Filing readiness for 2018 returns: the resources available to you are the form instructions (in draft form as of today), the 7th Classic edition of “1040NR? or 1040? U.S. Income Tax Returns for Visa Holders + International Organization and Foreign Embassy Employees”, recent blogposts on the website, www.1040nror1040.com., and articles on the IRS website. Not yet available: the 2018 edition of Publication 519, U.S. Tax Guide for Aliens.
2018 Form 1040NR is relatively unchanged from 2017, compared to the changes in Form 1040. TCJA did not provoke a reorganization of Form 1040NR. Some lines were dropped. A few lines were marked “reserved” or were renumbered. Item M on use of the IRC 871(d) election was added to Schedule OI. That’s it.
Thus, the TCJA notes in the 7th Classic edition of “1040NR? or 1040: U.S. Income Tax Returns for Visa Holders + International Organization Employees”, which uses 2017 forms., plus blogposts with 2018 forms are adequate guides to 2018 form preparation. The 8th edition will consolidate this information in one location.
The overall TCJA provisions apply to Form 1040NR as they do to Form 1040. There are no longer such deductions as personal exemptions, generally no moving expense deductions, and no unreimbursed employee business expense or 2106 expense deductions.
Page 1
Line 7 is now labelled Dependents. It was labelled Exemptions for 2017. You can still enter any qualifying dependents if you wish, but there is no associated exemption amount to be subtracted on Line 39. Mostly likely to be useful for people filing dual status returns, who can claim dependent related deductions or credits on Form 1040 and who are residents of Canada, Mexico, South Korea, and students who are residents of India.
Line 16 is now marled “Reserved”.
Line 17 includes both IRA distributions, which in 2017 were on Line 16, and pension and annuity distributions which were alone on Line 17 in 2017.
Line 34 in 2018 now holds the sum of the numbers in lines 24 through 33. (In 2017, line 34 had been for the Domestic Production Activities Deduction, which is gone from the form.)
Line 35 is now Adjusted Gross Income. (AGI). In 2017, AGI had been on Line 36.
Line 39, now labelled “Exemptions for estates and trusts only”, is the equivalent of the 2017 Line 40, Exemptions, in the Tax and Credits section of form. (Now at the bottom of page 1, instead of the top of page 2.)
Page 2
Now starts with a continuation of the “Tax and Credits” section, as
Line 40, sum of deductions on lines 38-39
Remaining sections and lines on pages 1 and 2 are unchanged in 2018 from 2017.
Page 3 Schedule A
Reflects the TCJA changes
Only state and local taxes, gifts to U.S. charities, casualty and theft losses, and unusual “Other Itemized Deductions” remain.
Job expenses and “Certain Miscellaneous Itemized Deductions”, such as tax preparation fees are gone, per TCJA.
Page 4 Schedule NEC
unchanged.
Page 5 Schedule OI
Item M is new. Schedule OI is otherwise unchanged.
Item M asks if you are making, or have made, the IRC 871(d) election to treat a rental property as the taxpayer’s own U.S. trade or business, and thus reporting income and expenses on Schedule E, as ECI,. (If this election is not made, the property is treated as an investment property and taxes are paid on the gross income, entered on Schedule NEC).
I do not know if Item M is relevant if no rental income is entered on Form 1040NR. The draft instructions for Form 1040NR, posted December 26, 2018, are not clear. The draft instructions refer the reader to Publication 519 for further information. The draft of that publication was not available on January 12, 2019.
Treaty Benefit Income Exclusions on Form 1040
In 2018, this exclusion continues to be an adjustment to gross income that is entered on Line 21.
Line 21 moved to the new Schedule 1.
A statement is still required to be attached to Form 1040 which explains the justification for the income exclusion. Cite the treaty article and exclusion history just as was done on Form 1040NR with Schedule OI, Item L, then summarize the taxpayer’s qualification history and exclusion claim history
And that’s it!.