Dual Status Return - No U.S. income for Form 1040-NR

[vmpas]

I'm a bit confused doing my dual-status return, I hope somebody could clarify a few things for me. 

I'm considered resident alien for tax purposes in 2021, but I left the US in September 2021 and was not a resident for the rest of the year. I know that I will have to file dual-status. I already filled out Form 1040 for the time I was a resident and also attached a residency termination statement. For the rest of the tax year, where I'm non-resident,  I have to file Form 1040-NR as my dual-status return and attach Form 1040 as my dual-status statement.

I didn't earn any US income for that time I was non-resident, so I think I can fill out $0 everywhere from line 1a-15 in 1040-NR. Also lines 16-24 should be all $0, I think (Please let me know if this is correct).

My problem now is the following: I read in the instructions of Form 1040-NR (page 14, credit for taxes paid) that I should "enter the amount from the attached statement (Form 1040 or 1040-SR, line 25d) in the column to the right of line 25d on Form 1040-NR." In my case, that would be $2906 for the federal income tax withheld on my W2 (which is only for the time I was a resident). I also entered line 26 from line 26 in Form 1040, because I had $406 tax credit from 2020 to be applied to 2021. If I add all this up, in line 33 it is $3312. Since I don't have any US income and therefore no taxes I can pay for that, line 24 is $0, and therefore line 34 (line 33 - line 24) is $3312, which is the amount I overpaid and I will get refunded. 

I don't think this is correct, since it would mean that I won't pay any federal income tax for 2021 at all, however I have been resident until September 2021. From my return Form 1040 alone, I will get a refund of $978. I assume Form 1040-NR should say $0 just everywhere, also on page 2?

[jagrover · Accepted solution]

You should report your total tax liability on Line 24 (amount transferred from Form 1040) and attach a note or statement reporting that this amount was transferred from your Form 1040 Statement.

Sum all of your withholding, estimated payments and credits and report this figure on Line 33 of Form 1040NR. Attach a note or statement listing the sources of the credits for 2021 tax payments that are claimed on Line 33.

Your tax liability (or refund) should be the difference between Line 24 and the credits identified on Line 33.

[DaveF1006]

Please contact our affiliate at sprintax.com. for questions regarding the 1040 NR return.

@vmpas

[vmpas]

I contacted sprintax, they said they can't help me either and referred me to turbotax. 

[DaveF1006]

It sounds like you meet the Substantial Presence Test for year 2021. File your 2021 as a resident for simplicity purposes rather than filing as a dual-status citizen. 

What was the $406 tax credit that was to be applied in 2021?

@vmpas

[jagrover]

Although you have no income for your nonresident period, you have tax due for the resident period.  The tax due for the resident period is calculated and reported on your Form 1040 Statement.  The tax liability calculated on the 1040 statement and your credits (refund from the prior year, withholding collected during your resident period and estimated taxes paid during your resident period) are calculated on the 1040 Statement.  The amounts your tax liability and your credits must then transferred to your Form 1040NR.  I have prepared numerous dual status returns and have rarely had problems with the IRS as long as the 1040 Statement is clearly identified at the top of the Form 1040 Page 1 and the Dual Status return identification appears ta the top of the From 1040NR.  When submitting the return be sure to attach the 1040 Statement behind all pages of the Form 1040NR and your Residency Termination statement.  I have found function to be more important than form when communicating with the IRS.  You want to be sure they understand what you are trying to communicate so attached notes and statements can be key to smooth processing of the return.

[vmpas]

Thanks @jagrover , I will try to do as you said with writing notes to make everything clear. 

@DaveF1006  The $406 tax credit is my refund from the previous year 2020, that I decided to be applied to my 2021 tax instead of refunding me directly. I could file as resident for the whole year, but then I would have to report my foreign income for the time after I left the US, which I think is more complicated than dual-status.