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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2827
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Lev,I am currently finalizing my 2015 Form1040NR Tax Return

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Hi Lev,I am currently finalizing my 2015 Form1040NR Tax Return (I had filed a request for extension) and need further clarification about the
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: My question is about Lev's response a year ago:
JA: Is there anything else important you think the Accountant should know?
Customer: Lev wrote: "US Social Security benefits will not be income that is not effectively connected with a trade or business in the United States - and that income will be taxed at flat 30% rate...etc"

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Social Security benefits will be entered on Schedule NEC of Form 1040NR under the appropriate rate of tax (30%).

The tax amount on Line 15 of Schedule NEC will then get carried forward to Line 54 of your 1040NR.

https://www.irs.gov/pub/irs-pdf/f1040nr.pdf

https://www.irs.gov/pub/irs-pdf/i1040nr.pdf

Please let me know if I can assist you further.

Thank you and best regards,

Barb

Just following up with you to see if you have any other questions about this topic. If so, please let me know, and I will be happy to assist you.

Best regards,

Barb

Customer: replied 1 month ago.
Sorry I had not seen your last message above. My specific question was that Lev's response last year included two negatives which seem to cancel each-other :
Lev wrote "...(When you become a Non-Resident), US Social Security benefits WILL NOT be income that IS NOT effectively connected with a trade or business in the United States". To me that meant those SS benefits resulting from my past employment by a US Business or self employed consultant business in the US IS EFFECTIVELY CONNECTED (because of the connection with the past employer and employee SS contributions.
Then I realized that the first "NOT" could be an error? In other words Lev meant to write:
"US Social Security benefits WILL be income that IS NOT effectively connected with a trade or business in the United States" therefore taxed at 30%?
Anyway because I did not see your answer in time for me to file, I assumed the worst case for me, i.e. 30% tax. Please confirm whether this was a typo from Lev and I made the right choice.Thank you

You are correct. The first "NOT" is an error.

85% of the U.S. social security and equivalent railroad retirement benefits you received are taxable. This amount is treated as U.S. source income not effectively connected with a U.S. trade or business. It is subject to the 30% tax rate, unless exempt or taxed at a reduced rate under a U.S. tax treaty. Social security benefits include any monthly benefit under title II of the Social Security Act or the part of a tier 1 railroad retirement benefit treated as a social security benefit. They do not include any Supplemental Security Income (SSI) payments. You should receive a Form SSA-1042S showing the total social security benefits paid to you in 2015 and the amount of any benefits you repaid in 2015. If you received railroad retirement benefits treated as social security, you should receive a Form RRB-1042S. Enter 85% of the total amount from box 5 of all of your Forms SSA-1042S and Forms RRB-1042S in the appropriate column of line 8 of Schedule NEC. Attach a copy of each Form SSA-1042S and RRB-1042S to the front of Form 1040NR.

https://www.irs.gov/pub/irs-pdf/i1040nr.pdf

Please let me know if I can assist you further.

Thank you and best regards,

Barb

Barbara and 2 other Tax Specialists are ready to help you

Thank you for the positive rating of my answer. It is very much appreciated!

Best regards,

Barb