US Tax Filing for Non-Residents: Form 1040-NR and IRS Compliance

Quick answer. A non-resident who carries on a trade or business in the United States, or who has had more tax withheld at source than was due, files Form 1040-NR with the IRS: by 15 April where they received wages subject to U.S. withholding or maintain an office in the United States, by 15 June in every other case. Form 4868 extends that deadline by six months, counted from the base date, so to 15 October or to 15 December depending on which one applies, but it does not extend the time to pay. If you are resident in France, the same income is also reported there on forms 2047 and 2042, with the treaty tax credit set against French tax, and your U.S. bank or brokerage accounts on form 3916.

The United States is unusual among major economies in that it taxes non-residents on their U.S.-source income, regardless of where those individuals or companies are based. If you are a French resident, an international entrepreneur, or a foreign company with U.S. investments, you may have IRS filing obligations that you are unaware of.

This applies to:

• French and European investors earning dividends from U.S. stocks
• Non-residents who own rental properties in the United States
• Foreign professionals receiving fees or compensation from U.S. companies
• Foreign partners in U.S. partnerships or LLCs
• Anyone who sold U.S. real estate (FIRPTA)

This guide explains who must file, which forms to use, how the France-US tax treaty works, and how excess withholding is recovered. One point up front: Hayot Expertise is a French chartered accountancy firm and does not prepare U.S. tax returns. Filing Form 1040-NR is the job of a practitioner authorised in the United States. We handle the French side of a cross-border file and work alongside your U.S. preparer.

The Two-Test Framework#

For U.S. federal income tax purposes, you are a Non-Resident Alien (NRA) if you do not satisfy either of the following:

Test 1, the Green Card Test: You hold a U.S. Permanent Resident Card (Green Card). If you do, you are taxed as a U.S. resident on your worldwide income.

Test 2, the Substantial Presence Test: You are considered a U.S. resident for tax purposes if you were physically present in the U.S. for:

• At least 31 days during the current calendar year, AND
• At least 183 weighted days over the three-year period made up of the current year and the two preceding years: all the days in the current year, plus 1/3 of the days in the first preceding year, plus 1/6 of the days in the second preceding year

If you fail both tests, you are a Non-Resident Alien and are subject to U.S. tax only on your U.S.-source income : not your worldwide income.

Common situation: A French resident who visits the U.S. for 2 weeks per year and owns U.S. shares and a Florida condo is almost certainly a Non-Resident Alien. They are subject to U.S. tax on U.S. dividends and U.S. rental income, but not on their French salary or French investment income.

Income Overview by Category#

Effectively Connected Income (ECI) vs. Fixed/Determinable/Annual/Periodical (FDAP)#

U.S. tax law distinguishes two categories of NRA income:

• FDAP income (dividends, rents, royalties, interest): generally subject to flat 30% withholding at source (or reduced treaty rate). No deductions allowed : taxed on gross amount
• ECI income (actively connected business income): taxed at the same progressive rates as U.S. residents (10%-37%), but deductions are allowed : taxed on net income

This distinction is critical: if you own U.S. rental property and elect to treat it as a business (Section 871(d) election), your rental income becomes ECI, meaning you can deduct mortgage interest, property taxes, depreciation, and management fees before calculating tax. The savings can be substantial.

The Convention Between the United States of America and the French Republic for the Avoidance of Double Taxation (signed on 31 August 1994, in general effect from 1 January 1996, amended by the protocols of 2004 and 2009) allocates taxing rights between the two states, so that French residents are not taxed twice on the same U.S.-source income.

Key provisions:

To benefit from treaty rates, you must certify your French residency to your U.S. payer (typically via Form W-8BEN). If your payer withheld at the standard 30% rate despite your French residency, you are entitled to a refund : claimed via Form 1040-NR.

What Is Form 1040-NR?#

The Form 1040-NR (U.S. Nonresident Alien Income Tax Return) is the U.S. federal tax return for non-residents. It is the equivalent of the regular Form 1040 used by U.S. residents and citizens, adapted for non-residents taxable only on U.S.-source income.

Filing a 1040-NR allows you to:

• Declare your U.S.-source income by category
• Claim treaty rate reductions (e.g., reduce withholding from 30% to 15%)
• Elect net income taxation for rental income (avoiding the default 30% gross withholding)
• Claim deductions on ECI income (mortgage interest, depreciation, professional expenses)
• Recover excess withholding if your payer withheld more than you actually owe
• Obtain an IRS refund where applicable

Key Sections of Form 1040-NR#

Page 1, identification and filing status: Your name, address, ITIN or SSN, country of residence, and foreign tax identification number.

Schedule NEC (Non-ECI Income): This is where you report FDAP income (dividends, rents subject to gross withholding) and claim treaty rate reductions. Each income item is reported alongside the applicable treaty article.

Effectively connected income: business income, rental income under the net election, and other effectively connected income are reported on page 1 of Form 1040-NR itself. Schedule 1 (Form 1040) covers additional income and adjustments only, and is not the ECI schedule.

Deductions: a non-resident alien cannot take the standard deduction. Itemised deductions specific to Form 1040-NR apply instead, on Schedule A.

Tax credits, two common misreadings: the Foreign Tax Credit is available on a Form 1040-NR only for foreign tax on foreign-source income that is effectively connected with a U.S. trade or business, so French tax paid on U.S. dividends cannot be credited there. And a resident of France cannot claim a dependent on a Form 1040-NR, which is open to U.S. nationals and to residents of Canada and Mexico, with particular rules for South Korea and for students from India: the Child Tax Credit is therefore closed. Relief from double taxation is obtained in France, through the treaty tax credit.

Who Needs an ITIN to File?#

To file a 1040-NR, you need a U.S. tax identification number. If you are not eligible for a Social Security Number (SSN), you need an ITIN (Individual Taxpayer Identification Number). This is a 9-digit number issued by the IRS specifically to non-residents with U.S. tax obligations. See our separate guide on obtaining an ITIN.

FBAR (Foreign Bank Account Report, FinCEN Form 114)#

The FBAR applies to US persons (citizens, Green Card holders, or those who pass the Substantial Presence Test) with foreign bank accounts that collectively exceeded $10,000 at any point during the year. Penalties for non-filing can reach $10,000 per account per year for non-willful violations, and up to $100,000 per account for willful violations.

For true Non-Resident Aliens, the FBAR generally does not apply. However, if your residency status is uncertain, for example if you have spent significant time in the U.S., a careful analysis is essential before concluding you are exempt.

FATCA (Foreign Account Tax Compliance Act)#

FATCA requires foreign financial institutions (including French banks) to report to the IRS accounts held by U.S. persons. If you hold U.S. citizenship or have previously resided in the U.S., your French bank may ask you to complete a Form W-9 to certify your U.S. person status. This is a FATCA compliance procedure.

FIRPTA: Withholding on U.S. Real Estate Sales#

When a non-resident sells U.S. real estate, the buyer is generally required to withhold 15% of the amount realised and remit it to the IRS (Foreign Investment in Real Property Tax Act, FIRPTA). The amount realised is the cash paid, plus the fair market value of any other property transferred, plus any liability assumed: it is not simply the gross sale price. Two statutory exceptions matter (26 U.S.C. § 1445): no withholding where the buyer acquires the property for use as a residence and the amount realised does not exceed $300,000 (subsection (b)(5)), and 10% instead of 15% where the buyer acquires it for use as a residence and the amount realised does not exceed $1,000,000 (subsection (c)(4)). This is a withholding mechanism, not a final tax.

You then file a 1040-NR to calculate your actual capital gains tax on the net profit. If the 15% withholding exceeds your actual tax, you receive the difference as a refund. FIRPTA withholding can be reduced or eliminated through an IRS withholding certificate if you can demonstrate the actual tax will be lower.

Important: NRAs living outside the U.S. automatically receive a 2-month extension (April 15 → June 15) without needing to request it. However, where your base deadline is 15 April and tax is due, interest runs from that date, so paying early reduces the interest cost even if you file later. Where your base deadline is 15 June, that is the prescribed payment date and interest runs from then.

Late penalties:

• Late filing: 5% of unpaid tax per month (maximum 25%)
• Late payment: 0.5% per month (maximum 25%)
• Missed FBAR (non-willful): up to $10,000 per account
• Missed FBAR (willful): up to $100,000 or 50% of account balance

This is the blind spot of most articles on Form 1040-NR. Filing with the IRS relieves you of nothing in France. If your tax residence is in France, you are taxable there on your worldwide income, U.S.-source income included, and three French obligations arise alongside your U.S. ones.

The mapping table worth keeping at hand#

Form 2047, then form 2042#

Form 2047 lists income received outside France: dividends from U.S. companies, rent from a U.S. property, fees paid by a U.S. client. Amounts are converted into euros, then carried to the 2042 under the matching headings. The rule to remember: income already taxed in the United States is still reported in France. It is the tax credit that then removes the double taxation, not the omission.

The France / United States treaty tax credit#

The treaty allocates the right to tax and provides, depending on the category of income, either exclusive taxation in one state or a tax credit available in France. The applicable text and the related agreements are published on the French tax administration's international treaties page. This is what makes the French return inseparable from the U.S. one: withholding suffered in the United States is only useful if it is correctly carried over in France.

Accounts held abroad: forms 3916 and 3916-bis#

Article 1649 A of the French Tax Code requires individuals resident in France to report, together with their income tax return, the details of accounts opened, held, used or closed abroad. A U.S. bank or brokerage account falls squarely within that scope, including where it produces no income and including where it stayed dormant all year. The report is made on form 3916 / 3916-bis, which also covers capitalisation contracts and digital asset accounts.

Omission is penalised under article 1736, IV: a fine of €1,500 per undeclared account, raised to €10,000 where the account is held in a state that has no administrative assistance agreement with France. France and the United States are bound by a treaty and by a FATCA-type automatic exchange agreement, so the €1,500 figure is the one that applies to a U.S. account. The fine accumulates per account and per year, which is why apparently modest files quickly reach several thousand euros.

When a U.S. company sets up in France#

The mirror image exists on the corporate side: a U.S. company opening an activity in France creates French obligations of its own, depending on whether it chooses a subsidiary, a branch, or ends up with a permanent establishment. The starting point is our guide on setting up a company in France as a non-resident.

Case Study 1: French Investor Recovering Excess U.S. Dividend Withholding#

Situation: Sophie, a French tax resident, holds a $200,000 U.S. stock portfolio (Apple, Microsoft, Coca-Cola) generating $6,000 in annual dividends. Her French broker applies 30% U.S. withholding by default.

Problem: The France-USA treaty caps withholding at 15%. At 30%, she is overpaying: $1,800 withheld vs. $900 owed. The $900 excess is refundable by the IRS.

Solution:

1. Obtain an ITIN (since she has no SSN)
2. File Form 1040-NR claiming the 15% treaty rate on dividends
3. IRS issues a refund of $900
4. For future years: submit Form W-8BEN to the U.S. payer to enforce treaty rate at source

Lesson: Filing a 1040-NR is not only a compliance requirement : it is often a tax recovery tool.

Case Study 2: Non-Resident Owner of a Miami Rental Property : Net Income Election#

Situation: Pierre, based in Lyon, owns a Miami condominium rented long-term for $24,000 gross annual rent. His actual expenses (mortgage interest, HOA fees, property management, property tax, depreciation) total $18,000.

Option A, default 30% gross withholding (no 1040-NR): $24,000 × 30% = $7,200 U.S. tax

Option B, net income election plus 1040-NR: ($24,000 - $18,000) × 10% progressive rate = $600 U.S. tax

Annual tax saved by filing Form 1040-NR: $6,600

This election under IRC Section 871(d) must be made by filing a 1040-NR. It cannot be claimed retroactively beyond the standard 3-year refund window.

1. Determine your NRA status : confirm you fail both the Green Card Test and the Substantial Presence Test
2. Obtain an ITIN (Form W-7) if you lack a Social Security Number
3. Collect U.S. source documents: Form 1042-S (withholding statements), rental income records, sale/closing statements, Schedule K-1 from any U.S. partnership
4. Elect net income treatment for rental income if advantageous (Section 871(d))
5. Prepare and file Form 1040-NR with all applicable schedules and treaty claims
6. Submit Form W-8BEN to your U.S. payers to enforce treaty rates going forward
7. Verify FBAR and FATCA obligations if your residency status is at all ambiguous