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Form 1040 vs 1040NR


Which form to file 1040 or 1040NR?

Residents of the U.S. and resident aliens must file regular 1040, 1040A, or 1040EZ depending on which form they are eligible to use for some certain tax year. In other words, the same taxpayer may choose each of those forms in different tax years as long as all necessary requirements for their use will be met. Moreover, if an individual is qualified to use 1040EZ he might opt to file just regular 1040 instead. In other words, if this person is eligible to use 1040EZ he can go with this from or choose either 1040A or 1040. It won’t affect his refund anyhow. On the other hand, if the taxpayer is eligible to use only 1040 because his income requirements haven’t been met or any other, he cannot use 1040A or 1040EZ.

Which form is more beneficial to file

If you qualify to use either 1040, 1040A, or 1040EZ then usually it doesn’t really matter which one to choose. The only time it might make a difference when you do your taxes with a tax service company and their fees based on which form you are eligible to file. For example, often times they might not charge anything for 1040EZ federal portion or just some relatively small amount. In contrast, your tax service fees might skyrocket when filing the regular 1040 depending on your particular situation.

1040NR and 1040NR-EZ

There are two forms nonresident aliens can use. These filing forms are 1040NR and 1040NR-EZ. You can read IRS Publication 519 to determine whether you are resident alien or not for tax purposes. You should not think that if you do not have U.S. citizenship then you are definitely a nonresident. Usually resident aliens should meet either green card test or substantial presence test. On the other hand, foreign individuals who work or study in the U.S. cannot be treated as nonresident aliens indefinitely.

Usually foreign people want to treat themselves as nonresident aliens in order not to pay Social Security and Medicare taxes because they are not going to stay in the country and retire here. On the other hand, residents of the U.S. and resident aliens must pay SS and MC taxes even if they are not going to benefit from that in the future.

Which form to file if Social Security and Medicare taxes were withheld in error

Many employers take automatically all necessary taxes that should be taken from employees disregarding sometimes the fact that not all of them might need to pay those taxes. If Social Security and Medicare taxes were withheld erroneously by your employer and he cannot reimburse it, you need to file Form 843 Claim for Refund and Request for Abatement. It might take quite awhile to get your money back. Therefore, file the form as soon as possible.

Planning point

If you see on your first paystub that Social Security and Medicare taxes were withheld, let your employer know about it right away. When your hirer takes taxes out from your paycheck he accrues liabilities because this money does not belong to him. Since your company does not send these withheld taxes to the IRS and Social Security shortly after the withholdings were made, there is a good chance of getting your money back even from your employer if the error occur and you notice it right away.