For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as nonresident aliens and resident aliens. This publication will help you determine your status and give you information you will need to file your U.S. tax return. Resident aliens generally are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States.

Table A, What You Need To Know About U.S. Taxes, provides a list of questions and the chapter or chapters in this publication where you will find the related discussion.

Answers to frequently asked questions are presented in the back of the publication.

The information in this publication is not as comprehensive for resident aliens as it is for nonresident aliens. Resident aliens are generally treated the same as U.S. citizens and can find more information in other IRS publications.

Itemized deduction worksheet—Form 1040NR-EZ.  The itemized deduction worksheet was unintentionally omitted from the instructions for Form 1040NR-EZ. If your adjusted gross income is more than $142,700 ($71,350 if you are married), you must use the worksheet in chapter 5 of this publication to figure the amount to enter on line 11 of Form 1040NR-EZ.

Higher taxable income limits for using Form 1040A, 1040EZ, and TeleFile. Beginning with the 2004 return, the income limit for using Form 1040A, Form 1040EZ, and TeleFile will increase to taxable income of less than $100,000. Previously, the limit was taxable income of less than $50,000. See your tax package instructions for other requirements to use these forms.

Health savings account (HSA) deduction. You may be able to take a deduction if contributions (other than an employer contribution) were made to your HSA for 2004. See Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Modified AGI limit for traditional IRA contributions increased. For 2004, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is:

For all filing statuses other than married filing separately, the upper and lower limits of the phaseout range increased by $5,000. See Publication 590, Individual Retirement Arrangements (IRAs).

Tax computation worksheet. If your taxable income for 2004 is $100,000 or more, you will figure your 2004 tax using a new Tax Computation Worksheet, rather than the Tax Rate Schedules. The Tax Computation Worksheet is found in your tax package.

Winnings from horse or dog races. Winnings from horse or dog races in the United States are excludable from the gross income of a nonresident alien if they are from a legal wager made after October 22, 2004, outside the United States in a parimutuel pool. See Gambling Winnings From Dog or Horse Racing in chapter 3.

Student loan interest deduction. The person legally obligated to make interest payments on a student loan may be able to deduct interest payments on that loan made by someone else. See Publication 970, Tax Benefits for Education, for more information.

Sales tax deduction. You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Form 1040, Schedule A. See your income tax package instructions for more information.

Earned income credit. The maximum amount of income you can earn and still get the earned income credit increased. The amount depends on your filing status and number of children. The maximum amount of investment income you can have and still be eligible for the credit has increased to $2,650. See Tax Credits and Payments in chapter 5.

Certain dividends paid by foreign corporations to nonresident aliens are not taxable. If you are a nonresident alien, there is no 30% tax on U.S. source dividends you receive from a foreign corporation after 2004. See Second exception under Dividends in chapter 2 for a definition of foreign corporation and how to figure the amount of excludable dividends.

No 30% tax on certain interest-related dividends. If you are a nonresident alien, there is no 30% tax on certain interest-related dividends from sources within the United States that you receive after 2004 from a regulated investment company.

No 30% tax on certain short-term capital gain dividends. If you are a nonresident alien, there may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive after 2004 from a regulated investment company. This tax relief will not apply to you if you are present in the United States for 183 days or more of your 2005 tax year.

IRA deduction expanded. You may be able to deduct up to $4,000 ($4,500 if age 50 or older at the end of 2005). If you were covered by a retirement plan, you may be able to take an IRA deduction if your 2005 modified AGI is less than $60,000 ($80,000 if qualifying widow(er)). See Publication 590 for more information.

Residents of Japan. Beginning in 2005, nonresident aliens who are residents of Japan generally cannot claim the following benefits.

However, if you choose to have the old U.S.- Japan treaty apply in its entirety for 2005, you may be able to claim these benefits in 2005. See chapter 5 for a discussion on exemptions and filing statuses.

Third party designee. You can check the “Yes” box in the “Third Party Designee” area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions such as asking the IRS for copies of notices or transcripts related to your return. Also, the authorization can be revoked. See your income tax package for details.

Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service using Form 8822, Change of Address. Nonresident aliens who filed Form 1040NR or Form 1040NR-EZ with the Internal Revenue Service Center, Philadelphia, PA 19255, should send the form there. Resident aliens should send the form to the Internal Revenue Service Center for their old address (addresses for the Service Centers are on the back of the form).

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.