Friday, October 2, 2020

Electronic filing of Form 1040-NR Now Mandated With Certain Exceptions

In a Notice, IRS has announced that Form 1040-NR, U.S. Nonresident Alien Income Tax Return, for 2021 and later tax years, will, in most cases, be removed from the list of returns that are administratively exempt from the electronic filing requirement. The Notice also contains an update on how IRS will announce future changes to the list of returns that are administratively exempt from the electronic filing requirement.

In Notice 2011-26, 2011-17 IRB 720, sets forth the specific administrative exemptions to the electronic filing requirement. In Notice 2011-26 the IRS provided an exemption for Form 1040-NR. 

The IRS has announced in Notice 2020-70, 2020-43 IRB that, except as otherwise provided below, the exemption for Form 1040-NR from the electronic filing requirement under Code Sec. 6011(e)(3) is removed. 

Accordingly, a specified tax return preparer must electronically file a Form 1040-NR, unless (1) an exemption described below or (2) an exemption under Reg § 301.6011-7(c) or Notice 2011-26, as modified by this new Notice (the Notice), applies. 

IRS does not currently accept Form 1040-NR tax returns via electronic filing by certain taxpayers. Therefore, the exemption from the electronic filing requirement set forth in Code Sec. 6011(e) (3) remains in effect for a Form 1040-NR filed for the following taxpayers:

  1. Dual-status taxpayers (taxpayers who have changed status between resident alien and nonresident alien during the tax year),

  2. Fiscal-year taxpayers,

  3. Trusts, and

  4. Estates.

The exemption for Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents, also remains in effect.

The Notice does not affect the exemptions provided in Notice 2011-26 for certain categories of specified tax return preparers, including certain foreign tax return preparers. 

Foreign tax return preparers without a social security number, who live and work abroad, remain exempt from the electronic filing requirement if they are not a member of a firm that is eligible for electronic filing with IRS and they applied for a Preparer Tax Identification Number (PTIN) under one of the methods described in Notice 2011-26.

Updates to all other administrative exemptions described in Notice 2011-26 (aside from exemptions due to IRS e-file limitations) will continue to be announced in a Notice or other appropriate guidance, rather than in IRS Publication 4164.

The Notice is effective for individual tax returns filed for tax years ending on or after December 31, 2020.  

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