A non-resident alien is an individual who is not a U.S. citizen or U.S. national and does not meet the criteria for being classified as a resident alien. They typically have a closer connection to another country and are in the U.S. temporarily, such as for work, study, or travel.
Non-resident aliens do not pass the green card or substantial presence test, which determines residency status for tax purposes. They are subject to different tax rules and obligations than U.S. residents and citizens.
What Is the Difference Between Resident Aliens and Nonresident Aliens?
The key differences between resident and nonresident aliens pertain to their tax status and residency. Let’s review these key differences in the table below.
| Resident Aliens | Nonresident Aliens | |
| Residency Criteria | Meet either the green card test (hold a U.S. green card) or the substantial presence test (physically present in the U.S. for a significant period, generally 183 days or more over three years). | Do not meet the green card test or substantial presence test. Typically, they have a closer connection to another country and are in the U.S. temporarily. |
| Taxation | Taxed similarly to U.S. citizens, meaning they must report and pay taxes on their worldwide income. | Only taxed on their U.S.-sourced income and must file different tax forms, such as Form 1040-NR. |
| Tax Forms | File the same tax forms as U.S. citizens, such as Form 1040. | File specific forms like Form 1040-NR and may have different withholding requirements. |
| Tax Deductions and Credits | Generally eligible for the same deductions and credits as U.S. citizens. | Have limited access to deductions and credits, often restricted to certain treaty benefits and specific conditions. |
Tax Implications for Non-Resident Aliens
Non-resident aliens are taxed only on income earned from U.S. sources. They must file Form 1040-NR for their U.S. tax returns. Generally, non-resident aliens are subject to a flat 30% tax rate on income such as interest, dividends, rents, and royalties, unless a tax treaty provides a lower rate.
They cannot claim standard deductions and have limited access to tax credits. Non-resident aliens must adhere to different withholding and reporting requirements than U.S. citizens and resident aliens. Understanding these rules is crucial to ensuring compliance and avoiding penalties.
What Employment Documentation Is Required for Nonresident Aliens?
Nonresident aliens working in the U.S. typically need an Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN) to work and pay taxes. They must complete Form W-4 for tax withholding purposes and provide their employer with the appropriate work authorization documents, such as an employment authorization document (EAD) or a visa that allows employment.
Additionally, they may need to submit Form W-8BEN to certify their foreign status for tax withholding purposes.
Do Nonresident Aliens Have Social Security Numbers?
Yes, nonresident aliens may have Social Security Numbers. However, if they are not eligible for an SSN, they can apply for an Individual Taxpayer Identification Number (ITIN) to fulfill their tax obligations.
SSNs are typically issued to individuals authorized to work in the U.S., including certain nonresident aliens eligible for employment-based visas or who have permission to work temporarily in the country.
Benefits of Hiring Non-Resident Aliens
Yes, there can be benefits for hiring non-resident aliens, depending on your circumstances and needs:
- Access to Global Talent: Hiring non-resident aliens allows employers to tap into a worldwide talent pool.
- Fill Skill Gaps: Non-resident aliens may possess specialized skills or expertise in high demand but may be scarce domestically.
- Cultural Diversity: Non-resident aliens often bring cultural diversity to the workplace, fostering a more inclusive and innovative work environment.
- Language Skills: Non-resident aliens fluent in languages other than English are advantageous for businesses with international operations or diverse customer bases.
- Global Market Knowledge: Hiring non-resident aliens can provide valuable insights into global markets, consumer preferences, and business practices.
- Cost Savings: Non-resident aliens may have lower salary expectations or be willing to accept alternative benefits or work arrangements, potentially resulting in cost savings.
Workforce Flexibility: Non-resident aliens may be available for temporary or project-based work arrangements.
