Difference Between Residents And Non-Residents Aliens And Their Taxes

Resident aliens use Form 1040 to file their tax returns. This is the same form used by U.S. citizens. Resident aliens are required to report both domestic and foreign income. 

Whereas non-resident aliens file Form 1040-NR or Form 1040NR-EZ. They are only required to report the U.S.-sourced income. At the same time, dual-status aliens who change their status mid-year may require special tax filing treatment. 

Resident aliens are taxed on their global income, like domestic salaries, wages, pensions, and investments. These individuals can also use tax credits and exclusions to reduce their tax, such as he foreign tax credit and foreign earned income exclusion. 

Whereas the non-resident aliens are taxed on the income they have earned in the US. However, the investment income can be taxed at the flat rate of 30% unless the respective tax treaty reduces it. 

Yes, a non-resident alien can be chosen as a resident alien if they are married to a US citizen or resident and file a joint return. 

The election must be made on your tax forms. 

Your tax status is affected by it:

• The alien status determines which tax form you will file. For the resident alien and the non-resident alien, the tax return form is different.
• The source income of both entities is different. 
• Eligibility criteria for the deduction, exemption, and credits are different.