There are few changes in the IRS draft forms 1040NR-EZ and 1040NR published on August 22, 2018.
The most important changes reflect the suspension of the personal exemptions for tax years 2018-2025, in TCJA (Tax Cuts and Jobs Act), and the changes in filing status available and the new “credit for other dependent” (Form 1040NR only),
Schedule OI of Form 1040NR has a new question, Item M, about the 871(d) election. A filer declaring income from real property can treat that income in the usual manner, as investment income that is Not Effectively Connected to the taxpayer’s own U.S. trade or business, or elect to declare it as ECI, effectively connected income. Item M has two check boxes, which state in (1) that this is the first year you are making this election, or, (2) you have made this election in the past and not revoked it.
Dependents: The remaining possible benefit from entering a dependent on Form 1040NR would be if either the child tax credit or the credit for other dependent could be claimed.
The non-resident alien taxpayer must qualify to claim a dependent – i.e. meet qualifications as a resident of Canada, Mexico, South Korea and the dependent resided in the same household for part of the tax year, or is a student or business apprentice with residency in India.
By TCJA, the dependent must:
- Be a U.S. citizen, a U.S. resident alien (SPT or green card) or a U.S. national
- Have an SSN or ITIN before the due date of the return
(If an ITIN application will accompany the return, be sure to file early enough for the ITIN to be processed before the due date of the return)
Form 1040NR-EZ Draft 2018
First change comes at Line 12.
The heading, filing status, and Lines 1-11 are the same for the 2017 form and the August, 2018 draft forms.
For 2018, the 2017 1040NR-EZ lines 12 and 13 have been dropped
2017 Line 12 was a subtraction line
2017 Line 13 was Exemption
For 2018, the lines after Line 11 are simply moved up two line numbers from what they were on 2017 Form 1040NR-EZ.
For 2018, Line 12 is Taxable Income. On the 2017 form, Taxable Income was line 14
For 2018, the final line number on the first page is Line 24, estimated tax penalty. In 2017, that was Line 26.
Schedule OI remains the same on Form 1040NR-EZ.
https://www.irs.gov/pub/irs-dft/f1040nre–dft.pdf
Form 1040NR Draft 2018
Most changes here are layout adjustments. Also, one line was dropped, on Domestic Production Activities Deduction (from Form 8903). Item M, on an IRC 871(d) election was added.
Line numbers on Page 1 are essentially unchanged from Line 1 through Line 33
Filing Status section
Checkboxes 1, 3, and 4 are greyed out and those lines are marked “Reserved”.
2017 Box 1 was single resident of Canada or Mexico or single U.S. national
2017 Box 3 was married resident of Canada or Mexico or married U.S. national
2017 Box 4 was married resident of South Korea
Dependents is the new 2018 name of the next section, instead of Exemptions
Line 7 Dependents is now the only line in this section. In 2017 this was 7(c).
Columns (1), (2), (3) are unchanged.
Column (4) is split in half, between “Child tax credit” and “Credit for other dependents”
Adjusted Gross Income 2018 section drops the 2017 line 34 Domestic Production…
The Adjusted Gross income amount is on Line 35 for 2018, not the 2017 Line 36
Tax and Credits section for 2018 now starts on Page 1, not the 2017 Page 2
2018 Line 40 is now an addition line, not the 2017 exemption line
Line 41 is Taxable Income in 2018, just as it was in 2017.
The 2018 and 2017 Form 1040NR page 2 are identical from Line 41 through the end of page 2.
Schedule A – Itemized Deductions Page 3
The TCJA changes are reflected on the NR Schedule A
Taxes You Paid Now has :
- 1a Taxes
- 1b smaller of line 1a and $10,000 ($5,000 if married)
The “$5,000 if married” reflects the fact that a Married Non-resident is filing as Married Filing Separately, and so the deduction is limited to ½ of the $10,000.
Line 7 “Other Itemized Deductions” does not include miscellaneous job expenses. They are not claimable in 2018, under TCJA.
Be sure to read the instructions for this line, when they are issued.
Schedule NEC (Page 4) is unchanged
Schedule OI (Page 5)
Item M is a new item on Form 1040NR. It concerns the 871(d) election
- M1 should be checked if this is the first year the taxpayer is making the 871(d) election (net election) to treat income from U.S. real property as ECI – income effectively connected to the taxpayer’s own U.S. trade or business.
- M2 should be checked if the taxpayer made this election in a previous year and it has not been revoked.
This election is made by attaching a statement to the Form 1040NR that the election is being made for a real property and lists all real property owned by the taxpayer. It is revoked in similar fashion.