You are not a Canadian resident, but some income from the sources in the United States and still wondering if you need to file an income tax return in the United States? Let’s try and understand your tax obligations in the United States.
Non-resident alien filing US tax return 1040NR
One thing is clear that if if you are a U.S. citizen then your filing status is “resident” for tax purposes, no matter where you live in this world. If you are not a U.S. citizen, then your filing status will be determined based on the substantial presence test in the United States or Green Card test and certain other factors. Please visit the “non-resident alien test” to determine your residency status. If both of these situations do not apply to you then you will be considered as a “non-resident” alien. Non-resident filing staus in a tax year only apply to a person who is not a citizen of the United States and he/she is not considered a resident for tax purposes in the year of filing.
You are a non-resident alien then you need not file an income tax return in the United States. That’s not always true. What if you have income effectively connected with a trade or business in the United States. You may need to file a US tax return if you have income from the sources in the United States, where you were engaged in a trade or business in the United States, or You invested in a qualified opportunity fund. For example, you as a Canadian Citizen went on vacation in Florida for a week and bought a vacation house there which later you rented out. Since you were present in the U.S. only 7 days in the tax year, assuming other test does not apply to you, you will be considered as a non-resident alien for tax purposes in the United States. But now you have rental income that is effectively connected with a property in Florida, you need to file an income tax return in the USA.
Your income taxes payable also depends on your filing status. If you are a non-resident alien filing Form 1040-NR, you may be able to use one of the filing statuses discussed below.
If you are single, your filing status should be “single”.
Married Filing Jointly
Generally, this filing status depends on your residency status. If you or your spouse both are considered non-resident then you cannot file as a married filing jointly. This also applies when only one spouse is considered a non-resident alien. If either you or your spouse was a non-resident alien at any time during the tax year, you cannot file under the status as married filing jointly. However, the spouse of a U.S. citizen or a resident alien has a choice. A spouse who is a non-resident alien but married to a U.S. citizen or a resident alien can choose to be treated as U.S. residents and file joint returns under the status of married filing jointly. While choosing this status you need to attach a statement with your tax return. Looking into this scenario carefully, you need to note that a non-resident alien spouse of a U.S. citizen or resident alien need not file a tax return in the United States.
Married Non-resident Aliens Filing Separately
If you are a married nonresident alien, and your spouse is not a U.S. citizen or resident, you will file your U.S. tax return under the status of married filing separate return. The tax rate that applies to you. is the Tax Rate Schedule for married filing separate returns. These tax rates will be used to determine the income tax on your income effectively connected with a U.S. trade or business. You normally cannot use the Tax Table column or the Tax Rate Schedule for single individuals.
Eligibility to file as a qualifying widow(er) and can use income tax rate for the joint return if:
Head of Household
You cannot file as head of household if you are a non-resident alien at any time during the tax year.
RKB Accounting has expertise in cross-border taxation and has been providing accounting and taxation services for the last fifteen years in Canada and USA. RKB services include incorporating a business on both sides of the border, bookkeeping, sales tax, payroll, and corporate and personal income tax. RKB’s expertise includes cross-border tax planning, long-term tax planning, helping business start-ups, business structure planning, and resolving complex tax matters. RKB a CPA(Delaware), CA(India), and CIA(USA) has over 25 years of experience in accounting and taxation in dealing with various countries in the world.
Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.