Publication 519 |
2000 Tax Year |
Illustration of Dual-Status Return
Sam R. Brown is single and a subject of the United Kingdom (U.K.).
He temporarily entered the United States with an H-1 visa to
develop a new product line for the Major Product Co. He arrived in the
United States March 18, 2000, and left May 25, 2000, returning to his
home in England.
The Major Product Co. later offered Sam a permanent job, and he
returned to the United States with a permanent visa on September 10,
2000.
During Sam's temporary assignment in the United States, the Major
Product Co. paid him $6,500. He accounted to his employer for his
expenses for travel, meals, and lodging while on temporary assignment,
and was reimbursed for his expenses. This amount was not included on
his wage statement, Form W-2, given to him when he left the
United States.
After Sam became permanently employed, his wages for the rest of
the year were $21,800, including reimbursement of his moving expenses.
He received a separate Form W-2 for this period. His other
income received in 2000 was:
Interest income paid by the U.S. Bank (not effectively connected):
March 31 |
$45 |
June 30 |
$48 |
September 30 |
$68 |
December 31 |
$89 |
Dividend income paid by Major Product Co. (not effectively
connected):
April 3 |
$120 |
July 3 |
$120 |
October 2 |
$120 |
Interest income (in U.S. dollars) paid by the U.K. Bank:
March 31 |
$90 |
June 30 |
$110 |
September 30 |
$118 |
December 31 |
$120 |
Sam paid the following expenses while he was in the United States:
Moving expenses incurred and paid in September
|
$8,300 |
VA State income tax |
$612 |
Contributions to U.S. charities |
$310 |
Before Sam left the United States in May, he filed Form
1040-C (see chapter 11).
He owed no tax when he left the United
States.
Form 1040NR
Sam completes Form 1040NR as follows.
Sam prints his name, address, and social security number on page 1
of Form 1040NR. He prints "Dual-Status Statement" across the top
of the form.
On line 8, Sam enters his salary while a nonresident. He enters the
state income tax withheld from his salary on line 35 (carried from
line 17, Schedule A) and the federal income tax withheld from his
salary on line 55. He also carries these amounts to Form 1040
(discussed later).
Sam also reports the not effectively connected U.S. income received
while he was a nonresident alien. He reports the April and July
dividends from the Major Product Co. in column (c) of line 70a, page
4. He figures the tax on his dividend income on lines 82 and 83 and
carries it forward to line 49 on Form 1040NR. (The rate of tax on this
income is limited to 15% by Article 10 of the U.S.-U.K. income
tax treaty. Treaty rates vary from country to country, so be sure to
check the provisions in the treaty you are claiming.)
Sam also reports $36, the amount of tax withheld at source by the
Major Product Co. in column (a) of line 70a, Form 1040NR, and carries
it forward to line 62a. Later he will report the amount on Form 1040.
Sam is not required to report the interest credited to his account
by the U.S. Bank during the period he was a nonresident alien.
Interest on deposits with U.S. banks that is not effectively connected
with a U.S. trade or business generally is treated as income from
sources in the United States but is not taxable to a nonresident
alien. He checks the "Yes" box on page 5, item L, of Form 1040NR,
and explains why this income is not included on his return.
The interest income received from the U.K. Bank while Sam was a
nonresident alien is foreign source income and not taxable on his U.S.
return.
Sam completes all applicable items on page 5 of Form 1040NR. This
provides the dates of arrival and departure, types of visas, and
information concerning tax treaty benefits that he has claimed.
Form 1040
Sam completes Form 1040 as follows.
Sam prints his name, social security number, and address on page 1
of Form 1040. He checks "Yes" for the Presidential Election
Campaign Fund and "Single" under filing status. He also checks
the exemption block for himself and prints "Dual-Status Return"
across the top of the form.
Sam reports on Form 1040 all income received during the period he
was a resident of the United States and the income received during the
period he was a nonresident alien that was effectively connected with
his U.S. trade or business. This income is taxed at the graduated
rates. For information purposes, he also reports on Form 1040NR his
salary while he was a nonresident.
Sam reports on Form 1040 the interest income credited to his
account by the U.S. Bank and the U.K. Bank in September and December,
while he was a U.S. resident. If any of the interest income received
while he was a nonresident alien was effectively connected with his
U.S. trade or business, he would also report these amounts on Form
1040. If he had paid foreign income tax on the interest income
received from the U.K. Bank, he would claim a foreign tax credit.
The dividend income includes only the October dividend, which was
received while Sam was a U.S. resident. The dividend income received
during his period of nonresidence was not effectively connected with
his U.S. trade or business and, therefore, not taxed at the graduated
rates.
Sam completes Form 3903 (not illustrated) to figure his moving
expense deduction and reports the total on line 26, Form 1040.
Sam cannot claim the standard deduction because he has a
dual-status tax year. He reports his itemized deductions on Schedule A
(Form 1040). The only itemized deduction he had while he was a
nonresident alien was the state income tax withheld from his pay. For
information purposes, he lists this amount on line 1, Schedule A, Form
1040NR, in addition to including it on Schedule A, Form 1040.
Sam totals his itemized deductions on line 28, Schedule A (Form
1040). He reports the amount from line 28 of Schedule A (Form 1040) on
line 36, Form 1040.
Sam enters $2,800 for one personal exemption on line 38, Form 1040.
He subtracts the amount on line 38 from the amount on line 37 to
figure his taxable income, line 39.
Sam is now ready to figure the tax on his income taxed at the
graduated rates. He uses the column in the Tax Table for single
individuals. To this tax ($2,516), he must add the tax on the income
not effectively connected ($36), the income taxed at the 30% or lower
treaty rate. Since there is no line on Form 1040 for this computation,
he reports the two amounts in the margin in the Tax and Credits
area of Form 1040.
Sam reports the total amount of tax withheld ($2,700) from his
wages on line 58, Form 1040. He includes in this amount the tax
withheld at source ($36 from line 62a, Form 1040NR) on dividends paid
to him while he was a nonresident alien. He also writes a brief
explanation.
For information purposes, Sam also reports on line 55, Form 1040NR,
the amount of tax withheld ($536) from wages earned while he was a
nonresident alien.
Sam compares the total tax on line 57, Form 1040, to the total
payments on line 65, to see if he has overpaid his tax or if he owes
an additional amount. Since the amount of tax withheld and the amount
of tax paid at source are more than his total tax, he has overpaid his
tax. He subtracts the amount on line 57 from the amount on line 65 to
figure his refund.
Sam checks to be sure that he has completed all parts of Form 1040
that apply to him. He also checks to see if he has completed the
necessary parts of the Form 1040NR that he is attaching as a
statement. He then signs and dates the return and enters his
occupation.
Sam mails the return to the following address.
Internal Revenue Service Center
Philadelphia, PA 19255
Form 1040 pg 1&2
Sch A (form 1040) & Form 1040NR pg1
Form 1040NR pg 2&3
Form 1040NR pg 4&5
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