Is there a minimum income threshold below which a non-resident alien with limited partnership income reported on a K-1 is not required to file Form 1040NR?
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There is no minimum income threshold below which a nonresident alien with limited partnership income reported on a K-1 is categorically exempt from filing Form 1040NR. The filing requirements for nonresident aliens are governed by both the Internal Revenue Code and Treasury Regulations, and the rules for partnership income are distinct from those for wage income.
Key Legal Principles
1. General Filing Requirement for Nonresident Aliens
Treasury Regulation § 1.6012-1(b)(1) states:
"[E]very nonresident alien individual (other than one treated as a resident under section 6013 (g) or (h)) who is engaged in trade or business in the United States at any time during the taxable year or who has income which is subject to taxation under Subtitle A of the Code shall make a return on Form 1040NR. For this purpose it is immaterial that the gross income for the taxable year is less than the minimum amount specified in section 6012(a) for making a return."
This means that if a nonresident alien is engaged in a U.S. trade or business or has U.S.-source income subject to tax, they must file Form 1040NR, regardless of the amount of income.
2. Partnership Income and "Engaged in Trade or Business"
A nonresident alien who is a partner in a partnership that is engaged in a trade or business in the United States is considered to be engaged in a U.S. trade or business, even if the nonresident alien's only connection to the U.S. is through the partnership. This applies to both general and limited partners, and the rule is not dependent on the amount of income.
3. Exception for Wage Income Below the Personal Exemption Amount
IRS Notice 2005-77 provides an exception for nonresident aliens who earn less than the personal exemption amount in U.S.-source wages that are effectively connected with a U.S. trade or business. Such individuals are not required to file Form 1040NR solely because of those wages, provided their tax liability is fully satisfied by withholding at source. However, this exception does not apply to partnership income.
4. No Minimum Threshold for Partnership Income
The exception in Notice 2005-77 is limited to wage income. For nonresident aliens with partnership income (such as that reported on a Schedule K-1), the general rule applies: there is no minimum income threshold. Even if the partnership income is very small, the nonresident alien must file Form 1040NR if they are engaged in a U.S. trade or business through the partnership.
5. Exception for Tax Fully Withheld at Source (Not Applicable to Partnership Income)
There is an exception to the filing requirement for nonresident aliens who are not engaged in a U.S. trade or business and whose U.S. tax liability is fully satisfied by withholding at source (e.g., on certain types of passive income). However, this does not apply to partnership income that is effectively connected with a U.S. trade or business, because such income is not subject to final withholding in the same way as fixed or determinable annual or periodical (FDAP) income.
Summary
- Nonresident aliens with partnership income (K-1) from a U.S. partnership engaged in a trade or business must file Form 1040NR, regardless of the amount of income.
- The only exception for a minimum income threshold applies to U.S.-source wage income, not partnership income.
- The filing requirement is not waived even if the partnership withheld tax on the nonresident alien's share of income.
Practical Example
If a nonresident alien receives a K-1 showing $10 of U.S.-source income from a partnership engaged in a U.S. trade or business, they are required to file Form 1040NR.
Conclusion
There is no minimum income threshold below which a nonresident alien with limited partnership income reported on a K-1 is exempt from filing Form 1040NR. The filing requirement applies regardless of the amount of partnership income.
If you have additional facts (such as whether the partnership is engaged in a U.S. trade or business, or whether the income is FDAP and fully withheld at source), those could affect the analysis, but for typical K-1 partnership income, the answer above applies.
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