Closer Connection Rule for NR – Form 8840

Establish Your Closer Connection and Avoid U.S. Taxation with Form 8840

As a nonresident alien, understanding U.S. tax laws is crucial, even if you don’t reside in the U.S. full-time. The closer connection rule is an important aspect of U.S. tax law for nonresident aliens. In this article, we will explain what the closer connection rule entails and how you can utilize Form 8840 to establish your closer connection to another country, thereby avoiding U.S. taxation.

What is the Closer Connection Rule?

The closer connection rule is used by nonresident aliens to demonstrate that their connection to another country is stronger than their connection to the U.S. This rule determines whether you are classified as a resident or a nonresident for U.S. tax purposes. If you are deemed a resident for U.S. tax purposes, you must pay taxes on your worldwide income, while nonresidents are only taxed on their U.S. source income.

Establishing Your Closer Connection

To establish your closer connection to another country and avoid U.S. taxation, you need to complete Form 8840. Form 8840 is utilized by nonresident aliens to assert a closer connection to another country, ensuring they are not considered U.S. residents for tax purposes. To claim a closer connection, you must meet the following conditions:

1. Physical Presence: You must have been physically present in one or more foreign countries for at least 330 full days during a 12-month period that overlaps with the U.S. tax year.
2. Tax Home: You must demonstrate that you have maintained a tax home in a foreign country for the entire calendar year. This means establishing a home in another country and intending to return there after your temporary stay in the U.S.
3. Closer Connection: You must establish that your connection to a foreign country is closer than your connection to the United States, considering all relevant facts and circumstances.

At Dimov Tax, we understand that navigating U.S. tax laws can be complex for nonresident aliens. Our experienced tax professionals are here to assist you in understanding and complying with the U.S. tax code, ultimately reducing your tax liability. We provide comprehensive support with Form 8840, ensuring that you meet all requirements to establish your closer connection to another country and avoid U.S. taxation.

Our services encompass a wide range of tax preparation and planning solutions for foreign nationals, including assistance with Form 1040NR and other tax filings. Contact us today to learn more about how we can help you achieve your tax goals and provide you with peace of mind when it comes to your U.S. tax obligations.