US tax obligations for Europeans: when the IRS expects a return

For income tax, the US doesn't ask about your passport. It asks how many days you spent in the country and where your money comes from. So if you're a European who rents out an apartment in Florida, works a few months on a project in Texas, gets a green card or moves over for good, you'll deal with the IRS, the federal tax authority, sooner or later. This page sorts every situation where that happens in the order you need to check it: residency, income, treaties, tax number, deadlines, estimated payments, missed years and the side at home. Each section leads to its own guide. For how filing itself works step by step, see our article How to file a US tax return as a foreign national.

1The first question: are you a resident for the IRS?

US tax law splits foreigners into two groups. Resident aliens are taxed like Americans, on their entire worldwide income. Nonresident aliens pay only on US-source income. Which group you're in is decided by two tests in the statute, 26 U.S.C. § 7701(b), not by your visa or your registered address.

The Green Card Test. If you hold a green card at any point in the calendar year, meaning you may lawfully live in the US permanently, you're a resident. That stays the case until the status is formally given up or revoked, even if you've long since moved back to Europe.

The Substantial Presence Test. Without a green card, you're a resident if you were in the US on at least 31 days in the current year and the weighted total over three years reaches at least 183 days. It counts all days of the current year, one third of the days of the previous year and one sixth of the days of the year before that. Any day you're in the country, even briefly, counts. The IRS does the math itself: someone who spent 120 days in the US in each of three years gets 120 plus 40 plus 20, so 180, and is not a resident.

That's why 183 days are not always 183 days. The 183 days in the test are weighted days across three years. The 183 days in Article 15 of tax treaties, which apply to employment income, are actual days in one year or a twelve-month period. And your visa or ESTA governs something else again: how long a single stay may last. If you travel on business a lot, our article US tax liability when staying on a B1/B2 visa or ESTA covers the consequences.

Some days don't count: days in transit of less than 24 hours between two places outside the US, days when an illness that arose in the US keeps you from leaving, and days as a so-called exempt individual, for example as a student or teacher on a study or exchange visa whose conditions you meet. If you exclude such days, you must file Form 8843 with the IRS. And even if you meet the test, you stay a nonresident if you spent fewer than 183 days in the US that year, had your tax home abroad and can show a closer connection there. That's what Form 8840 is for, filed on time by the Form 1040-NR deadline.

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2Moving in and moving out: the year with two statuses

In the year you move to the US or leave it, you're often both: a nonresident for part of the year and a resident for the rest. The IRS calls this dual status. If you meet the Substantial Presence Test, your residency generally starts on the first day you were in the US that year. You can leave out up to ten days of an earlier short visit if you can show a closer connection to your home country for those days. Something similar applies at the end: your residency ends on your last day in the US if you then have a closer connection to another country and don't become a resident again the following year.

The dual-status return has limits that surprise many people. You get no standard deduction, you can't file jointly with your spouse, and if you're married you use the rates for married filing separately. Two elections can change that. With the First-Year Choice, you can be treated as a resident for part of the year you arrive if you were in the US for at least 31 consecutive days and then on at least 75 percent of the remaining days, and you meet the test the following year. And if you're married to a resident or US citizen at year end, you can jointly choose to be treated as a resident for the whole year. You then file jointly, but both on worldwide income, and neither of you can rely on the treaty to be a nonresident.

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3What the US taxes for nonresidents

As a nonresident, the IRS sorts your US income into two baskets, and each is taxed differently.

Effectively Connected Income. Income connected with a US trade or business is taxed, after allowable expenses, at the same graduated rates Americans pay. You usually have such a trade or business as soon as you work in person in the US, run a business there or hold a stake in a partnership active in the US. There's a narrow exception for employees of a foreign employer with no US business: if you spend no more than 90 days in the US in total during the year and earn no more than $3,000 for that work, the wages are not US income.

Fixed or Determinable Income. Passive US-source income with no link to a US business, such as dividends, interest, rents, royalties and pensions, is hit with a flat 30 percent tax on the gross amount, unless a treaty provides a lower rate. It's usually withheld by the payer. For rental income from US real estate, you can elect to treat it as business income. You then pay on the profit after depreciation and costs rather than on the gross rent, but you must file every year. Our article Taxes for US property owners shows what that means for a vacation home or rental apartment.

The US generally doesn't tax nonresidents on capital gains from securities, as long as they spent fewer than 183 days in the country that year; selling US real estate follows its own rules. Nonresidents don't pay self-employment tax, the social security contributions of the self-employed, unless a social security agreement assigns them to the US system.

That's where the filing requirement comes from. You must file a Form 1040-NR if you were engaged in a US trade or business during the year, even if you made no profit or your income is tax-exempt. Without a US business, you must file if the tax on your US income wasn't already fully withheld at source. And you file if you want a refund of overwithheld tax or want to claim deductions. Nonresidents face their own limits: no standard deduction, only single, married filing separately or qualifying surviving spouse status, and married filers use the rates for filing separately. Deductions and credits are only allowed if the return is filed on time, which the IRS says means no later than 16 months after the deadline.

Besides federal tax, states and in some cases cities levy their own income taxes with their own returns. Whether you have to file there depends on the state where you work, live or own property. Your federal return with the IRS does not replace them.

4What the tax treaty changes

Most European countries, including Norway, Sweden, Denmark, Finland, the UK, Ireland and the Netherlands, have a tax treaty with the US. For individuals, three effects matter most.

It settles dual residency. If you're a resident under US law and also count as resident at home, the treaty makes you resident in only one country. To decide, treaties check in turn where you have a permanent home, where your center of vital interests lies, where you habitually stay and what your nationality is. If your home country wins, the IRS calculates your tax as for a nonresident. You then file Form 1040-NR and attach Form 8833, disclosing that you're relying on the treaty. Failing to make that disclosure risks a penalty of $1,000 per case. For green card holders who were US residents for a long time, this step can trigger the expatriation tax rules.

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5No US tax number, no return: the ITIN

Every US tax return needs a taxpayer number. If you have a Social Security Number or can get one, you use it. Everyone else needs an ITIN, a nine-digit number the IRS issues for tax purposes only. It doesn't authorize you to work, doesn't change your immigration status and isn't valid ID outside the tax system. If you work in the US on a work visa, you can get an SSN and therefore won't be issued an ITIN.

You apply with Form W-7. As a rule, the application is attached to the return you need the number for; applying without a return only works if one of the IRS exceptions applies, for example for investment income subject to withholding where you claim treaty benefits. A valid passport on its own is enough to prove both identity and foreign status, either the original or a copy certified by the issuing agency. You can submit by mail to the IRS ITIN office in Austin, in person at a Taxpayer Assistance Center in the US, or through one of the IRS-authorized Acceptance Agents, some of whom operate abroad. The IRS quotes seven weeks for processing, and nine to eleven weeks during peak season (January 15 to April 30) and for applications from abroad.

You don't need an ITIN yet to file an extension or make estimated payments; the forms simply say "ITIN TO BE REQUESTED". If you need the number before your first return, for a bank account for example, we offer ITIN Express: a special procedure we developed together with the attorneys on the firm's team that doesn't require a prior tax return. The IRS processing time stays the same.

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6When your ITIN sits unused: expiry and renewal

An ITIN doesn't last forever. Under 26 U.S.C. § 6109(i), it only stays active as long as you use it. If it doesn't appear on a federal tax return for three consecutive tax years, neither your own nor someone else's as a dependent, IRS practice is to let it expire on December 31 of the third year. ITINs issued before 2013 and never renewed have already expired.

You only need to renew if the number is going to appear on a tax return again. If you only need your ITIN on information returns that others file about payments to you, such as Form 1099 or 1042-S, you can keep using it there even after it expires. Renewal again goes through Form W-7, ticking "Renew an existing ITIN", with your existing number and the same documents as for the first application, usually together with your return. If you file with an expired ITIN, expect delays, and some credits will be held back until the number is renewed.

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7Deadlines: April 15, June 15, October 15, December 15

Your deadline depends on your status at year-end and the type of income you have. Residents file by April 15 of the following year. If you're a resident living outside the US, with both your home and your main place of business abroad on April 15, you automatically get two extra months, until June 15. Nonresidents with US wages subject to withholding also have until April 15; all other nonresidents have until June 15.

Filing Form 4868 by the regular deadline pushes your filing date back six months: to October 15, or to December 15 if your regular deadline was June 15. The extension only covers filing. The tax is still due on the original date, and interest runs from then. If a deadline falls on a weekend or a legal holiday, the next business day applies.

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8Paying tax during the year: estimated payments

US income tax is paid as you go during the year, not just when you file. For employees, payroll withholding takes care of it. If you have income without withholding, such as profits from US business activity or rental income you report as business income, you make quarterly estimated payments. Nonresidents use Form 1040-ES (NR), residents Form 1040-ES.

You generally have to make estimated payments if, after withholding and refundable credits, you expect to owe at least $1,000 in tax and your withholding covers less than 90 percent of this year's tax or 100 percent of last year's. If your adjusted gross income last year was over $150,000, that figure rises to 110 percent. Nonresidents without US wages subject to withholding pay in three installments: half by June 15, and a quarter each by September 15 and January 15 of the following year. Everyone else pays in four installments: April 15, June 15, September 15 and January 15. Pay too little or too late and you owe a penalty at the interest rate the IRS sets each quarter. The IRS doesn't send reminders.

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9Missed years: catch up before the IRS asks

Many people only realize years later that they should have filed: after buying a rental property, after a long project in the US, after getting their green card. For nonresidents, the biggest reason not to wait is the rule on deductions. Expenses, depreciation and credits are only allowed on a timely return. File too late and the IRS can tax your gross income. The IRS can waive the deadline if you show that you acted reasonably and in good faith and you cooperate with its review. If you believe you have no US business income, you can file a protective return as a precaution, securing your deductions in case the IRS sees it differently.

The Streamlined Filing Compliance Procedures aren't a general route for anyone who has missed something. They're only open to US taxpayers, meaning US citizens, green card holders and people who meet the Substantial Presence Test, and only if the failure wasn't willful. The version for people living in the US requires that the returns for the last three years were filed when due: they are amended, FBARs for the last six years are filed late, and a flat penalty of 5 percent of the highest balance of foreign assets applies. Returns that were never filed can't be caught up this way. There's a separate version for US citizens living abroad, described on our page Streamlined Filing, and the first step for those affected is covered in Filing for the first time as an Accidental American.

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11Your roadmap: seven steps to the right return

1. Count your days. Take your entry and exit dates for the last three years and run the Substantial Presence Test for each year.
2. Determine your status. Check for a green card, exemptions for specific days, a closer connection to your home country and the treaty's tie-breaker rule for dual residence. Note which forms you'll need for this: 8843, 8840 or 8833.
3. Sort your income. Split your US income into business income and passive income, and check whether electing net-basis taxation makes sense for rental income.
4. Sort out your taxpayer number. An SSN if you have one or can get one, otherwise an ITIN via Form W-7, filed with your return.
5. Choose your forms. Form 1040 or Form 1040-NR with Schedule OI and whatever schedules your income requires; in the year you move, a dual-status return.
6. Lock in deadlines and payments. Note your regular deadline, file Form 4868 if needed, pay the tax by the original due date and plan estimated payments for the current year.
7. Report at home. Your US income belongs on your tax return in your home country, together with proof of the US tax paid.

For the full filing process and every detail the IRS asks for, see our guide How to file a US tax return as a European citizen. If you would rather not prepare the return yourself, we will handle it for you: your US tax return, Form 1040 or 1040-NR.

In short

• The IRS doesn't care about your passport, only your status: resident alien with a green card or under the Substantial Presence Test, otherwise nonresident alien.
• Residents report their worldwide income on Form 1040; nonresidents report only US income on Form 1040-NR, with a flat 30 percent on passive income unless a tax treaty says otherwise.
• Without an SSN you need an ITIN, applied for on Form W-7; it expires if you don't use it on a return for three years in a row.
• Nonresidents without US wages file by June 15, with an extension to December 15; deductions are only allowed if you file on time.

Frequently asked questions

Do I have to file a US tax return as a European?

It depends on your status and your income, not your citizenship. As a resident alien, meaning with a green card or under the Substantial Presence Test, you report your worldwide income on Form 1040. As a nonresident alien, you must file Form 1040-NR if you work or do business in the USA, and also if the tax on your US income was not fully withheld at source.

How many days in the USA make me taxable there?

Under the Substantial Presence Test you are a resident if you spent at least 31 days in the USA this year and the days this year, plus one third of last year's days and one sixth of the days the year before, add up to at least 183. Exceptions such as a closer connection to your home country and the tax treaty can still make you a nonresident.

Which form do I need, 1040 or 1040-NR?

Residents file Form 1040, nonresidents Form 1040-NR. In the year you move in or out you are often both, so you file a dual-status return, and your status at year end decides the main form.

Do I need an ITIN for my US tax return?

Yes, if you don't have a Social Security Number and can't get one. You apply for the ITIN on Form W-7, usually together with the return you need it for. You don't need it yet for an extension or for estimated payments.

When is my US tax return due?

Residents by April 15 of the following year. Nonresidents with US wages subject to withholding also by April 15, all other nonresidents by June 15. Form 4868 pushes the filing deadline back six months, but not the payment.

Do I also have to report my US income at home?

How we help you

• Your US Tax ReturnForm 1040 or 1040-NR, handled in English.
• ITIN ExpressYour ITIN through our special procedure, no tax return needed.
• Streamlined FilingCatch up on missed US tax returns and FBARs through the Streamlined procedure.
• US Tax ConsultationYour US tax question, answered by people who know both sides.