I am a non-resident alien. Should I file a tax return if I get a non-tax-applied monetary award (less than $500) from a US-based company? No other income from US.

[pk]

@user5924704 , need more info before one can answer --

(a) which visa are you on -- F-1 or what ?

(b) when did you enter the country ?  Was this your first entry with this visa in the last 3 years?

(c) if you filed a return for year past ( 2024 or 2023) , how did you file ?

(d) which country are you from?

(e) by "non-tax applied" do you mean that  no taxes were withheld by the disburser of the award?

(f) do you have a tax id ( SSN/ ITIN ) ?

I will circle back once I hear from you --yes ?

[user5924704]

Thank you for your message and kind help! Below is my response. Please let me know if you'd need any further clarification:

(a) which visa are you on -- F-1 or what ? 

--> I used to be an F-1 visa holder to study in US, but am now in Japan; it's been 5 years since I left US.

(b) when did you enter the country ?  Was this your first entry with this visa in the last 3 years?

--> My last trip to US was in 2024 for a short stay with ESTA.

(c) if you filed a return for year past ( 2024 or 2023) , how did you file ?

--> The last time to file a US tax return was 2021. I filed with Turbotax. Let me know if this answers this question (c).

(d) which country are you from?

--> Japan

(e) by "non-tax applied" do you mean that  no taxes were withheld by the disburser of the award?

--> Yes, no taxes are withheld by the disburser of the award.

(f) do you have a tax id ( SSN/ ITIN ) ?

--> I used to work in US, so I have SSN from US. But I have been and am a Japanese resident for tax purposes.

[pk]

@user5924704  thank you for your response.

The very correct way ( and assuming that this was an award of some kind from US sources and not funded by a foreign entity  ) would be  for you to file  1040-NR return recognizing the  US sourced income, claiming Foreign Tax credit ( for  taxes placed on this income by your tax-home country ( Japan).

Assuming that you were in US for less than  90 days, and if NO tax docs are issued to you by the disburser of the award, that you just recognize this income on your Japan taxes and ignore the US filing altogether --- this position/ possibility is based on the small amount of the award and the double taxation clause of the tax treaty between US and Japan.

As I said the pref. way is the first option.

[user5924704]

Thank you very much for your kind help! Could I ask two follow-up questions?:

"file  1040-NR return recognizing the  US sourced income"

--> In my case, could I file the 1040-NR through Turbotax?

"claiming Foreign Tax credit ( for  taxes placed on this income by your tax-home country"

-->  Could you explain how I can claim this in the 1040-NR? Or is there a separate form to be submitted for this Foreign Tax? Is there any documentation I should obtain from the National tax agency in my home country Japan?

Thank you again!

[pk]

@user5924704 , your questions are answered below :

1.  In my case, could I file the 1040-NR through Turbotax?

----- TurboTax does not support Non-Resident tax returns  ( form 1040-NR ).  Generally they suggest using their  partner  SprinTax. I think this is an on-line service.  You may also find  a local tax professional  doing taxes for the  US ExPat community  ( like the military,  etc. ).

2.  Could you explain how I can claim this in the 1040-NR? Or is there a separate form to be submitted for this Foreign Tax? Is there any documentation I should obtain from the National tax agency in my home country Japan?

----- for claiming foreign tax credit on your US return, you use the form 1116. This form requires the following information ---

(1)  in the type of  income  box, you select  " resourced by treaty"  -- this allows you to take US sourced income and resource this as foreign ONLY for purposes of form 1116;   

(2) the foreign source income is  the award amount as received by you 

(3)  Foreign source income country is Japan

(4)  Foreign Taxes  Paid  is the  tax imposed by Japan on this doubly taxed income.

The foreign tax credit is the lesser of  US imposed Tax on this income   AND  that  paid to Japan in your particular case.

Is there more I can do for you ?

[pk]

@user5924704 ,  on rethinking through your situation, it may be simpler if :

(a) you file the form 1040-NR, recognizing the award income 

and  thereafter, 

(b) you file your Japan return normally, recognize the award income and then seek  Foreign Tax credit ( from Japan ) per the tax treaty.  While I don't know the mechanism / form to use, the fact that you are a resident and citizen of Japan, would allow you to claim Foreign Tax Credit in Japan.  And much easier probably  ( also because your local tax professional can  help easily ).

Is there more I can do for you ?

[user5924704]

Thank you so much for your professional guidance.

Could I ask one more question?: What if I ask the company to transfer the money to my bank account in Japan? (they said they can do it.) Will this potentially reduce the necessity of filing US tax return? Please let me know your thoughts.

[pk]

@user5924704 

No , where and how you received the award is not material.  That is since the award was issued  by a US entity while you were in the US as NRA, it is still US sourced income and therefore generally taxable  income to US.

What was the reason for the award ?    Consultation fee. speaker's  fee , help with travel expenses  or what ?  How long were you in the US with ESTA (  visitor  visa ) ?  What were you doing ?

Absent any contravening facts, I am still of the view that you need to file a 1040-NR recognizing the income, pay the US taxes and  then in Japan recognize the income as part of your world income and request  Foreign Tax Credit ( against Japan tax ) per  Japan-US tax treaty article " double taxation relief".

Is there more I can do for you ?

[user5924704]

Thank you very much for your message!

I did a conference presentation in another country outside US and Japan, and got a monetary award for my presentation. The award awarded at the conference was sponsored by a publisher located in US.

For now, the US publisher is asking me to submit W-8BEN for me to receive the award payment. No other tax-related document they have asked me to fill out.

I checked with the US publisher, and it seems like they have a tax-related office, so maybe I should ask them about 1040-NR and  Foreign Tax Credit. I do have any confidence in filling out these two forms on my own so...

Thank you again! Please let me know if there's anything else I should keep in mind in this matter.