Federal Tax Filing Requirements for Nonresident Aliens Temporarily in the United States

October 27, 2025

Overview

Nonresident aliens who are temporarily present in the United States and perform personal services (i.e., work) are generally considered engaged in a U.S. trade or business (ETB). Under the Internal Revenue Code (IRC), such individuals are required to file a U.S. income tax return using Form 1040-NR, even if they ultimately owe no tax. Failure to file this return exposes the individual to substantial penalties, including the potential forfeiture of the treaty benefit itself.

However, certain limited exemptions apply when the income is minimal and the stay in the U.S. is very short.

Exemption from Federal Tax Filing under IRC §864(b)(1)

A nonresident alien may be exempt from U.S. federal tax filing and taxation if all of the following three conditions are met during the tax year:

1. The individual was present in the U.S. for no more than 90 days;

2. Total compensation for U.S. services does not exceed $3,000; and

3. The services were performed for:

   • A foreign person or entity not engaged in a U.S. trade or business;

   • A foreign office of a U.S. entity; or

   • A foreign office of a U.S. government agency.

     
     

If all three conditions are met, the income is not treated as U.S.-sourced and is exempt from U.S. income tax under IRC §864(b)(1). No federal tax return filing is required in this case.

When the IRC §864(b)(1) Exemption Does Not Apply

If any of the above conditions are not met (for example, the stay exceeds 90 days or the total income exceeds $3,000), the individual is considered to have U.S.-source income effectively connected with a U.S. trade or business (ECI). In this case:

• Form 1040-NR must be filed, even if no tax is ultimately due; and

• The filing requirement exists regardless of the income amount or whether any tax was withheld at source.

  
  

The obligation to file is based on the individual's status (a Nonresident Alien engaged in U.S. trade or business), not on the amount of tax owed.

Japan-U.S. Tax Treaty Relief

A resident of Japan who does not qualify for the IRC §864(b)(1) exemption may still be able to eliminate U.S. taxation under the Japan–U.S. Tax Treaty.

Under Article 14 (Dependent Personal Services) of the treaty, income earned from employment in the United States is exempt from U.S. income tax if all of the following conditions are met:

1. The individual is present in the U.S. for no more than 183 days within any 12-month period;

2. The employer is not a U.S. resident; and

3. The compensation is not paid by or charged to a U.S. permanent establishment of the employer.

However, the treaty benefit is not automatic—it must be formally claimed and disclosed by filing Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Failure to do so can result in penalties and the loss of treaty protection, potentially subjecting the income to full U.S. tax.

To properly claim the exemption, the taxpayer must complete Schedule OI (Other Information) within Form 1040-NR to identify the applicable treaty article and provide details of U.S. presence and employer. Filing Form 8833 (Treaty-Based Return Position Disclosure) may not be required for ordinary employment income exemptions. However, to avoid any miscommunications with the IRS, you may opt to file the Form 8833 to claim and substantiate the treaty benefit.

If the tax payer stays in the U.S. longer than 183 days, tax liability must be calculated accordingly.

Substantial Presence Test

If your stay in the U.S. becomes longer, you may meet the Substantial Presence Test (SPT) and become a resident alien for tax purposes, making your worldwide income subject to U.S. taxation.

You are considered a U.S. resident for tax purposes if both of the following apply:

• You were physically present in the U.S. for at least 31 days during the current year; and

• The total of:

  • All days present in the current year,

  • One-third of the days in the previous year, and

  • One-sixth of the days in the year before that equals or exceeds 183 days.

If you do not meet this threshold, you remain a Nonresident Alien (NRA) and are taxed only on your U.S.-source income. Further, you may use the treaty exemption for the days of presence, or use tie-breaker rule to remain NRA for the U.S. tax purpose. Please refer to https://www.topc.us/post/determining-alien-tax-status-1?lang=en for further details.