2003 HTML Instructions for Form 1040-C,

This is archived information that pertains only to the 2003 Tax Year. If you
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Table of Contents

Joint return. Nonresident aliens may not file a joint return. Resident aliens may file a joint return on Form 1040-C only if both of the following apply.

The alien and his or her spouse can reasonably expect to be eligible to file a joint return at the close of the tax period for which the return is made.
If the tax period of the alien is terminated, the tax period of his or her spouse is terminated at the same time.

If Form 1040-C is filed as a joint return, both spouses should enter their names, identification numbers, and passport or alien registration card numbers in the spaces provided on page 1 of the form. Also, both spouses should include their income in Part III and furnish the information requested in Part I of the form. If necessary, a separate Part I should be completed for each spouse.

Identifying number. You are generally required to enter your social security number (SSN). To apply for an SSN, get Form SS-5 from a Social Security Administration (SSA) office or you may call the SSA at 1-800-772-1213. Fill in Form SS-5 and return it to the SSA.

If you do not have an SSN and are not eligible to get one, you must apply for an individual taxpayer identification number (ITIN). For details on how to do so, see Form W-7 and its instructions. It usually takes about 4-6 weeks to get an ITIN. If you already have an ITIN, enter it wherever your SSN is requested on your tax return. If you are required to include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN.

Note:

An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law.

Line A. If your employer is willing to furnish a letter guaranteeing that the tax will be paid, check the “Yes” box. You only need to sign the form and leave the remainder blank. Be sure to attach the letter from your employer to Form 1040-C. The letter should state specifically the period and type of tax covered.

Part I—Explanation of Status—Resident or Nonresident Alien

Generally, you are considered a resident alien if you meet either the green card test or the substantial presence test for 2004. You are considered a nonresident alien for the year if you do not meet either of these tests. For more information on resident and nonresident alien status, see Pub. 519.

Green card test. You are a resident alien for tax purposes if you are a lawful permanent resident of the United States at any time during 2004. You are a lawful permanent resident of the United States if you have been given the privilege, under U.S. immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services (USCIS) or the Immigration and Naturalization Service (INS) has issued you an alien registration card, also known as a “green card.”

Substantial presence test. You are considered a resident alien for tax purposes if you meet the substantial presence test for 2004. You meet this test if you were physically present in the United States for at least:

31 days during 2004 and
183 days during the period 2004, 2003, and 2002, counting all the days of physical presence in 2004, ⅓ of the number of days of presence in 2003, and⅙ of the number of days in 2002.

Days of presence in the United States. Generally, you are treated as present in the United States on any day that you are physically present in the country at any time during the day. However, you do not count the following days of presence in the United States for purposes of the substantial presence test.

Days you regularly commuted to work in the United States from a residence in Canada or Mexico.
Days you were in the United States for less than 24 hours while you were traveling between two places outside the United States.
Days you were temporarily present in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States. This rule does not apply to any day you were otherwise engaged in a trade or business in the United States.
Days you intended, but were unable, to leave the United States because of a medical condition or medical problem that developed while you were in the United States.
Days you were an exempt individual. In general, an exempt individual is: (a) a foreign- government-related individual, (b) a teacher or trainee, (c) a student, or (d) a professional athlete who is temporarily present in the United States to compete in a charitable sports event.

Note:

If you qualify to exclude days of presence in the United States because you are an exempt individual (other than a foreign-government- related individual) or because of a medical condition or problem, file Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition, with your final income tax return.

Closer connection to a foreign country exception. Even though you would otherwise meet the substantial presence test, you are not treated as having met that test for 2004 if you: (a) were present in the United States for fewer than 183 days during 2004, (b) establish that during 2004 you had a tax home in a foreign country, and (c) establish that during 2004 you had a closer connection to one foreign country in which you had a tax home than to the United States unless you had a closer connection to two foreign countries.

Note:

If you meet this exception, file Form 8840, Closer Connection Exception Statement for Aliens, with your final income tax return.

Residence determined by tax treaty. Even though you would otherwise meet the substantial presence test, you are not treated as having met that test if you qualify as a resident of another country within the meaning of the tax treaty between the United States and that other country.

Dual-status tax year. Generally, if you are a resident alien and you leave the United States during the year with no intent to return, you have a dual-status tax year and are subject to dual-status restrictions in completing Form 1040-C. A dual-status tax year is one in which you have been both a resident alien and a nonresident alien. In figuring your income tax liability, different U.S. income tax rules apply to each status. See the Form 1040NR instructions for details.

Note:

Certain resident aliens who leave the United States during the year with no intent to return may owe tax under section 877. These resident aliens must take into account any amounts due for 2004 under section 877 when completing Form 1040-C. See Expatriation Tax in Pub. 519 for more information.

Income effectively connected with a U.S. trade or business—nonresident aliens. If you are a nonresident alien, the tax on your income depends on whether the income is or is not effectively connected with a U.S. trade or business.

Income effectively connected with a U.S. trade or business (including wages earned by an employee) is taxed at the graduated rates that apply to U.S. citizens and resident aliens. Income you receive as a partner in a partnership or as a beneficiary of an estate or trust is considered effectively connected with a U.S. trade or business if the partnership, estate, or trust conducts a U.S. trade or business.

Income from U.S. sources that is not effectively connected with a U.S. trade or business is generally taxed at 30%. Your rate may be lower if the country of which you are a resident and the United States have a treaty setting lower rates. See Pub. 901 for more details.

For a list of the types of income not considered effectively connected with a U.S. trade or business, see the instructions for Schedules A and B beginning on page 5. If you are a nonresident alien in the United States to study or train, see Pub. 519.

Part II—Exemptions

If you are a resident alien, you may claim the same exemptions allowed U.S. citizens on Form 1040.

If you are a nonresident alien engaged in a trade or business in the United States and you are a U.S. national (American Samoan or a Northern Mariana Islander who chose to be a U.S. national) or a resident of Canada, India, Mexico, Japan, the Republic of Korea (South Korea), you may claim the same number of exemptions you are entitled to on Form 1040NR. All other nonresident aliens engaged in a U.S. trade or business may claim only one exemption. For more details, see Pub. 519 or the Form 1040NR instructions.

If you are a nonresident alien not engaged in a trade or business in the United States, you cannot claim any personal exemptions for income that is not effectively connected with a U.S. trade or business.

Line 14c, column (2). You must enter each dependent's SSN or ITIN. See Identifying number on page 3.

Line 14c, column (4). Check the box in this column if your dependent is a qualifying child for the child tax credit. See the instructions for Form 1040 or Form 1040NR to find out who is a qualifying child.

Part III—Figuring Your Income Tax

Read the descriptions on line 1 of Form 1040-C for Groups I, II, and III to see which group(s) applies to you. If Group I or II applies, use lines 15-22 to figure your tax. If Group III applies, use lines 23 and 24 to figure your tax. If you are a nonresident alien to which both Groups II and III apply, use lines 15-24 to figure your tax.

Line 16. Adjustments. If you are a resident alien, you can take the adjustments allowed on Form 1040. The Form 1040 instructions have information on adjustments you can take. Be sure to consider the tax law changes noted on page 1.

If you are a nonresident alien and have income effectively connected with a U.S. trade or business, you can take the adjustments allowed on Form 1040NR. See the Form 1040NR instructions. Be sure to consider the tax law changes noted on page 1.

If you are a nonresident alien with income not effectively connected with a U.S. trade or business, you cannot take any adjustments.

Line 19. Credits. If you are a resident alien, you can claim the same credits as on Form 1040. If you are a nonresident alien with income effectively connected with a U.S. trade or business, you can generally claim the same credits as on Form 1040NR. Be sure to consider the tax law changes noted on page 1.

Line 21. Other taxes. Enter on line 21 any other taxes such as those listed below. See the instructions for Form 1040 or Form 1040NR for information on the additional taxes to include on this line.

Self-employment tax. This tax applies only to resident aliens. Use Schedule SE (Form 1040), Form 1040-PR, or Form 1040-SS to figure your self-employment tax. The self-employment tax rate for 2004 is 15.3%. This includes a 2.9% Medicare tax and a 12.4% social security tax. For 2004, the maximum amount of self-employment income subject to social security tax is $87,900. There is no limit on the amount of self-employment income subject to the Medicare tax.
Social security and Medicare tax on tip income not reported to employer. If you received tips of $20 or more in any month and you did not report the full amount to your employer, you must generally pay this tax. See the Form 1040 instructions or the Form 1040NR instructions.
Tax on qualified plans including IRAs, and other tax-favored accounts. If you received a distribution from or made an excess contribution to one of these plans, you may owe this tax. See the
Form 1040 instructions or the Form 1040NR instructions.
Household employment taxes. If you pay cash wages to any one household employee in 2004, you may owe this tax. See the Form 1040 instructions or the Form 1040NR instructions.
Tax on accumulation distribution of trusts. Use Form 4970 to figure the tax.
Tax from recapture of investment credit. Use Form 4255 to figure the tax.
Tax from recapture of low-income housing credit. Use Form 8611 to figure the tax.
Tax from recapture of Federal mortgage subsidy. Use Form 8828 to figure the tax.
Tax from recapture of qualified electric vehicle credit. For details on how to figure the tax, see Pub. 535, Business Expenses.

Line 24. Tax. You must generally enter 30% of the amount on line 23. However, if you are entitled to a lower rate or an exemption from tax because of a treaty between your country and the United States, attach a statement showing your computation. Also include the applicable treaty and article(s).

Line 28. Other payments. Include on line 28 any of the following payments. See the instructions for Form 1040 or Form 1040NR for details on other payments to include on this line.

Earned income credit (EIC). This credit applies only to resident aliens. Enter any EIC that is due to you.
Additional child tax credit to which you are entitled.
U.S. income tax paid at previous departure during the tax period. Enter any tax you paid if you previously departed the United States during this tax period.
Excess social security and RRTA tax withheld. If you had two or more employers in 2004 who together paid you more than $87,900 in wages, too much social security tax and tier 1 railroad retirement (RRTA) tax may have been withheld. See Pub. 505, Tax Withholding and Estimated Tax. For 2004, the maximum social security tax and
tier 1 RRTA tax is $5,449.80.
Credit for Federal tax paid on fuels. Use Form 4136 to figure the credit.

Signature

Form 1040-C is not considered a valid return unless you sign it. You may have an agent in the United States prepare and sign your return if you are sick or otherwise unable to sign. However, you must have IRS approval to use an agent. To obtain approval, file a statement with the IRS office where you file Form 1040-C explaining why you cannot sign.

If an agent (including your spouse) signs for you, your authorization of the signature must be filed with the return.

Paid preparers must sign. Generally, anyone you pay to prepare your return must sign it in the space provided. The preparer must also give you a copy of the return for your records. Someone who prepares your return but does not charge you should not sign your return.

If you have questions about whether a preparer is required to sign your return, please contact an IRS office.

Schedule A—Income

Line 1, column (c). Enter amounts shown as Federal income tax withheld on your Forms W-2, 1099, 1042-S, etc. Be sure to enter the amount withheld on the same line on which the related income is reported.

Line 1, column (d). Resident aliens should include income that would be included on Form 1040, such as wages, salaries, interest, dividends, rents, alimony, etc.

Line 1, column (e). Enter nonresident alien income effectively connected with a U.S. trade or business. Nonresident aliens should include income that would be included on page 1 of Form 1040NR or Form 1040NR-EZ. This includes:

Salaries and wages (generally shown in box 1 of Form W-2),
The taxable part of a scholarship or fellowship grant,
Business income or loss (income that would be included on Schedule C (Form 1040) or Schedule C-EZ
(Form 1040) as an attachment to Form 1040NR).
Any other income considered to be effectively connected with a U.S. trade or business. See the Instructions for Form 1040NR for details.

Line 1, column (f). Enter nonresident alien income from U.S. sources that is not effectively connected with a U.S. trade or business, including:

Interest, dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, and other fixed or determinable annual or periodic gains, profits, and income.
Prizes, awards, and certain gambling winnings. Proceeds from lotteries, raffles, etc., are gambling winnings. You must report the full amount of your winnings. You cannot offset losses against winnings and report the difference.
85% of the U.S. social security benefits you receive. This amount is treated as U.S. source income not effectively connected with a U.S. trade or business and is subject to the 30% tax rate, unless exempt or taxed at a reduced rate under a U.S. tax treaty. Social security benefits include any monthly benefit under Title II of the Social Security Act or part of a tier 1 railroad retirement benefit treated as a social security benefit. They do not include any supplemental security income (SSI) payments.

Line 5. Include on line 5, column (d), (e), or (f), all income you received during the year that is exempt by Code (see examples below). Also include on line 5 income that is exempt by treaty, but only if the income is reportable in column (d) or (e). Attach a statement that shows the basis for the treaty exemption (including treaty and article(s)).

Note:

Do not include on line 5 income reportable in column (f) that is exempt by treaty. Instead report these amounts on line 1 of column (f) and explain on the statement required for Part III, line 24, the basis for the reduced rate or exemption (see page 5).

Be sure to include on line 5, column (c), any amount withheld on exempt income you are reporting on line 5, column (d), (e), or (f). For example, include amounts that were withheld by a withholding agent that was required to withhold due to lack of documentation. However, do not include amounts reimbursed by the withholding agent.

Do not include on lines 1 through 4 any amount that is reportable on line 5.

Exempt income for nonresident aliens. The following income received by nonresident aliens is exempt from U.S. tax.

Interest on bank deposits or withdrawable accounts with savings and loan associations or credit unions that are chartered and supervised under Federal or state law, or amounts held by an insurance company under an agreement to pay interest on them, if the income is not effectively connected with a U.S. trade or business. Certain portfolio interest on obligations issued after July 18, 1984, is also exempt income.
Your personal service income if:
- You were in the United States 90 days or less during the tax year,
- You received $3,000 or less for your services, and
- You performed the services as an employee of or under contract with a nonresident alien individual, foreign partnership, or foreign corporation not engaged in a U.S. trade or business; or for a foreign office of a U.S. partnership, corporation, citizen, or resident.
Capital gains not effectively connected with a U.S. trade or business if you were in the United States fewer than 183 days during the tax year. Exception: Gain or loss on the disposition of a U.S. real property interest is not exempt.
U.S. bond income. Your income from series E, EE, H, or HH U.S. savings bonds that you bought while a resident of the Ryukyu Islands (including Okinawa) or the Trust Territory of the Pacific Islands (Caroline and Marshall Islands).
Annuities you received from qualified annuity plans or trusts if both of the following conditions apply:
- The work that entitles you to the annuity was performed either (1) in the United States for a foreign employer and you met the conditions under 2 earlier, or (2) outside the United States and
- When the first amount was paid as an annuity, at least 90% of the employees covered by the plan (or by the plan or plans that included the trust) were U.S. citizens or residents.

Itemized Deduction Worksheet

Certain items of income may be exempt from Federal tax under a tax treaty. For more details, see
Pub. 901.

Schedule B—Certain Gains and Losses From Sales or Exchanges of Nonresidents' Property Not Effectively Connected With a U.S. Trade or Business

If you are a nonresident alien, use Schedule B to figure your gain or loss from the sale or exchange of property not effectively connected with a U.S. trade or business. Include the following types of income. For more information on these types of income, see Pub. 519 and the Instructions for Form 1040NR.

1. Capital gains. Capital gains in excess of capital losses if you were in the United States at least 183 days during the year.

Note:

The gain or loss on the disposition of a U.S. real property interest is considered effectively connected and should be shown in column (e) of Schedule A.

2. Income other than capital gains.

Gains on the disposal of timber, coal, or U.S. iron ore with a retained economic interest.
Gains from the sale or exchange of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property, or of any interest in any such property. The gains must result from payments for the productivity, use, or disposition of the property or interest.

Original issue discount (OID). If you sold or exchanged the obligation, include only the OID that accrued while you held the obligation minus the amount previously included in income. If you received a payment on the obligation, see Pub. 519.

Schedule C—Itemized Deductions

If you are a resident alien, you can take the deductions allowed on Schedule A of Form 1040. See the Schedule A (Form 1040) instructions.

If you are a nonresident alien and have income effectively connected with a U.S. trade or business, you can take the deductions allowed on Schedule A of Form 1040NR. See the Schedule A (Form 1040NR) instructions. If you do not have income effectively connected with a U.S. trade or business, you cannot take any deductions.

Note:

Residents of India who were students or business apprentices may be able to take the standard deduction. See Pub. 519 for details.

Line 2. If the amount on
Form 1040-C, line 17, is over $142,700 ($71,350 if married filing separately), use the worksheet on page 7 to figure the amount to enter on line 2.

Schedule D—Tax Computation

Standard Deduction (Group I only)

If you do not itemize your deductions, you may take the 2004 standard deduction listed below for your filing status.

Filing Status	Standard Deduction
Married filing jointly or Qualifying widow(er)		$9,700*
Head of household		$7,150*
Single or Married filing separately		$4,850*
*To these amounts, add the additional amount shown next.

Additional amount for the elderly or the blind. An additional standard deduction amount of $950 is allowed for a married individual (whether filing jointly or separately) or a qualifying widow(er) who is age 65 or older or blind in 2004 ($1,900 if the individual is both age 65 or older and blind, $3,800 if both spouses are age 65 or older and blind). An additional standard deduction amount of $1,200 is allowed for an unmarried individual (single or head of household) who is age 65 or older or blind ($2,400 if the individual is both age 65 or older and blind).

Note:

If you were born before January 2, 1940, you are considered to be age 65 or older in 2004.

Limited standard deduction for dependents. If you can be claimed as a dependent on another person's 2004 return, your standard deduction is the greater of:

$800 or
Your earned income plus $250 (up to the standard deduction amount).

To this amount add any additional amount for the elderly or the blind.

Lines 6 and 14

Include in the total on line 6 or line 14, whichever applies, any tax from Form 4972, Tax on Lump-Sum Distributions, and Form 8814, Parents' Election To Report Child's Interest and Dividends.

Lines 7 and 15

Enter on line 7 or 15, whichever applies, any tax from Form 6251, Alternative Minimum Tax for Individuals.

Specific Instructions