1040NR required to file North Carolina State Tax?

[ytriay87]

Working on a 1040NR for a person working and living in the state of North Carolina under a F1 student visa for the entire 2019 tax year. The person earned $24,000 and paid $2,606 in state taxes. Should this person file a state income tax return or do the state taxes paid only impact the federal return?

Proseries seems to force a federal itemized deduction for the state taxes paid but nothing is populated on the D-400 (NC state return). Any suggestions or comments would be appreciated.

[sjrcpa]

Why wouldn't he have to file a NC return?

[ytriay87]

No clue. I ask the question because the ProSeries software is not transferring info from the 1040NR to the D-400 (State Return). The AGI shows blank. I figured maybe there is an exception for people filing a 1040NR. I have called both the state of NC and Intuit, and no one can give me an answer as to why the state info isn't populating in ProSeries.

[sjrcpa]

I don't use ProSeries but last year people were saying you could not do a state return with a 1040NR.

[ytriay87]

Do you have a source for that info? That's helpful to know I'm not the only one facing this issue. I had to override numbers in the North Carolina state return because it wasn't pulling in the AGI for calculations. 

[itonewbie]

Have you considered whether there is an income tax treaty with your client's home country, whether your client was a resident of the treaty country by (usually) Article 4, if there is an article that covers the income in question, and, if so, how and where that income should be taxed, and if the income is taxable in the US, whether that article provides for similar tax treatment as if a US resident?

In the absence of any treaty exemption or concession and provided your client is eligible to be treated as an exempt individual, he/she would be subject to US tax as a nonresident alien (NRA).  NRAs, under the IRC, are not eligible for standard deduction - that's why PS only computes itemized deductions on the 1040NR.

Based on NC's statutes, GS 105-153.3(15) and (11), you client may be considered a nonresident for NC individual income tax purposes.  Although NC does not explicitly require modifications for federal tax treatments for treaty income, your client will still need to file a NC return if he/she meets the relevant thresholds explained in D-401.

[sjrcpa]

 I don't. I was going on memory.

[Frank Broadway]

This is from 2019 NC-D401

If you are not eligible for the federal standard deduction,
your N.C. standard deduction is ZERO. (For information
on who is eligible for the federal standard deduction, see
federal publication 501, Dependents, Standard Deduction,
and Filing Information.)

Your 1040NR uses itemized deductions. 

Your deduction will always be zero unless you can itemize on Schedule S Part C.

Nonresident Aliens. Nonresident aliens are required to file returns at the same time they
are required to file their federal returns. (For a definition of nonresident alien, see page 5.)

Nonresident Alien. A nonresident alien is an alien (not a U.S. Citizen) who has not passed
the green card test or the substantial presence test (For more information on the green
card test and the substantial presence test, see federal publication 519, U.S. Tax Guide
for Aliens.) For North Carolina tax purposes, a nonresident alien may be considered a
resident, part-year resident, or nonresident. (For more information, on filing requirements
for each residency status, see above.) 

Filing Status - A Return is Required if Federal Gross Income Exceeds
Single..................................................................................................................................$ 10,000
Married - Filing Jointly......................................................................................................$ 20,000
Married - Filing Separately
If spouse does not claim itemized deductions...............................................................$ 10,000
If spouse claims itemized deductions..............................................................................$ 0
Head of Household.............................................................................................................$ 15,000
Qualifying Widow(er)/Surviving Spouse ..........................................................................$ 20,000
Nonresident alien (regardless of filing status)....................................................$ 0