407-344-1012 
July 21, 2025 
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Wondering if you need to file U.S. taxes as a foreign national? In this video, we break down who is required to pay taxes in the United States, how the IRS defines U.S. source income, and the tax obligations for non-resident aliens, international workers, and foreign investors.
👉 Whether you’re working in the U.S. temporarily, own property, or earn U.S.-based income from abroad, this video will help you understand:
- Who qualifies as a non-resident alien vs resident alien
- What types of U.S. income are taxable to foreign nationals
- How tax treaties can affect your liability
- Reporting requirements and common filing forms (e.g., Form 1040-NR)
- Penalties for not filing U.S. taxes
📚 Resources Mentioned in the Video:
- IRS Publication 519 – U.S. Tax Guide for Aliens
- Form 1040-NR Instructions
- U.S. Tax Treaties by Country
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This video is intended for education purposes and should not be taken as legal, financial or tax advice. You should consult with a professional about your unique situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but it cannot give blanket advice to a broad audience. Things are always changing, therefore, this channel may not contain the most up-to-date information. Neither Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. nor its members can be held liable for any use or misuse of this content.
TRANSCRIPTION
Are you a foreign national earning income in the United States and are wondering if you have to pay taxes here? You’re not alone.
Today we are breaking down exactly what you need to know to stay compliant and protect your wallet. Welcome to the Freedom Group channel where we help business owners and individuals thrive.
Freedom Group is made of four companies that have served our community for over 20 years. We specialize in taxes, accounting, insurance, financial planning, and real estate, providing complete support for your business and your personal needs as well. If you find this video helpful, don’t forget to like, subscribe, and hit that notification bell so you never miss any updates.
Who is a foreign national? Let’s start with the basics. A foreign national is someone who is not a U.S. citizen and does not hold a green card. You might be here on a visa, maybe working, investing, or even studying.
Or maybe you live in another country but you’re earning U.S. income. Either way, the IRS has rules that you need to know of. So here’s the big question.
Do foreign nationals have to pay taxes in the U.S.? The short answer is yes. If you earn income from U.S. sources, that could be from a U.S.-based job, rental real estate income that’s generated in the United States, dividends or interest from U.S. investments, or running a business inside the United States. But here’s the thing.
If you only make money outside of the United States and you don’t have any U.S. ties, then you likely won’t owe U.S. taxes. Still, it’s important to check because the rules are very strict and the penalties for ignoring them can be very steep. So resident versus non-resident alien.
The next key concept is your tax status. The IRS looks at whether you are a resident alien or a non-resident alien for tax purposes. And no, this has nothing to do with your immigration status.
You’re a resident alien if you pass what’s called the Substantial Presence Test, which generally means that you’ve been in the United States for 183 days or more in the past three consecutive years. If neither apply to you, you’re a non-resident alien. And that means you only pay taxes on U.S. source income if it falls into one of two categories.
The first one we’ll talk about is ECI, which is an acronym for Effectively Connected Income or, number two, FDAP income. FDAP stands for Fixed, Determinable, Annual, or Periodic. But if you’re a resident alien, you’re going to be taxed on your worldwide income, just like us, U.S. citizens.
Now let’s talk about how taxes are collected. If you’re a non-resident alien and you earn U.S. source income, that is FDAP, there’s usually an automatic tax withholding. It’s often times around 30%.
For example, if you receive dividends from a U.S. company, that company might withhold 30% of that payment and send it to the IRS automatically. But, and this is important, some countries have tax treaties with the U.S. that reduce or sometimes eliminate the withholding altogether. So if you’re from Mexico, Canada, or many countries in Europe, you might qualify for a lower rate.
Just make sure you file the correct forms like Form W-8BEN and to claim those benefits. If the business is generating income that is ECI or Effectively Connected Income, that’s going to be subject to the regular graduated tax rates, the same as I would pay as an American citizen. Even if taxes were already withheld from your income, you may still need to file a U.S. tax return.
A good example of this would be FERPTA withholding. FERPTA stands for Foreign Investment and Real Property Tax Act, and this withholding is mandatory and it’s done by the title companies at closing. As with all withholding, it is done with the purpose of forcing non-resident aliens to file a tax return and declare the sale of the property and pay the appropriate tax, if any is due.
We hope many foreigners get back some or even all of the FERPTA money that was withheld from the proceeds of the sale of their properties. Most non-resident aliens use Form 1040-NR. So why file? Number one, you might get a refund.
Number two, it helps you stay compliant. And number three, if you’re planning on living, working, or investing more in the United States, it builds a clean track record with immigration and financial institutions. If you feel that you’re going to need help with that, schedule a consultation with our team.
We’ll talk about your particular situation and walk you through it step by step. So let’s look at a quick example. Say Carlos is a business owner from Colombia, but he’s investing in the stock market here in the United States.
Because he is a foreigner and doesn’t live in the U.S., the dividends or interest income is considered FDAP income and is subject to 30% taxation. And he needs to report it if it was not withheld at the source, as it should have been. If he has a tax treaty benefit, he might pay less in taxes, but only if he files the right forms.
And that’s where working with experienced professionals like us at Freedom Group can really make a difference. So to sum it all up, if you are a foreign national with U.S. income, you probably need to pay taxes. The rules depend on your tax status and your type of income, and whether your country has a tax treaty with the United States.
Filing the right forms and getting the proper help can save you money and definitely stress. Here at Freedom Group, we help clients from all over the world understand and manage their particular U.S. tax responsibilities. If you’re unsure about your situation, please give us a call.
It would be our pleasure to help you. And if you want to learn more, check out our next video, U.S. Taxes for Foreigners, Resident Alien vs. Non-Resident Alien Tax Differences.
It’s popping up right here on the screen. Thanks for watching, and we will see you in the next one. – End of transcription
Summary
Foreign nationals earning money in the United States are often unsure whether they must pay U.S. taxes—and the answer is yes, in most cases. In this Freedom Group video, Carlos Hurst explains the legal obligations and IRS classifications that determine how and when foreign nationals must file taxes.
Understanding Who Is a Foreign National
A foreign national is anyone who is not a U.S. citizen and does not possess a green card. This includes people on temporary visas, individuals living abroad while earning U.S. income, and those investing in American businesses or assets. Even if you never step foot in the U.S., income earned from U.S. sources could trigger a tax liability.
Interesting Fact: The U.S. government withholds up to 30% in taxes on certain types of income earned by non-resident aliens unless a tax treaty applies.
U.S. Tax Obligations for Foreign Nationals
Carlos clarifies that if a foreign national earns money from a job in the U.S., collects rental income from U.S. property, receives dividends from U.S. stocks, or runs a business located in the U.S., they are generally required to pay U.S. taxes. However, if the income is earned outside the U.S. and there are no U.S. business or investment ties, taxes may not be required.
Tax Status: Resident Alien vs. Non-Resident Alien
It’s not your immigration status but your presence in the country that matters to the IRS. Foreigners are classified for tax purposes as either:
- Resident Aliens: Individuals who meet the Substantial Presence Test (typically spending 183+ days in the U.S. over three years).
- Non-Resident Aliens: Those who do not meet this test and typically only pay taxes on income from U.S. sources.
Resident aliens must report and pay taxes on worldwide income, while non-resident aliens are only taxed on U.S. source income.
Two Categories of Taxable Income
Non-resident aliens are taxed on income that falls into:
- ECI – Effectively Connected Income (e.g., income from operating a U.S. business)
- FDAP – Fixed, Determinable, Annual, or Periodic Income (e.g., dividends, royalties)
FDAP income is typically subject to a 30% withholding tax unless reduced by a tax treaty.
The Role of Tax Treaties
Tax treaties between the U.S. and certain countries (like Mexico, Canada, and many EU nations) can reduce or eliminate the 30% withholding. But you must file Form W-8BEN to claim these benefits.
When Withholding Happens Automatically
For FDAP income, U.S. companies often withhold taxes before issuing payment. An example is the Foreign Investment in Real Property Tax Act (FIRPTA), where title companies withhold funds during real estate sales involving non-residents.
Why Filing a U.S. Tax Return Still Matters
Even if taxes are already withheld:
- You may be entitled to a refund
- You’ll stay compliant with IRS regulations
- You’ll build a trustworthy financial track record—valuable for future immigration, investments, or loans
Most non-resident aliens use Form 1040-NR when filing.
Example Scenario
Let’s say Carlos from Colombia earns U.S. dividends. As a non-resident alien, this income is FDAP and should have 30% withheld. If Colombia has a tax treaty with the U.S., he might qualify for a lower rate—but only if he files the right paperwork.
Get Professional Help Before Filing
Misunderstanding your obligations or missing out on tax treaty benefits could cost you significantly. That’s where professional help becomes essential. Freedom Group assists clients from all over the world in managing their U.S. tax responsibilities correctly.
If you’re a foreign national with U.S. income, don’t leave your tax situation to chance. The IRS rules are complex, and the consequences of non-compliance can be expensive. Whether you’re a student, investor, or entrepreneur, knowing your tax classification and filing the correct forms is key.
Freedom Group is here to help with all your international tax matters—from initial evaluations to full compliance support. Schedule a consultation with us today and get the clarity you need to move forward confidently.
Learn More:
https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens
https://www.irs.gov/forms-pubs/about-form-1040-nr
https://www.irs.gov/individuals/international-taxpayers/tax-treaties
