Form 1040-NR: The Non-Resident's US Tax Return, Explained

Written by CA Sumit ChandwaniChartered Accountant & Founder · Reviewed by Minal Bihani, EA

Non-residents are taxed by the US only on US-connected income — but the rules for what counts are precise.

Who files a 1040-NR

• Non-resident individuals with income effectively connected to a US trade or business
• Non-residents with US-source income that wasn't fully withheld at source
• Anyone claiming a refund of over-withheld US tax or protective treaty positions

ECI vs FDAP — the two buckets

ECI (effectively connected income) is income from actively doing business in the US. It's taxed at normal graduated rates on the 1040-NR, after deductions. FDAP (dividends, royalties, certain interest) is passive US-source income taxed at a flat 30% — or a lower treaty rate — usually collected by withholding, with no deductions.

The LLC question everyone asks

Owning a US LLC does not automatically create US tax. A non-resident selling services to US clients while physically working from abroad often has foreign-source income — potentially no US income tax at all. But dependent agents, US inventory, or US-performed work change the answer fast, and the 5472/1120 filing exists regardless.

Deadlines

Generally April 15 if you had wages subject to withholding; June 15 otherwise, with extensions available to October 15. You'll need an ITIN — which is usually applied for with this very return.

The bottom line

Source the income, characterize it as ECI or FDAP, apply the treaty, then file — or document why you don't have to. MOREOFTAX prepares 1040-NRs, ITIN applications and the 5472 filings that ride alongside them.