Do I file a 1040-NR if tax was already withheld?
Not always. The return is required where US-source income was not fully satisfied by withholding at source. If everything you received was passive income taxed on the gross amount and the payer withheld the full statutory amount, the liability may already be settled. Two situations change that. Income effectively connected with a US trade or business is taxed on a net basis and so has to be computed on a return. And where a payer withheld at the statutory rate although a treaty reduced it, the return is how the excess is recovered rather than an obligation to pay more.
Why is some of my US income taxed at a different rate?
Because two rate systems run side by side on the one return. Income effectively connected with a US trade or business is taxed on a net basis at graduated rates, so the expenses of earning it come into the calculation. Passive US-source income is taxed on the gross amount at a flat statutory rate, with no deduction for the costs of producing it, and only a treaty can reduce that rate. The same taxpayer can have both on one form, so the first question on any item is which of the two systems it falls into.
What does effectively connected income actually mean?
It is the category that decides how an item is taxed rather than whether it is taxable at all. Income effectively connected with a US trade or business is taxed on a net basis at graduated rates, which means the deductions attributable to it are allowed. Other US-source passive income is taxed on the gross amount. Because the consequence is both a different rate and a different base, the classification is worth settling before the return is prepared: an item put into the wrong system produces a wrong answer that stays arithmetically consistent throughout.
I left the US mid-year, which return do I file?
Possibly both, on a split year. A dual-status filer reports the non-resident part of the year on the non-resident return and the resident part separately, and the division between them is a question of fact about when status changed rather than a choice to be made. The difficulty is rarely the arithmetic. It is the allocation: each item of income has to be assigned to the part of the year it belongs to, on a consistent basis, and the two halves must not report the same receipt or leave one out.
Can a treaty reduce the tax on my US income?
On the gross-basis income, yes. That flat statutory rate is the one a treaty can reduce, and for many kinds of passive US-source income that is the whole of the benefit. On the net-basis side a treaty works differently, because the question there is usually whether the activity amounts to a US trade or business at all, or whether a treaty article keeps the profits out of US taxation. Either way the position rests on facts you should be able to evidence, and it belongs on the return rather than only inside the calculation.
How do I get back US tax that was over-withheld?
By filing the return for the year and claiming the amount withheld against the liability actually due. Withholding at source is a payment on account applied by a payer who knows the payment and not the recipient, so it goes on at the statutory rate unless the payer held valid documentation of your foreign status and treaty eligibility before paying. Where it did not, the difference comes back through the return. That means a year of your money sitting with a treasury, which is why the documentation is worth putting in front of the payer first.
What is a "dual-status alien spouse", and why is my software asking?
The question comes from the filing-status screens, and it is asking whether your spouse was a non-resident or part-year resident for the year — because if they were, a joint return is not available by default. An election exists to treat a non-resident spouse as a resident for the whole year, which unlocks joint filing at the price of bringing their worldwide income into the US return and their accounts into its reporting. See a US person with a non-resident spouse.
What is a double tax treaty and what does it actually do?
It is an agreement between two countries that divides up the right to tax. Article by article it decides which country taxes employment income, dividends, interest, royalties, pensions, property and business profits — and where both may tax, it caps what the source country can withhold and tells the other to give credit. It also breaks residence ties and opens a government-to-government channel for disputes. What it never does is apply itself: a treaty position is claimed. See our treaty work.
