Closer Connection Form 8840: Avoid U.S. Taxation for Nonresidents

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.

Requirements for Filing Closer Connection Form

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:

• 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.
• 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.
• 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.