Tax implications of receiving cash bonus from bank for a non-resident alien

Question

Suppose that a non-resident alien, who occasionally visits the US as a tourist, but who also happens to have a social security number (issued while being on an academic visa many years ago), opens a US bank account which offers a cash bonus. The bank states that:

"Bonus will be reported as interest earned on IRS form 1099-INT and recipient is responsible for any applicable taxes"

The non-resident alien isn't otherwise subject to any US income tax or required to file any reports with the IRS.

Would receiving such a bonus, along with the ensuing report by the bank to the IRS, result in the alien having to start filing tax returns? Would there be any other implications of such a report to the IRS?

(for completing the picture, such an alien would report that income in his home country which has a tax treaty with the US for avoiding double taxation, so this question is solely concerned with avoiding a potential bureaucratic nightmare. The alien would also not mind if any amount of tax was to be withheld by the bank, as long as there are no requirements for filing returns etc.)

Answer 1

You will need to fill the form W8-BEN and give it to the bank when you open the account. As the result, you'll receive the bonus sans 30% IRS tax withholding, which you'll then need to get back as a refund after filing the annual tax return. You don't have to file the return, but you will not get a refund if you don't file. Note that your country will not count the withholding as double taxation, unless you actually file the return to show the real tax paid. So without filing a return in the US you'll pay the tax twice.

If your home country has a tax treaty with the US that exempts interest from taxes or allows lower withholding, you should mention it on the W8 form.