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The IRS began issuing unclaimed Recovery Rebate Credit payments under the American Rescue Plan Act to individuals who had not filed 2021 or 2022 tax returns. While this move aimed to distribute missed stimulus payments to eligible individuals, a significant number of nonresident aliens received the payments in error, leading to widespread confusion and concern.

Background of the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted in April 2020 as a federal initiative to support individuals and families facing economic hardships due to the COVID-19 pandemic. One of the key components of the Act included direct economic impact payments (EIPs) to qualifying taxpayers.

These stimulus payments were distributed in multiple phases, with the initial round providing $1,200 to individuals earning less than $75,000 per year, $2,400 for married couples earning under $150,000, and an additional $500 for each qualifying child. The payments were based on information from taxpayers’ 2018 or 2019 tax returns.

Who Was Eligible for CARES Act Payments

To qualify for a stimulus payment under the CARES Act, an individual must have met the following criteria:

• Be a U.S. citizen, permanent resident, or a resident alien for tax purposes
• Possess a valid Social Security Number
• Have filed a U.S. tax return for 2018 or 2019

The payment was not available to individuals who were:

• Nonresident aliens
• Claimed as dependents on someone else’s tax return
• Part of a married couple where one spouse had an Individual Taxpayer Identification Number (ITIN) or no SSN (unless one spouse was a member of the U.S. Armed Forces)
• Estates or trusts

Misclassification and Erroneous Payments

Despite these clear eligibility guidelines, many nonresident aliens received stimulus payments due to filing Form 1040 instead of the appropriate Form 1040-NR. This error often occurred because of confusion regarding residency status or incorrect advice. Inaccurate filings misled the IRS into treating nonresidents as eligible individuals.

In December 2024, the IRS began reissuing payments from the American Rescue Plan Act to those who had not filed tax returns in 2021 or 2022. Nonresident aliens who had previously misfiled were included in this distribution, further compounding the issue.

Determining Tax Residency Status

Understanding whether you are a resident or nonresident alien for tax purposes is critical. There are two primary methods for determining U.S. tax residency:

The Green Card Test

An individual is considered a U.S. resident for tax purposes if they hold a Green Card, meaning they are a lawful permanent resident of the United States. Green Card holders are generally treated the same as U.S. citizens when it comes to federal tax obligations.

The Substantial Presence Test

This test applies to individuals who are not Green Card holders but have spent time in the United States. It considers:

• All the days present in the current year
• One-third of the days present in the previous year
• One-sixth of the days present in the year before that

If the total equals or exceeds 183 days and the person has spent at least 31 days in the current year, they are classified as resident aliens for tax purposes.

Exceptions to the Substantial Presence Test

There are key exemptions for certain visa holders:

• Students on F, J, M, or Q visas are generally exempt from counting days for up to five calendar years
• Teachers or trainees under J or Q visas are exempt for up to two years
• Days in transit (less than 24 hours), days where a person was unable to leave due to medical conditions, and some diplomats are also exempt

These exemptions mean that many international students, scholars, and exchange visitors remain classified as nonresident aliens for extended periods, making them ineligible for stimulus payments.

Receiving a Stimulus Payment in Error

If a nonresident alien mistakenly received a stimulus payment, they are required to return it to the IRS. The appropriate action depends on how the payment was received.

If You Received a Paper Check (Not Cashed):

• Write “Void” on the endorsement section on the back of the check
• Mail the voided check to the IRS address for your state
• Include a brief letter explaining that you are returning the payment because you are a nonresident alien and not eligible to receive it
• Do not staple, bend, or clip the check

If You Cashed the Check or Received a Direct Deposit:

• Write a personal check or obtain a money order made payable to “U.S. Treasury”
• Include “Third EIP” and your Social Security Number or Individual Taxpayer Identification Number in the memo section
• Write a short explanation of why you are returning the payment
• Mail it to the appropriate IRS address based on your state or foreign residence

IRS Mailing Addresses for Returning Payments

To return a stimulus payment, use the following addresses according to your state or territory:

• ME, MD, MA, NH, VT: Andover IRS, 310 Lowell St., Andover, MA 01810
• GA, IA, KS, KY, VA: Atlanta IRS, 4800 Buford Hwy, Chamblee, GA 30341
• FL, LA, MS, OK, TX: Austin IRS, 3651 S Interregional Hwy 35, Austin, TX 78741
• NY: Brookhaven IRS, 1040 Waverly Ave., Holtsville, NY 11742
• AK, AZ, CA, CO, HI, NV, NM, OR, UT, WA, WI, WY: Fresno IRS, 3211 S Northpointe Dr., Fresno, CA 93725
• AR, CT, DE, IN, MI, MN, MO, MT, NE, NJ, OH, WV: Kansas City IRS, 333 W Pershing Rd., Kansas City, MO 64108
• AL, NC, ND, SC, SD, TN: Memphis IRS, 5333 Getwell Rd., Memphis, TN 38118
• DC, ID, IL, PA, RI: Philadelphia IRS, 2970 Market St., Philadelphia, PA 19104
• Foreign addresses, U.S. territories, APO/FPO, or dual-status filers: Austin IRS, 3651 S Interregional Hwy 35, Austin, TX 78741

The Consequences of Filing the Wrong Tax Form

Many international students and temporary visitors unknowingly file the wrong tax form by choosing Form 1040 instead of Form 1040-NR. This mistake can lead to being classified as a resident alien, resulting in erroneous eligibility for benefits like stimulus payments. Filing incorrectly may not only cause issues with stimulus eligibility but can also expose individuals to IRS audits, tax penalties, or complications with immigration status.

Filing an incorrect return should be corrected by submitting an amended tax return. This involves filing Form 1040-X along with the correct Form 1040-NR. Making this correction voluntarily shows good faith and can help avoid further scrutiny from the IRS.

Taking swift action to return funds received in error and amending incorrect returns is critical to maintaining compliance with U.S. tax regulations. It’s also essential for nonresidents to educate themselves on the specific requirements and responsibilities of their tax classification.

The issue of nonresidents receiving COVID-19 stimulus payments in error has highlighted the importance of accurate tax filing and understanding one’s residency status. While the financial support provided under the CARES Act was much needed, it was never intended for individuals who do not meet the legal definition of a U.S. resident for tax purposes.

How to Determine Tax Residency Status and Understand Its Implications

Understanding tax residency is fundamental to determining eligibility for various tax benefits, including COVID-19 stimulus payments issued under the CARES Act. Many individuals who temporarily visit the United States—such as students, researchers, and temporary workers—find themselves unsure whether they are considered residents or nonresidents for tax purposes. The distinction is not just important; it is essential for filing accurate tax returns and avoiding costly errors.

Why Tax Residency Status Matters

Tax residency status defines how you are taxed by the Internal Revenue Service (IRS). Resident aliens are taxed on their worldwide income, similar to U.S. citizens. In contrast, nonresident aliens are only taxed on income derived from U.S. sources, and they generally do not qualify for the same deductions and credits. Furthermore, only resident aliens were eligible for stimulus payments under the CARES Act, American Rescue Plan Act, and related economic relief programs.

Filing as the wrong residency type can lead to overpayment or underpayment of taxes, incorrect receipt of government benefits, and future complications with the IRS. For this reason, identifying the correct tax status is a necessary first step for every non-citizen who spends time in the United States.

Two Primary Tests for Determining Residency

The IRS uses two tests to determine an individual’s residency status for tax purposes: the Green Card Test and the Substantial Presence Test.

The Green Card Test

If you are a lawful permanent resident of the United States at any time during the calendar year, you meet the Green Card Test. Holding a Green Card (Form I-551) means that the U.S. Citizenship and Immigration Services (USCIS) has granted you authorization to live and work in the U.S. on a permanent basis. Even if you spend only part of the year in the United States, you are considered a resident for tax purposes for the entire year, unless your residency is officially terminated.

The Substantial Presence Test

This test applies to individuals who do not hold a Green Card but spend time in the United States. Under this test, you are considered a U.S. resident for tax purposes if:

• You are physically present in the U.S. for at least 31 days during the current calendar year, and
• The total of your days in the current year, one-third of the days in the previous year, and one-sixth of the days in the year before that equals or exceeds 183 days

To calculate the number of days:

• Count all days in the current year
• Add one-third of the days from the previous year
• Add one-sixth of the days from two years prior

If the sum is 183 days or more, and you were present for at least 31 days in the current year, you are a resident for tax purposes.

Exceptions and Exempt Individuals

Certain individuals are exempt from counting days toward the Substantial Presence Test, depending on their visa type and purpose of stay.

Students

International students on F, J, M, or Q visas are considered exempt individuals for the first five calendar years they are in the United States. During this time, their days of presence do not count toward the Substantial Presence Test. After five years, the student must begin counting days, unless they can show closer ties to a foreign country under the Closer Connection Exception.

Teachers and Trainees

Nonresident aliens on J or Q visas who are in the U.S. for teaching or training purposes are exempt from counting days for two out of every six years. If they were previously in the U.S. under a student visa, those years might count against this two-year exemption, potentially affecting their status sooner than expected.

Other Exempt Categories

• Individuals commuting daily from Canada or Mexico
• Persons temporarily present due to medical conditions
• Athletes competing in charitable events
• Diplomats and their families

Each of these categories has specific conditions and documentation requirements. Being classified as exempt means the days present in the U.S. do not apply to the Substantial Presence Test.

Residency Starting and Ending Dates

For tax purposes, the date your residency begins depends on the first day you meet the Substantial Presence or Green Card Test. Conversely, your residency ends on the last day before you no longer meet either test, unless you qualify for a special rule, such as the Dual-Status Alien rule, which can split the year into resident and nonresident periods.

If you switch from nonresident to resident status within a single calendar year, you may need to file as a dual-status alien. In such cases, you must submit a return that reflects income earned during each status period. For example, income earned while a nonresident may only be subject to U.S. tax if it is U.S.-sourced, while income earned after residency begins is taxable worldwide.

Common Misunderstandings About Residency Status

Many temporary visitors mistakenly believe they are residents simply because they have a U.S. address, a work authorization, or because they file a standard tax return. Others assume that once they begin working in the U.S., they automatically become residents. These assumptions are incorrect and may lead to filing the wrong tax forms.

Filing Form 1040 instead of Form 1040-NR can result in misclassification by the IRS, causing them to treat you as a resident and issue benefits you are not entitled to, such as stimulus checks. This error is one of the primary reasons nonresident aliens have been mistakenly issued payments under the CARES Act.

How to Correct an Incorrect Filing

If you filed as a resident alien in error and received stimulus payments or other benefits you were not entitled to, it is crucial to take corrective action. You should:

• File Form 1040-X, Amended U.S. Individual Income Tax Return
• Include the corrected Form 1040-NR for the applicable year
• Attach an explanation detailing why you are amending the return and clarifying your residency status
• Return any stimulus payments to the IRS following the appropriate procedures

Acting promptly not only helps resolve the issue but also demonstrates good faith and compliance with U.S. tax law.

Tax Implications for Nonresident Aliens

As a nonresident alien, your U.S. tax obligations differ significantly from those of a resident. You are taxed only on U.S.-sourced income, such as wages earned in the U.S., U.S. dividends, and rental income from U.S. properties. In most cases, this income is subject to flat withholding rates.

You may not claim the same deductions and credits available to residents. For example, the standard deduction is generally not available to nonresidents, except for certain Indian and South Korean residents under tax treaties. Instead, nonresident aliens typically itemize deductions and are eligible for limited personal exemptions.

Social Security and Medicare taxes are also treated differently. Students and scholars on F-1, J-1, M-1, and Q-1 visas are generally exempt from these taxes if they remain nonresidents. However, once you become a resident alien for tax purposes, you may become subject to these payroll taxes depending on your employment.

Residency Status and Treaty Benefits

The U.S. has tax treaties with numerous countries to prevent double taxation and provide benefits to certain foreign residents. These treaties often contain provisions that override general tax rules, including reduced withholding rates, exemption from certain taxes, and eligibility for credits.

To claim treaty benefits, nonresident aliens must file Form 8233 for income such as wages and scholarships, or Form W-8BEN for passive income like dividends or royalties. The benefits under these treaties often apply only while the individual maintains nonresident status.

Be aware that if you transition to resident status, your eligibility for treaty benefits may change or terminate. It’s important to review the terms of any applicable treaty to understand how your tax status affects the benefits you can claim.

Mistaken Eligibility for Stimulus Payments

With the IRS using tax return data from 2018 and 2019 to issue payments, many nonresident aliens who filed incorrectly were mistakenly sent stimulus checks. The problem was compounded when individuals who later filed returns after 2022 were sent unclaimed Recovery Rebate Credit payments under the American Rescue Plan Act in 2024. These payments, though well-intended, were not meant for nonresidents.

If you are a nonresident alien and received a stimulus payment in error, you must return it. The procedure involves either voiding and returning an uncashed paper check or sending a repayment via personal check or money order if the funds were already deposited or cashed.

In addition to returning the payment, you should evaluate your previous tax filings. If they were completed using Form 1040 instead of Form 1040-NR, filing an amended return may be necessary to correct your residency status and prevent additional complications.

Avoiding Future Mistakes

To prevent future errors related to residency status and tax filings:

• Maintain accurate records of your entry and exit dates for each year
• Keep copies of your immigration documents and visa status
• Understand the rules of the Substantial Presence and Green Card Tests
• Consult the IRS guidelines and tax treaty terms applicable to your country
• File the correct tax forms each year based on your residency status

Residency status can change over time depending on your presence in the U.S. and your immigration path. Each year should be evaluated independently to determine the correct classification.

 Filing as a Nonresident Alien and Handling IRS Communications

For nonresident aliens, filing U.S. taxes can be a complex process that requires a clear understanding of status, applicable forms, and procedural requirements. Errors in these areas have led many nonresidents to inadvertently receive stimulus payments under the CARES Act and related legislation. We will walk through the correct process of filing taxes as a nonresident alien, address common filing mistakes, and explain how to respond to notices from the IRS.

Understanding the Correct Tax Forms

Taxpayers classified as nonresident aliens must file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, instead of the standard Form 1040 used by U.S. citizens and resident aliens. Filing the incorrect form not only misrepresents your tax status but may trigger IRS systems to process your return as a resident’s, qualifying you for benefits, such as stimulus checks, for which you are not eligible.

When to Use Form 1040-NR

You should file Form 1040-NR if you:

• Are a nonresident alien engaged in trade or business in the United States
• Earned U.S. income on which the correct tax was not fully withheld
• Wish to claim a refund of U.S. taxes withheld in error
• Need to report passive income such as U.S. dividends, royalties, or interest that requires special treatment

Income reported on Form 1040-NR includes wages, salaries, tips, and other compensation earned within the United States. It also includes non-effectively connected income that may be taxed at a flat rate.

Key Sections of Form 1040-NR

Form 1040-NR consists of several parts that differ from Form 1040. You will find specific lines related to treaty benefits, foreign addresses, and types of income that are more common among nonresident filers.

You are generally not allowed to claim the standard deduction (except for certain treaty residents) but may itemize deductions. These include state and local income taxes, charitable contributions to U.S. organizations, and certain business-related expenses. Claiming dependents or education credits is limited and typically not available to nonresidents unless exceptions apply under a tax treaty.

Avoiding Common Mistakes in Filing

Incorrectly claiming tax credits or deductions reserved for residents is one of the most common errors made by nonresident filers. This often happens when individuals are unfamiliar with the limitations of Form 1040-NR or are advised to use software not tailored for nonresident returns.

Another widespread issue is filing Form 1040 instead of Form 1040-NR. This mistake can lead to receiving tax credits such as the Recovery Rebate Credit (stimulus payments) that should not have been issued. It can also prompt a future review by the IRS, leading to repayment demands, amended return requests, or even penalties.

Understanding the Recovery Rebate Credit

The Recovery Rebate Credit was created to ensure that individuals who were eligible for stimulus payments under the CARES Act but did not receive them would still be able to claim the benefit. It was added to the 2020 and 2021 tax returns and has since been a source of confusion.

Nonresident aliens are not eligible for this credit. However, filing Form 1040 incorrectly may have caused the IRS to treat an individual as a resident and automatically issue the credit. If you believe you received a payment in error because of incorrect filing, you are required to return the funds.

Responding to IRS Notices

If the IRS identifies an issue with your return or the distribution of an incorrect stimulus payment, they may contact you via mail. Common notices include:

• CP12: Notifies you that your tax return was adjusted
• CP13: Informs you that a change was made to your return, and you owe no tax or refund
• CP14: A balance due notice for unpaid taxes
• Notice 1444/1444-B: Confirmation that a stimulus payment was issued to you

Each notice should be reviewed carefully. The first step is to verify the IRS contact information and ensure the letter is legitimate. The IRS does not send unsolicited emails or text messages. Official notices will contain your identifying information and a notice number in the upper corner.

Steps to Take After Receiving a Notice

• Read the notice in full and identify the reason for the IRS’s communication.
• Gather all relevant documentation, including prior tax returns, immigration documents, and correspondence.
• If the notice is about a stimulus payment received in error, prepare to return the payment.
• Respond by the deadline indicated on the notice to avoid penalties or further action.

If you need to amend your return, you will use Form 1040-X and include the corrected Form 1040-NR. Be sure to attach all schedules and forms required and include a clear explanation of the changes made.

IRS Contact Points for Nonresidents

When dealing with IRS issues, especially related to international tax matters, it is important to contact the appropriate office. For nonresident aliens, the IRS has a dedicated International Taxpayer Service.

You can reach the IRS International Department by phone at 267-941-1000 (not toll-free) or by mail at the Austin Service Center: 

Department of the Treasury Internal Revenue Service Austin, TX USA

Record-Keeping and Documentation

Maintaining accurate and organized records is crucial for any taxpayer, especially nonresidents. You should retain copies of the following:

• Form I-94, travel history, and visa documentation
• U.S. and foreign tax returns
• W-2, 1042-S, 1099 forms
• Any IRS correspondence

Documentation is especially important if you claim tax treaty benefits or exemptions under the Substantial Presence Test. Keep evidence of your physical presence, including copies of tickets, housing agreements, and employment records.

Impact of Amending Past Tax Returns

If you need to correct previously filed tax returns due to residency misclassification, you may file an amended return for any of the previous three years. In cases involving stimulus payment errors, the IRS may request repayment, even if the error originated from unintentional filing mistakes.

When filing Form 1040-X with the corrected 1040-NR, you should:

• Explain clearly why the amendment is being filed
• Show calculations supporting changes in income, tax liability, or credits
• Return any funds that were issued in error

Amending a return does not automatically trigger an audit, but the IRS may follow up if further clarification is needed.

Consequences of Not Returning Erroneous Payments

Failure to return a stimulus payment received in error can lead to penalties, interest, and collection actions. While the IRS has not penalized every mistaken payment, it has issued guidance indicating that payments received by nonresident aliens must be returned. Ignoring this responsibility could result in future tax refund offsets, liens, or eligibility issues with visa or immigration processes.

If you’re unsure whether you were eligible, determine your status using the Green Card and Substantial Presence Tests. If those tests confirm nonresident status during the relevant tax year, and you received a payment, you are expected to return it.

Timing and Deadlines for Corrective Actions

Timing is essential when resolving tax-related issues. If you received a payment in 2020 or 2021 but only discovered the error in 2024 or later, you may still amend your tax return and return the payment. The IRS may accept corrections and repayments even outside the typical statute of limitations if the funds were improperly received.

For most returns, the standard period to file an amended return is three years from the original due date. However, when dealing with the Recovery Rebate Credit or pandemic-related payments, flexibility may apply, especially if the IRS initiates contact.

Long-Term Considerations for Nonresident Filers

Staying compliant with IRS regulations enhances your credibility as a visa holder, student, or temporary worker in the United States. Proper filing protects your legal and immigration status, ensures accurate records with the IRS, and reduces the risk of repayment demands or penalties.

As you continue your journey in the U.S., your tax residency status may evolve. Annual reassessment is necessary, especially if your visa changes, your stay extends beyond initial expectations, or your financial circumstances shift.

Staying informed, using the correct tax forms, and responding proactively to IRS communications are the most effective strategies for managing your U.S. tax responsibilities. If you receive unexpected payments or unclear notices, it is essential to act promptly and seek clarity before making any assumptions.

Conclusion

Navigating the complexities of U.S. tax laws as a nonresident alien can be especially challenging in the aftermath of the COVID-19 pandemic, particularly when it comes to unexpected stimulus payments issued under the CARES Act and related legislation. Understanding your tax residency status is essential for determining whether you were eligible for economic impact payments. If you were a nonresident alien during the applicable years and received a payment in error, it is your responsibility to take corrective action.

Throughout this guide, we have explored the background of the CARES Act and outlined who qualifies for stimulus benefits. We’ve discussed the criteria that define a resident or nonresident alien, including the Green Card Test and Substantial Presence Test, and examined various exemptions that apply to certain visa categories. In doing so, we emphasized that nonresident aliens are generally excluded from receiving stimulus payments unless they meet specific tax residency requirements.

We also addressed the common mistake of filing Form 1040 instead of the appropriate Form 1040-NR, which can trigger unintended stimulus payments and result in future complications with the IRS. Taking prompt action to return erroneous payments and clarify your tax status is the best way to remain in compliance and avoid legal or financial issues down the line.

Being proactive, informed, and thorough in your tax filing approach is key to staying on the right side of U.S. tax law. If you’re uncertain about your status or how to proceed, it’s advisable to consult with a qualified tax professional familiar with nonresident alien taxation.

By understanding the requirements and following the correct procedures, nonresident aliens can effectively resolve any issues related to the receipt of stimulus payments and maintain a clear and accurate tax record with the IRS.