Part III: Special considerations when filing Form 1040NR
This three part series will look at who qualifies, requirements and exemptions of the form based on individual circumstances, and, finally, special considerations to note when filing a 1040NR: U.S. Nonresident Alien Income Tax Return. Even after you have determined which form you should use for filing as an NRA as discussed in Part II, important special rules and considerations can play important roles in future tax planning when filing Form 1040NR.
The main focus of this segment will take a closer look at spouse elections under Section 6013 comparisons, filing status considerations for same-sex couples, and special rules for dual-status taxpayers.
Spouse elections considerations under Section 6013
Section 6013 (g) – Election to treat Nonresident Spouse as U.S. Resident: Only applies to married taxpayers with one spouse being a NRA and other must either be a U.S. citizen or resident at the end of the tax year. This is a continuing election that can only be used once in a lifetime, meaning this election must be selected every future tax year after the initial tax year it is used. Neither spouse can make another 6013 (g) election in the future even if the spouses separate, divorce, or remarry. The death of either spouse will result in the termination of the election. Termination or suspension of the election by either spouse will result in the inability to use this election in any future tax years for either spouse as well. Both spouses are taxed on worldwide income. Neither spouse is eligible to claim they are not U.S. residents under a tax treaty.
Section 6013 (h) – Election to treat Nonresident Spouse as U.S. Resident Alien: Applies to dual-status taxpayers. This option may be beneficial for those with small incomes outside of the U.S. This is a one-time only use election. This election cannot be used again in any subsequent year after the initial year the election is selected. Both the taxpayer and spouse are treated as U.S. residents for the entire tax year. The spouses must file a joint return for the year of the election.
Filing status for same-sex couples
For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state or foreign country whose laws authorized the marriage of the same-sex individuals even if the same-sex couple now resides in a state or foreign country that does not recognize the marriage.
Note: Same-sex couples registered in domestic partnerships, domestic unions, or other similar relationships that are not considered a marriage under state or foreign law are also not considered married for federal tax purposes.
Special rules for dual-status taxpayers
In general, dual-status taxpayers may not claim the standard deduction, even for the part of the year the individual is a U.S. resident. Dual-status taxpayers may also not file a joint return unless the individual elects to be taxed as a resident alien rather than a dual-status taxpayer. For more information, see Chapter 6 of Publication 519 on how to prepare a tax return for a dual-status taxpayer.
Tax rates: Dual-status taxpayers, who are married at the end of the year and do not elect to file a joint return, must use the married filing separate rates.
Exemptions: A dual-status taxpayer can claim their own personal exemption. The dual-status taxpayer may also claim personal exemptions for a spouse or dependents for part of the year the tax payer was a U.S. resident, although these exemptions are subject to general rules for qualification. These exemptions also may not exceed the taxpayer’s taxable income.
Tax Credits: Dual-status residents can only claim tax credits on business income. Dual-status taxpayers may not claim any of the following credits: earned income tax credit, credit for the elderly or disabled, or education tax credits.
Other circumstantial considerations may affect your own tax filing of Form 1040NR. Having a better understanding the long-term consequences of how you file Form 1040NR today and its ramifications in the future can help you to make more informed choices based on your unique situation and tax obligations.
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