anyone with experience filing US 1040-NR taxes?

[gamb00ler]

My landlady asked me to help her send a fax to US.  Our conversation then turned to other US related financial matters.

 

She worked in US for 15 years but never became a citizen and then moved back to Thailand.  She gave up her green card also.

She has been receiving her SS benefits for many years (15+).  The IRS is withholding ~25% because she is a non-resident alien.

She has never filed taxes since moving back to Thailand.

 

I read parts of several IRS publications about taxation of Non Resident Aliens who receive income from US.  I believe that if she files a 1040-NR she will be refunded a substantial portion of the money withheld.  She will probably get more than half of it back.

 

Here comes the technical portion ????

SSA benefits are classified as ECI income (Effectively Connected Income) and are therefor taxed using the same tax rates as for citizens.

IRS Pub 519, Chapter 4 states that ECI "income, after allowable deductions, is taxed at graduated rates.  These are the same rates that apply to US citizens and residents."

Chapter 5 of the same Pub 519 states that nonresident Aliens CANNOT claim the standard deduction. (Ouch!)  She will have no deductions.

 

Tax brackets are roughly 10% on 1st 10,000 and then 12% on next 30,000.  So her net tax rate will probably be around 11%.

 

I hope there are no gaping holes.  She has been a very helpful landlady and I'd like to see her only pay her correct taxes.

 

[Thailand J]

Just what I found.

Enter 85% of SS benefit on Line 8 of Schedule NEC, it is taxed at 10%, 15% or 30%.

The form: Schedule NEC   https://www.irs.gov/pub/irs-pdf/f1040nrn.pdf

The Instruction is on page 43 here: https://www.irs.gov/pub/irs-pdf/i1040nr.pdf

 

[Thailand J]

Is it 30%?

if so, 30% of 85% is 25.5% of the total SS payment.

https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1_2019_Feb.pdf

 

[gamb00ler]

Thanks @Thailand J.  In those instructions it clearly states that SS benefits are US sourced income but NOT considered ECI, so tax rate is 30% on 85% of benefit amount.

 

The bottom line is that my landlady won't get any of the withholding money back by filing 1040-NR.

[Tracyb]

(Deleted)

Edited August 5, 2022 by Tracyb

[rwill]

You could have her fill in her information on an online tax site and see what they come up with.

 

I use olt.com.  Federal returns are free.

 

OnLine Taxes at OLT.COM - Federal and State taxes Online

[gamb00ler]

1 hour ago, rwill said:

You could have her fill in her information on an online tax site and see what they come up with.

 

I use olt.com.  Federal returns are free.

 

OnLine Taxes at OLT.COM - Federal and State taxes Online

I considered that, but she's 81 and computer illiterate.

[Wrwest]

6 hours ago, gamb00ler said:

I considered that, but she's 81 and computer illiterate.

This past IRS filing, I needed to be sure of handling a couple matters and contacted American Asia Tax Company in Bangkok. Very helpful.      [email protected]