What happens if I file my 1040-NR several years late?
Three things run at once and only one of them is the penalty. The late-filing penalty is computed by reference to the tax owing and the length of the delay, so a year with no balance carries little of it. Interest runs on anything unpaid. The third is the one nobody expects: on a non-resident return, deductions and credits against effectively connected income can be refused where the return goes in too late, which turns a net-basis computation into a gross-basis one and can create a liability that would never otherwise have existed. That is why the order of work here is to establish where you stand first and file second, not the other way round.
Can I still get back tax that was over-withheld from me?
Often, but not indefinitely. A refund is claimed by filing the return for that year, and the right to claim it is time-limited, so the oldest years in a backlog are the ones genuinely at risk. The practical step is to settle which years still fall inside the claim period before any reconstruction is done on the rest — it changes what is worth rebuilding and in what order. Where a year has closed, the withholding is simply gone, and it is far better to know that at the start than to find out after the file has been rebuilt. Bringing several missed years current is its own kind of engagement.
Is there a penalty if the late return shows no tax owing?
The late-filing penalty is charged by reference to the tax owing, so a year that produces no balance usually carries little of it. That is not the same as the year being free. Separate penalties attach to the information returns that may sit alongside the return, and those are charged per form rather than by reference to any tax — on a cross-border file the heaviest exposure is frequently a disclosure form and not the tax at all. A nil year can also cost you deductions if it goes in late enough. So the question to ask is not whether tax is owing, but what else was due for that year.
Can deductions be refused on a late non-resident return?
Yes, and that is why lateness bites harder on this return than on an ordinary one. Effectively connected income is taxed on a net basis, expenses first, but that treatment is conditional on a return being filed — and where it is filed late enough the deductions and credits against that income can be denied, leaving the gross receipts taxed. Someone with real costs can find themselves assessed on money they never kept. The point at which that happens turns on the facts of the year and on what has already come from the IRS, so it is established for your own years before anything is filed rather than assumed.
Can late-filing penalties be reduced or cancelled?
They can be, on two quite different grounds. One is administrative and turns on a clean prior record rather than on any explanation at all. The other is reasonable cause, which is not an assertion of good intent — it is a documented sequence of what you knew, when you knew it, and what you did about it, with records standing behind each date. A request saying the client was unaware and meant well decides nothing; one setting out a dated narrative supported by correspondence gives the reviewer something to weigh. We write those statements alongside the returns they explain.
What do I do about an IRS letter for an unfiled year?
Answer it with a return rather than with a letter, wherever that is still possible. Where nothing has been filed, the IRS can work out a liability from the payer statements it already holds — the gross amounts reported against your name, with no expenses, no cost base on a property disposal and no treaty position in them. That figure is normally well above the real one, and it does not become correct by being ignored. Preparing the return that should have been filed and submitting it as the response is what replaces a proposed computation with a computed one. Responding to an IRS notice has its own sequence.
Do non-residents pay US estate tax?
Yes, on US-situs assets — and with a far smaller exemption than a US citizen or domiciliary receives, which is why exposure can arise at values people assume are safe. US real property, tangible property located there and shares issued by US companies are generally in; foreign-issued securities and certain deposits generally are not. An estate tax treaty, where one exists, can improve the position considerably. See US estate tax for non-resident aliens.
What is Form 1042-S and what do I do with it?
The statement a US payer issues to a non-resident showing US-source income paid and tax withheld — the non-resident counterpart to a 1099. Use it two ways. In your own country it evidences the US tax paid for credit purposes. And where the rate withheld was higher than your treaty entitlement, or the income was not taxable at all, the way back to the money is a US non-resident return claiming the refund. Check the income and exemption codes before assuming the rate was right. See Form 1042-S.
