Who is Required to File a US Tax Return: a Guide
Our firm often gets questions from former US residents who want to know when they are required to file a US tax return. The following provides a quick guide to help people determine when they might be required to file a US tax return.
Part 1: US Residents (for tax purposes)
To start, all US citizens and permanent residents (green card holders) must file a US tax return every year unless their income level is so low they fall under the minimum threshold for filing. Generally, if you can’t be claimed as a dependent on someone else’s return, and you don’t have any self-employment income, then your minimum income threshold for the 2015 tax year will be:
Gross Income ($) 2015
Single (under 65 years of age/65+)
Married, filing jointly (both under 65, one 65+, both)
Married, filing separately
Head of Household (under 65, 65+)
Widower with dependent child (under 65, 65+)
If your gross income falls below the appropriate threshold you are not required to file but it might be beneficial to file (especially if you have dependents) in case you will be entitled to a refund.
It doesn’t matter where your income was earned or what type of income it was, you must file a return even if you won’t be required to actually pay taxes thanks to the foreign tax credit or foreign income exclusion.
In addition to citizens and green-card holders, anyone who has been in the US for a sufficient period of time under the substantial presence test (and you can’t claim any exemptions, exceptions, or exclusions) you must file a US resident return. If you qualify under the substantial presence test but can claim one of those exemptions you must file the appropriate form (8840 or 8843) with the IRS and a 1040 or 1040NR where applicable.
Part 2: Nonresidents who must file a non-resident return (1040-NR or 1040NR-EZ)
Non-residents who are engaged in a US trade or business must file a 1040NR regardless if none of that income is “effectively connected” with the US, no income was actually earned, or the income is exempt from taxation under a tax treaty.
The other group of persons required to file a non-resident return are representatives of a deceased non-resident who was required to file and representatives of estates or trusts with US-source income.
Part 3: Persons with US-source income who are not required to file a non-resident return
People with US-source income who are not engaged in a trade or business (for example, interest on bank accounts or pension funds) they are only required to file a yearly non-resident return if there isn’t sufficient withholding to cover the taxes they may owe. To ensure sufficient withholding is made, a nonresident should submit the appropriate W-8 form (or 8233 for personal services) to the person making those payments who must withhold and pay the taxes directly to the IRS. The W-8 form will provide an opportunity to claim a lower rate of taxation for residents of certain treaty countries which have negotiated a lower rate of withholding on US taxes.
Just like US citizens who are not required to file a yearly return, it may still be advantageous for some non-residents to file when they are entitled to receive a refund (and the value of that refund is greater than the cost of preparing the yearly return.)