reimbursement. If you do not, you cannot deduct
this loss as a casualty or theft loss.
Figure your deductible casualty and theft
losses on Form 4684.
Losses from personal use property. You
cannot deduct the first $100 of each casualty or

theft loss to property held for personal use. You
can deduct only the total of these losses for the
year (reduced by the $100 limit) that is more
than 10% of your adjusted gross income
(line 37, Form 1040NR) for the year.
Losses from income-producing property. These losses are not subject to the limitations that apply to personal use property. Use
Section B of Form 4684 to figure your deduction
for these losses.
Job expenses and other miscellaneous deductions. You can deduct job expenses, such
as allowable unreimbursed travel expenses
(discussed next), and other miscellaneous deductions. Generally, the allowable deductions
must be related to effectively connected income. Deductible expenses include:
Union dues,
Safety equipment and small tools needed
for your job,
Dues to professional organizations,
Subscriptions to professional journals,
Tax return preparation fees, and
Casualty and theft losses of property used
in performing services as an employee
(employee property).
Most miscellaneous itemized deductions are
deductible only if they are more than 2% of your
adjusted gross income (line 37, Form 1040NR).
For more information on miscellaneous deductions, see the instructions for Form 1040NR.
Travel expenses. You may be able to deduct
your ordinary and necessary travel expenses
while you are temporarily performing personal

services in the United States. Generally, a temporary assignment in a single location is one
that is realistically expected to last (and does in
fact last) for one year or less. You must be able
to show you were present in the United States
on an activity that required your temporary absence from your regular place of work.
For example, if you have established a “tax
home” through regular employment in a foreign
country, and intend to return to similar employment in the same country at the end of your
temporary stay in the United States, you can
deduct reasonable travel expenses you paid.
You cannot deduct travel expenses for other
members of your family or party.
Deductible travel expenses. If you qualify, you can deduct your expenses for:
Transportation—airfare, local transportation, including train, bus, etc.,
Lodging—rent paid, utilities (do not include
telephone), hotel or motel room expenses,
and
Meal expenses—actual expenses allowed
if you keep records of the amounts, or, if
you do not wish to keep detailed records,
you are generally allowed a standard meal
allowance amount depending on the date
and area of your travel. You generally can
deduct only 50% of unreimbursed meal expenses. The standard meal allowance
rates for high-cost areas are available at
www.gsa.gov/perdiem. The rates for other
areas are in Pub. 463.
Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 7 of
Schedule A (Form 1040NR).
Chapter 5

Figuring Your Tax

Page 29

Expenses allocable to U.S. tax-exempt
income. You cannot deduct an expense, or
part of an expense, that is allocable to U.S.
tax-exempt income, including income exempt
by tax treaty.
Example. Irina Oak, a citizen of Poland, resided in the United States for part of the year to
acquire business experience from a U.S. company. During her stay in the United States, she
received a salary of $8,000 from her Polish employer. She received no other U.S. source income. She spent $3,000 on travel expenses, of
which $1,000 were for meals. None of these expenses were reimbursed. Under the tax treaty
with Poland, $5,000 of her salary is exempt
from U.S. income tax. In filling out Form
2106-EZ, she must reduce her deductible meal
expenses by half ($500). She must reduce the
remaining $2,500 of travel expenses by 62.5%
($1,563) because 62.5% ($5,000 ÷ $8,000) of
her salary is exempt from tax. She enters the remaining total of $937 on line 7 of Schedule A
(Form 1040NR). She completes the remaining
lines according to the instructions for Schedule A.
More information. For more information
about deductible expenses, reimbursements,
and recordkeeping, get Pub. 463.

Tax Credits
and Payments
This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens.

Resident Aliens
Resident aliens generally claim tax credits and
report tax payments, including withholding, using the same rules that apply to U.S. citizens.
The following items are some of the credits
you may be able to claim.
Foreign tax credit. You can claim a credit,
subject to certain limits, for income tax you paid
or accrued to a foreign country on foreign
source income. You cannot claim a credit for
taxes paid or accrued on excluded foreign
earned income. To claim a credit for income
taxes paid or accrued to a foreign country, you
generally will file Form 1116 with your Form
1040.
For more information, get Pub. 514.
Child and dependent care credit. You may
be able to take this credit if you pay someone to
care for your qualifying child who is under age
13, or your disabled dependent or disabled
spouse, so that you can work or look for work.
Generally, you must be able to claim an exemption for your dependent.
For more information, get Pub. 503 and
Form 2441.
Credit for the elderly or the disabled. You
may qualify for this credit if you are 65 or older
or if you retired on permanent and total disabilPage 30

Chapter 5

Figuring Your Tax

ity. For more information on this credit, get Pub.
524 and Schedule R (Form 1040A or 1040).
Education credits. You may qualify for these
credits if you paid qualified education expenses
for yourself, your spouse, or your dependent.
There are two education credits: the American
Opportunity Credit and the lifetime learning
credit. You cannot claim these credits if you are
married filing separately. Use Form 8863 to figure the credit. For more information, see Pub.
970.
Nonresident aliens, see Education credits
under Nonresident Aliens, later.
Retirement savings contributions credit.
You may qualify for this credit (also known as
the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan
or to an individual retirement arrangement (IRA)
in 2015. You cannot claim this credit if:
1. You were born after January 1, 1998,
2. You were a full-time student,
3. Your exemption is claimed by someone
else on his or her 2015 tax return, or
4. Your adjusted gross income is more than:
a. $61,000, if your filing status is married
filing jointly,
b. $45,750, if your filing status is head of
household, or
c. $30,500, if your filing status is single,
married filing separately, or qualifying
widow(er).
Use Form 8880 to figure the credit. For more information, see Pub. 590.
Child tax credit. You may be able to take this
credit if you have a qualifying child.
A qualifying child for purposes of the child
tax credit is a child who:
Was under age 17 at the end of 2015.
Is your son, daughter, stepchild, foster
child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, your
grandchild, niece, or nephew).
Is a U.S. citizen, a U.S. national, or a resident alien.
Did not provide over half of his or her own
support for 2015.
Lived with you more than half of 2015.
Temporary absences, such as for school,
vacation, or medical care, count as time
lived in the home.
Is claimed as a dependent on your return.
An adopted child is always treated as your own
child. An adopted child includes a child lawfully
placed with you for legal adoption.
See your form instructions for additional details.
Adoption credit. You may qualify to take a tax
credit of up to $13,400 for qualifying expenses
paid to adopt an eligible child. This amount may
be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit,
file Form 8839 with your Form 1040.

Earned income credit. You may qualify for an
earned income credit of up to $3,359 if a child
lived with you in the United States and your
earned income and adjusted gross income
were each less than $39,131 ($44,651 if married filing jointly). If two children lived with you in
the United States and your earned income and
adjusted gross income were each less than
$44,454 ($49,974 if married filing jointly), your
credit could be as much as $5,548. If three or
more children lived with you in the United
States and your earned income and adjusted
gross income were each less than $47,747
($53,267 if married filing jointly), your credit
could be as much as $6,424. If you do not have
a qualifying child and your earned income and
adjusted gross income were each less than
$14,820 ($20,330 if married filing jointly), your
credit could be as much as $503. You cannot
claim the earned income credit if your filing status is married filing separately.
You and your spouse (if filing a joint
return) and any qualifying child must
CAUTION
have valid SSNs to claim this credit.
You cannot claim the credit using an ITIN. If a
social security card has a legend that says Not
Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded
benefit, you cannot claim the earned income
credit. An example of a federally funded benefit
is Medicaid. If a card has this legend and the individual's immigration status has changed so
that the individual is now a U.S. citizen or lawful
permanent resident, ask the SSA to issue a new
social security card without the legend.

!

Other information. There are other eligibility rules that are not discussed here. For more
information, get Pub. 596.

Nonresident Aliens
You can claim some of the same credits that
resident aliens can claim. You can also report
certain taxes you paid, are considered to have
paid, or that were withheld from your income.

Credits
Credits are allowed only if you receive effectively connected income. You may be able to
claim some of the following credits.
Foreign tax credit. If you receive foreign
source income that is effectively connected with
a trade or business in the United States, you
can claim a credit for any income taxes paid or
accrued to any foreign country or U.S. possession on that income.
If you do not have foreign source income effectively connected with a U.S. trade or business, you cannot claim credits against your
U.S. tax for taxes paid or accrued to a foreign
country or U.S. possession.
You cannot take any credit for taxes imposed by a foreign country or U.S. possession
on your U.S. source income if those taxes were
imposed only because you are a citizen or resident of the foreign country or possession.

Is a U.S. citizen, a U.S. national, or a resident alien.
Did not provide over half of his or her own
support for 2015.
Lived with you more than half of 2015.
Temporary absences, such as for school,
vacation, or medical care, count as time
lived in the home.
Is claimed as a dependent on your return.

If you claim a foreign tax credit, you generally will have to attach to your return a Form
1116. See Pub. 514 for more information.
Child and dependent care credit. You may
qualify for this credit if you pay someone to care
for your qualifying child who is under age 13, or
your disabled dependent or disabled spouse,
so that you can work or look for work. Generally, you must be able to claim an exemption for
your dependent.
Married nonresident aliens can claim the
credit only if they choose to file a joint return
with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain
married individuals living apart (see Joint Return Test in Pub. 503).
The amount of your child and dependent
care expense that qualifies for the credit in any
tax year cannot be more than your earned income from the United States for that tax year.
Earned income generally means wages, salaries, and professional fees for personal services
performed.
For more information, get Pub. 503.
Education credits. If you are a nonresident
alien for any part of the year, you generally cannot claim the education credits. However, you
may be able to claim an education credit under
the following circumstances.
1. You are married and choose to file a joint
return with a U.S. citizen or resident
spouse as discussed under Nonresident
Spouse Treated as a Resident in chapter 1.
2. You are a dual-status alien, and choose to
be treated as a U.S. resident for the entire
year. See Choosing Resident Alien Status
in chapter 1.
Additional information on the American Opportunity tax credit and foreign students is availwww.irs.gov/Individuals/Americanable
at
Opportunity-Tax-Credit-Facts.
Retirement savings contributions credit.
You may qualify for this credit (also known as
the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan
or to an individual retirement arrangement (IRA)
in 2015. You cannot claim this credit if:
You were born after January 1, 1998,
You were a full-time student,
Your exemption is claimed by someone
else on his or her 2015 tax return, or
Your adjusted gross income is more than
$30,500.
Use Form 8880 to figure the credit. For more information, see Pub. 590.
Child tax credit. You may be able to take this
credit if you have a qualifying child.
A qualifying child for purposes of the child
tax credit is a child who:
Was under age 17 at the end of 2015.
Is your son, daughter, stepchild, foster
child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, your
grandchild, niece, or nephew).

An adopted child is always treated as your own
child. An adopted child includes a child lawfully
placed with you for legal adoption.
See your form instructions for additional details.
Adoption credit. You may qualify to take a tax
credit of up to $13,400 for qualifying expenses
paid to adopt an eligible child. This amount may
be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit,
file Form 8839 with your Form 1040NR.
Married nonresident aliens can claim the
credit only if they choose to file a joint return
with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain
married individuals living apart (see Married
Persons Not Filing Jointly in the Form 8839 instructions).
Credit for prior year minimum tax. If you
paid alternative minimum tax in a prior year, get
Form 8801 to see if you qualify for this credit.
Earned income credit. If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit.
However, if you are married and choose to file a
joint return with a U.S. citizen or resident
spouse as discussed in chapter 1, you may be
eligible for the credit.
You, your spouse, and any qualifying
child must have valid SSNs to claim
CAUTION
this credit. You cannot claim the credit
using an ITIN. If a social security card has a legend that says Not Valid for Employment and the
number was issued so that you (or your spouse
or your qualifying child) could receive a federally funded benefit, you cannot claim the earned
income credit. An example of a federally funded
benefit is Medicaid. If a card has this legend
and the individual's immigration status has
changed so that the individual is now a U.S. citizen or lawful permanent resident, ask the SSA
to issue a new social security card without the
legend.

!

See Pub. 596 for more information on the
credit.

Tax Withheld
You can claim the tax withheld during the year
as a payment against your U.S. tax. You claim it
on line 62 of Form 1040NR or on line 18 of
Form 1040NR-EZ. The tax withheld reduces
any tax you owe with Form 1040NR or Form
1040NR-EZ.

lowed as a payment against your U.S. income
tax liability for the same year. You can claim the
income tax withheld whether or not you were
engaged in a trade or business in the United
States during the year, and whether or not the
wages (or any other income) were connected
with a trade or business in the United States.
Excess social security tax withheld. If you
have two or more employers, you may be able
to claim a credit against your U.S. income tax liability for social security tax withheld in excess
of the maximum required. See Social Security
and Medicare Taxes in chapter 8 for more information.
Additional Medicare Tax. Your employer is
responsible for withholding the 0.9% Additional
Medicare Tax on Medicare wages or RRTA
compensation it pays to you in excess of
$200,000 in 2015. If you do not owe Additional
Medicare Tax, you can claim a credit for any
withheld Additional Medicare Tax against the
total tax liability shown on your tax return by filing Form 8959.
Tax paid on undistributed long-term capital
gains. If you are a shareholder in a mutual fund
(or other regulated investment company) or real
estate investment trust, you can claim a credit
for your share of any taxes paid by the company
on its undistributed long-term capital gains. You
will receive information on Form 2439, which
you must attach to your return.
Tax withheld at the source. You can claim as
a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. Fixed or
determinable income includes interest, dividend, rental, and royalty income that you do not
claim to be effectively connected income. Wage
or salary payments can be fixed or determinable income to you, but usually are subject to
withholding as discussed above. Taxes on fixed
or determinable income are withheld at a 30%
rate or at a lower treaty rate.
Tax withheld on partnership income. If you
are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. The partnership will give you a
statement on Form 8805, showing the tax withheld. A partnership that is publicly traded may
withhold on your actual distributions of effectively connected income. In this case, the partnership will give you a statement on Form
1042-S. Claim the tax withheld as a payment on
line 62b or 62d of Form 1040NR, as appropriate.
Claiming tax withheld on your return. When
you fill out your tax return, take extra care to enter the correct amount of any tax withheld
shown on your information documents. The following table lists some of the more common information documents and shows where to find
the amount of tax withheld.

Withholding from wages. Any federal income
tax withheld from your wages during the tax
year while you were a nonresident alien is alChapter 5

Figuring Your Tax

Page 31

Form number

Location
of tax
withheld

RRB-1042S . . . . . . . . . . . . . . . . . . .
SSA-1042S . . . . . . . . . . . . . . . . . . . .
W-2 . . . . . . . . . . . . . . . . . . . . . . . . .
W-2c . . . . . . . . . . . . . . . . . . . . . . . .
1042-S . . . . . . . . . . . . . . . . . . . . . . .
8805 . . . . . . . . . . . . . . . . . . . . . . . .
8288-A . . . . . . . . . . . . . . . . . . . . . . .

Box 12
Box 9
Box 2
Box 2
Box 10
Line 10
Box 2

Bona Fide Residents
of American Samoa
or Puerto Rico
If you are a nonresident alien who is a bona fide
resident of American Samoa or Puerto Rico for
the entire tax year, you generally are taxed the
same as resident aliens. You should file Form
1040 and report all income from sources both in
and outside the United States. However, you
can exclude the income discussed in the following paragraphs.
For tax purposes other than reporting income, however, you will be treated as a nonresident alien. For example, you are not allowed
the standard deduction, you cannot file a joint
return, and you are not allowed a deduction for
a dependent unless that person is a citizen or
national of the United States. There are also
limits on what deductions and credits are allowed. See Nonresident Aliens under Deductions, Itemized Deductions, and Tax Credits
and Payments in this chapter.
Residents of Puerto Rico. If you are a bona
fide resident of Puerto Rico for the entire year,
you can exclude from gross income all income
from sources in Puerto Rico (other than
amounts for services performed as an employee of the United States or any of its agencies).
If you report income on a calendar year basis and you do not have wages subject to withholding for 2015, file your return and pay your
tax by June 15, 2016. You must also make your
first payment of estimated tax for 2016 by June
15, 2016. You cannot file a joint income tax return or make joint payments of estimated tax.
However, if you are married to a U.S. citizen or
resident, see Nonresident Spouse Treated as a
Resident in chapter 1.
If you earn wages subject to withholding,
your U.S. income tax return is due by April 18,
2016. Your first payment of estimated tax is
also due by April 18, 2016. For information on
withholding and estimated tax, see chapter 8.
Residents of American Samoa. If you are a
bona fide resident of American Samoa for the
entire year, you can exclude from gross income
all income from sources in American Samoa
(other than amounts for services performed as
an employee of the U.S. government or any of
its agencies). An employee of the American Samoan government is not considered an employee of the U.S. government or any of its
agencies for purposes of the exclusion. For
more information about this exclusion, get Form
4563 and Pub. 570.
Page 32

Chapter 6

Dual-Status Tax Year

6.
Dual-Status
Tax Year
Introduction
You have a dual-status tax year when you have
been both a resident alien and a nonresident
alien in the same year. Dual status does not refer to your citizenship; it refers only to your resident status in the United States. In determining
your U.S. income tax liability for a dual-status
tax year, different rules apply for the part of the
year you are a resident of the United States and
the part of the year you are a nonresident.
The most common dual-status tax years are
the years of arrival and departure. See
Dual-Status Aliens in chapter 1.
If you are married and choose to be treated
as a U.S. resident for the entire year, as explained in chapter 1, the rules of this chapter do
not apply to you for that year.

Topics

This chapter discusses:
Income subject to tax,
Restrictions for dual-status taxpayers,
Exemptions,
How to figure the tax,
Forms to file,
When and where to file, and
How to fill out a dual-status return.

Useful Items

You may want to see:
Publication
503 Child and Dependent Care Expenses
514 Foreign Tax Credit for Individuals
575 Pension and Annuity Income
Form (and Instructions)
1040 U.S. Individual Income Tax Return
1040-C U.S. Departing Alien Income Tax
Return
1040-ES Estimated Tax for Individuals
1040-ES (NR) U.S. Estimated Tax for
Nonresident Alien Individuals
1040NR U.S. Nonresident Alien Income
Tax Return
1116 Foreign Tax Credit
See chapter 12 for information about getting
these publications and forms.

Tax Year
You must file your tax return on the basis of an
annual accounting period called a tax year. If
you have not previously established a fiscal tax
year, your tax year is the calendar year. A calendar year is 12 consecutive months ending on
December 31. If you have previously established a regular fiscal year (12 consecutive
months ending on the last day of a month other
than December, or a 52–53 week year) and are
considered to be a U.S. resident for any calendar year, you will be treated as a U.S. resident
for any part of your fiscal year that falls within
that calendar year.

Income Subject to Tax
For the part of the year you are a resident alien,
you are taxed on income from all sources. Income from sources outside the United States is
taxable if you receive it while you are a resident
alien. The income is taxable even if you earned
it while you were a nonresident alien or if you
became a nonresident alien after receiving it
and before the end of the year.
For the part of the year you are a nonresident alien, you are taxed on income from U.S.
sources and on certain foreign source income
treated as effectively connected with a U.S.
trade or business. (The rules for treating foreign
source income as effectively connected are discussed in chapter 4 under Foreign Income.)
Income from sources outside the United
States that is not effectively connected with a
trade or business in the United States is not taxable if you receive it while you are a nonresident
alien. The income is not taxable even if you
earned it while you were a resident alien or if
you became a resident alien or a U.S. citizen after receiving it and before the end of the year.
Income from U.S. sources is taxable
whether you receive it while a nonresident alien
or a resident alien unless specifically exempt
under the Internal Revenue Code or a tax treaty
provision. Generally, tax treaty provisions apply
only to the part of the year you were a nonresident. In certain cases, however, treaty provisions may apply while you were a resident
alien. See chapter 9 for more information.
When determining what income is taxed in
the United States, you must consider exemptions under U.S. tax law as well as the reduced
tax rates and exemptions provided by tax treaties between the United States and certain foreign countries. For a further discussion of tax
treaties, see chapter 9.

Restrictions for
Dual-Status Taxpayers
The following restrictions apply if you are filing a
tax return for a dual-status tax year.
1) Standard deduction. You cannot use the
standard deduction allowed on Form 1040.

However, you can itemize any allowable deductions.
2) Exemptions. Your total deduction for the
exemptions for your spouse and allowable dependents cannot be more than your taxable income (figured without deducting personal exemptions) for the period you are a resident
alien.

2. U.S. national, or
3. Student or business apprentice from India.
For more information, see Exemptions in chapter 5.

How To Figure Tax

3) Head of household. You cannot use the
head of household Tax Table column or Tax
Computation Worksheet.

When you figure your U.S. tax for a dual-status
year, you are subject to different rules for the
part of the year you are a resident and the part
of the year you are a nonresident.

4) Joint return. You cannot file a joint return.
However, see Choosing Resident Alien Status
under Dual-Status Aliens in chapter 1.

Income

5) Tax rates. If you are married and a nonresident of the United States for all or part of the tax
year and you do not choose to file jointly as discussed in chapter 1, you must use the Tax Table column or Tax Computation Worksheet for
married filing separately to figure your tax on income effectively connected with a U.S. trade or
business. You cannot use the Tax Table column or Tax Computation Worksheet for married
filing jointly or single. However, you may be
able to file as single if you lived apart from your
spouse during the last 6 months of the year and
you are a:
Married resident of Canada, Mexico, or
South Korea, or
Married U.S. national.
See the instructions for Form 1040NR to see if
you qualify.
A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern
Mariana Islanders who chose to become U.S.
nationals instead of U.S. citizens.
6) Tax credits. You cannot claim the education credits, the earned income credit, or the
credit for the elderly or the disabled unless:
You are married, and
You choose to be treated as a resident for
all of 2015 by filing a joint return with your
spouse who is a U.S. citizen or resident, as
discussed in chapter 1.

Exemptions
As a dual-status taxpayer, you usually will be
able to claim your own personal exemption.
Subject to the general rules for qualification,
you can claim exemptions for your spouse and
dependents when you figure taxable income for
the part of the year you are a resident alien. The
amount you can claim for these exemptions is
limited to your taxable income (figured before
subtracting exemptions) for the part of the year
you are a resident alien. You cannot use exemptions (other than your own) to reduce taxable income to less than zero for that period.
Special rules apply to exemptions for the
part of the tax year you are a nonresident alien
if you are a:
1. Resident of Canada, Mexico, or South Korea,

All income for your period of residence and all
income that is effectively connected with a trade
or business in the United States for your period
of nonresidence, after allowable deductions, is
added and taxed at the rates that apply to U.S.
citizens and residents. Income that is not connected with a trade or business in the United
States for your period of nonresidence is subject to the flat 30% rate or lower treaty rate. You
cannot take any deductions against this income.
Social security and railroad retirement benefits. During the part of the year you are a nonresident alien, 85% of any U.S. social security
benefits (and the equivalent portion of tier 1 railroad retirement benefits) you receive is subject
to the flat 30% tax, unless exempt, or subject to
a lower treaty rate. (See The 30% Tax in chapter 4.)
During the part of the year you are a resident
alien, part of the social security and the equivalent portion of tier 1 railroad retirement benefits
will be taxed at graduated rates if your modified
adjusted gross income plus half of these benefits is more than a certain base amount.
Use the Social Security Benefits Worksheet
in the Form 1040 instructions to help you figure
the taxable part of your social security and
equivalent tier 1 railroad retirement benefits for
the part of the year you were a resident alien.
If you received U.S. social security benefits
while you were a nonresident alien, the Social
Security Administration will send you Form
SSA-1042S showing your combined benefits
for the entire year and the amount of tax withheld. You will not receive separate statements
for the benefits received during your periods of
U.S. residence and nonresidence. Therefore, it
is important for you to keep careful records of
these amounts. You will need this information to
properly complete your return and determine
your tax liability.
If you received railroad retirement benefits
while you were a nonresident alien, the U.S.
Railroad Retirement Board (RRB) will send you
Form RRB-1042S, Statement for Nonresident
Alien Recipients of Payments by the Railroad
Retirement Board, and/or Form RRB-1099-R,
Annuities or Pensions by the Railroad Retirement Board. If your country of legal residence
changed or your rate of tax changed during the
tax year, you may receive more than one form.

Tax Credits and Payments
This discussion covers tax credits and payments for dual-status aliens.

Credits
As a dual-status alien, you generally can claim
tax credits using the same rules that apply to
resident aliens. There are certain restrictions
that may apply. These restrictions are discussed here, along with a brief explanation of
credits often claimed by individuals.
Foreign tax credit. If you have paid or are liable for the payment of income tax to a foreign
country on income from foreign sources, you
may be able to claim a credit for the foreign
taxes.
If you claim the foreign tax credit, you generally must file Form 1116 with your income tax
return. For more information, see the Instructions for Form 1116 and Pub. 514.
Child and dependent care credit. You may
qualify for this credit if you pay someone to care
for your qualifying child who is under age 13, or
your disabled dependent or disabled spouse so
that you can work or look for work. Generally,
you must be able to claim an exemption for your
dependent.
Married dual-status aliens can claim the
credit only if they choose to file a joint return as
discussed in chapter 1, or if they qualify as certain married individuals living apart.
The amount of your child and dependent
care expense that qualifies for the credit in any
tax year cannot be more than your earned income for that tax year.
For more information, get Pub. 503 and
Form 2441.
Retirement savings contributions credit.
You may qualify for this credit (also known as
the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan
or to an individual retirement arrangement (IRA)
in 2015. You cannot claim this credit if:
You were born after January 1, 1998,
You were a full-time student,
Your exemption is claimed by someone
else on his or her 2015 tax return, or
Your adjusted gross income is more than
$30,500.
Use Form 8880 to figure the credit. For more information, see Pub. 590.
Child tax credit. You may be able to take this
credit if you have a qualifying child.
A qualifying child for purposes of the child
tax credit is a child who:
Was under age 17 at the end of 2015.
Is your son, daughter, stepchild, foster
child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, your
grandchild, niece, or nephew).
Is a U.S. citizen, a U.S. national, or a resident alien.
Did not provide over half of his or her own
support for 2015.
Chapter 6

Dual-Status Tax Year

Page 33

Lived with you more than half of 2015.
Temporary absences, such as for school,
vacation, or medical care, count as time
lived in the home.
Is claimed as a dependent on your return.
An adopted child is always treated as your own
child. An adopted child includes a child lawfully
placed with you for legal adoption.
See your form instructions for additional details.
Adoption credit. You may qualify to take a tax
credit of up to $13,400 for qualifying expenses
paid to adopt an eligible child. This amount may
be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. To claim the adoption credit,
file Form 8839 with the U.S. income tax return
that you file.
Married dual-status aliens can claim the
credit only if they choose to file a joint return
with a U.S. citizen or resident spouse as discussed in chapter 1, or if they qualify as certain
married individuals living apart (see Married
Persons Not Filing Jointly in the Form 8839 instructions).

Payments
You can report as payments against your U.S.
income tax liability certain taxes you paid, are
considered to have paid, or that were withheld
from your income. These include:
Tax withheld from wages earned in the
United States,
Taxes withheld at the source from various
items of income from U.S. sources other
than wages,
Estimated tax paid with Form 1040-ES or
Form 1040-ES (NR), and
Tax paid with Form 1040-C, at the time of
departure from the United States.

Forms To File
The U.S. income tax return you must file as a
dual-status alien depends on whether you are a
resident alien or a nonresident alien at the end
of the tax year.
Resident at end of year. You must file Form
1040 if you are a dual-status taxpayer who becomes a resident during the year and who is a
U.S. resident on the last day of the tax year.
Write “Dual-Status Return” across the top of the
return. Attach a statement to your return to
show the income for the part of the year you are
a nonresident. You can use Form 1040NR or
Form 1040NR-EZ as the statement, but be sure
to mark “Dual-Status Statement” across the top.
Nonresident at end of year. You must file
Form 1040NR or Form 1040NR-EZ if you are a
dual-status taxpayer who gives up residence in
the United States during the year and who is not
a U.S. resident on the last day of the tax year.
Write “Dual-Status Return” across the top of the
return. Attach a statement to your return to
show the income for the part of the year you are
a resident. You can use Form 1040 as the

Page 34

Chapter 7

Filing Information

statement, but be sure to mark “Dual-Status
Statement” across the top.
If you expatriated or terminated your residency in 2015, you may be required to file an
expatriation statement (Form 8854) with your
tax return. For more information, see Expatriation Tax in chapter 4.
Statement. Any statement must have your
name, address, and taxpayer identification
number on it. You do not need to sign a separate statement or schedule accompanying your
return, because your signature on the return
also applies to the supporting statements and
schedules.

When and
Where To File
If you are a resident alien on the last day of your
tax year and report your income on a calendar
year basis, you must file no later than April 15 of
the year following the close of your tax year. If
you report your income on other than a calendar year basis, file your return no later than the
15th day of the 4th month following the close of
your tax year. In either case, file your return with
the address for dual-status aliens shown on the
back page of the Form 1040 instructions.
If you are a nonresident alien on the last day
of your tax year and you report your income on
a calendar year basis, you must file no later
than April 15 of the year following the close of
your tax year if you receive wages subject to
withholding. If you report your income on other
than a calendar year basis, file your return no
later than the 15th day of the 4th month following the close of your tax year. If you did not receive wages subject to withholding and you report your income on a calendar year basis, you
must file no later than June 15 of the year following the close of your tax year. If you report
your income on other than a calendar year basis, file your return no later than the 15th day of
the 6th month following the close of your tax
year. In any case, mail your return to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
If enclosing a payment, mail your return to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
If the regular due date for filing falls on
TIP a Saturday, Sunday, or legal holiday,
the due date is the next day that is not
a Saturday, Sunday, or legal holiday.

7.
Filing
Information
Introduction
This chapter provides the basic filing information that you may need.

Topics

This chapter discusses:
Forms aliens must file,
When and where to file,
Penalties, and
Amended returns and claims for refund.

Useful Items

You may want to see:
Forms (and Instructions)
1040 U.S. Individual Income Tax Return
1040A U.S. Individual Income Tax Return
1040EZ Income Tax Return for Single and
Joint Filers With No Dependents
1040NR U.S. Nonresident Alien Income
Tax Return
1040NR-EZ U.S. Income Tax Return for
Certain Nonresident Aliens With No
Dependents
See chapter 12 for information about getting
these forms.

What, When, and
Where To File
What return you must file as well as when and
where you file that return, depends on your status at the end of the tax year as a resident or a
nonresident alien.

Resident Aliens
Resident aliens should file Form 1040EZ,
1040A, or 1040 at the address shown in the instructions for that form. The due date for filing
the return and paying any tax due is April 15 of
the year following the year for which you are filing a return (but see the Tip, later).
Under U.S. immigration law, a lawful permanent resident who is required to file a tax return
as a resident and fails to do so may be regarded as having abandoned status and may lose
permanent resident status.
Extensions of time to file. You are allowed
an automatic extension to June 15 to file if your

main place of business and the home you live in
are outside the United States and Puerto Rico
on April 15. You can get an extension of time to
October 15 to file your return if you get an extension by April 15 (June 15 if you qualify for the
June 15 extension). Use Form 4868 to get the
extension to October 15. In addition to this
6-month extension, taxpayers who are out of
the country (as defined in the Form 4868 instructions) can request a discretionary 2-month
additional extension of time to file their returns
(to December 15 for calendar year taxpayers).
To request this extension, you must send the
IRS a letter explaining the reasons why you
need the additional 2 months. Send the letter by
the extended due date (October 15 for calendar
year taxpayers) to the following address:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
You will not receive any notification from the
IRS unless your request is denied for being untimely.
The discretionary 2-month additional extension is not available to taxpayers who have an
approved extension of time to file on Form 2350
(for U.S. citizens and resident aliens abroad
who expect to qualify for special tax treatment).
If the due date for filing falls on a Saturday, Sunday, or legal holiday, the
due date is the next day which is not a
Saturday, Sunday, or legal holiday.

TIP

e-file at IRS.gov.

You may be able to file your
return electronically. See IRS

Nonresident Aliens
Nonresident aliens who are required to file an
income tax return should use Form 1040NR or,
if qualified, Form 1040NR-EZ.
If you are any of the following, you must file
a return.
1. A nonresident alien individual engaged or
considered to be engaged in a trade or
business in the United States during 2015.
(But see Exceptions, later.)
You must file even if:
a. Your income did not come from a
trade or business conducted in the
United States,
b. You have no income from U.S. sources, or
c. Your income is exempt from income
tax.
2. A nonresident alien individual not engaged
in a trade or business in the United States
with U.S. income on which the tax liability
was not satisfied by the withholding of tax
at the source.
3. A representative or agent responsible for
filing the return of an individual described
in (1) or (2).
4. A fiduciary for a nonresident alien estate
or trust.

You must also file if you want to:
Claim a refund of overwithheld or overpaid
tax, or
Claim the benefit of any deductions or
credits. For example, if you have no U.S.
business activities but have income from
real property that you choose to treat as effectively connected income (discussed in
chapter 4), you must timely file a true and
accurate return to take any allowable deductions against that income. For information on what is timely, see When to file for
deductions and credits under When To
File, later.
Exceptions. You do not need to file Form
1040NR or Form 1040NR-EZ if you meet either
of the following conditions.
1. Your only U.S. trade or business was the
performance of personal services, and
a. Your wages were less than $4,000,
and
b. You have no other need to file a return
to claim a refund of overwithheld
taxes, to satisfy additional withholding
at source, or to claim income exempt
or partly exempt by treaty.
2. You were a nonresident alien student,
teacher, or trainee who was temporarily
present in the United States under an “F,”
“J,” “M,” or “Q” visa and you have no income that is subject to tax, such as wages, tips, scholarship and fellowship
grants, dividends, etc.
Even if you have left the United States
and filed a Form 1040-C, U.S. DepartCAUTION
ing Alien Income Tax Return, on departure, you still must file an annual U.S. income tax return. If you are married and both you
and your spouse are required to file, you must
each file a separate return.

!

Form 1040NR-EZ
You can use Form 1040NR-EZ if all of the following conditions are met.
1. You do not claim any dependents.
2. You cannot be claimed as a dependent on
someone else's U.S. tax return.
3. If you were married, you do not claim an
exemption for your spouse.
4. Your taxable income is less than
$100,000.
5. The only itemized deduction you can claim
is for state and local income taxes. Note.
Residents of India who were students or
business apprentices may be able to take
the standard deduction instead of the
itemized deduction for state and local income taxes. See chapter 5.
6. Your only U.S. source income is from wages, salaries, tips, taxable refunds of state
and local income taxes, scholarship or fellowship grants, and nontaxable interest or
dividends. (If you had taxable interest or
dividend income, you cannot use this
form.)

7. You are not claiming any adjustments to
income other than the student loan interest deduction or scholarship and fellowship grants excluded.
8. You are not claiming any tax credits.
9. This is not an “expatriation return.” See
Expatriation Tax in chapter 4.
10. The only taxes you owe are:
a. The income tax from the Tax Table.
b. The social security and Medicare tax
from Form 4137 or Form 8919.
11. You are not claiming a credit for excess
social security and tier 1 RRTA tax withheld.
12. You are not filing Form 8959, to figure the
amount of Additional Medicare Tax you
owe and/or the amount of Additional Medicare Tax withheld by your employer, if
any.
If you do not meet all of the above conditions, you must file Form 1040NR.

When To File
If you are an employee and you receive wages
subject to U.S. income tax withholding, you will
generally file by the 15th day of the 4th month
after your tax year ends. For the 2015 calendar
year, file your return by April 18, 2016.
If you are not an employee who receives
wages subject to U.S. income tax withholding,
you must file by the 15th day of the 6th month
after your tax year ends. For the 2015 calendar
year, file your return by June 15, 2016.
Extensions of time to file. If you cannot file
your return by the due date, file Form 4868 or
use one of the electronic filing options explained in the Form 4868 instructions. For the
2015 calendar year, this will extend the due
date to October 17, 2016 (December 15, 2016,
if the regular due date of your return is June 15,
2016). You must file the extension by the regular due date of your return.
In addition to the 6-month extension to October 15, taxpayers whose main place of business is outside the United States and Puerto
Rico and who live outside those jurisdictions
can request a discretionary 2-month extension
of time to file their returns (to December 15 for
calendar year taxpayers). To request this extension, you must send the IRS a letter explaining
the reasons why you need the additional 2
months. Send the letter by the extended due
date (October 15 for calendar year taxpayers)
to the following address:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
You will not receive any notification from the
IRS unless your request is denied for being untimely.
When to file for deductions and credits. To
get the benefit of any allowable deductions or
credits, you must timely file a true and accurate
Chapter 7

Filing Information

Page 35

return. For this purpose, a return is timely if it is
filed within 16 months of the due date just discussed. However, if you did not file a 2014 tax
return and 2015 is not the first year for which
you are required to file one, your 2015 return is
timely for this purpose if it is filed by the earlier
of:
The date that is 16 months after the due
date for filing your 2015 return, or
The date the IRS notifies you that your
2015 return has not been filed and that you
cannot claim certain deductions and credits.
The allowance of the following credits is not affected by this time requirement.
Credit for withheld taxes.
Credit for excise tax on certain uses of
gasoline and special fuels.
Credit for tax paid by a mutual fund (or
other regulated investment company) or a
real estate investment trust on undistributed long-term capital gains.
Protective return. If your activities in the
United States were limited and you do not believe that you had any gross income effectively
connected with a U.S. trade or business during
the year, you can file a protective return (Form
1040NR) by the deadline explained above. By
filing a protective return, you protect your right
to receive the benefit of deductions and credits
in the event it is later determined that some or
all of your income is effectively connected. You
are not required to report any effectively connected income or any deductions on the protective return, but you must give the reason the return is being filed.
If you believe some of your activities resulted in effectively connected income, file your return reporting that income and related deductions by the regular due date. To protect your
right to claim deductions or credits resulting
from other activities, attach a statement to that
return explaining that you wish to protect your
right to claim deductions and credits if it is later
determined that the other activities produced effectively connected income.
You can follow the same procedure if you
believe you have no U.S. tax liability because of
a U.S. tax treaty. Be sure to also complete item
L on page 5 of Form 1040NR.
Waiver of filing deadline. The IRS may
waive the filing deadline if you establish that,
based on the facts and circumstances, you acted reasonably and in good faith in failing to file
a U.S. income tax return (including a protective
return) and you cooperate with the IRS in determining your U.S. income tax liability for the tax
year for which you did not file a return.

Where To File
If you are not enclosing a payment, file
Form 1040NR-EZ and Form 1040NR
at the following address.
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
If enclosing a payment, mail your return to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
Aliens from the U.S. Virgin Islands.
If you are a bona fide resident of the
U.S. Virgin Islands during your entire
tax year and work temporarily in the
United States, you must pay your income taxes
to the U.S. Virgin Islands and file your income
tax returns at the following address.
Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay
Suite 225
St. Thomas, VI 00802
Report all income from U.S. sources, as well
as income from other sources, on your return.
For information on filing U.S. Virgin Islands returns, contact the U.S. Virgin Islands Bureau of
Internal Revenue.
Chapter 8 discusses withholding from U.S.
wages of U.S. Virgin Islanders.
Aliens from Guam or the Commonwealth of
the Northern Mariana Islands. If you are a
bona fide resident of Guam or the Commonwealth of the Northern Mariana Islands (CNMI)
during your entire tax year, you must file your
return with, and pay any tax due to, Guam or
the CNMI. Report all income, including income
from U.S. sources, on your return. It is not necessary to file a separate U.S. income tax return.
Bona fide residents of Guam should
file their Guam returns at the following
address.
Department of Revenue and Taxation
Government of Guam
P.O. Box 23607
GMF, GU 96921
Bona fide residents of the CNMI
should file their CNMI income tax returns at the following address.
Department of Finance
Division of Revenue and Taxation
Commonwealth of the Northern Mariana
Islands
P.O. Box 5234 CHRB
Saipan, MP 96950

If you are not a bona fide resident of Guam
or the CNMI, see Pub. 570 for information on
where to file your return.

Amended Returns
and Claims for Refund
If you find changes in your income, deductions,
or credits after you mail your return, file Form
1040X, Amended U.S. Individual Income Tax
Return. Also use Form 1040X if you should
have filed Form 1040, 1040A, or 1040EZ instead of Form 1040NR or 1040NR-EZ, or vice
versa. If you amend Form 1040NR or Form
1040NR-EZ or file the correct return, attach the
corrected return (Form 1040, Form 1040NR,
etc.) to Form 1040X. Print “Amended” across
the top. Ordinarily, an amended return claiming
a refund must be filed within 3 years from the
date your return was filed or within 2 years from
the time the tax was paid, whichever is later. A
return filed before the final due date is considered to have been filed on the due date.

Other Forms You
May Have To File
You may be required to file information returns
to report certain foreign income or assets, or
monetary transactions.

FinCEN Form 105
FinCEN Form 105 must be filed by each person
who physically transports, mails, or ships, or
causes to be physically transported, mailed, or
shipped, currency or other monetary instruments in a total amount of more than $10,000 at
one time from the United States to any place
outside the United States, or into the United
States from any place outside the United
States. The filing requirement also applies to
each person who receives in the United States
currency or monetary instruments totaling more
than $10,000 at one time from any place outside of the United States.
The term “monetary instruments” means the
following:
Coin and currency of the United States or
of any other country,
Travelers' checks in any form,
Investment securities or stock in bearer
form or otherwise in such form that title to
them passes upon delivery,
Negotiable instruments (including checks,
promissory notes, and money orders) in
bearer form, endorsed without restriction,
made out to a fictitious payee, or otherwise
in such form that title to them passes upon
delivery, and
Checks, promissory notes, and money orders which are signed but on which the
name of the payee has been omitted.
However, the term does not include:
Checks or money orders made payable to
the order of a named person which have
not been endorsed or which contain restrictive endorsements,
Warehouse receipts, or
Bills of lading.

Page 36

Chapter 7

Filing Information

A transfer of funds through normal banking
procedures (wire transfer) that does not involve
the physical transportation of currency or monetary instruments is not required to be reported
on FinCEN Form 105.
Filing requirements. FinCEN Form 105 filing
requirements follow.
Recipients. Each person who receives currency or other monetary instruments in the United States must file FinCEN Form 105 within 15
days after receipt, with the Customs officer in
charge at any port of entry or departure, or by
mail at the following address.
Commissioner of Customs
Attention: Currency Transportation
Reports
Washington, DC 20229
Shippers or mailers. If the currency or
other monetary instrument does not accompany
the person entering or departing the United
States, FinCEN Form 105 can be filed by mail
at the above address on or before the date of
entry, departure, mailing, or shipping.
Travelers. Travelers must file FinCEN
Form 105 with the Customs officer in charge at
any Customs port of entry or departure, when
entering or departing the United States.
Penalties. Civil and criminal penalties are provided for failing to file a report, filing a report
containing material omissions or misstatements, or filing a false or fraudulent report. Also,
the entire amount of the currency or monetary
instrument may be subject to seizure and forfeiture.
More information. More information regarding the filing of FinCEN Form 105 can be found
in the instructions on the back of the form.

Form 8938
You may have to file Form 8938, Statement of
Specified Foreign Financial Assets, to report
the ownership of specified foreign financial asset(s) if you are one of the following individuals.
A resident alien of the United States for
any part of the tax year.
A resident alien of the United States who
elects to be treated as a resident of a foreign country under the provisions of a U.S.
income tax treaty. See Effect of Tax Treaties in chapter 1.
A nonresident alien who makes an election
to be treated as a resident alien for purposes of filing a joint income tax return. See
chapter 1 for information about this election.
A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico.
See Pub. 570 for a definition of bona fide
resident.
You must file Form 8938 if the total value of
those assets exceeds an applicable threshold
(the “reporting threshold”). The reporting
threshold varies depending on whether you live
in the United States, are married, or file a joint
income tax return with your spouse. Specified

foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any
stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a
U.S. person.
You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if
you have an understatement of tax due to any
transaction involving an undisclosed foreign financial asset.
More information about the filing of Form
8938 can be found in the separate instructions
for Form 8938.

Penalties
The law provides penalties for failure to file returns or pay taxes as required.

Civil Penalties
If you do not file your return and pay your tax by
the due date, you may have to pay a penalty.
You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax
submission, or fail to supply your taxpayer identification number. If you provide fraudulent information on your return, you may have to pay a
civil fraud penalty.
Filing late. If you do not file your return by the
due date (including extensions), you may have
to pay a failure-to-file penalty. The penalty is
based on the tax not paid by the due date (without regard to extensions). The penalty is usually
5% for each month or part of a month that a return is late, but not more than 25%.
Fraud. If your failure to file is due to fraud,
the penalty is 15% for each month or part of a
month that your return is late, up to a maximum
of 75%.
Return over 60 days late. If you file your
return more than 60 days after the due date or
extended due date, the minimum penalty is the
smaller of $135 or 100% of the unpaid tax.
Exception. You will not have to pay the
penalty if you show that you failed to file on time
because of reasonable cause and not because
of willful neglect.
Paying tax late. You will have to pay a failure-to-pay penalty of 1 2 of 1% (0.50%) of your
unpaid taxes for each month, or part of a month,
after the due date that the tax is not paid. This
penalty does not apply during the automatic
6-month extension of time to file period, if you
paid at least 90% of your actual tax liability on
or before the due date of your return and pay
the balance when you file the return.
The monthly rate of the failure-to-pay penalty is half the usual rate (0.25% instead of
0.50%) if an installment agreement is in effect
for that month. You must have filed your return
by the due date (including extensions) to qualify
for this reduced penalty.

If a notice of intent to levy is issued, the rate
will increase to 1% at the start of the first month
beginning at least 10 days after the day that the
notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and
demand is issued.
This penalty cannot be more than 25% of
your unpaid tax. You will not have to pay the
penalty if you can show that you had a good
reason for not paying your tax on time.
Combined penalties. If both the failure-to-file
penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or
15%) failure-to-file penalty is reduced by the
failure-to-pay penalty. However, if you file your
return more than 60 days after the due date or
extended due date, the minimum penalty is the
smaller of $135 or 100% of the unpaid tax.
Accuracy-related penalty. You may have to
pay an accuracy-related penalty if you underpay your tax because:
You show negligence or disregard of rules
or regulations,
You substantially understate your income
tax,
You claim tax benefits for a transaction that
lacks economic substance, or
You fail to disclose a foreign financial asset.
The penalty is equal to 20% of the underpayment. The penalty is 40% of any portion of the
underpayment that is attributable to an undisclosed noneconomic substance transaction or
an undisclosed foreign financial asset transaction. The penalty will not be figured on any part
of an underpayment on which the fraud penalty
(discussed later) is charged.
Negligence or disregard. The term “negligence” includes a failure to make a reasonable
attempt to comply with the tax law or to exercise
ordinary and reasonable care in preparing a return. Negligence also includes failure to keep
adequate books and records. You will not have
to pay a negligence penalty if you have a reasonable basis for a position you took.
The term “disregard” includes any careless,
reckless, or intentional disregard.
Adequate disclosure. You can avoid the
penalty for disregard of rules or regulations if
you adequately disclose on your return a position that has at least a reasonable basis. See
Disclosure statement, later.
This exception will not apply to an item that
is attributable to a tax shelter. In addition, it will
not apply if you fail to keep adequate books and
records, or substantiate items properly.
Substantial understatement of income
tax. You understate your tax if the tax shown
on your return is less than the correct tax. The
understatement is substantial if it is more than
the larger of 10% of the correct tax or $5,000.
However, the amount of the understatement is
reduced to the extent the understatement is due
to:
1. Substantial authority, or

Chapter 7

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Page 37

2. Adequate disclosure and a reasonable basis.
If an item on your return is attributable to a
tax shelter, there is no reduction for an adequate disclosure. However, there is a reduction
for a position with substantial authority, but only
if you reasonably believed that your tax treatment was more likely than not the proper treatment.
Substantial authority. Whether there is or
was substantial authority for the tax treatment of
an item depends on the facts and circumstances. Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue
procedures,
and
notices
and
announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as
yours.
Disclosure statement. To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275. You must also
have a reasonable basis for treating the item
the way you did.
In cases of substantial understatement only,
items that meet the requirements of Revenue
Procedure 2015-16 available at www.irs.gov/
irb/2015-7_IRB/ar06.html (or later update) are
considered adequately disclosed on your return
without filing Form 8275.
Use Form 8275-R to disclose items or positions contrary to regulations.
Transaction lacking economic substance. For more information on economic
substance, see section 7701(o).
Foreign financial asset. For more information on undisclosed foreign financial assets,
see section 6662(j) or the Instructions for Form
8938.
Reasonable cause. You will not have to
pay a penalty if you show a good reason (reasonable cause) for the way you treated an item.
You must also show that you acted in good
faith. This does not apply to a transaction that
lacks economic substance.
Filing erroneous claim for refund or credit.
You may have to pay a penalty if you file an erroneous claim for refund or credit. The penalty
is equal to 20% of the disallowed amount of the
claim, unless you can show a reasonable basis
for the way you treated an item. However, any
disallowed amount due to a transaction that
lacks economic substance will not be treated as
having a reasonable basis. The penalty will not
be figured on any part of the disallowed amount
of the claim that relates to the earned income
credit or on which the accuracy-related or fraud
penalties are charged.

2010-17 I.R.B. 609 available at www.irs.gov/irb/
2010-17_IRB/ar13.html.
You will have to pay the penalty if you filed
this kind of return or submission based on a frivolous position or a desire to delay or interfere
with the administration of federal tax laws. This
includes altering or striking out the preprinted
language above the space provided for your
signature.
This penalty is added to any other penalty
provided by law.
Fraud. If there is any underpayment of tax on
your return due to fraud, a penalty of 75% of the
underpayment due to fraud will be added to
your tax.
Failure to supply taxpayer identification
number. If you do not include your social security number (SSN) or individual taxpayer
identification number (ITIN) or the SSN or ITIN
of another person where required on a return,
statement, or other document, you will be subject to a penalty of $50 for each failure. You will
also be subject to a penalty of $50 if you do not
give your SSN or ITIN to another person when it
is required on a return, statement, or other
document.
For example, if you have a bank account
that earns interest, you must give your SSN or
ITIN to the bank. The number must be shown
on the Form 1099-INT or other statement the
bank sends you. If you do not give the bank
your SSN or ITIN, you will be subject to the $50
penalty. (You also may be subject to “backup”
withholding of income tax.)
You will not have to pay the penalty if you
are able to show that the failure was due to reasonable cause and not willful neglect.

Criminal Penalties
You may be subject to criminal prosecution
(brought to trial) for actions such as:
1. Tax evasion,
2. Willful failure to file a return, supply information, or pay any tax due,
3. Fraud and false statements, or
4. Preparing and filing a fraudulent return.

Frivolous tax submission. You may have to
pay a penalty of $5,000 if you file a frivolous tax
return or other frivolous submissions. A frivolous tax return is one that does not include
enough information to figure the correct tax or
that contains information clearly showing that
the tax you reported is substantially incorrect.
For more information on frivolous returns, frivolous submissions, and a list of positions that are
identified as frivolous, see Notice 2010-33,
Page 38

Chapter 8

Paying Tax Through Withholding or Estimated Tax

8.
Paying Tax
Through
Withholding or
Estimated Tax
Introduction
This chapter discusses how to pay your U.S. income tax as you earn or receive income during
the year. In general, the federal income tax is a
pay as you go tax. There are two ways to pay
as you go.
1. Withholding. If you are an employee,
your employer probably withholds income
tax from your pay. Tax may also be withheld from certain other income—including
pensions, bonuses, commissions, and
gambling winnings. In each case, the
amount withheld is paid to the U.S. Treasury in your name.
2. Estimated tax. If you do not pay your tax
through withholding, or do not pay enough
tax that way, you might have to pay estimated tax. People who are in business for
themselves generally will have to pay their
tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, rent, and royalties. Estimated tax is used to pay not only income
tax, but self-employment tax and alternative minimum tax as well.

Topics

This chapter discusses:
How to notify your employer of your alien
status,
Income subject to withholding of income
tax,
Exemptions from withholding,
Social security and Medicare taxes, and
Estimated tax rules.

Useful Items

You may want to see:
Publication
515 Withholding of Tax on Nonresident
Aliens and Foreign Entities
901 U.S. Tax Treaties
Form (and Instructions)
W-4 Employee's Withholding Allowance
Certificate
W-8BEN Certificate of Foreign Status of
Beneficial Owner for United States

Tax Withholding and Reporting
(Individuals)
W-8ECI Certificate of Foreign Person's
Claim That Income Is Effectively
Connected With the Conduct of a
Trade or Business in the United
States
W-9 Request for Taxpayer Identification
Number and Certification
1040-ES (NR) U.S. Estimated Tax for
Nonresident Alien Individuals
8233 Exemption From Withholding on
Compensation for Independent (and
Certain Dependent) Personal
Services of a Nonresident Alien
Individual
8288-B Application for Withholding
Certificate for Dispositions by Foreign
Persons of U.S. Real Property
Interests
13930 Application for Central Withholding
Agreement
See chapter 12 for information about getting
these publications and forms.

Notification of
Alien Status
You must let your employer know whether you
are a resident or a nonresident alien so your
employer can withhold the correct amount of
tax from your wages.
If you are a resident alien under the rules
discussed in chapter 1, you must file Form W-9
or a similar statement with your employer. If you
are a nonresident alien under those rules, you
must furnish to your employer Form 8233 or
Form W-8BEN, establishing that you are a foreign person, or Form W-4, establishing that
your compensation is subject to graduated withholding at the same rates as resident aliens or
U.S. citizens.
If you are a resident alien and you receive
income other than wages (such as dividends
and royalties) from sources within the United
States, file Form W-9 or similar statement with
the withholding agent (generally, the payer of
the income) so the agent will not withhold tax on
the income at the 30% (or lower treaty) rate. If
you receive this type of income as a nonresident alien, file Form W-8BEN with the withholding agent so that the agent will withhold tax at
the 30% (or lower treaty) rate. However, if the
income is effectively connected with a U.S.
trade or business, file Form W-8ECI instead.

Withholding From
Compensation
The following discussion generally applies only
to nonresident aliens. Tax is withheld from resident aliens in the same manner as U.S. citizens.
Wages and other compensation paid to a
nonresident alien for services performed as an

employee are usually subject to graduated withholding at the same rates as resident aliens and
U.S. citizens. Therefore, your compensation,
unless it is specifically excluded from the term
“wages” by law, or is exempt from tax by treaty,
is subject to graduated withholding.

Withholding on Wages
If you are an employee and you receive wages
subject to graduated withholding, you will be required to fill out a Form W-4. Also fill out Form
W-4 for a scholarship or fellowship grant to the
extent it represents payment for past, present,
or future services and for which you are not
claiming a tax treaty withholding exemption on
Form 8233 (discussed later under Income Entitled to Tax Treaty Benefits). These are services
you are required to perform as an employee
and as a condition of receiving the scholarship
or fellowship (or tuition reduction).
Nonresident aliens should fill out Form W-4
using the following instructions instead of the instructions on the Form W-4. This is because of
the restrictions on a nonresident alien's filing
status, the limited number of personal exemptions a nonresident alien is allowed, and because a nonresident alien cannot claim the
standard deduction.
1. Enter your social security number (SSN)
on line 2. Do not enter an individual taxpayer identification number (ITIN).
2. Check only “Single” marital status on line 3
(regardless of your actual marital status).
3. Claim only one allowance on line 5, unless
you are a resident of Canada, Mexico, or
South Korea, or a U.S. national.
4. Write “Nonresident Alien” or “NRA” on the
dotted line on line 6. You can request additional withholding on line 6 at your option.
5. Do not claim “Exempt” withholding status
on line 7.
A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans, and Northern
Mariana Islanders who chose to become U.S.
nationals instead of U.S. citizens.
See Withholding on Scholarships and Fellowship Grants later, for how to fill out Form
W-4 if you receive a U.S. source scholarship or
fellowship grant that is not a payment for services.
Students and business apprentices from India. If you are eligible for the benefits of Article
21(2) of the United States-India Income Tax
Treaty, you may claim an additional withholding
allowance for the standard deduction. You can
claim an additional withholding allowance for
your spouse only if your spouse will have no
gross income for 2015 and cannot be claimed
as a dependent on another U.S. taxpayer's
2015 return. You may also claim an additional
withholding allowance for each of your dependents not admitted to the United States on “F-2,”
“J-2,” or “M-2” visas if they meet the same rules
that apply to U.S. citizens.
Chapter 8

Household employees. If you work as a
household employee, your employer does not
have to withhold income tax. However, you may
agree to voluntary income tax withholding by filing a Form W-4 with your employer. The agreement goes into effect when your employer accepts the agreement by beginning the
withholding. You or your employer may end the
agreement by letting the other know in writing.
Agricultural workers. If you are an agricultural worker on an H-2A visa, your employer
does not have to withhold income tax. However,
your employer will withhold income tax only if
you and your employer agree to withhold. In
that case, you must provide your employer with
a properly completed Form W-4. You can find
more information about not having tax withheld
www.irs.gov/Individuals/Internationalat
Taxpayers/Foreign-Agricultural-Workers.

Wages Exempt From Withholding
Wages that are exempt from U.S. income tax
under an income tax treaty are generally exempt from withholding. For information on how
to claim this exemption from withholding, see
Income Entitled to Tax Treaty Benefits, later.
Wages paid to aliens who are residents of
American Samoa, Canada, Mexico, Puerto
Rico, or the U.S. Virgin Islands may be exempt
from withholding. The following paragraphs explain these exemptions.
Residents of Canada or Mexico engaged in
transportation-related employment. Certain
residents of Canada or Mexico who enter or
leave the United States at frequent intervals are
not subject to withholding on their wages.
These persons either:
Perform duties in transportation service
between the United States and Canada or
Mexico, or
Perform duties connected to the construction, maintenance, or operation of a waterway, viaduct, dam, or bridge crossed by, or
crossing, the boundary between the United
States and Canada or the boundary between the United States and Mexico.
This employment is subject to withholding of social security and MediCAUTION
care taxes unless the services are performed for a railroad.

!

To qualify for the exemption from withholding during a tax year, a Canadian or Mexican
resident must give the employer a statement in
duplicate with name, address, and identification
number, certifying that the resident:
Is not a U.S. citizen or resident,
Is a resident of Canada or Mexico, whichever applies, and
Expects to perform duties previously described during the tax year in question.
The statement can be in any form, but it
must be dated and signed by the employee and
must include a written declaration that it is
made under the penalties of perjury.
Residents of American Samoa and Puerto
Rico. If you are a nonresident alien employee

Paying Tax Through Withholding or Estimated Tax

Page 39

who is a resident of American Samoa or Puerto
Rico, wages for services performed in American Samoa or Puerto Rico are generally not
subject to withholding unless you are an employee of the United States or any of its agencies in American Samoa or Puerto Rico.
Residents of the U.S. Virgin Islands. Nonresident aliens who are bona fide residents of
the U.S Virgin Islands are not subject to withholding of U.S. tax on income earned while temporarily employed in the United States. This is
because those persons pay their income tax to
the U.S. Virgin Islands. To avoid having tax
withheld on income earned in the United States,
bona fide residents of the U.S. Virgin Islands
should write a letter, in duplicate, to their employers, stating that they are bona fide residents of the U.S. Virgin Islands and expect to
pay tax on all income to the U.S. Virgin Islands.

Withholding on Pensions
If you receive a pension as a result of personal
services performed in the United States, the
pension income is subject to the 30% (or lower
treaty) rate of withholding. You may, however,
have tax withheld at graduated rates on the portion of the pension that arises from the performance of services in the United States after December 31, 1986. You must fill out Form
W-8BEN and give it to the withholding agent or
payer before the income is paid or credited to
you.

Withholding on Tip Income
Tips you receive during the year for services
performed in the United States are subject to
U.S. income tax. Include them in taxable income. In addition, tips received while working
for one employer, amounting to $20 or more in
a month, are subject to graduated withholding.

Independent Contractors
If there is no employee-employer relationship
between you and the person for whom you perform services, your compensation is subject to
the 30% (or lower treaty) rate of withholding.
However, if you are engaged in a trade or business in the United States during the tax year,
your compensation for personal services as an
independent contractor (independent personal
services) may be entirely or partly exempt from
withholding if you reach an agreement with the
IRS on the amount of withholding required. An
agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for
payments covered by the agreement after it is
agreed to by all parties. You must agree to
timely file an income tax return for the current
tax year.
Central withholding agreements. If you are a
nonresident alien entertainer or athlete performing or participating in athletic events in the United States, you may be able to enter into a withholding agreement with the IRS for reduced
withholding provided certain requirements are
met. Under no circumstances will such a withPage 40

Chapter 8

holding agreement reduce taxes withheld to
less than the anticipated amount of income tax
liability.
File Form 13930 and the required attachments with the IRS to request a central withholding agreement. Either you or your authorized representative can file the form. It should
be sent to the IRS at least 45 days before the
tour begins or the event occurs. Exceptions will
be considered on a case by case basis.
For more information on the CWA program,
go to www.irs.gov/Individuals/InternationalTaxpayers/Central-Withholding-Agreements.
Final payment exemption. Your final payment of compensation during the tax year for independent personal services may be entirely or
partly exempt from withholding. This exemption
is available only once during your tax year and
applies to a maximum of $5,000 of compensation. To obtain this exemption, you or your
agent must give the following statements and
information to the Commissioner or his delegate.
A statement by each withholding agent
from whom you have received gross income effectively connected with a trade or
business in the United States during the
tax year, showing the amount of income
paid and the tax withheld. Each statement
must be signed by the withholding agent
and verified by a declaration that it is made
under penalties of perjury.
A statement by the withholding agent from
whom you expect to receive the final payment of compensation, showing the
amount of the payment and the amount of
tax that would be withheld if a final payment exemption were not granted. This
statement must also be signed by the withholding agent and verified by a declaration
that it is made under penalties of perjury.
A statement by you that you do not intend
to receive any other income effectively
connected with a trade or business in the
United States during the current tax year.
The amount of tax that has been withheld
or paid under any other provision of the Internal Revenue Code or regulations for any
income effectively connected with your
trade or business in the United States during the current tax year.
The amount of your outstanding tax liabilities, if any, including interest and penalties,
from the current tax year or prior tax periods.
Any provision of an income tax treaty under which a partial or complete exemption
from withholding may be claimed, the
country of your residence, and a statement
of sufficient facts to justify an exemption
under the treaty.
A statement signed by you, and verified by
a declaration that it is made under penalties of perjury, that all the information given
is true and that to your knowledge no relevant information has been omitted.
If satisfied with the information, the IRS will
determine the amount of your tentative income
tax for the tax year on gross income effectively
connected with your trade or business in the

Paying Tax Through Withholding or Estimated Tax

United States. Ordinary and necessary business expenses can be taken into account if proven to the satisfaction of the Commissioner or
his delegate.
The Commissioner or his delegate will send
you a letter, directed to the withholding agent,
showing the amount of the final payment of
compensation that is exempt from withholding
and the amount that can be paid to you because of the exemption. You must give two copies of the letter to the withholding agent and
must also attach a copy of the letter to your income tax return for the tax year for which the
exemption is effective.

Allowance for
Personal Exemption
Withholding on payments for independent personal services is generally based on the
amount of your compensation payment minus
the value of one exemption ($4,050 for 2016).
To determine the income for independent
personal services performed in the United
States to which the 30% (or lower treaty) rate
will apply, you are allowed one personal exemption if you are not a U.S. national and are
not a resident of Canada, Mexico, or South Korea. For purposes of 30% withholding, the exemption is prorated at $11.07 a day in 2016 for
the period that labor or personal services are
performed in the United States. To claim an exemption from withholding on the personal exemption amount, fill out the applicable parts of
Form 8233 and give it to the withholding agent.
Example. Eric Johannsen, who is a resident of Country X worked under a contract with
a U.S. firm (not as an employee) in the United
States for 100 days during 2016 before returning to his country. He earned $6,000 for the
services performed (not considered wages) in
the United States. Eric is married and has three
dependent children. His wife is not employed
and has no income subject to U.S. tax. The
amount of the personal exemption to be allowed against the income for his personal services performed within the United States in 2016
is $1,107 (100 days × $11.07), and withholding
at 30% is applied against the balance. Thus,
$1,467.90 in tax is withheld from Eric's earnings
(30% of $4,893 ($6,000 − $1,107)).
U.S. nationals or residents of Canada, Mexico, or South Korea. If you are a nonresident
alien who is a resident of Canada, Mexico, or
South Korea, or who is a national of the United
States, you are subject to the same 30% withholding on your compensation for independent
personal services performed in the United
States. However, if you are a U.S. national or a
resident of Canada or Mexico, you are allowed
the same personal exemptions as U.S. citizens.
For the 30% (or lower treaty) rate withholding,
you can take $11.07 per day for each allowable
exemption in 2016. If you are a resident of
South Korea, you are allowed personal exemptions for yourself and for your spouse and children who live with you in the United States at
any time during the tax year. However, the additional exemptions for your spouse and children

must be further prorated as explained in chapter 5 under Exemptions.
Students and business apprentices from India. If you are eligible for the benefits of Article
21(2) of the United States-India Income Tax
Treaty, you are allowed an exemption for your
spouse only if your spouse will have no gross
income for 2016 and cannot be claimed as a
dependent on another U.S. taxpayer's 2016 return. You are also allowed an exemption for
each dependent not admitted to the United
States on “F-2,” “J-2,” or “M-2” visas if they
meet the same rules that apply to U.S. citizens.
For the 30% (or lower treaty rate) withholding
on compensation for independent personal
services performed in the United States, you
are allowed $11.07 per day for each allowable
exemption in 2016.

Refund of Taxes Withheld in Error
Multi-level marketing. If you are a distributor
for a multi-level marketing company who had
taxes withheld in error, file a U.S. income tax return (Form 1040NR, Form 1040NR-EZ, or Form
1120-F) or, if a tax return has already been
filed, a claim for refund (Form 1040X or amended Form 1120-F) to recover the amount withheld in error. You must also attach to the U.S.
income tax return or claim for refund supporting
information that includes, but is not limited to,
the following items.
A copy of your Form W-2, Form 1042-S, or
Form 1099 to prove the amount of taxes
withheld.
A statement explaining why income reported on your Form W-2, Form 1042-S, or
Form 1099 is not subject to U.S. taxation.
A statement listing all the dates you entered and left the United States during the
taxable year. If the compensation is
multi-year compensation, the statement
must list all the dates you entered and left
the United States during each of the taxable years to which the compensation is attributable.
A copy of any documents or records that
show the number of days you actually
were present in the United States during
the years listed.
A statement providing: (a) the number of
days (or unit of time less than a day, if appropriate) that personal services were performed in the United States in connection
with recruiting, training, and supporting
your lower-tier distributors; and (b) the total
number of days (or unit of time less than a
day, if appropriate) that personal services
were performed globally in connection with
recruiting, training, and supporting your
lower-tier distributors.
Any further relevant document or record
supporting your claim that the taxes were
withheld in error.
Refund of taxes withheld in error on social
security benefits paid to resident aliens.
Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. For U.S. income tax
purposes, green card holders continue to be
resident aliens until their lawful permanent resi-

dent status under immigration laws is either
taken away or is administratively or judicially
determined to have been abandoned. See
Green Card Test in chapter 1. If you are a green
card holder and tax was withheld in error on
your social security benefits because you have
a foreign address, the withholding tax is refundable by the Social Security Administration
(SSA) or the IRS. SSA will refund taxes erroneously withheld if the refund can be processed
during the same calendar year in which the tax
was withheld. If SSA cannot refund the taxes
withheld, you must file a Form 1040 or 1040A
with the Department of the Treasury, Internal
Revenue Service Center, Austin, TX 73301 to
determine if you are entitled to a refund. You
must also attach the following to your Form
1040 or 1040A.
A copy of Form SSA-1042S, Social Security Benefit Statement.
A copy of the “green card.”
A signed declaration that includes the following statements: The SSA should not
have withheld income tax from my social
security benefits because I am a U.S. lawful permanent resident and my green card
has been neither revoked nor administratively or judicially determined to have been
abandoned. I am filing a U.S. income tax
return for the tax year as a resident alien
reporting all of my worldwide income. I
have not claimed benefits for the tax year
under an income tax treaty as the resident
of a country other than the United States.

Withholding From
Other Income
Other income subject to 30% withholding generally includes fixed or determinable income
such as interest (other than portfolio interest),
dividends, pensions and annuities, and gains
from certain sales and exchanges, discussed in
chapter 4. It also includes 85% of social security
benefits paid to nonresident aliens.
Other income not subject to withholding of
30% (or lower treaty) rate. The following income is not subject to withholding at the 30%
(or lower treaty) rate if you file Form W-8ECI
with the payer of the income.
Income (other than compensation) that is
effectively connected with your U.S. trade
or business.
Income from real property that you choose
to treat as effectively connected with a
U.S. trade or business. See Income From
Real Property in chapter 4 for details about
this choice.
Special rules for withholding on partnership
income, scholarships, and fellowships are explained next.

Tax Withheld on
Partnership Income
If you are a foreign partner in a U.S. or foreign
partnership, the partnership will withhold tax on
your share of effectively connected taxable income (ECTI) from the partnership. You may be
Chapter 8

able to reduce your ECTI subject to withholding
by certain partner-level deductions. Generally,
you must use Form 8804-C for this purpose.
See the Instructions for Form 8804-C for more
information.
The withholding rate on your share of effectively connected income is generally the highest
rate of tax specified under section 1 of the Code
(39.6% for 2016). However, the partnership
may withhold at the highest rate that applies to
a particular type of income allocable to you if
you gave the partnership the appropriate documentation. Long-term capital gain is an example of a particular type of income to which the
highest tax rate applies. Claim the tax withheld
as a credit on your 2016 Form 1040NR.
The partnership will give you a statement on
Form 8805 showing the tax withheld. A partnership that is publicly traded will withhold tax on
your actual distributions of effectively connected income. In this case the partnership will give
you a statement on Form 1042-S.

Withholding on Scholarships
and Fellowship Grants
There is no withholding on a qualified scholarship received by a candidate for a degree. See
chapter 3.
If you are a nonresident alien student or
grantee with an “F,” “J,” “M,” or “Q” visa and you
receive a U.S. source grant or scholarship that
is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax
at 14% (or lower treaty rate) of the taxable part
of the grant or scholarship that is not a payment
for services. However, if you are not a candidate for a degree and the grant does not meet
certain requirements, tax will be withheld at the
30% (or lower treaty) rate.
Any part of a scholarship or fellowship grant
that is a payment for services is subject to graduated withholding as discussed earlier under
Withholding on Wages.

Alternate Withholding Procedure
Your withholding agent may choose to use an
alternate procedure by asking you to fill out
Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). Use the following
instructions instead of the Form W-4 instructions to complete the worksheet.
Line A. Enter the total of the following amounts
on line A.
Personal exemption. Include the prorated
part of your allowable personal exemption. Figure the amount by multiplying the number of
days you expect to be in the United States in
2016 by the daily exemption amount ($11.07).
Expenses. Include expenses that will be
deductible on your return. These include
away-from-home expenses (meals, lodging,
and transportation), certain state and local income taxes, charitable contributions, and casualty losses, discussed earlier under Itemized
Deductions in chapter 5. They also include
business expenses, moving expenses, and the

Paying Tax Through Withholding or Estimated Tax

Page 41

IRA deduction discussed under Deductions in
chapter 5.
Nontaxable grant or scholarship. Include
the part of your grant or scholarship that is not
taxable under U.S. law or under a tax treaty.
Line B. Enter -0- unless the following paragraph applies to you.
If you are a student who qualifies under Article 21(2) of the United States-India Income Tax
Treaty, and you are not claiming deductions for
away-from-home expenses or other itemized
deductions (discussed earlier), enter the standard deduction on line B. The standard deduction amount for 2016 is $6,300.
Lines C and D. Enter -0- on both lines unless
the following paragraphs apply to you.
If you are a resident of Canada, Mexico,
South Korea, or a U.S. national, an additional
daily exemption amount may be allowed for
your spouse and each of your dependents.
If you are a resident of India who is eligible
for the benefits of Article 21(2) of the United
States-India Income Tax Treaty, you can claim
an additional daily exemption amount for your
spouse only if your spouse will have no gross
income for 2016 and cannot be claimed as a
dependent on another U.S. taxpayer's 2016 return. You can also claim an additional amount
for each of your dependents not admitted to the
United States on “F-2,” “J-2,” or “M-2” visas if
they meet the same rules that apply to U.S. citizens.
Enter any additional amount for your spouse
on line C. Enter any additional amount for your
dependents on line D.
Lines E, F, and G. No entries should be made
on lines E, F, and G.
Line H. Add the amounts on lines A through D
and enter the total on line H.
Form W-4. Complete lines 1 through 4 of Form
W-4. Sign and date the form and give it with the
Personal Allowances Worksheet to your withholding agent.
If you file a Form W-4 to reduce or eliminate
the withholding on your scholarship or grant,
you must file an annual U.S. income tax return
to be allowed the exemptions and deductions
you claimed on that form. If you are in the United States during more than one tax year, you
must attach a statement to your yearly Form
W-4 indicating that you have filed a U.S. income
tax return for the previous year. If you have not
been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a
U.S. income tax return when required.
After the withholding agent has accepted
your Form W-4, tax will be withheld on your
scholarship or grant at the graduated rates that
apply to wages. The gross amount of the income is reduced by the amount on line H of the
worksheet and the withholding tax is figured on
the remainder.

taxable scholarship or fellowship grant less the
withholding allowance amount, the tax rate, and
the amount of tax withheld. Use this form to prepare your annual U.S. income tax return.

Income Entitled to
Tax Treaty Benefits
If a tax treaty between the United States and
your country provides an exemption from, or a
reduced rate of, tax for certain items of income,
you should notify the payor of the income (the
withholding agent) of your foreign status to
claim a tax treaty withholding exemption. Generally, you do this by filing either Form W-8BEN
or Form 8233 with the withholding agent.
File Form W-8BEN for income that is not
personal services income. File Form 8233 for
personal services income as discussed next.
Employees and independent contractors. If
you perform personal services as an employee
or as an independent contractor and you can
claim an exemption from withholding on that
personal service income because of a tax
treaty, give Form 8233 to each withholding
agent from whom amounts will be received.
Even if you submit Form 8233, the withholding agent may have to withhold tax from your income. This is because the factors on which the
treaty exemption is based may not be determinable until after the close of the tax year. In this
case, you must file Form 1040NR (or Form
1040NR-EZ if you qualify) to recover any overwithheld tax and to provide the IRS with proof
that you are entitled to the treaty exemption.
Students, teachers, and researchers.
Students, teachers, and researchers must attach the appropriate statement shown in Appendix A (for students) or Appendix B (for
teachers and researchers) at the end of this
publication to the Form 8233 and give it to the
withholding agent. For treaties not listed in the
appendices, attach a statement in a format similar to those for other treaties.
If you received a scholarship or fellowship
and personal services income from the same
withholding agent, use Form 8233 to claim an
exemption from withholding based on a tax
treaty for both types of income.
Special events and promotions. Withholding
at the full 30% rate is required for payments
made to a nonresident alien or foreign corporation for gate receipts (or television or other receipts) from rock music festivals, boxing promotions, and other entertainment or sporting
events, unless the withholding agent has been
specifically advised otherwise by letter from the
IRS. Form 13930 is used to request a reduction
in withholding. Withholding may be required
even if the income may be exempt from taxation
by provisions of a tax treaty. One reason for this
is that the partial or complete exemption is usually based on factors that cannot be determined
until after the close of the tax year.

You will receive a Form 1042-S from the
withholding agent (usually the payer of your
grant) showing the gross amount of your
Page 42

Chapter 8

Paying Tax Through Withholding or Estimated Tax

You will be required to pay U.S. tax, at
the time of your departure from the
CAUTION
United States, on any income for
which you incorrectly claimed a treaty exemption. For more details on treaty provisions that
apply to compensation, see Pub. 901.

!

Tax Withheld on
Real Property Sales
If you are a nonresident alien and you dispose
of a U.S. real property interest before February
17, 2016, the transferee (buyer) of the property
generally must withhold a tax equal to 10% of
the amount realized on the disposition.
For dispositions of a U.S. real property interest after February 16, 2016, the rate of withholding has generally increased to 15%. However, if the property is acquired after February
16, 2016, by the buyer for use as a residence
and the amount realized does not exceed
$1,000,000, the rate of withholding remains at
10%.
The amount realized is the sum of:
The cash paid, or to be paid (principal
only);
The fair market value of other property
transferred, or to be transferred; and
The amount of any liability assumed by the
transferee or to which the property is subject immediately before and after the transfer.
If the property transferred was owned jointly
by U.S. and foreign persons, the amount realized is allocated between the transferors based
on the capital contribution of each transferor.
A distribution by a qualified investment entity
to a nonresident alien shareholder that is
treated as gain from the sale or exchange of a
U.S. real property interest by the shareholder is
subject to withholding at 35%. Withholding is
also required on certain distributions and other
transactions by domestic or foreign corporations, partnerships, trusts, and estates. These
rules are covered in Pub. 515.
For information on the tax treatment of dispositions of U.S. real property interests, see
Real Property Gain or Loss in chapter 4.
If you are a partner in a domestic partnership, and the partnership disposes of a U.S.
real property interest at a gain, the partnership
will withhold tax on the amount of gain allocable
to its foreign partners. Your share of the income
and tax withheld will be reported to you on Form
8805, Foreign Partner's Information Statement
of Section 1446 Withholding Tax, or Form
1042-S, Foreign Person's U.S. Source Income
Subject to Withholding (in the case of a publicly
traded partnership).
Withholding is not required in the following
situations.
1. The property is acquired by the buyer for
use as a residence and the amount realized is not more than $300,000.
2. The property disposed of is an interest in a
domestic corporation if any class of stock

of the corporation is regularly traded on an
established securities market. However,
this exception does not apply to certain
dispositions of substantial amounts of
non-publicly traded interests in publicly
traded corporations.
3. The property disposed of is an interest in a
U.S. corporation that is not regularly traded on an established market and you
(the seller) give the buyer a copy of a
statement issued by the corporation certifying that the interest is not a U.S. real
property interest.
4. You (the seller) give the buyer a certification stating, under penalties of perjury, that
you are not a foreign person, and containing your name, U.S. taxpayer identification
number, and home address.
You can give the certification to a qualified substitute. The qualified substitute
gives the buyer a statement, under penalties of perjury, that the certification is in the
possession of the qualified substitute. For
this purpose, a qualified substitute is (a)
the person (including any attorney or title
company) responsible for closing the
transaction, other than your agent, and (b)
the buyer's agent.
5. The buyer receives a withholding certificate from the IRS.
6. You give the buyer written notice that you
are not required to recognize any gain or
loss on the transfer because of a nonrecognition provision in the Internal Revenue
Code or a provision in a U.S. tax treaty.
The buyer must file a copy of the notice
with the Ogden Service Center, P.O. Box
409101, Ogden, UT 84409. You must verify the notice as true and sign it under penalties of perjury. The notice must contain
the following information.
a. A statement that the notice is a notice
of nonrecognition under Regulation
section 1.1445-2(d)(2).
b. Your name, taxpayer identification
number, and home address.
c. A statement that you are not required
to recognize any gain or loss on the
transfer.
d. A brief description of the transfer.
e. A brief summary of the law and facts
supporting your claim that recognition
of gain or loss is not required.
You may not give the buyer a written
notice for any of the following transfers:
the sale of your main home on which you
exclude gain, a like-kind exchange that
does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind
exchange that has not been completed at
the time the buyer must file Form 8288. Instead, a withholding certificate (described
next) must be obtained.
7. The amount you realize on the transfer of
a U.S. real property interest is zero.

political subdivision, or the District of Columbia.
9. The distribution is from a domestically
controlled qualified investment entity (QIE)
and is treated as a distribution of a U.S.
real property interest only because an interest in the entity was disposed of in an
applicable wash sale transaction. For the
definition of a QIE, see Qualified investment entities under Real Property Gain or
Loss, earlier. See Wash sale under Real
Property Gain or Loss in chapter 4.
The certifications in (3) and (4) must be disregarded by the buyer if the buyer or qualified
substitute has actual knowledge, or receives
notice from a seller's or buyer's agent (or substitute), that they are false. This also applies to the
qualified substitute's statement under (4).
Withholding certificates. The tax required to
be withheld on a disposition can be reduced or
eliminated under a withholding certificate issued by the IRS. In most cases, either you or
the buyer can request a withholding certificate.
A withholding certificate can be issued due
to any of the following.
1. The IRS determines that reduced withholding is appropriate because either:
a. The amount required to be withheld
would exceed your maximum tax liability, or
b. Withholding of the reduced amount
would not jeopardize collection of the
tax.
2. All of your realized gain is exempt from
U.S. tax and you have no unsatisfied withholding liability.
3. You or the buyer enters into an agreement
with the IRS for the payment of tax and
provide security for the tax liability.
Get Pub. 515 and Form 8288-B for information on procedures to request a withholding certificate.
Credit for tax withheld. The buyer must report and pay over the withheld tax within 20
days after the transfer using Form 8288, U.S.
Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests.
This form is filed with the IRS with copies A and
B of Form 8288-A, Statement of Withholding on
Dispositions by Foreign Persons of U.S. Real
Property Interests. Copy B of this statement will
be stamped received by the IRS and returned to
you (the seller) if the statement is complete and
includes your taxpayer identification number
(TIN). You must file Copy B with your tax return
to take credit for the tax withheld.
A stamped copy of Form 8288-A will not be
provided to you if your TIN is not included on
that form. The IRS will send you a letter requesting the TIN and provide instructions for
how to get a TIN. When you provide the IRS
with a TIN, the IRS will provide you with a stamped Copy B of Form 8288-A.

8. The property is acquired by the United
States, a U.S. state or possession, a
Chapter 8

Social Security and
Medicare Taxes
If you work as an employee in the United
States, you must pay social security and Medicare taxes in most cases. Your payments of
these taxes contribute to your coverage under
the U.S. social security system. Social security
coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who
meet certain eligibility requirements.
In most cases, the first $118,500 of taxable
wages received in 2015 for services performed
in the United States is subject to social security
tax. All taxable wages are subject to Medicare
tax. Your employer deducts these taxes from
each wage payment. Your employer must deduct these taxes even if you do not expect to
qualify for social security or Medicare benefits.
You can claim a credit for excess social security
tax on your income tax return if you have more
than one employer and the amount deducted
from your combined wages for 2015 is more
than $7,347. Use the appropriate worksheet in
chapter 3 of Pub. 505 to figure your credit.
If any one employer deducted more than
$7,347, you cannot claim a credit for that
amount. Ask your employer to refund the excess. If your employer does not refund the excess, you can file a claim for refund using Form
843.
In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United
States, regardless of the citizenship or residence of either the employee or the employer.
In limited situations, these taxes apply to wages
for services performed outside the United
States. Your employer should be able to tell you
if social security and Medicare taxes apply to
your wages. You cannot make voluntary payments if no taxes are due.
Additional Medicare Tax. In addition to the
Medicare tax, a 0.9% Additional Medicare Tax
applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and
self-employment income that are more than:
$250,000 if married filing jointly,
$125,000 if married filing separately, or
$200,000 for any other filing status.
There are no special rules for nonresident
aliens for purposes of Additional Medicare Tax.
Wages, RRTA compensation, and self-employment income that are subject to Medicare tax
will also be subject to Additional Medicare Tax if
in excess of the applicable threshold.
Your employer is responsible for withholding
the 0.9% Additional Medicare Tax on Medicare
wages or RRTA compensation it pays to you in
excess of $200,000 in the calendar year. If you
intend to file a joint return and you anticipate
that you and your spouse's individual wages are
not going to be more than $200,000 but your
combined wages and self-employment income
are going to be more than $250,000, you may
want to request additional withholding on Form
W-4 and/or make estimated tax payments.

Paying Tax Through Withholding or Estimated Tax

Page 43

If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages
and your self-employment income was more
than $125,000 if married (Box 3, 4, or 5 on
page 1 of Form 1040NR), or $200,000 if single
or qualifying widow(er) (Box 1, 2, or 6 on page 1
of Form 1040NR).
See Form 8959 and its separate instructions
to determine whether you are required to pay
Additional Medicare Tax. For more information
on Additional Medicare Tax, go to IRS.gov and
enter “Additional Medicare Tax” in the search
box.
Self-employed individuals may also be required to pay Additional Medicare Tax. See
Self-Employment Tax, later.

Students and
Exchange Visitors
Generally, services performed by you as a nonresident alien temporarily in the United States
as a nonimmigrant under subparagraph (F), (J),
(M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under
the social security program if the services are
performed to carry out the purpose for which
you were admitted to the United States. This
means that there will be no withholding of social
security or Medicare taxes from the pay you receive for these services. These types of services are very limited, and generally include only
on-campus work, practical training, and economic hardship employment.
Social security and Medicare taxes will be
withheld from your pay for these services if you
are considered a resident alien as discussed in
chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the
same.
Services performed by a spouse or minor
child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered
under social security.

Nonresident Alien Students
If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or
salary or to engage in business while you are in
the United States. In some cases, a student admitted to the United States in “F-1,” “M-1,” or
“J-1” status is granted permission to work. Social security and Medicare taxes are not withheld from pay for the work unless the student is
considered a resident alien.
Any student who is enrolled and regularly attending classes at a school may
be exempt from social security and
Medicare taxes on pay for services performed
for that school.

TIP

The U.S. Citizenship and Immigration Services (USCIS) permits on-campus work for students in “F-1” status if it does not displace a
U.S. resident. On-campus work means work
performed on the school's premises. On-campus work includes work performed at an
off-campus location that is educationally
Page 44

Chapter 8

affiliated with the school. On-campus work under the terms of a scholarship, fellowship, or assistantship is considered part of the academic
program of a student taking a full course of
study and is permitted by the USCIS. Social security and Medicare taxes are not withheld from
pay for this work unless the student is considered a resident alien.
If services performed by a nonresident alien
student are not considered as performed to
carry out the purpose for which the student was
admitted to the United States, social security
and Medicare taxes will be withheld from pay
for the services unless the pay is exempt under
the Internal Revenue Code.

Exchange Visitors
Exchange visitors are temporarily admitted to
the United States under section 101(a)(15)(J) of
the Immigration and Nationality Act. Social security and Medicare taxes are not withheld on
pay for services of an exchange visitor who has
been given permission to work and who possesses or obtains a letter of authorization from
the sponsor unless the exchange visitor is considered a resident alien.
If services performed by an exchange visitor
are not considered as performed to carry out
the purpose for which the visitor was admitted
to the United States, social security and Medicare taxes are withheld from pay for the services unless the pay is exempt under the Internal
Revenue Code.
Nonresident aliens temporarily admitted to
the United States as participants in international
cultural exchange programs under section
101(a)(15)(Q) of the Immigration and Nationality Act may be exempt from social security and
Medicare taxes. The employer must be the petitioner through whom the alien obtained the “Q”
visa. Social security and Medicare taxes are not
withheld from pay for this work unless the alien
is considered a resident alien.

Refund of Taxes Withheld in Error
If social security or Medicare taxes were withheld in error from pay that is not subject to
these taxes, contact the employer who withheld
the taxes for a refund. If you are unable to get a
full refund of the amount from your employer,
file a claim for refund with the IRS on Form 843.
Attach the following items to Form 843.
A copy of your Form W-2 to prove the
amount of social security and Medicare
taxes withheld.
A copy of your visa.
Form I-94 (or other documentation showing your dates of arrival or departure).
If you have an F-1 visa, documentation
showing permission to work in the U.S.
If you have a J-1 visa, documentation
showing permission to work in the U.S.
If you are engaged in optional practical
training or employment due to severe economic necessity, documentation showing
permission to work in the U.S.
A statement from your employer indicating
the amount of the reimbursement your

Paying Tax Through Withholding or Estimated Tax

employer provided and the amount of the
credit or refund your employer claimed or
you authorized your employer to claim. If
you cannot obtain this statement from your
employer, you must provide this information on your own statement and explain
why you are not attaching a statement from
your employer or on Form 8316 claiming
your employer will not issue the refund.
If you were exempt from social security
and Medicare tax for only part of the year,
pay statements showing the tax paid during the period you were exempt.
File Form 843 (with attachments) with the
Department of the Treasury, Internal Revenue
Service Center, Ogden, UT 84201-0038.
Do not use Form 843 to request a refund of Additional Medicare Tax. If AdCAUTION
ditional Medicare Tax was withheld
from your pay in error, you can claim a credit for
any withheld Additional Medicare Tax against
the total tax liability shown on your tax return by
filing Form 8959 with Form 1040 or 1040NR. If
Additional Medicare Tax was withheld in error in
a prior year for which you already filed Form
1040 or 1040NR, you must file Form 1040X,
Amended U.S. Individual Income Tax Return,
for the prior year in which the wages or compensation were originally received to recover
the Additional Medicare Tax withheld in error.
See the Instructions for Form 1040X.

!

Agricultural Workers
Agricultural workers temporarily admitted into
the United States on H-2A visas are exempt
from social security and Medicare taxes on
compensation paid to them for services performed in connection with the H-2A visa. You
can find more information about not having tax
www.irs.gov/Individuals/
withheld
at
International-Taxpayers/Foreign-AgriculturalWorkers.

Self-Employment Tax
Self-employment tax is the social security and
Medicare taxes for individuals who are self-employed. Nonresident aliens are not subject to
self-employment tax unless an international social security agreement in effect determines that
they are covered under the U.S. social security
system. Residents of the U.S. Virgin Islands,
Puerto Rico, Guam, the Commonwealth of the
Northern Mariana Islands, or American Samoa
are considered U.S. residents for this purpose
and are subject to the self-employment tax.
Resident aliens must pay self-employment
tax under the same rules that apply to U.S. citizens. However, a resident alien employed by
an international organization, a foreign government, or a wholly-owned instrumentality of a foreign government is not subject to the self-employment tax on income earned in the United
States.
Self-employment income you receive while
you are a resident alien is subject to self-employment tax even if it was paid for services you
performed as a nonresident alien.

Example. Bill Jones is an author engaged
in the business of writing books. Bill had several
books published in a foreign country while he
was a citizen and resident of that country. During 2015, Bill entered the United States as a
resident alien. After becoming a U.S. resident,
he continued to receive royalties from his foreign publisher. Bill reports his income and expenses on the cash basis (he reports income
on his tax return when received and deducts
expenses when paid). Bill's 2015 self-employment income includes the royalties received after he became a U.S. resident even though the
books were published while he was a nonresident alien. This royalty income is subject to
self-employment tax.
Reporting self-employment tax. Use Schedule SE (Form 1040) to report and figure your
self-employment tax. Then enter the tax on
Form 1040, line 57, or Form 1040NR, line 55.
Attach Schedule SE to Form 1040 or Form
1040NR.
Additional Medicare Tax. Self-employed individuals must pay a 0.9% Additional Medicare
Tax on self-employment income that exceeds
one of the following threshold amounts (based
on your filing status):
Married filing jointly — $250,000;
Married filing separately — $125,000;
Single, Head of household, or Qualifying
widow(er) — $200,000.
If you have both wages and self-employment income, the threshold amount for applying
the Additional Medicare Tax on the self-employment income is reduced (but not below zero) by
the amount of wages subject to Additional Medicare Tax. A self-employment loss should not
be considered for purposes of this tax.
If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages
and your self-employment income was more
than $125,000 if married (Box 3, 4, or 5 on
page 1 of Form 1040NR), or $200,000 if single
or qualifying widow(er) (Box 1, 2, or 6 on page 1
of Form 1040NR).
See Form 8959 and its separate instructions
to determine whether you are required to pay
Additional Medicare Tax. For more information
on Additional Medicare Tax, go to IRS.gov and
enter “Additional Medicare Tax” in the search
box.
Deduction for employer-equivalent portion
of self-employment tax. If you must pay
self-employment tax, you can deduct a portion
of the self-employment tax paid in figuring your
adjusted gross income. This deduction is figured on Schedule SE (Form 1040).
Note. No portion of the Additional Medicare
Tax is deductible for self-employment tax.
More information. Get Pub. 334 for more information about self-employment tax.

International Social
Security Agreements
The United States has entered into social security agreements with foreign countries to

coordinate social security coverage and taxation of workers employed for part or all of their
working careers in one of the countries. These
agreements are commonly referred to as totalization agreements. Under these agreements,
dual coverage and dual contributions (taxes) for
the same work are eliminated. The agreements
generally make sure that social security taxes
(including self-employment tax) are paid only to
one country.
For a list of current international social security
agreements,
go
to
www.socialsecurity.gov/international/
status.html. As agreements with additional
countries enter into force, they will be posted at
this website. For more information on international social security agreements, go to
www.socialsecurity.gov/international/
totalization_agreements.html.
Employees. Generally, under these agreements, you are subject to social security taxes
only in the country where you are working.
However, if you are temporarily sent to work for
the same employer in the United States and
your pay would normally be subject to social security taxes in both countries, most agreements
provide that you remain covered only by the social security system of the country from which
you were sent.
To establish that your pay is subject only to
foreign social security taxes and is exempt from
U.S. social security taxes (including the Medicare tax) under an agreement, you or your employer should request a certificate of coverage
from the appropriate agency of the foreign
country. This will usually be the same agency to
which you or your employer pays your foreign
social security taxes. The foreign agency will be
able to tell you what information is needed for
them to issue the certificate. Your employer
should keep a copy of the certificate because it
may be needed to show why you are exempt
from U.S. social security taxes. Only wages
paid on or after the effective date of the agreement can be exempt from U.S. social security
taxes.
Some of the countries with which the
United States has agreements will not
issue certificates of coverage. In this
case, either you or your employer should request a statement that your wages are not covered by the U.S. social security system. Request the statement from the following address.
U.S. Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, MD 21235-7741
Self-employed
individuals. Under
most
agreements, self-employed individuals are covered by the social security system of the country where they reside. However, under some
agreements, you may be exempt from U.S.
self-employment tax if you temporarily transfer
your business activity to or from the United
States.
If you believe that your self-employment income is subject only to U.S. self-employment
tax and is exempt from foreign social security
Chapter 8

taxes, request a certificate of coverage from the
U.S. Social Security Administration online at
www.socialsecurity.gov/coc or by writing to the
address given earlier. This certificate will establish your exemption from foreign social security
taxes. For more information about requesting a
certificate
of
coverage
go
to
www.socialsecurity.gov/international/
CoC_link.html.
To establish that your self-employment income is subject only to foreign social security
taxes and is exempt from U.S. self-employment
tax, request a certificate of coverage from the
appropriate agency of the foreign country. If the
foreign country will not issue the certificate, you
should request a statement that your income is
not covered by the U.S. social security system.
Request it from the U.S. Social Security Administration at the address given earlier. Attach a
photocopy of either statement to Form 1040
each year you are exempt. Also print “Exempt,
see attached statement” on the line for self-employment tax.

Estimated Tax
Form 1040-ES (NR)
You may have income from which no U.S. income tax is withheld. Or the amount of tax withheld may be less than the income tax you estimate you will owe at the end of the year. If so,
you may have to pay estimated tax.
Generally, you must make estimated tax
payments for 2016 if you expect to owe at least
$1,000 in tax and you expect your withholding
and certain refundable credits to be less than
the smaller of:
1. 90% of the tax to be shown on your 2016
income tax return, or
2. 100% of the tax shown on your 2015 income tax return (if your 2015 return covered all 12 months of the year).
If your adjusted gross income for 2015 was
more than $150,000 ($75,000 if your filing status for 2016 is married filing separately), substitute 110% for 100% in (2) above if you are not a
farmer or fisherman. Item (2) does not apply if
you did not file a 2015 return.
A nonresident alien should use Form
1040-ES (NR) to figure and pay estimated tax.
If you pay by check, make it payable to the "United States Treasury."
How to estimate your tax for 2016. If you
filed a 2015 return on Form 1040NR or Form
1040NR-EZ and expect your income, number
of exemptions, and total deductions for 2016 to
be nearly the same, you should use your 2015
return as a guide to complete the Estimated Tax
Worksheet in the Form 1040-ES (NR) instructions. If you did not file a return for 2015, or if
your income, exemptions, deductions, or credits will be different for 2016, you must estimate
these amounts. Figure your estimated tax liability using the Tax Rate Schedule in the 2016
Form 1040-ES (NR) instructions for your filing
status.

Paying Tax Through Withholding or Estimated Tax

Page 45

Note. If you expect to be a resident of Puerto Rico during the entire year, use Form
1040-ES or Formulario 1040-ES (PR).
When to pay estimated tax. Make your first
estimated tax payment by the due date for filing
the previous year's Form 1040NR or Form
1040NR-EZ. If you have wages subject to the
same withholding rules that apply to U.S. citizens, you must file Form 1040NR or Form
1040NR-EZ and make your first estimated tax
payment by April 18, 2016. If you do not have
wages subject to withholding, file your income
tax return and make your first estimated tax
payment by June 15, 2016.
If your first estimated tax payment is due
April 18, 2016, you can pay your estimated tax
in full at that time or in four equal installments by
the dates shown next.
1st installment . . . . . . . . . . . . .
2nd installment . . . . . . . . . . . .
3rd installment . . . . . . . . . . . . .
4th installment . . . . . . . . . . . .

April 18, 2016
June 15, 2016
Sept. 15, 2016
Jan. 17, 2017

If your first payment is not due until June 15,
2016, you can pay your estimated tax in full at
that time or:
1.

1

2.

1

3.

1

2

of your estimated tax by June 15, 2016,

4

of the tax by September 15, 2016, and

4

by January 17, 2017.

You do not have to make the payment
due January 17, 2017, if you file your
2016 Form 1040NR or 1040NR-EZ by
January 31, 2017, and pay the entire balance
due with your return.

TIP

Fiscal year. If your return is not on a calendar year basis, your due dates are the 15th day
of the 4th, 6th, and 9th months of your fiscal
year, and the 1st month of the following fiscal
year. If any date falls on a Saturday, Sunday, or
legal holiday, use the next day that is not a Saturday, Sunday, or legal holiday.
Changes in income, deductions, or exemptions. Even if you are not required to make an
estimated tax payment in April or June, your circumstances may change so that you will have
to make estimated tax payments later. This can
happen if you receive additional income or if
any of your deductions are reduced or eliminated. If so, see the instructions for Form 1040-ES
(NR) and Pub. 505 for information on figuring
your estimated tax.
Amended estimated tax. If, after you have
made estimated tax payments, you find your
estimated tax is substantially increased or decreased because of a change in your income or
exemptions, you should adjust your remaining
estimated tax payments. To do this, see the instructions for Form 1040-ES (NR) and Pub.
505.
Penalty for failure to pay estimated income
tax. You will be subject to a penalty for underpayment of installments of estimated tax except
in certain situations. These situations are explained on Form 2210.

Page 46

Chapter 9

Tax Treaty Benefits

9.

To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the
graduated rate, depending upon whether or not
the income is effectively connected with your
trade or business in the United States.

Tax Treaty
Benefits

Your tax liability is the sum of the tax on
treaty income plus the tax on nontreaty income,
but cannot be more than the tax liability figured
as if the tax treaty had not come into effect.

Introduction
A nonresident alien (and certain resident aliens)
from a country with which the United States has
an income tax treaty may qualify for certain benefits. Most treaties require that the nonresident
alien be a resident of the treaty country to qualify. However, some treaties require that the
nonresident alien be a national or a citizen of
the treaty country.
See Table 9–1 below for a list of tax treaty
countries.
You can generally arrange to have withholding tax reduced or eliminated on wages and
other income that are eligible for tax treaty benefits. See Income Entitled to Tax Treaty Benefits in chapter 8.

Topics

This chapter discusses:
Typical tax treaty benefits,

Example. Arthur Banks is a nonresident
alien who is single and a resident of a foreign
country that has a tax treaty with the United
States. He received gross income of $25,900
during the tax year from sources within the United States, consisting of the following items:
Dividends on which the tax is limited to a 15%
rate by the tax treaty . . . . . . . . . . . . . . . . .

$1,400

Compensation for personal services on which
the tax is not limited by the tax treaty . . . . . .

24,500

Total gross income .

. . . . . . . . . . . .

Arthur was engaged in business in the United States during the tax year. His dividends are
not effectively connected with that business. He
has no deductions other than his own personal
exemption.
His tax liability, figured as though the tax
treaty had not come into effect, is $3,038 determined as follows:

How to obtain copies of tax treaties, and

Total compensation

How to claim tax treaty benefits on your tax
return.

Less: Personal exemption

Useful Items

You may want to see:
Publication
901 U.S. Tax Treaties
Form (and Instructions)
1040NR U.S. Nonresident Alien Income
Tax Return
1040NR-EZ U.S. Income Tax Return for
Certain Nonresident Aliens With No
Dependents
8833 Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b)
See chapter 12 for information about getting
these publications and forms.

Treaty Income
A nonresident alien's treaty income is the gross
income on which the tax is limited by a tax
treaty. Treaty income includes, for example,
dividends from sources in the United States that
are subject to tax at a tax treaty rate not to exceed 15%. Nontreaty income is the gross income of a nonresident alien on which the tax is
not limited by a tax treaty.
Figure the tax on treaty income on each
separate item of income at the reduced rate that
applies to that item under the treaty.

$25,900

Taxable income

. . . . . . . . . . . . . . . . . .

$24,500

. . . . . . . . . . . . .

4,000

. . . . . . . . . . . . . .

$20,500

Tax determined by graduated rate (Tax Table
column for single taxpayers) . . . . . . . . . . . .
Plus: Tax on gross dividends ($1,400 ×
30%) . . . . . . . . . . . . . . . . . . . . . . .

. . . . .

Tax determined as though treaty had not
come into effect . . . . . . . . . . . . . .

$2,618

420

$3,038

Arthur's tax liability, figured by taking into account the reduced rate on dividend income as
provided by the tax treaty, is $2,828 determined
as follows:
Tax determined by graduated rate (same as
figured above) . . . . . . . . . . . . . . . . . . . .

.

Plus: Tax on gross dividends ($1,400 ×
15%) . . . . . . . . . . . . . . . . . . . . . . .

. . . . .

Tax on compensation and dividends

. . .

$2,618

210
$2,828

His tax liability, therefore, is limited to
$2,828, the tax liability figured using the tax
treaty rate on the dividends.

Some Typical Tax
Treaty Benefits
The following paragraphs briefly explain the exemptions that are available under tax treaties
for personal services income, remittances,

scholarships, fellowships, and capital gain income. The conditions for claiming the exemptions vary under each tax treaty. For more information about the conditions under a particular
tax treaty, see Pub. 901. Or, you can download
the complete text of most U.S. tax treaties at
IRS.gov. Enter “Tax Treaties” in the search box.
Click on “United States Income Tax Treaties – A
to Z.” Technical explanations for many of those
treaties are also available at that site.
Tax treaty benefits also cover income such
as dividends, interest, rentals, royalties, pensions, and annuities. These types of income
may be exempt from U.S. tax or may be subject
to a reduced rate of tax. For more information,
see Pub. 901 or the applicable tax treaty.

Personal Services
Nonresident aliens from treaty countries who
are in the United States for a short stay and also
meet certain other requirements may be exempt from tax on their compensation received
for personal services performed in the United
States. Many tax treaties require that the nonresident alien claiming this exemption be
present in the United States for a total of not
more than 183 days during the tax year. Other
tax treaties specify different periods of maximum presence in the United States, such as
180 days or 90 days. Spending part of a day in
the United States counts as a day of presence.
Tax treaties may also require that:
The compensation cannot be more than a
specific amount (frequently $3,000), and
The individual has a foreign employer; that
is, an individual, corporation, or entity of a
foreign country.
Note. Under most treaties, income received
as an employee (generally designated as dependent personal services) and income received as a self-employed person (generally
designated as independent personal services
or business income) are treated differently.

Teachers, Professors,
and Researchers
Under many income tax treaties, nonresident
alien teachers or professors who temporarily
visit the United States for the primary purpose
of teaching at a university or other accredited
educational institution are not subject to U.S. income tax on compensation received for teaching for the first 2 or 3 years after their arrival in
the United States. Many treaties also provide
an exemption for engaging in research.

treaty exemption may still apply. See Students,
Apprentices, Trainees, Teachers, Professors,
and Researchers Who Became Resident Aliens, later under Resident Aliens.

Employees of
Foreign Governments
All treaties have provisions for the exemption of
income earned by certain employees of foreign
governments. However, a difference exists
among treaties as to who qualifies for this benefit. Under many treaties, aliens admitted to the
United States for permanent residence do not
qualify. Under most treaties, aliens who are not
nationals or subjects of the foreign country do
not qualify. Employees of foreign governments
should read the pertinent treaty carefully to determine whether they qualify for benefits. Chapter 10 of this publication also has information for
employees of foreign governments.

Students, Apprentices,
and Trainees
Under some income tax treaties, students, apprentices, and trainees are exempt from tax on
remittances received from abroad for study and
maintenance. Also, under some treaties, scholarship and fellowship grants, and a limited
amount of compensation received by students,
apprentices, and trainees may be exempt from
tax.
If you entered the United States as a nonresident alien, but are now a resident alien, the
treaty exemption may still apply. See Students,
Apprentices, Trainees, Teachers, Professors,
and Researchers Who Became Resident Aliens, later, under Resident Aliens.

Capital Gains
Most treaties provide for the exemption of gains
from the sale or exchange of personal property.
Generally, gains from the sale or exchange of
real property located in the United States are
taxable.

Resident Aliens
Resident aliens may qualify for tax treaty benefits in the situations discussed below.

U.S. Residency Under Tax
Treaty “Tie-Breaker” Rule

Generally, the teacher or professor must be
in the United States primarily to teach, lecture,
instruct, or engage in research. A substantial
part of that person's time must be devoted to
those duties. The normal duties of a teacher or
professor include not only formal classroom
work involving regularly scheduled lectures,
demonstrations, or other student-participation
activities, but also the less formal method of
presenting ideas in seminars or other informal
groups and in joint efforts in the laboratory.

In certain circumstances, individuals who are
treated as residents of the United States under
an income tax treaty (after application of the
so-called “tie-breaker” rule) will be entitled to
treaty benefits. (The “tie-breaker” rule is explained in chapter 1 under Effect of Tax Treaties.) If this applies to you, you generally will not
need to file a Form 8833 for the income for
which treaty benefits are claimed. This is because the income will typically be of a category
for which disclosure on a Form 8833 is waived.
See Reporting Treaty Benefits Claimed.

If you entered the United States as a nonresident alien, but are now a resident alien, the

In most cases, you also will not need to report the income on your Form 1040 because

the income will be exempt from U.S. tax under
the treaty. However, if the income has been reported as taxable income on a Form W-2, Form
1042-S, Form 1099, or other information return,
you should report it on the appropriate line of
Form 1040 (for example, line 7 in the case of
wages or salaries). Enter the amount for which
treaty benefits are claimed in parentheses on
Form 1040, line 21. Next to the amount write
“Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount
from your income to arrive at total income on
Form 1040, line 22.
Also follow the above procedure for income
that is subject to a reduced rate of tax, instead
of an exemption, under the treaty. Attach a
statement to Form 1040 showing a computation
of the tax at the reduced rate, the name of the
treaty country, and the treaty article that provides for the reduced tax rate. Include this tax
on Form 1040, line 63. On the dotted line next
to line 63, write “Tax from attached statement”
and the amount of the tax.
Example. Jacques Dubois, who is a resident of the United States under Article 4 of the
U.S.–France income tax treaty, receives French
social security benefits. Under Article 18(1) of
the treaty, French social security benefits are
not taxable by the United States. Mr. Dubois is
not required to file a Form 8833 for his French
social security benefits or report the benefits on
Form 1040.

Special Rule for Canadian and
German Social Security Benefits
Under income tax treaties with Canada and
Germany, if a U.S. resident receives social security benefits from Canada or Germany, those
benefits are treated for U.S. income tax purposes as if they were received under the social
security legislation of the United States. If you
receive social security benefits from Canada or
Germany, include them on line 1 of your Social
Security Benefits Worksheet for purposes of
determining the taxable amount to be reported
on Form 1040, line 20b or Form 1040A,
line 14b. You are not required to file a Form
8833 for those benefits.

Students, Apprentices, Trainees,
Teachers, Professors, and
Researchers Who Became
Resident Aliens
Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or
researcher in order to claim a tax treaty exemption for remittances from abroad for study and
maintenance in the United States, for scholarship, fellowship, and research grants, and for
wages or other personal service compensation.
Once you become a resident alien, you generally can no longer claim a tax treaty exemption
for this income.
However, if you entered the United States
as a nonresident alien, but you are now a resident alien for U.S. tax purposes, the treaty exemption will continue to apply if the tax treaty's
Chapter 9

Tax Treaty Benefits

Page 47

saving clause (explained later) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including
any time limit, explained later). This is true even
if you are a nonresident alien electing to file a
joint return as explained in chapter 1.
Some exceptions to the saving clause apply
to all resident aliens (for example, under the
U.S.-People's Republic of China treaty); others
apply only to resident aliens who are not lawful
permanent residents of the United States
(green card holders).
If you qualify under an exception to the treaty's saving clause, you can avoid income tax
withholding by giving the payor a Form W-9 with
the statement required by the Form W-9 instructions.
Saving clause. Most tax treaties have a saving clause. A saving clause preserves or
“saves” the right of each country to tax its own
residents as if no tax treaty were in effect. Thus,
once you become a resident alien of the United
States, you generally lose any tax treaty benefits that relate to your income. However, many
tax treaties have exceptions to the saving
clause, which may allow you to continue to
claim certain treaty benefits when you become
a resident alien. Read the treaty to find out if it
has a saving clause and an exception to it.
Time limit for claiming treaty exemptions.
Many treaties limit the number of years you can
claim a treaty exemption. For students, apprentices, and trainees, the limit is usually 4–5
years; for teachers, professors, and researchers, the limit is usually 2–3 years. Once you
reach this limit, you can no longer claim the
treaty exemption. See the treaty or Pub. 901 for
the time limits that apply.
How to report income on your tax return. In
most cases, you also will not need to report the
income on your Form 1040 because the income
will be exempt from U.S. tax under the treaty.
However, if the income has been reported as
taxable income on a Form W-2, Form 1042-S,
Form 1099, or other information return, you
should report it on the appropriate line of Form
1040 (for example, line 7 in the case of wages,
salaries, scholarships, or fellowships). Enter the
amount for which treaty benefits are claimed in
parentheses on Form 1040, line 21. Next to the
amount write “Exempt income,” the name of the
treaty country, and the treaty article that provides the exemption. On Form 1040, subtract
this amount from your income to arrive at total
income on Form 1040, line 22.

Page 48

Chapter 9

Tax Treaty Benefits

Example. Mr. Yu, a citizen of the People's
Republic of China, entered the United States as
a nonresident alien student on January 1, 2011.
He remained a nonresident alien through 2015
and was able to exclude his scholarship from
U.S. tax in those years under Article 20 of the
U.S.-People's Republic of China income tax
treaty. On January 1, 2016, he became a resident alien under the substantial presence test
because his stay in the United States exceeded
5 years. Even though Mr. Yu is now a resident
alien, the provisions of Article 20 still apply because of the exception to the saving clause in
paragraph 2 of the Protocol to the U.S.-People's
Republic of China treaty dated April 30, 1984.
Mr. Yu should submit Form W-9 and the required statement to the payor.

Reporting Treaty
Benefits Claimed
If you claim treaty benefits that override or modify any provision of the Internal Revenue Code,
and by claiming these benefits your tax is, or
might be, reduced, you must attach a fully completed Form 8833 to your tax return. See below,
for the situations where you are not required to
file Form 8833.
You must file a U.S. tax return and Form
8833 if you claim the following treaty benefits.
You claim a reduction or modification in the
taxation of gain or loss from the disposition
of a U.S. real property interest based on a
treaty.
You claim a credit for a specific foreign tax
for which foreign tax credit would not be allowed by the Internal Revenue Code.
You receive payments or income items totaling more than $100,000 and you determine your country of residence under a
treaty and not under the rules for residency
discussed in chapter 1.
These are the more common situations for
which Form 8833 is required.
Exceptions. You do not have to file Form 8833
for any of the following situations.
1. You claim a reduced rate of withholding
tax under a treaty on interest, dividends,
rent, royalties, or other fixed or determinable annual or periodic income ordinarily
subject to the 30% rate.
2. You claim a treaty reduces or modifies the
taxation of income from dependent personal services, pensions, annuities, social

security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable
scholarship and fellowship grants.
3. You claim a reduction or modification of
taxation of income under an International
Social Security Agreement or a Diplomatic
or Consular Agreement.
4. You are a partner in a partnership or a
beneficiary of an estate or trust and the
partnership, estate, or trust reports the required information on its return.
5. The payments or items of income that are
otherwise required to be disclosed total no
more than $10,000.
6. You are claiming treaty benefits for
amounts that are:
a. Reported to you on Form 1042-S and
b. Received by you:
i. As a related party from a reporting corporation within the meaning of Internal Revenue Code
section 6038A (relating to information returns on Form 5472 filed
by U.S. corporations that are
25-percent owned by a foreign
person), or
ii. As a beneficial owner that is a direct account holder of a U.S. financial institution or qualified intermediary, or a direct partner,
beneficiary, or owner of a withholding foreign partnership or
trust, from that U.S. financial institution, qualified intermediary, or
withholding foreign partnership or
trust.
The exception described in (6)
above does not apply to any amounts
for which a treaty-based return disclosure is specifically required by the
Form 8833 instructions.
Penalty for failure to provide required information on Form 8833. If you are required to
report the treaty benefits but do not, you may be
subject to a penalty of $1,000 for each failure.
Additional information. For additional information, see section 301.6114-1(c) of the Income Tax Regulations.

Table 9–1. List of Tax Treaties (Updated through October 31, 2015)
Note. You can find the text of the tax treaties listed below on IRS.gov. Enter “Tax Treaties” in the search box. Click on “United States Income Tax
Treaties – A to Z”.
Country
Australia
Protocol
Austria
Bangladesh
Barbados
Protocol
Protocol
Belgium
Bulgaria
Canada2
Protocol
Protocol
Protocol
China, People's Republic of
Commonwealth of Independent States3
Cyprus
Czech Republic
Denmark
Protocol
Egypt
Estonia
Finland
Protocol
France
Protocol
Protocol
Germany
Protocol
Greece
Hungary
Iceland
India
Indonesia
Protocol
Ireland
Amending Convention
Israel
Italy
Jamaica

General
Effective Date 1
Dec. 1, 1983
Jan. 1, 2004
Jan. 1, 1999
Jan. 1, 2007
Jan. 1, 1984
Jan. 1, 1994
Jan. 1, 2005
Jan. 1, 2008
Jan. 1, 2009
Jan. 1, 1985
Jan. 1, 1996
Dec.16, 1997
Jan. 1, 2009
Jan. 1, 1987
Jan. 1, 1976
Jan. 1, 1986
Jan. 1, 1993
Jan. 1, 2001
Jan. 1, 2008
Jan. 1, 1982
Jan. 1, 2000
Jan. 1, 1991
Jan. 1, 2008
Jan. 1, 1996
Jan. 1, 2007
Jan. 1, 2010
Jan. 1, 1990
Jan. 1, 2008
Jan. 1, 1953
Jan. 1, 1980
Jan. 1, 2009
Jan. 1, 1991
Jan. 1, 1990
Feb. 1, 1997
Jan. 1, 1998
Sep. 1, 2000
Jan. 1, 1995
Jan. 1, 2010
Jan. 1, 1982

Country
Japan
Kazakhstan
Korea, South
Latvia
Lithuania
Luxembourg
Malta
Mexico
Protocol
Protocol
Morocco
Netherlands
Protocol
New Zealand
Protocol
Norway
Protocol
Pakistan
Philippines
Poland
Portugal
Romania
Russia
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Protocol
Switzerland
Thailand
Trinidad and Tobago
Tunisia
Turkey
Ukraine
United Kingdom
Venezuela

General
Effective Date 1
Jan. 1, 2005
Jan. 1, 1996
Jan. 1, 1980
Jan. 1, 2000
Jan. 1, 2000
Jan. 1, 2001
Jan. 1, 2011
Jan. 1, 1994
Oct. 26,1995
Jan. 1, 2004
Jan. 1, 1981
Jan. 1, 1994
Jan. 1, 2005
Jan. 1, 1984
Jan. 1, 2011
Jan. 1, 1971
Jan. 1, 1982
Jan. 1, 1959
Jan. 1, 1983
Jan. 1, 1974
Jan. 1, 1996
Jan. 1, 1974
Jan. 1, 1994
Jan. 1, 1993
Jan. 1, 2002
Jan. 1, 1998
Jan. 1, 1991
Jan. 1, 2004
Jan. 1, 1996
Jan. 1, 2007
Jan. 1, 1998
Jan. 1, 1998
Jan. 1, 1970
Jan. 1, 1990
Jan. 1, 1998
Jan. 1, 2001
Jan. 1, 2004
Jan. 1, 2000

1
The general effective date of the treaty is when a treaty enters into force. However, there are often separate effective dates for taxes withheld at source and for all other taxes, and in some instances
taxpayers may be able to apply an existing treaty for an additional year. Check the treaty and/or protocol for effective dates for specific types of income.
2
Information on the treaty can be found in Pub. 597, Information on the United States-Canada Income Tax Treaty.
3
The U.S.-U.S.S.R. income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

Chapter 9

Tax Treaty Benefits

Page 49

Exemption Under
U.S. Tax Law

10.
Employees
of Foreign
Governments
and
International
Organizations
Introduction
Employees of foreign governments (including
foreign municipalities) have two ways to get exemption of their governmental wages from U.S.
income tax:
1. By a provision in a tax treaty or consular
convention between the United States and
their country, or
2. By meeting the requirements of U.S. tax
law.
Employees of international organizations can
exempt their wages either by a provision, if one
exists, in the international agreement creating
the international organization, or by meeting the
requirements of U.S. tax law.
The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international
organization. Other U.S. income received by
persons who qualify for this exemption may be
fully taxable or given favorable treatment under
an applicable tax treaty provision. The proper
treatment of this kind of income (interest, dividends, etc.) is discussed earlier in this publication.

Exemption
Under Tax Treaty
If you are from a country that has a tax treaty
with the United States, you should first look at
the treaty to see if there is a provision that exempts your income. The income of U.S. citizens
and resident aliens working for foreign governments usually is not exempt. However, in a few
instances, the income of a U.S. citizen with dual
citizenship may qualify. Often the exemption is
limited to the income of persons who also are
nationals of the foreign country involved.

Page 50

Chapter 11

Employees of foreign governments who do not
qualify under a tax treaty provision and employees of international organizations may qualify
for exemption by meeting the following requirements of U.S. tax law.
The exemption under U.S. tax law applies only to current employees and
CAUTION
not to former employees. Pensions received by former employees living in the United
States do not qualify for the exemption discussed here.

!

Employees of foreign governments. If you
are not a U.S. citizen, or if you are a U.S. citizen
but also a citizen of the Philippines, and you
work for a foreign government in the United
States, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by U.S. government employees in that foreign country and that foreign
government grants an equivalent exemption to
U.S. government employees.
Certification. To qualify for the exemption
under U.S. tax law, either the Department of
State must certify that you perform services
similar to those performed by employees of the
government of the United States in foreign
countries and that your foreign government employer grants an equivalent exemption to U.S.
government employees performing similar services in its country or you must establish those
facts. However, see Aliens who keep immigrant
status, later, for a special rule that may affect
your qualifying for this exemption.
Employees of international organizations.
If you work for an international organization in
the United States and you are not a U.S. citizen
(or you are a U.S. citizen but are also a citizen
of the Philippines), your salary from that organization is exempt from U.S. tax. However, see
Aliens who keep immigrant status, later, for a
special rule that may affect your qualifying for
this exemption.
An international organization is an organization designated by the President of the United
States through Executive Order to qualify for
the privileges, exemptions, and immunities provided in the International Organizations Immunities Act.
You should find out if you have been made
known to, and have been accepted by, the Secretary of State as an officer or an employee of
that organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective officer or employee.
If you are claiming exemption, you should
know the number of the Executive Order covering the international organization and should
have some written evidence of your acceptance
or designation by the Secretary of State.
The exemption is denied when, because the
Secretary of State determines your presence in
the United States is no longer desirable, you
leave the United States (or after a reasonable

Departing Aliens and the Sailing or Departure Permit

time allowed for leaving the United States). The
exemption is also denied when a foreign country does not allow similar exemptions to U.S.
citizens. Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country.
Aliens who keep immigrant status. If you file
the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form
I-508) to keep your immigrant status (green
card), you no longer qualify for the exemption
from U.S. tax under U.S. tax law from the date
of filing the waiver with the Attorney General.
However, you do not lose the exemption if
you file the waiver, and meet either of the following conditions.
You are exempt from U.S. tax under an income tax treaty, consular agreement, or international agreement between the United
States and your foreign government employer.
You work for an international organization
and the international organization agreement creating the international organization provides that alien employees are exempt from U.S. income tax. Two
international organizations that have such
a provision are the International Monetary
Fund (IMF) and the International Bank for
Reconstruction and Development (World
Bank).
.

For more information about a specific foreign country or international organization, send
an email to [email protected].

11.
Departing Aliens
and the Sailing
or Departure
Permit
Introduction
Before leaving the United States, all aliens (except those listed under Aliens Not Required To
Obtain Sailing or Departure Permits must obtain
a certificate of compliance. This document, also
popularly known as the sailing permit or departure permit, is part of the income tax form you
must file before leaving. You will receive a sailing or departure permit after filing a Form
1040-C or Form 2063. These forms are discussed in this chapter.
To find out if you need a sailing or departure
permit, first read Aliens Not Required To Obtain
Sailing or Departure Permits. If you do not fall
into one of the categories in that discussion,

you must obtain a sailing or departure permit.
Read Aliens Required To Obtain Sailing or Departure Permits.

Topics

This chapter discusses:
Who needs a sailing permit,
How to get a sailing permit, and
Forms you file to get a sailing permit.

Useful Items

You may want to see:
Form (and Instructions)
1040-C U.S. Departing Alien Income Tax
Return
2063 U.S. Departing Alien Income Tax
Statement
See chapter 12 for information about getting
these forms.

Aliens Not Required
To Obtain Sailing
or Departure Permits
If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States.
If you are in one of these categories and do
not have to get a sailing or departure permit,
you must be able to support your claim for exemption with proper identification or give the
authority for the exemption.
Category 1. Representatives of foreign governments with diplomatic passports, whether
accredited to the United States or other countries, members of their households, and servants accompanying them. Servants who are
leaving, but not with a person with a diplomatic
passport, must get a sailing or departure permit.
However, they can get a sailing or departure
permit on Form 2063 without examination of
their income tax liability by presenting a letter
from the chief of their diplomatic mission certifying that:
Their name appears on the “White List” (a
list of employees of diplomatic missions),
and
They do not owe to the United States any
income tax, and will not owe any tax up to
and including the intended date of departure.
The statement must be presented to an IRS
office.
Category 2. Employees of international organizations and foreign governments (other than
diplomatic representatives exempt under category 1) and members of their households:
Whose compensation for official services
is exempt from U.S. tax under U.S. tax
laws (described in chapter 10), and
Who receive no other income from U.S.
sources.

If you are an alien in category (1) or
(2), above, who filed the waiver under
CAUTION
section 247(b) of the Immigration and
Nationality Act, you must get a sailing or departure permit. This is true even if your income is
exempt from U.S. tax because of an income tax
treaty, consular agreement, or international
agreement.

!

Category 3. Alien students, industrial trainees,
and exchange visitors, including their spouses
and children, who enter on an “F-1,” “F-2,”
“H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and
who receive no income from U.S. sources while
in the United States under those visas other
than:
Allowances to cover expenses incident to
study or training in the United States, such
as expenses for travel, maintenance, and
tuition,
The value of any services or food and
lodging connected with this study or training,
Income from employment authorized by
the U.S. Citizenship and Immigration Services (USCIS), or
Interest income on deposits that is not effectively connected with a U.S. trade or
business. (See Interest Income in chapter 3.)
Category 4. Alien students, including their
spouses and children, who enter on an “M-1” or
“M-2” visa only and who receive no income
from U.S. sources while in the United States under those visas, other than:
Income from employment authorized by
the U.S. Citizenship and Immigration Services (USCIS) or
Interest income on deposits that is not effectively connected with a U.S. trade or
business. (See Interest Income in chapter 3.)
Category 5. Certain other aliens temporarily in
the United States who have received no taxable
income during the tax year up to and including
the date of departure or during the preceding
tax year. If the IRS has reason to believe that an
alien has received income subject to tax and
that the collection of income tax is jeopardized
by departure, it may then require the alien to obtain a sailing or departure permit. Aliens in this
category are:
1. Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and
who leave the United States on official
military travel orders,
2. Alien visitors for business on a “B-1” visa,
or on both a “B-1” visa and a “B-2” visa,
who do not remain in the United States or
a U.S. possession for more than 90 days
during the tax year,
3. Alien visitors for pleasure on a “B-2” visa,
4. Aliens in transit through the United States
or any of its possessions on a “C-1” visa,
or under a contract, such as a bond agreement, between a transportation line and
the Attorney General, and

Chapter 11

5. Aliens who enter the United States on a
border-crossing identification card or for
whom passports, visas, and border-crossing identification cards are not required, if
they are:
a. Visitors for pleasure,
b. Visitors for business who do not remain in the United States or a U.S.
possession for more than 90 days
during the tax year, or
c. In transit through the United States or
any of its possessions.
Category 6. Alien residents of Canada or Mexico who frequently commute between that
country and the United States for employment,
and whose wages are subject to the withholding
of U.S. tax.

Aliens Required To
Obtain Sailing or
Departure Permits
If you do not fall into one of the categories listed
under Aliens Not Required To Obtain Sailing or
Departure Permits, you must obtain a sailing or
departure permit. To obtain a permit, file Form
1040-C or Form 2063 (whichever applies) with
your local IRS office before you leave the United States. See Forms To File, later. You must
also pay all the tax shown as due on Form
1040-C and any taxes due for past years. See
Paying Taxes and Obtaining Refunds, later.

Getting a Sailing
or Departure Permit
The following discussion covers when and
where to get your sailing permit.
Where to get a sailing or departure permit.
If you have been working in the United States,
you should get the permit from an IRS office in
the area of your employment, or you may obtain
one from an IRS office in the area of your departure.
When to get a sailing or departure permit.
You should get your sailing or departure permit
at least 2 weeks before you plan to leave. You
cannot apply earlier than 30 days before your
planned departure date. Do not wait until the
last minute in case there are unexpected problems.
Papers to submit. Getting your sailing or departure permit will go faster if you bring to the
IRS office papers and documents related to
your income and your stay in the United States.
Bring the following records with you if they apply.
1. Your passport and alien registration card
or visa.
2. Copies of your U.S. income tax returns
filed for the past 2 years. If you were in the
United States for less than 2 years, bring
the income tax returns you filed for that period.

Departing Aliens and the Sailing or Departure Permit

Page 51

3. Receipts for income taxes paid on these
returns.
4. Receipts, bank records, canceled checks,
and other documents that prove your deductions, business expenses, and dependents claimed on your returns.
5. A statement from each employer showing
wages paid and tax withheld from January
1 of the current year to the date of departure if you were an employee. If you were
self-employed, you must bring a statement
of income and expenses up to the date
you plan to leave.
6. Proof of estimated tax payments for the
past year and this year.
7. Documents showing any gain or loss from
the sale of personal property and/or real
property, including capital assets and merchandise.
8. Documents relating to scholarship or fellowship grants including:
a. Verification of the grantor, source, and
purpose of the grant.
b. Copies of the application for, and approval of, the grant.
c. A statement of the amount paid, and
your duties and obligations under the
grant.
d. A list of any previous grants.
9. Documents indicating you qualify for any
special tax treaty benefits claimed.
10. Document verifying your date of departure
from the United States, such as an airline
ticket.
11. Document verifying your U.S. taxpayer
identification number, such as a social security card or an IRS issued Notice CP
565 showing your individual taxpayer
identification number (ITIN).
Note. If you are married and reside in a
community property state, also bring the
above-listed documents for your spouse. This
applies whether or not your spouse requires a
permit.

Forms To File
If you must get a sailing or departure permit,
you must file Form 2063 or Form 1040-C. Employees in the IRS office can assist in filing
these forms. Both forms have a “certificate of
compliance” section. When the certificate of
compliance is signed by an agent of the Field
Assistance Area Director, it certifies that your
U.S. tax obligations have been satisfied according to available information. Your Form 1040-C
copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit.

Page 52

Chapter 11

Form 2063
This is a short form that asks for certain information but does not include a tax computation.
The following departing aliens can get their sailing or departure permits by filing Form 2063.
Aliens, whether resident or nonresident,
who have had no taxable income for the
tax year up to and including the date of departure and for the preceding year, if the
period for filing the income tax return for
that year has not expired.
Resident aliens who have received taxable
income during the tax year or preceding
year and whose departure will not hinder
the collection of any tax. However, if the
IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C.
Aliens in either of these categories who
have not filed an income tax return or paid income tax for any tax year must file the return
and pay the income tax before they can be issued a sailing or departure permit on Form
2063.
The sailing or departure permit detached
from Form 2063 can be used for all departures
during the current year. However, the IRS may
cancel the sailing or departure permit for any
later departure if it believes the collection of income tax is jeopardized by that later departure.

Form 1040-C
If you must get a sailing or departure permit and
you do not qualify to file Form 2063, you must
file Form 1040-C.
Ordinarily, all income received or reasonably expected to be received during the tax year
up to and including the date of departure must
be reported on Form 1040-C and the tax on it
must be paid. When you pay any tax shown as
due on the Form 1040-C, and you file all returns
and pay all tax due for previous years, you will
receive a sailing or departure permit. However,
the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes
for certain years. See Bond To Ensure Payment, discussed later. The sailing or departure
permit issued under the conditions in this paragraph is only for the specific departure for which
it is issued.
Returning to the United States. If you furnish
the IRS with information showing, to the satisfaction of the IRS, that you intend to return to
the United States and that your departure does
not jeopardize the collection of income tax, you
can get a sailing or departure permit by filing
Form 1040-C without having to pay the tax
shown on it. You must, however, file all income
tax returns that have not yet been filed as required, and pay all income tax that is due on
these returns.

Departing Aliens and the Sailing or Departure Permit

Your Form 1040-C must include all income
received and reasonably expected to be received during the entire year of departure. The
sailing or departure permit issued with this Form
1040-C can be used for all departures during
the current year. However, the Service may
cancel the sailing or departure permit for any
later departure if the payment of income tax appears to be in jeopardy.
Joint return on Form 1040-C. Departing husbands and wives who are nonresident aliens
cannot file joint returns. However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if:
Both spouses can reasonably be expected
to qualify to file a joint return at the normal
close of their tax year, and
The tax years of the spouses end at the
same time.

Paying Taxes and
Obtaining Refunds
You must pay all tax shown as due on the Form
1040-C at the time of filing it, except when a
bond is furnished, or the IRS is satisfied that
your departure does not jeopardize the collection of income tax. You must also pay any taxes
due for past years. If the tax computation on
Form 1040-C results in an overpayment, there
is no tax to pay at the time you file that return.
However, the IRS cannot provide a refund at
the time of departure. If you are due a refund,
you must file either Form 1040NR or Form
1040NR-EZ at the end of the tax year.

Bond To Ensure Payment
Usually, you must pay the tax shown as due on
Form 1040-C when you file it. However, if you
pay all taxes due that you owe for prior years,
you can furnish a bond guaranteeing payment
instead of paying the income taxes shown as
due on the Form 1040-C or the tax return for the
preceding year if the period for filing that return
has not expired.
The bond must equal the tax due plus interest to the date of payment as figured by the
IRS. Information about the form of bond and security on it can be obtained from your IRS office.

Filing Annual U.S.
Income Tax Returns
Form 1040-C is not an annual U.S. income tax
return. If an income tax return is required by
law, that return must be filed even though a
Form 1040-C has already been filed. Chapters
5 and 7 discuss filing an annual U.S. income tax
return. The tax paid with Form 1040-C should
be taken as a credit against the tax liability for
the entire tax year on your annual U.S. income
tax return.

links to help you find answers to your questions.
Additionally, you may be able to access
tax law information in your electronic filing
software.

12.
How To Get Tax
Help
If you have questions about a tax issue, need
help preparing your tax return, or want to download free publications, forms, or instructions, go
to IRS.gov and find resources that can help you
right away.

Taxpayer Assistance
Inside the United States
Preparing and filing your tax return. Find
free options to prepare and file your return on
IRS.gov or in your local community if you qualify.
Go to IRS.gov and click on the Filing tab to
see your options.
Enter “Free File” in the search box to see
whether you can use brand-name software
to prepare and e-file your federal tax return
for free.
Enter “VITA” in the search box, download
the free IRS2Go app, or call
1-800-906-9887 to find the nearest Volunteer Income Tax Assistance or Tax Counseling for the Elderly (TCE) location for free
tax preparation.
Enter “TCE” in the search box, download
the free IRS2Go app, or call
1-888-227-7669 to find the nearest Tax
Counseling for the Elderly location for free
tax preparation.
The Volunteer Income Tax Assistance
(VITA) program offers free tax help to people
who generally make $54,000 or less, persons
with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing their own tax returns. The Tax Counseling
for the Elderly (TCE) program offers free tax
help for all taxpayers, particularly those who are
60 years of age and older. TCE volunteers specialize in answering questions about pensions
and retirement-related issues unique to seniors.
Getting answers to your tax law
questions. On IRS.gov get answers
to your tax questions anytime, any-

where.
Go to www.irs.gov/Help- &-Resources for a
variety of tools that will help you with your
taxes.
Enter “ITA” in the search box on IRS.gov
for the Interactive Tax Assistant, a tool that
will ask you questions on a number of tax
law topics and provide answers. You can
print the entire interview and the final response.
Enter “Pub 17” in the search box on
IRS.gov to get Pub. 17, Your Federal Income Tax for Individuals, which features
details on tax-saving opportunities, 2015
tax changes, and thousands of interactive

Tax forms and publications. You can download or print all of the forms and publications
you may need on www.irs.gov/formspubs. Otherwise, you can go to www.irs.gov/orderforms
to place an order and have forms mailed to you.
You should receive your order within 10 business days.
Direct deposit. The fastest way to receive a
tax refund is by combining direct deposit and
IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. The majority
of refunds are received within 21 days or less.
Getting a transcript or copy of a return.
Go to IRS.gov and click on “Get Transcript
of Your Tax Records” under “Tools.”
Call the transcript toll-free line at
1-800-908-9946.
Mail Form 4506-T or Form 4506T-EZ (both
available on IRS.gov).
Using online tools to help prepare your return. Go to IRS.gov and click on the Tools bar
to use these and other self-service options.
The Earned Income Tax Credit Assistant
determines if you are eligible for the EIC.
The Online EIN Application helps you get
an employer identification number.
The IRS Withholding Calculator estimates
the amount you should have withheld from
your paycheck for federal income tax purposes.
The Electronic Filing PIN Request helps to
verify your identity when you do not have
your prior year AGI or prior year self-selected PIN available.
The First Time Homebuyer Credit Account
Look-up tool provides information on your
repayments and account balance.
For help with the alternative minimum tax,
go to IRS.gov/AMT.
Understanding identity theft issues.
Go to www.irs.gov/uac/Identity-Protection
for information and videos.
If your SSN has been lost or stolen or you
suspect you are a victim of tax-related
identity theft, visit www.irs.gov/identitytheft
to learn what steps you should take.
Checking on the status of a refund.
Go to www.irs.gov/refunds.
Download the free IRS2Go app to your
smart phone and use it to check your refund status.
Call the automated refund hotline at
1-800-829-1954.
Making a tax payment. The IRS uses the latest encryption technology so electronic payments are safe and secure. You can make electronic payments online, by phone, or from a
mobile device. Paying electronically is quick,
easy, and faster than mailing in a check or

money order. Go to www.irs.gov/payments to
make a payment using any of the following options.
IRS Direct Pay (for individual taxpayers
who have a checking or savings account).
Debit or credit card (approved payment
processors online or by phone).
Electronic Funds Withdrawal (available
during e-file).
Electronic Federal Tax Payment System (best option for businesses; enrollment required).
Check or money order.
IRS2Go provides access to mobile-friendly
payment options like IRS Direct Pay, offering you a free, secure way to pay directly
from your bank account. You can also
make debit or credit card payments
through an approved payment processor.
Simply download IRS2Go from Google
Play, the Apple App Store, or the Amazon
Appstore, and make your payments anytime, anywhere.
What if I can’t pay now? Click on the “Pay
Your Tax Bill” icon on IRS.gov for more information about these additional options.
Apply for an online payment agreement to
meet your tax obligation in monthly installments if you cannot pay your taxes in full
today. Once you complete the online process, you will receive immediate notification
of whether your agreement has been approved.
An offer in compromise allows you to settle
your tax debt for less than the full amount
you owe. Use the Offer in Compromise
Pre-Qualifier to confirm your eligibility.
Checking the status of an amended return.
Go to IRS.gov and click on the Tools tab and
then Where’s My Amended Return?
Understanding an IRS notice or letter. Enter
“Understanding your notice” in the search box
on IRS.gov to find additional information about
your IRS notice or letter.
Visiting the IRS. Locate the nearest Taxpayer
Assistance Center using the Office Locator tool
on IRS.gov. Enter “office locator” in the search
box. Or choose the “Contact Us” option on the
IRS2Go app and search Local Offices. Before
you visit, use the Locator tool to check hours
and services available.
Watching IRS videos. The IRS Video portal
www.irsvideos.gov contains video and audio
presentations for individuals, small businesses,
and tax professionals. You’ll find video clips of
tax topics, archived versions of panel discussions and Webinars, and audio archives of tax
practitioner phone forums.
Getting tax information in other languages.
For taxpayers whose native language is not
English, we have the following resources available.
1. Taxpayers can find information on IRS.gov
in the following languages.
a. Spanish.
b. Chinese.
Chapter 12

How To Get Tax Help

Page 53

How Can You Reach Us?

c. Vietnamese.
d. Korean.
e. Russian.
2. The IRS Taxpayer Assistance Centers
provide over-the-phone interpreter service
in over 170 languages, and the service is
available free to taxpayers.

The Taxpayer Advocate
Service Is Here To Help You
What is the Taxpayer Advocate
Service?

The Taxpayer Advocate Service (TAS) is an independent organization within the Internal
Revenue Service that helps taxpayers and protects taxpayer rights. Our job is to ensure that
every taxpayer is treated fairly and that you
know and understand your rights under the
Taxpayer Bill of Rights.

What Can the Taxpayer Advocate
Service Do For You?
We can help you resolve problems that you
can’t resolve with the IRS. And our service is
free. If you qualify for our assistance, you will be
assigned to one advocate who will work with
you throughout the process and will do everything possible to resolve your issue. TAS can
help you if:
Your problem is causing financial difficulty
for you, your family, or your business,
You face (or your business is facing) an
immediate threat of adverse action, or
You’ve tried repeatedly to contact the IRS
but no one has responded, or the IRS
hasn’t responded by the date promised.

Page 54

Chapter 12

How To Get Tax Help

We have offices in every state, the District of
Columbia, and Puerto Rico. Your local advocate’s number is in your local directory and at
www.taxpayeradvocate.irs.gov. You can also
call us at 1-877-777-4778.

How Can You Learn About Your
Taxpayer Rights?
The Taxpayer Bill of Rights describes ten basic
rights that all taxpayers have when dealing with
the
IRS.
Our
Tax
Toolkit
at
www.taxpayeradvocate.irs.gov can help you
understand what these rights mean to you and
how they apply. These are your rights. Know
them. Use them.

How Else Does the Taxpayer
Advocate Service Help Taxpayers?
TAS works to resolve large-scale problems that
affect many taxpayers. If you know of one of
these broad issues, please report it to us at
www.irs.gov/sams.

Low Income Taxpayer
Clinics
Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level
and need to resolve tax problems such as audits, appeals, and tax collection disputes. Some
clinics can provide information about taxpayer
rights and responsibilities in different languages
for individuals who speak English as a second
language. To find a clinic near you, visit

www.irs.gov/litc or see IRS Publication 4134,
Low Income Taxpayer Clinic List.

Taxpayer Assistance
Outside the United
States
toll free.

If you are outside the United States,
you can call 267-941-1000 (English-speaking only). This number is not
If you wish to write instead of calling,
please address your letter to:

Internal Revenue Service
International Accounts
Philadelphia, PA 19255-0725
U.S.A.
Additional contact information for taxpayers
who live outside the U.S. is available at
www.irs.gov/uac/Contact-My-Local-OfficeInternationally.
Taxpayer Advocate International. You can
call the Taxpayer Advocate toll-free at
1-877-777-4778. For more information on the
Taxpayer Advocate Service and contacts if you
are outside of the United States go to
www.irs.gov/Advocate/Local-TaxpayerAdvocate/Contact-Your-Local-TaxpayerAdvocate.

Frequently Asked Questions
This section answers tax-related I am a nonresident alien with no
questions commonly asked by ali- dependents. I am working temens.
porarily for a U.S. company.
What return do I file?
What is the difference between a
resident alien and a nonresident You must file Form 1040NR if you
alien for tax purposes?
are engaged in a trade or business
For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as resident aliens
and nonresident aliens. Resident
aliens are taxed on their worldwide
income, the same as U.S. citizens.
Nonresident aliens are taxed only
on their U.S. source income and
certain foreign source income that is
effectively connected with a U.S.
trade or business.
What is the difference between
the taxation of income that is effectively connected with a trade
or business in the United States
and income that is not effectively
connected with a trade or business in the United States?
The difference between these two
categories is that effectively connected income, after allowable deductions, is taxed at graduated
rates. These are the same rates that
apply to U.S. citizens and residents.
Income that is not effectively connected is taxed at a flat 30% (or
lower treaty) rate.
I am a student with an F-1 visa. I
was told that I was an exempt individual. Does this mean I am exempt from paying U.S. tax?
The term “exempt individual” does
not refer to someone exempt from
U.S. tax. You were referred to as an
exempt individual because as a student temporarily in the United
States on an F visa, you do not have
to count the days you were present
in the United States as a student
during the first 5 years in determining if you are a resident alien under
the substantial presence test. See
chapter 1.

in the United States, or have any
other U.S. source income on which
tax was not fully paid by the amount
withheld.

and is not eligible to get an SSN, he both a resident alien and a nonresimust apply for an individual tax- dent alien in the same year. See
chapter 6.
payer identification number (ITIN).
If you are a U.S. citizen or resident and you choose to treat your
nonresident spouse as a resident
and file a joint tax return, your nonresident spouse needs an SSN or
an ITIN. Alien spouses who are
claimed as exemptions or dependents are also required to furnish an
SSN or an ITIN.

The following rules apply if the diviYou can use Form 1040NR-EZ
dends and capital gains are not efinstead of Form 1040NR if you meet
fectively connected with a U.S.
all 11 conditions listed under Form
See Identification Number in trade or business.
1040NR-EZ in chapter 7.
chapter 5 for more information.
Capital gains are generally not
taxable if you were in the UniI came to the United States on I am a nonresident alien. Can I
ted States for less than 183
June 30th of last year. I have an file a joint return with my
days during the year. See
H-1B visa. What is my tax status, spouse?
Sales or Exchanges of Capital
resident alien or nonresident aliAssets in chapter 4 for more inen? What tax return do I file?
Generally, you cannot file as marformation and exceptions.
ried filing jointly if either spouse was
Dividends are generally taxed
You were a dual-status alien last a nonresident alien at any time durat a 30% (or lower treaty) rate.
year. As a general rule, because ing the tax year.
The brokerage company or
you were in the United States for
payor of the dividends should
183 days or more, you have met the
However, nonresident aliens
withhold this tax at source. If
substantial presence test and you married to U.S. citizens or residents
tax is not withheld at the corare taxed as a resident. However, can choose to be treated as U.S.
rect rate, you must file Form
for the part of the year that you were residents and file joint returns. For
1040NR to receive a refund or
not present in the United States, you more information on this choice, see
pay any additional tax due.
are a nonresident. File Form 1040. Nonresident Spouse Treated as a
If
the capital gains and dividends
Print “Dual-Status Return” across Resident in chapter 1.
are effectively connected with a
the top. Attach a statement showing
your U.S. source income for the part I have an H-1B visa and my hus- U.S. trade or business, they are
of the year you were a nonresident. band has an F-1 visa. We both taxed according to the same rules
You may use Form 1040NR as the lived in the United States all of and at the same rates that apply to
statement. Print “Dual-Status State- last year and had income. What U.S. citizens and residents.
ment” across the top. See First Year kind of form should we file? Do
of Residency in chapter 1 for rules we file separate returns or a joint I am a nonresident alien. I receive U.S. social security beneon determining your residency start- return?
fits. Are my benefits taxable?
ing date.
When is my Form 1040NR due?
If you are an employee and you receive wages subject to U.S. income
tax withholding, you must generally
file by the 15th day of the 4th month
after your tax year ends. If you file
for the 2015 calendar year, your return is due April 18, 2016.

Assuming both of you had these visas for all of last year, you are a resident alien. Your husband is a nonresident alien if he has not been in
the United States as a student for
more than 5 years. You and your
husband can file a joint tax return on
Form 1040, 1040A, or 1040EZ if he
makes the choice to be treated as a
resident for the entire year. See
Nonresident Spouse Treated as a
Resident in chapter 1. If your husband does not make this choice,
you must file a separate return on
Form 1040 or Form 1040A. Your
husband must file Form 1040NR or
1040NR-EZ.

If you are not an employee who
receives wages subject to U.S. income tax withholding, you must file
by the 15th day of the 6th month afI am a resident alien. Can I claim ter your tax year ends. For the 2015
any treaty benefits?
calendar year, file your return by
June 15, 2016. For more informaGenerally, you cannot claim tax tion on when and where to file, see
Is a “dual-resident taxpayer” the
treaty benefits as a resident alien. chapter 7.
same as a “dual-status taxpayHowever, there are exceptions. See
Effect of Tax Treaties in chapter 1. My spouse is a nonresident ali- er”?
See also Resident Aliens under en. Does he need a social securiNo. A dual-resident taxpayer is one
Some Typical Tax Treaty Benefits in ty number?
who is a resident of both the United
chapter 9.
A social security number (SSN) States and another country under
must be furnished on returns, state- each country's tax laws. See Effect
ments, and other tax-related docu- of Tax Treaties in chapter 1. You are
ments. If your spouse does not have a dual-status taxpayer when you are
Publication 519 (2015)

I am a nonresident alien and invested money in the U.S. stock
market through a U.S. brokerage
company. Are the dividends and
the capital gains taxable? If yes,
how are they taxed?

If you are a nonresident alien, 85%
of any U.S. social security benefits
(and the equivalent portion of tier 1
railroad retirement benefits) you receive is subject to the flat 30% tax,
unless exempt, or subject to a lower
treaty rate. See The 30% Tax in
chapter 4.
Do I have to pay taxes on my
scholarship?
If you are a nonresident alien and
the scholarship is not from U.S.
sources, it is not subject to U.S. tax.
See Scholarships, Grants, Prizes,
and Awards in chapter 2 to determine whether your scholarship is
from U.S. sources.
If your scholarship is from U.S.
sources or you are a resident alien,
your scholarship is subject to U.S.
tax according to the following rules.
If you are a candidate for a degree, you may be able to exclude from your income the
part of the scholarship you use
Page 55

to pay for tuition, fees, books,
supplies, and equipment required by the educational institution. However, the part of the
scholarship you use to pay for
other expenses, such as room
and board, is taxable. See
Scholarships and Fellowship
Grants in chapter 3 for more information.
If you are not a candidate for a
degree, your scholarship is taxable.

I am not a U.S. citizen. What ex- If you are a nonresident alien for any
emptions can I claim?
part of the year, you cannot claim
the earned income credit. See
Resident aliens can claim personal chapter 6 for more information on
exemptions and exemptions for de- dual-status aliens.
pendents in the same way as U.S.
citizens. However, nonresident ali- I am a nonresident alien student.
ens generally can claim only a per- Can I claim an education credit
sonal exemption for themselves on on my Form 1040NR?

their U.S. tax return. There are special rules for residents of Mexico,
Canada, and South Korea; for U.S.
nationals; and for students and business apprentices from India. See
I am a nonresident alien. Can I Exemptions in chapter 5.
claim the standard deduction?
What exemptions can I claim as
Nonresident aliens cannot claim the a dual-status taxpayer?
standard deduction. However, see
Students and business apprentices As a dual-status taxpayer, you usufrom India, under Itemized Deduc- ally will be able to claim your own
tions in chapter 5 for an exception.
personal exemption. Subject to the
general rules for qualification, you
I am a dual-status taxpayer. Can can claim exemptions for your
I claim the standard deduction?
spouse and dependents when you
figure taxable income for the part of
You cannot claim the standard de- the year you are a resident alien.
duction allowed on Form 1040. The amount you can claim for these
However, you can itemize any al- exemptions is limited to your taxable
lowable deductions.
income (figured before subtracting
exemptions) for the part of the year
I am filing Form 1040NR. Can I you are a resident alien. You cannot
claim itemized deductions?
use exemptions (other than your
own) to reduce taxable income to
Nonresident aliens can claim some less than zero for that period.
of the same itemized deductions
that resident aliens can claim. How- I am single with a dependent
ever, nonresident aliens can claim child. I was a dual-status alien in
itemized deductions only if they 2015. Can I claim the earned inhave income effectively connected come credit on my 2015 tax rewith their U.S. trade or business. turn?
See Itemized Deductions in chapter 5.

Page 56

If social security or Medicare taxes
were withheld in error from pay that
is not subject to these taxes, contact
the employer who withheld the
taxes for a refund. If you are unable
to get a full refund of the amount
from your employer, file a claim for
refund with the IRS on Form 843.
Do not use Form 843 to request a
refund of Additional Medicare Tax.
If you are a nonresident alien for any See Refund of Taxes Withheld in
part of the year, you generally can- Error in chapter 8.
not claim the education credits.
However, if you are married and I am an alien who will be leaving
choose to file a joint return with a the United States. What forms do
U.S. citizen or resident spouse, you I have to file before I leave?

may be eligible for these credits.
See Nonresident Spouse Treated Before leaving the United States,
as a Resident in chapter 1.
aliens generally must obtain a certificate of compliance. This document,
I am a nonresident alien, tempo- also popularly known as the sailing
rarily working in the U.S. under a permit or departure permit, is part of
J visa. Am I subject to social se- the income tax form you must file
curity and Medicare taxes?
before leaving. You will receive a
sailing or departure permit after filGenerally, services you perform as ing a Form 1040-C or Form 2063.
a nonresident alien temporarily in These forms are discussed in chapthe United States as a nonimmigrant ter 11.
under subparagraph (F), (J), (M), or
(Q) of section 101(a)(15) of the Im- I filed a Form 1040-C when I left
migration and Nationality Act are not the United States. Do I still have
covered under the social security to file an annual U.S. tax return?
program if you perform the services
to carry out the purpose for which Form 1040-C is not an annual U.S.
you were admitted to the United income tax return. If an income tax
States. See Social Security and return is required by law, you must
Medicare Taxes in chapter 8.
file that return even though you already filed a Form 1040-C. ChapI am a nonresident alien student. ters 5 and 7 discuss filing an annual
Social security taxes were with- U.S. income tax return.
held from my pay in error. How
do I get a refund of these taxes?

Publication 519 (2015)

Appendix A—Tax Treaty Exemption Procedure for Students
This appendix contains the statements nonresident alien students
and trainees must file with Form
8233 to claim a tax treaty exemption from withholding of tax on
compensation for dependent personal services. For treaty countries
not listed, attach a statement in a
format similar to those for other
treaties. See chapter 8 for more information on withholding.

Belgium
1. I was a resident of Belgium on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am present in the United
States for the purpose of my
education or training.
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Belgium in
an amount not in excess of
$9,000 for any tax year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study or training]. For a
trainee who is temporarily
present in the United States
for the purpose of securing
training required to practice a
profession or professional
specialty, the treaty exemption is available only for compensation paid during a period of two years.

Bulgaria
1. I was a resident of Bulgaria
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study] or
securing training to practice a
Publication 519 (2015)

profession or professional
specialty. .
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Bulgaria in
an amount not in excess of
$9,000 for any tax year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study or training] . The treaty
exemption for training is available only for compensation
paid during a period of two
years.

China, People's
Republic of
1. I was a resident of the People's Republic of China on the
date of my arrival in the United States. I am not a U.S.
citizen.
2. I am present in the United
States solely for the purpose
of my education or training.
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and the People's Republic of China in an
amount not in excess of
$5,000 for any tax year.
4. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
study or training]. I am claiming this exemption only for
such period of time as is reasonably necessary to complete the education or training.

Cyprus
1. I was a resident of Cyprus on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.

2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Cyprus in
an amount not in excess of
$2,000 ($10,000 if you are a
participant in a government
sponsored program of study
not exceeding one year) for
any tax year. I have not previously claimed an income tax
exemption under that treaty
for income received as a student before the date of my arrival in the United States.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The $2,000 treaty
exemption is available only
for compensation paid during
a period of five tax years beginning with the tax year that
includes my arrival date, and
for such additional period of
time as is necessary to complete, as a full-time student,
educational requirements as
a candidate for a postgraduate or professional degree
from a recognized educational institution.

Czech Republic,
Estonia, Latvia,
Lithuania, and
Slovak Republic
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United
States. I am not a U.S. citizen. I have not been lawfully
accorded the privilege of residing permanently in the United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying or
training at
[insert the
name of the university or
other recognized educational
institution at which you study];

or, I am temporarily present in
the United States as a recipient of a grant, allowance, or
award from
[insert
the name of the nonprofit organization or government institution providing the grant,
allowance, or award].
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty
between the United States
and
[Insert the
name of the country] in the
amount not in excess of
$5,000 ($10,000 if you are a
participant in a government
sponsored program of study
not exceeding one year) for
any tax year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The $5,000 treaty
exemption is available only
for compensation paid during
a period of five tax years beginning with the tax year that
includes my arrival date.

Egypt
1. I was a resident of Egypt on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Egypt in an
amount not in excess of
$3,000 ($10,000 if you are a
participant in a government
sponsored program of study
not exceeding one year) for
any tax year. I have not previously claimed an income tax
exemption under that treaty
Page 57

for income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The $3,000 treaty
exemption is available only
for compensation paid during
a period of five tax years beginning with the tax year that
includes my arrival date, and
for such period of time as is
necessary to complete, as a
full-time student, educational
requirements as a candidate
for a postgraduate or professional degree from a recognized educational institution.

France
1. I was a resident of France on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the accredited university, college, school or other educational institution].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and France in
an amount not in excess of
$5,000 for any taxable year. I
have not previously claimed
an income tax exemption under this treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. I will be present in the United
States only for such period of
time as may be reasonably or
customarily required to effectuate the purpose of this visit.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years.

Page 58

Germany
1. I was a resident of Germany
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States as a student or business apprentice
for the purpose of full-time
study or training at
[insert the name of the accredited university, college,
school or other educational
institution]; or, I am temporarily present in the United
States as a recipient of a
grant, allowance, or award
from
[insert the
name of the nonprofit organization or government institution providing the grant, allowance, or award].
3. I will receive compensation
for dependent personal services performed in the United
States. This compensation
qualifies for exemption from
withholding of federal income
tax under the tax treaty between the United States and
Germany in an amount not in
excess of $9,000 for any tax
year, provided that such services are performed for the
purpose of supplementing
funds otherwise available for
my maintenance, education,
or training.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of four tax years
beginning with the tax year
that includes my arrival date.

Iceland
1. I was a resident of Iceland on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study]; or, I am
temporarily present in the

United States to obtain professional training or to study
or do research as a recipient
of a grant, allowance, or
[insert
award from
the name of the nonprofit organization or government institution providing the grant,
allowance, or award].
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty
between the United States
and Iceland in the amount not
in excess of $9,000 for any
tax year.
4. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Indonesia
1. I was a resident of Indonesia
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States solely for
the purpose of study at
[insert the name of
the university or other accredited educational institution at which you study]; or, I
am temporarily present in the
United States as a recipient of
a grant, allowance or award
[insert the
from
name of the nonprofit organization or government institution providing the grant, allowance, or award] for the
primary purpose of study, research, or training.
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty
between the United States
and Indonesia in an amount
not in excess of $2,000 for my
tax year, provided such services are performed in connection with my studies or are
necessary for my maintenance.

4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Israel, Philippines
and Thailand
1. I was a resident of the
[insert the name of
the country under whose
treaty you claim exemption]
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and
[insert the name of the country under whose treaty you
claim exemption] in an
amount not in excess of
$3,000 for any tax year. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Korea, Norway,
Poland, and Romania
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United
Publication 519 (2015)

States. I am not a U.S. citizen. I have not been lawfully
accorded the privilege of residing permanently in the United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and
[insert the name of the country under whose treaty you
claim exemption] in an
amount not in excess of
$2,000 for any tax year. I
have not previously claimed
an income tax exemption under this treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Morocco
1. I was a resident of Morocco
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other recognized educational institution
at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Morocco in
an amount not in excess of
$2,000 for any tax year. I
have not previously claimed
an income tax exemption
Publication 519 (2015)

under that treaty for income
received as a student before
the date of my arrival in the
United States.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years,
beginning with the tax year
that includes my arrival date.

Netherlands
1. I was a resident of the Netherlands on the date of my arrival
in the United States. I am not
a U.S. citizen. I have not been
lawfully accorded the privilege of residing permanently
in the United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of full time
[insert the
study at
name of the recognized university, college, or school in
the United States at which
you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and the Netherlands in an amount not in excess of $2,000 for any tax
year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. I am claiming this
exemption only for such period of time as is reasonably
necessary to complete my
education.

Pakistan
1. I am a resident of Pakistan. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant and would
not otherwise be considered
a resident alien for the relevant tax year.
2. I am temporarily present in
the United States solely as a
[insert
student at
the name of the recognized
university, college, or school

in the United States at which
you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Pakistan in
an amount not in excess of
$5,000 for any tax year.

Portugal and Spain
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United
States. I am not a U.S. citizen. I have not been lawfully
accorded the privilege of residing permanently in the United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying or
training at
[insert the
name of the university or
other recognized educational
institution at which you study];
or, I am temporarily present in
the United States as a recipient of a grant, allowance, or
award from
[insert
the name of the nonprofit organization or government institution providing the grant,
allowance, or award].
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty
between the United States
and
[Insert the
name of the country] in the
amount not in excess of
$5,000 for any tax year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Slovenia and
Venezuela
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United
States. I am not a U.S. citizen. I have not been lawfully

accorded the privilege of residing permanently in the United States as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying or
training at
[insert the
name of the university or
other accredited educational
institution at which you study
or train].
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty
between the United States
and
[insert the
name of the country under
whose treaty you claim exemption] in an amount not in
excess of $5,000 for any tax
year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the taxable
year that includes my arrival
date, and for such period of
time as is necessary to complete, as a full-time student,
educational requirements as
a candidate for a postgraduate or professional degree
from a recognized educational institution.

Trinidad and Tobago
1. I was a resident of Trinidad
and Tobago on the date of my
arrival in the United States. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant.
2. I am temporarily present in
the United States for the primary purpose of studying at
[insert the name of
the university or other accredited educational institution at which you study].
3. I will receive compensation
for personal services performed in the United States.
This compensation qualifies
for exemption from withholding of federal income tax under the tax treaty between the
United States and Trinidad
and Tobago in an amount not
in excess of $2,000 (or, if you
are securing training required
to qualify you to practice a
Page 59

profession or a professional
specialty, not in excess of
$5,000) for any taxable year. I
have not previously claimed
an income tax exemption under this treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. I will be present in the United
States only for such period of
time as may be reasonably or
customarily required to effectuate the purpose of this visit.
5. I arrived in the United States
on
[insert the date

Page 60

of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years.

Tunisia
1. I was a resident of Tunisia on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the

United States as an immigrant.
2. I am temporarily present in
the United States for the purpose of full-time study, training, or research at
[insert the name of the university or other accredited educational institution at which
you study, train, or perform
research].
3. I will receive compensation
for services performed in the
United States. This compensation qualifies for exemption
from withholding of federal income tax under the tax treaty

between the United States
and Tunisia in an amount not
in excess of $4,000 for any
tax year.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
study at the U.S. educational
institution]. The treaty exemption is available only for compensation paid during a period of five tax years
beginning with the tax year
that includes my arrival date.

Publication 519 (2015)

Appendix B—Tax Treaty Exemption Procedure for Teachers and Researchers
This appendix contains the statements nonresident alien teachers
and researchers must file with
Form 8233 to claim a tax treaty exemption from withholding of tax on
compensation for dependent personal services. For treaty countries
not listed, attach a statement in a
format similar to those for other
treaties. See chapter 8 for more information on withholding.

Belgium
1. I am a resident of Belgium. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant.
2. I am visiting the United States
for the purpose of teaching or
engaging in research at
[insert the name of
the educational or research
institution at which you teach
or perform research] for a period not exceeding two years.
I will receive compensation
for my teaching or research
activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) for these activities qualifies for exemption
from withholding of federal
tax under the tax treaty between the United States and
Belgium.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research for
which exemption is claimed].
The treaty exemption is available only for compensation
received during a period of
two years beginning on that
date.

Bulgaria
1. I was a resident of Bulgaria
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an
immigrant.
Publication 519 (2015)

2. I am visiting the United States
for the purpose of teaching or
conducting research at
[insert the name of
the university, college, or
other recognized educational
or research institution]. I will
receive compensation for my
teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) for these activities qualifies for exemption
from withholding of federal
tax under the tax treaty between the United States and
Bulgaria.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the services for which
the exemption is claimed].
The treaty exemption is available only for compensation
paid during a period of two
years beginning on that date.

China, People's
Republic of
1. I was a resident of the People's Republic of China on the
date of my arrival in the United States. I am not a U.S.
citizen.
2. I am visiting the United States
for the primary purpose of
teaching, giving lectures, or
conducting research at
[insert the name of
the educational institution or
scientific research institution
at which you teach, lecture, or
conduct research], which is
an accredited educational institution or scientific research
institution. I will receive compensation for my teaching,
lecturing, or research activities.
3. The teaching, lecturing, or research compensation received during the entire tax
year (or during the period
from
to
) qualifies for exemption from withholding of federal tax under
the tax treaty between the

United States and the People's Republic of China. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher, lecturer,
researcher, or student before
the date of my arrival in the
United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
your teaching, lecturing, or research activities]. The treaty
exemption is available only
for compensation received
during a maximum aggregate
period of three years.

Commonwealth of
Independent States
The treaty with former Union of Soviet Socialist Republics remains in
effect for the following countries:
Armenia, Azerbaijan, Belarus,
Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.
1. I am a resident of
[insert the name of country]. I
am not a U.S. citizen.
2. I have accepted an invitation
by a governmental agency or
institution in the United
States, or by an educational
or scientific research institution in the United States, to
come to the United States for
the primary purpose of teaching, engaging in research, or
participating in scientific,
technical, or professional
conferences at
[insert the name of governmental agency or institution, educational or scientific
institution, or organization
sponsoring professional conference], which is a governmental agency or institution,
an educational or scientific institution, or an organization
sponsoring a professional
conference. I will receive
compensation for my teaching, research, or conference
activities.
3. The teaching, research or
conference compensation received the entire tax year (or

to
for the period from
) qualifies for exemption from withholding of federal tax under the tax treaty
between the United States
and the former Union of Soviet Socialist Republics. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher, researcher, conference
participant, or student before
the date of my arrival in the
United States.
4. Any research I perform will
not be undertaken primarily
for the benefit of a private
person or commercial enterprise of the United States or a
foreign trade organization of
[insert the name of
country], unless the research
is conducted on the basis of
intergovernmental agreements on cooperations.
5. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed], The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

Czech Republic and
Slovak Republic
1. I was a resident of the
[insert the name of
the country under whose
treaty you claim exemption]
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am visiting the United States
for the primary purpose of
teaching or conducting research at
[insert the
name of the educational or
scientific institution], which is
an accredited educational or
research institution. I will receive compensation for my
teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) qualifies for
Page 61

exemption from withholding
of federal tax under the tax
treaty between the United
States and the
[insert the name of the country
under whose treaty you claim
exemption]. I have not previously claimed an income tax
exemption under that treaty
for income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching, research, or
conference services for which
exemption is claimed]. The
treaty exemption is available
only for compensation received during a period of two
years beginning on that date.

Egypt, Hungary,
Korea, Philippines,
Poland, and Romania
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United
States. I am not a U.S. citizen. I have not been lawfully
accorded the privilege of residing permanently in the United States as an immigrant.
2. I have accepted an invitation
by the U.S. government (or by
a political subdivision or local
authority thereof), or by a university or other recognized
educational institution in the
United States for a period not
expected to exceed two years
for the purpose of teaching or
engaging in research at
[insert the name of
the educational institution],
which is a recognized educational institution. I will receive
compensation for my teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or for
the portion of the year from
to
) qualifies for
exemption from withholding
of federal tax under the tax
treaty between the United
States and
[insert
the name of the country under
whose treaty you claim exemption]. I have not previously claimed an income tax
Page 62

exemption under this treaty
for income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

France
1. I was a resident of France on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I have accepted an invitation
by the U.S. government, or by
a university or other recognized educational or research
institution in the United States
for the primary purpose of
teaching or engaging in re[insert the
search at
name of the educational or research institution]. I will receive compensation for my
teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or for
the portion of the year from
to
) qualifies for
exemption from withholding
of federal tax under the tax
treaty between the United
States and France. I have not
previously claimed an income
tax exemption under this
treaty for income received as
a teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is

claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

Germany
1. I am a resident of Germany. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant.
2. I am a professor or teacher
visiting the United States for
the purpose of advanced
study, teaching, or research
at
[insert the name
of the accredited university,
college, school, or other educational institution, or a public
research institution or other
institution engaged in research for the public benefit].
I will receive compensation
for my teaching, research, or
study activities.
3. The compensation received
during the entire tax year (or
during the period from
to
) for
these activities qualifies for
exemption from withholding
of federal tax under the tax
treaty between the United
States and Germany. I have
not previously claimed an income tax exemption under
that treaty for income received as a student, apprentice, or trainee during the immediately preceding period.
(If, however, following the period in which the alien
claimed benefits as a student,
apprentice, or trainee, that
person returned to Germany
and resumed residence and
physical presence before returning to the United States
as a teacher or researcher,
that person may claim the
benefits of this treaty.)
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the services for which
the exemption is claimed].
The treaty exemption is available only for compensation
paid during a period of two
years beginning on that date.

Greece
1. I am a resident of Greece. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant (and would
not otherwise be considered
a resident alien for the relevant tax year).
2. I am a professor or teacher
visiting the United States for
the purpose of teaching at
[insert the name of
the other educational institution at which you teach],
which is an educational institution. I will receive compensation for my teaching activities.
3. The teaching compensation
received during the entire tax
year (or during the period
to
) qualifrom
fies for exemption from withholding of federal tax under
the tax treaty between the
United States and Greece. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher or student before the date of my
arrival in the United States.
4. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
the teaching services for
which exemption is claimed].
The treaty exemption is available only for compensation
received during a period of
three years beginning on that
date.

India
1. I was a resident of India on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am visiting the United States
for the purpose of teaching or
conducting research at
[insert the name of
the university, college, or
other recognized educational
institution]. I will receive compensation for my teaching or
research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) for these activities qualifies for exemption
Publication 519 (2015)

from withholding of federal
tax under the tax treaty between the United States and
India.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the services for which
the exemption is claimed].
The treaty exemption is available only for compensation
paid during a period of two
years beginning on that date.

Indonesia
1. I was a resident of Indonesia
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I have accepted an invitation
[insert the name
by
of the university, college,
school, or other similar educational institution] to come to
the United States solely for
the purpose of teaching or engaging in research at that educational institution. I will receive compensation for my
teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) qualifies for exemption from withholding of
federal tax under the tax
treaty between the United
States and Indonesia. I have
not previously claimed an income tax exemption under
that treaty for income received as a teacher or researcher before the date
specified in the next paragraph.
4. I arrived in the United States
[insert the date
on
of your arrival into the United
States before beginning the
teaching or research services
for which the exemption is
claimed]. The treaty exemption is available only for compensation paid during a period of two years beginning
on that date.
5. Any research I perform will be
undertaken in the public interest and not primarily for the
Publication 519 (2015)

private benefit of a specific
person or persons.

Israel
1. I was a resident of Israel on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I have accepted an invitation
by the U.S. government (or by
a political subdivision or local
authority thereof), or by a university or other recognized
educational institution in the
United States, to come to the
United States for a period not
expected to exceed two years
for the purpose of teaching or
engaging in research at
[insert the name of
the educational institution],
which is a recognized educational institution. I will receive
compensation for my teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or for
the portion of the year from
to
) qualifies for
exemption from withholding
of federal tax under the tax
treaty between the United
States and Israel. I have not
previously claimed an income
tax exemption under this
treaty for income received as
a teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

Italy
1. I was a resident of Italy on the
date of my arrival in the United States. I am not a U.S.
citizen. I have not been accorded the privilege of residing
permanently in the United
States as an immigrant.

2. I am a professor or teacher
visiting the United States for
the purpose of teaching or
performing research at
[insert the name of
the educational institution or
medical facility at which you
teach or perform research],
which is a recognized educational institution or a medical
facility primarily funded from
governmental sources. I will
receive compensation for my
teaching or research activities.
3. The compensation received
during the entire tax year (or
during the period from
to
) qualifies for exemption from withholding of
federal tax under the tax
treaty between the United
States and Italy. I have not
previously claimed an income
tax exemption under that
treaty for income received as
a teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the general interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

Jamaica
1. I was a resident of Jamaica
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am visiting the United States
for the purpose of teaching or
conducting research for a period not expected to exceed
[insert
two years at
the name of the educational
institution at which you teach
or conduct research], which is
a recognized educational institution. I will receive compensation for my teaching or
research activities.
3. The teaching or research
compensation received during the entire tax year (or durto
ing the period from

) qualifies for exemption from withholding of federal tax under the tax treaty
between the United States
and Jamaica. I have not previously claimed an income tax
exemption under that treaty
for income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation paid during a period of two years beginning
on that date.

Luxembourg
1. I am a resident of Luxembourg. I am not a U.S. citizen.
I have not been lawfully accorded the privilege of residing permanently in the United
States as an immigrant.
2. I have accepted an invitation
[insert the name
by
of the educational institution
at which you teach or perform
research], which is a recognized educational institution,
to come to the United States
for the purpose of teaching or
engaging in research at that
institution. I will receive compensation for my teaching or
research activities.
3. The teaching or research
compensation received during the entire tax year (or durto
ing the period from
) qualifies for exemption from withholding of federal tax under the tax treaty
between the United States
and Luxembourg. I have not
previously claimed an income
tax exemption under that
treaty for income received as
a teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will
not be carried on for the benefit of any person using or
disseminating the results for
purposes of profit.
5. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the teaching services for
which exemption is claimed].
The treaty exemption is available only for compensation
received during a period of
Page 63

two years beginning on that
date.

Netherlands
1. I am a resident of the Netherlands. I am not a U.S. citizen.
I have not been lawfully accorded the privilege of residing permanently in the United
States as an immigrant.
2. I am visiting the United States
for the purpose of teaching or
engaging in research at
[insert the name of
the educational institution at
which you teach or perform
research] for a period not exceeding two years. I will receive compensation for my
teaching or research activities.
3. The compensation received
during the entire tax year (or
during the period from
to
) for these activities
qualifies for exemption from
withholding of federal tax under the tax treaty between the
United States and Netherlands. I have not previously
claimed an income tax exemption under that treaty for
income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
benefit of a specific person or
persons.
5. I arrived in the United States
[insert the date
on
of your last arrival into the
United States before beginning the teaching or research
services for which exemption
is claimed]. The treaty exemption is available for compensation received during a
period of two years beginning
on that date only if my visit
does not exceed 2 years.

Norway
1. I was a resident of Norway on
the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I have accepted an invitation
by the U.S. government, or by
a university or other recognized educational institution
in the United States for a period not expected to exceed
two years for the purpose of
Page 64

teaching or engaging in research at
[insert the
name of the educational institution], which is a recognized
educational institution. I will
receive compensation for my
teaching or research activities.
3. The teaching or research
compensation qualifies for
exemption from withholding
of federal tax under the tax
treaty between the United
States and Norway. I have
not previously claimed an income tax exemption under
this treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. Any research I perform will
not be undertaken primarily
for the private benefit of a
specific person or persons.
5. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

Pakistan
1. I am a resident of Pakistan. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant and would
not otherwise be considered
a resident alien for the relevant tax year.
2. I am a professor or teacher
visiting the United States for
the purpose of teaching at
[insert the name of
the educational institution at
which you teach], which is a
recognized educational institution. I will receive compensation for my teaching activities.
3. The teaching compensation
received during the entire tax
year (or during the period
to
) qualifrom
fies for exemption from withholding of federal tax under
the tax treaty between the
United States and Pakistan. I
have not previously claimed
an income tax exemption under this treaty for income received as a teacher or student before the date of my
arrival in the United States.

4. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the teaching services for
which exemption is claimed].
The treaty exemption is available only for compensation
paid during a period of two
years beginning on that date.

Portugal
1. I was a resident of Portugal
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I have accepted an invitation
by
[insert the name
of the university, college,
school, or other similar educational institution] to come to
the United States solely for
the purpose of teaching or engaging in research at that educational institution. I will receive compensation for my
teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) qualifies for exemption from withholding of
federal tax under the tax
treaty between the United
States and Portugal. I have
not previously claimed an income tax exemption under
that treaty for income received as a teacher or researcher before the date
specified in paragraph 5.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your arrival into the United
States before beginning the
teaching or research services
for which the exemption is
claimed]. The treaty exemption is available only for compensation paid during a period of two years beginning
on that date.

Slovenia and
Venezuela
1. I was a resident of
[insert the name of the country under whose treaty you
claim exemption] on the date
of my arrival in the United

States. I am not a U.S. citizen. I have not been lawfully
accorded the privilege of residing permanently in the United States as an immigrant.
2. I am temporarily present in
the United States for the purpose of teaching or carrying
on research at
[insert the name of the educational or research institution],
which is a recognized educational or research institution. I
will receive compensation for
my teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) qualifies for exemption from withholding of federal tax under the tax treaty
between the United States
[insert the
and
name of the country under
whose treaty you claim exemption]. I have not previously claimed an income tax
exemption under this treaty
for income received as a
teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the general interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
[insert the date
on
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date. In no event have
I claimed an exemption under
this treaty for income received as a teacher or researcher for more than five
years.

Thailand
1. I was a resident of Thailand
on the date of my arrival in the
United States. I am not a U.S.
citizen. I have not been lawfully accorded the privilege of
residing permanently in the
United States as an immigrant.
2. I am visiting the United States
for the purpose of teaching or
engaging in research at
[insert the name of
the educational or research
institution at which you teach
or perform research] for a
Publication 519 (2015)

period not exceeding two
years. I will receive compensation for my teaching or research activities.
3. The compensation received
during the entire tax year (or
during the period from
to
) for these activities
qualifies for exemption from
withholding of federal tax under the tax treaty between the
United States and Thailand. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
benefit of a specific person or
persons.
5. I arrived in the United States
on
[insert the date
of your last arrival into the
United States before beginning the teaching or research
services for which exemption
is claimed]. The treaty exemption is available only for
compensation received during a period of two years beginning on that date.

Trinidad and Tobago
1. I was a resident of Trinidad
and Tobago on the date of my

Publication 519 (2015)

arrival in the United States. I
am not a U.S. citizen. I have
not been lawfully accorded
the privilege of residing permanently in the United States
as an immigrant.
2. I have accepted an invitation
by the U.S. government, or by
a university or other educational institution in the United
States, to come to the United
States for the purpose of
teaching or engaging in re[insert the
search at
name of the educational institution], which is an educational institution approved by
an appropriate governmental
education authority. No
agreement exists between
the government of the United
States and the government of
Trinidad and Tobago for the
provision of my services. I will
receive compensation for my
teaching or research services.
3. The teaching or research
compensation received during the entire tax year (or for
the period from
to
) qualifies for exemption from withholding of
federal tax under the tax
treaty between the United
States and Trinidad and Tobago. I have not previously
claimed an income tax exemption under that treaty for
income received as a

teacher, researcher, or student before the date of my arrival in the United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
private benefit of a specific
person or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date.

United Kingdom
1. I was a resident of the United
Kingdom on the date of my
arrival in the United States. I
am not a U.S. citizen. I have
not been accorded the privilege of residing permanently
in the United States as an immigrant.
2. I am a professor or teacher
visiting the United States for a
period of not more than two
years for the purpose of
teaching or engaging in research at
[insert the
name of the educational institution], which is a recognized
educational institution. I will
receive compensation for my

teaching or research activities.
3. The teaching or research
compensation received during the entire tax year (or during the period from
to
) qualifies for exemption from withholding of federal tax under the tax treaty
between the United States
and the United Kingdom. I
have not previously claimed
an income tax exemption under that treaty for income received as a teacher, researcher, or student before
the date of my arrival in the
United States.
4. Any research I perform will be
undertaken in the public interest and not primarily for the
benefit of any private person
or persons.
5. I arrived in the United States
on
[insert the date
of your last arrival in the United States before beginning
the teaching or research services for which exemption is
claimed]. The treaty exemption is available only for compensation received during a
period of two years beginning
on that date. The entire treaty
exemption is lost retroactively
if my stay in the United States
exceeds two years.

Page 65

Index

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

30% Tax 20

A

Accuracy-related penalties 37
Additional Medicare Tax 43, 45
Adoption credit:
Dual-status alien 34
Nonresident alien 31
Resident alien 30
Agricultural workers 39, 44
Alien:
Nonresident 3, 10, 17
Resident 3, 10, 17
Alien status, employer
notification of 39
Alternative minimum tax 19
Amended returns 36
American Samoa, residents
of 10, 26, 32
Annuities:
Income 16
Source rule 12
Asset-use test 18
Assistance (See Tax help)
Athletes, professional 5
Awards 12

B

Basis of property 13
Beneficiary of estate or trust 17
Business, U.S. 17
Business-activities test 18
Business expenses, ordinary
and necessary 26
Business operations 17
Business profits and losses and
sales transactions 18

C

Canada:
Commuters 4
Exemptions 33
Personal exemption 27
Qualifying widow filing
status 26
Residents of 27
Social security benefits 47
Transportation-related
employment 39
Withholding tax 40
Capital assets, sales or
exchanges 20
Casualty and theft losses 29
Central withholding
agreements 40
Charitable contributions 28
Child and dependent care
credit:
Dual-status alien 33
Nonresident alien 31
Resident alien 30
Child tax credit:
Resident alien 30, 31, 33
Claims for refund 36
Closer connection 6
Commodities, trading in 17
Community income 14
Page 66

Commuters from Canada or
Mexico 4
Compensation for labor or
personal services:
Geographical basis 11
Contingent interest 15
Credit for the elderly or the
disabled:
Dual-status alien 33
Resident alien 30
Credits against tax:
Child and dependent care
credit 31, 33
Child tax credit 30, 31, 33
Credit for the elderly or the
disabled 33
Dual-status alien 33
Earned income credit 31, 33
Education credits 30, 31, 33
Excess social security tax
withheld 31
Foreign tax credit 30, 33
Hope credit 30, 31
Lifetime learning credit 30, 31
Retirement savings
contributions 30, 31, 33
Tax paid on undistributed
long-term capital gains 31
Tax withheld at source 31
Tax withheld on partnership
income 31
Withholding from wages 31
Crew members:
Alien status 4
Compensation 16
Currency, transporting 36

D

Days of presence 4
Deductions 26, 28
De minimis presence 8
Departure permit 51
Depreciable property 13
Diplomats (See Foreign
government employees)
Direct economic
relationship 18
Disclosure statement 38
Dividends, U.S. source
income 10
Dual-status aliens 7
Dual-status tax year 7, 32
Child care credit 33
Computation of tax 33
Credit for the elderly or the
disabled 33
Earned income credit 33
Education credit 33
Exemptions 33
Foreign tax credit 33
Forms to file 34
Head of household. 33
Income subject to tax 32
Joint return 33
Residency ending date 7
Residency starting date 7
Restrictions 32
Standard deduction 32
Tax rates 33
When and where to file 34

E

Earned income credit:
Dual-status alien 33
Nonresident alien 31
Resident alien 30
Education credits:
Dual-status alien 33
Nonresident alien 31
Resident alien 30
Effectively connected
income 18
Foreign income 19
Investment income 18
Pensions 18
Real property gain or loss 18
Real property income
choice 21
Tax on 20
Transportation income 18
Employees, household 39
Employees, withholding
exemption under tax
treaty 42
Employees of foreign
governments 50
Employees of international
organizations 50
Employer identification
number 25
Estate, beneficiary 17
Estimated tax 38, 45
Excess social security tax 31
Exchange visitors 44
Income from foreign
employer 16
Social security and Medicare
taxes 44
Exclusions from gross
income 14
Annuities 16
Compensation from a foreign
employer 16
Gambling winnings, dog or
horse racing 16
Students and exchange
visitors 16
Treaty income 16, 46
Exempt individual 5
Exemption from withholding:
Employees 42
Independent contractors 42
Students, teachers, and
researchers 42
Exemptions:
Dual-status taxpayer 33
Indian students and business
apprentices 28
Nonresident alien 27
Resident alien 27
Residents of Mexico or
Canada 27
Residents of South Korea 27
U.S. nationals 27
Expatriation tax 22

F

Fellowship grant:
Excludable 16
Source rule 12

Withholding tax 41
Filing requirements 35
Filing returns 25
Amended returns 36
Claims for refund 36
Commonwealth of the Northern
Mariana Islands 36
Dual-status taxpayer 34
Estimated tax 46
Form 1040-C 52
Form 1040NR 25, 35
Form 1040NR-EZ 25, 35
Form 2063 52
Guam 36
Nonresident alien 25
U.S. Virgin Islands 36
Who must file 35
Filing status 26
First-year choice 7
Fixed or determinable
income 20
Foreign country 6
Foreign earned income
exclusion 14
Foreign employer 15, 16
Foreign government
employees:
Alien status 5
Exempt from U.S. tax 50
Tax treaty exemption 47
Foreign income subject to U.S.
tax 19
Foreign organizations,
charitable contributions
to 28
Foreign tax credit:
Dual-status alien 33
Nonresident alien 30
Resident alien 30
Forms 6
1040-C 52
1040-ES(NR) 45
1040NR 35
1040NR-EZ 35
1040X 36
1042-S 42
1116 30, 33
2063 52
2106 29
2210 46
3903 27
4563 32
4790 (See FinCEN 105)
6251 19
8233 42
8275 38
8288 43
8288-A 43
8288-B 43
8801 31
8805 41, 42
8833 6, 47
8840 6
8843 6
8854 22
FinCEN 105 36
W-4 39, 41, 42
W-7 25
W-8BEN 42
W-8ECI 40
W-9 39

Publication 519 (2015)

Forms to file:
Dual-status alien 34
Nonresident aliens 35
Resident alien 34
Sailing permits 52

G

Gambling winnings, dog or
horse racing 16
German social security
benefits 47
Green card test 3

H

Head of household:
Nonresident alien 26
Resident alien 26
Home, sale of 16
Household employees 39

I

Identification number, taxpayer:
Defined 25
Penalty for failure to supply 38
Identity theft 53
Income:
Community 14
Effectively connected 18
Exclusions 14
Fixed or determinable 20
Foreign 19
From real property 21
Income affected by treaties 16
Interest 14
Investment 18
Personal services 18
Reporting 26
Sale of home 16
Tip 40
Income code:
28 20
Income from U.S. sources 10
Dividends 10
Interest 10
Pensions and annuities 12
Personal property 13
Personal services 11
Real property 13
Rents or royalties 13
Independent contractors:
Withholding exemption under
tax treaty 42
Withholding rules 40
India, students and business
apprentices from:
Exemptions 41
Exemptions for spouse and
dependents 28
Standard deduction 28
Withholding allowances 39
Individual retirement
arrangement (IRA) 27
Individual taxpayer
identification number
(ITIN) 25
Intangible property 13
Interest:
Portfolio 14, 15
Interest income:
Contingent 15
Excludable 14
Source rule 10
Publication 519 (2015)

International organization
employees:
Alien status 5
Exempt from U.S. tax 50
International social security
agreements 45
Interrupted period of
residence 22
Inventory 13
Investment income 18
Itemized deductions 28

J

Job expenses 29

K

Korea, South:
Exemptions 27, 33
Married filing separately 26
Qualifying widow filing
status 26
Withholding tax 40

L

Last year of residency 8
Long-term U.S. resident:
Defined 22
Expatriation tax 22
Losses:
Business 18
Capital Assets 20
Casualty and theft 29
Of nonresident aliens 26
Real property 18

M

Married filing jointly:
Nonresident alien 26
Resident alien 26
Medical condition 4
Medicare tax 43
Mexico:
Commuters 4
Exemptions 33
Personal exemption 27
Qualifying widow filing
status 26
Residents of 27
Transportation-related
employment 39
Withholding tax 40
Miscellaneous deductions 29
Monetary instruments,
transporting 36
Moving expenses 27
Multi-level marketing 11, 41
Municipal bonds 14

N

National of the United
States 26, 33, 39
Natural resources (See Real
property)
Non-registered obligations 15
Nonresident alien 3
Annuity income 16
Business expenses 26
Casualty and theft losses 29
Charitable contributions 28
Child care credit 31

Credit for excess social security
tax withheld 31
Credit for income tax
withheld 31
Credit for prior year minimum
tax 31
Defined 3
Earned income credit 31
Education credits 31
Effectively connected income,
tax on 20
Filing Form 1040NR 25
Filing Form 1040NR-EZ 25
Foreign tax credit 30
Gambling winnings, dog or
horse racing 16
Head of household 26
How income is taxed 17
Individual retirement
arrangement (IRA) 27
Interest income 10
Job expenses 29
Losses 26
Married filing jointly 26
Miscellaneous deductions 29
Moving expenses 27
Personal exemptions 27
Qualifying widow(er) 26
Standard deduction 28
State and local income
taxes 28
Students 44
Tax paid on undistributed
long-term capital gains 31
Tax withheld at source 31
Travel expenses 29
Withholding from partnership
income 31
Withholding tax 38
Nonresident spouse treated as
a resident 9

O

Obligations:
Not in registered form 15
Registered 15
Original issue discount 20

P

Partnership Income, tax
withheld on 41
Partnerships 17
Payment against U.S. tax 34
Tax withheld at the source 31
Withholding from wages 31
Penalties 37
Accuracy-related 37
Failure to file 37
Failure to pay 37
Failure to supply taxpayer
identification number 38
Fraud 38
Frivolous tax submission 38
Negligence 37
Substantial understatement of
income tax 37
Penalty for failure to pay
estimated income tax 46
Penalty on early withdrawal of
savings 27
Pensions 18
Source rule 12
Withholding on 40

Personal exemption:
Prorating 41
Withholding allowance 40
Personal property 13
Personal services income:
Connected with U.S.
business 18
Paid by foreign employer 15
Source rule 11
Tax treaty exemption 47
Withholding on wages 39
Portfolio interest 14, 15
Prizes 12
Professional athletes 5
Property:
Depreciable 13
Intangible 13
Inventory 13
Personal 13
Real 13, 18
Protective return 36
Publications (See Tax help)
Puerto Rico, residents of 10,
26, 32, 39

Q

Qualified investment entity:
Distributions paid by 19

R

Railroad retirement
benefits 20, 33
Real estate (See Real property)
Real property:
Definition 13
Income from 21
Natural resources 13
Sale or exchange of 18
Source rule 13
Tax withheld on sale of 42
U.S. real property interest 18
Real property income 20
Refunds, claims for 36
Registered obligations 15
Rents 13
Researchers, wage withholding
exemption under tax
treaty 42, 61
Residence, interrupted 22
Residency:
First year 7
Last year 8
Starting date 7
Termination date 8
Tests 3
Resident alien 3
Child tax credit 30, 31, 33
Defined 3
Education credits 30
Head of household 26
Married filing jointly 26
Qualifying widow(er) 26
Resident alien status,
choosing 8
Retirement savings
contributions credit:
Dual-status alien 33
Nonresident alien 31
Resident alien 30
Royalties 13

Page 67

S

Sailing permits, departing
aliens:
Aliens not requiring 51
Bond furnished, insuring tax
payment 52
Form 1040-C 52
Form 2063 52
Forms to file 52
When to get 51
Where to get 51
Salary (See Personal services
income)
Sale of home, income from 16
Sales or exchanges, capital
assets 20
Scholarship:
Excludable 16
Source rule 12
Withholding tax 41
Securities, trading in 17
Self-employed retirement
plans 27
Self-employment tax 44
Social security benefits:
Dual-status alien 33
Nonresident alien 20
Social security number 25
Social security tax:
Credit for excess tax
withheld 43
Excess withheld 31
Foreign students and exchange
visitors 44
International agreements 45
Self-employment tax 44
Totalization agreements 45
Withheld in error 44
Source of compensation for
labor or personal services:
Alternative basis 12
Multi-year compensation 11
Time basis 11
Source of income 10
Standard deduction 28
State and local income
taxes 28

Page 68

Stocks, trading in 17
Student loan interest
expense 27
Students:
Alien status 5
Engaged in U.S. business 17
Fellowship grant 12, 41
Income from foreign
employer 16
Scholarship 12, 41
Social security and Medicare
taxes 44
Tax treaty exemption 47
Wage withholding exemption
under tax treaty 42, 57
Students and business
apprentices from India 28,
39, 41
Substantial presence test 4

T

Tax, expatriation 22
Tax, transportation 21
Tax credits and payments:
Nonresident aliens 30
Resident aliens 30
Tax help 53
Tax home 6, 13
Tax paid on undistributed
long-term capital gains 31
Taxpayer identification number:
Defined 25
Penalty for failure to supply 38
Tax treaties:
Tax Treaties:
Benefits 46
Capital gains 47
Effect of 6
Employees of foreign
governments 47
Exclusions from income 16
Income affected by 16
Income entitled to benefits 42
Reporting benefits claimed 48
Table of 49
Teachers and professors 47

Trainees, students, and
apprentices 47
Tax year 25, 32
Teachers:
Alien status 5
Tax treaty exemption 47
Wage withholding exemption
under tax treaty 42, 61
Tie-breaker rule 6
Tip income 40
Totalization agreements 45
Trade or business, U.S. 17
Beneficiary of estate or
trust 17
Business operations 17
Income from U.S. sources 18
Partnerships 17
Personal services 17
Students and trainees 17
Trading in stocks, securities,
and commodities 17
Trading in stocks, securities,
and commodities 17
Trainees 5, 17
Transportation income:
Connected with U.S.
business 18
Source rule 12
Transportation of currency or
monetary instruments 36
Transportation-related
employment, residents of
Canada or Mexico 39
Transportation tax 21
Travel expenses 29
Treaties, income affected by 16
Treaty benefits, reporting
benefits claimed 48
Treaty benefits for resident
aliens 47
Trust, beneficiary 17

U

U.S. national 26, 33, 39
U.S. real property holding
corporation 19
U.S. real property interest 18

U.S. tax-exempt income,
expenses allocable to 30
U.S. Virgin Islands, residents of:
Where to file 36
U.S Virgin Islands, residents of:
Withholding on wages 40

W

Wages (See Personal services
income)
Wages, withholding on 39
Wages exempt from
withholding 39
Waiver of filing deadline 36
When to file 35
Where to file 35
Who must file 35
Withholding 38, 41
Withholding tax:
Allowance for personal
exemption 40
Central withholding
agreements 40
Notification of alien status 39
On sale of real property 19
Pensions 40
Puerto Rico, residents of 39
Real property sales 42
Residents of Canada, Mexico,
or South Korea 40
Scholarships and grants 41
Social security taxes 43
Tax treaty benefits 42
Tip income 40
U.S. nationals 40
U.S. Virgin Islands, residents
of 40
Wages 39
Wages exempt from 39
Where to report on the
return 31
Withholding from
compensation 39

Publication 519 (2015)