Are non-resident aliens with limited partnership income below a certain threshold required to file Form 1040NR?
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Nonresident aliens with U.S. partnership income must generally file Form 1040-NR if they are engaged in a trade or business in the United States at any time during the taxable year, regardless of the amount of income earned. This requirement is set out in Treasury Regulations and the Internal Revenue Code, and is not subject to a minimum income threshold in most cases.
1. General Filing Requirement for Nonresident Aliens with Partnership Income
- Regulations: Treasury Regulation § 1.6012-1(b)(1) states that every nonresident alien individual who is engaged in a trade or business in the United States at any time during the taxable year must file a return on Form 1040-NR, even if their gross income is less than the minimum amount specified in section 6012(a) for making a return. This includes nonresident aliens who are partners in a partnership that is engaged in a U.S. trade or business, because the partnership’s activities are attributed to the partner under section 875(1).
- Partnership Attribution: If a partnership is engaged in a U.S. trade or business, each nonresident alien partner is considered to be engaged in a U.S. trade or business and must file Form 1040-NR, regardless of the amount of income allocated to them.
- No General Minimum Threshold: There is no general minimum income threshold for nonresident aliens with U.S. partnership income. Even if the income is very small, the filing requirement applies if the partnership is engaged in a U.S. trade or business.
2. Exception for Effectively Connected Wages Below the Personal Exemption
- Notice 2005-77 Exception: There is a limited exception for nonresident aliens whose only U.S. source income is wages that are effectively connected with a U.S. trade or business and are less than the personal exemption amount. In such cases, the nonresident alien is not required to file Form 1040-NR solely because of those wages. However, this exception does not apply to partnership income; it is limited to wage income.
3. Partnership Income and the Exception
- Partnership Income Not Covered by Exception: The exception in Notice 2005-77 does not apply to nonresident aliens with partnership income. The exception is specifically for nonresident aliens whose only U.S. source income is wages below the personal exemption amount. If a nonresident alien has U.S. partnership income, even if it is below the personal exemption amount, the filing requirement remains.
- IRS Instructions: The Instructions for Form 1040-NR confirm that a nonresident alien partner in a U.S. partnership that is engaged in a trade or business in the United States must file Form 1040-NR, regardless of the amount of income, unless the partnership was not engaged in a U.S. trade or business and the partner’s income is only U.S. source income reportable on Schedule NEC (i.e., not effectively connected income) and the tax was fully withheld at source.
4. Summary Table from IRS Instructions
5. Conclusion
Nonresident aliens with U.S. partnership income are required to file Form 1040-NR, regardless of the amount of income, if the partnership is engaged in a U.S. trade or business. There is no minimum income threshold for this filing requirement. The exception for income below the personal exemption amount applies only to wage income, not to partnership income.
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