Filing a tax return for NON-U.S Entity with Schedule K-1 losses - 1040-NR requirements?

This is a common area of confusion for non-U.S. persons with U.S. business interests. The short answer is yes, you should file Form 1040-NR even though you have losses rather than income. The requirement to file isn't just based on whether you had positive income - it's based on whether you were "engaged in a trade or business in the United States." As a partner in a U.S. LLC that issues you a Schedule K-1, you are considered engaged in a U.S. trade or business through the partnership, regardless of whether that business was profitable or not. Filing the 1040-NR allows you to report those business losses, which could potentially be valuable to you in offsetting future income from the same business. If you don't file, you might lose the ability to carry these losses forward.

After struggling with a similar situation last year, I found a tool that was super helpful for navigating the non-resident tax filing requirements. I used https://taxr.ai to help analyze my K-1 and determine my filing obligations as a non-US person with business interests here. It analyzed my documents and confirmed I needed to file even with losses, plus showed me exactly where to report everything on the 1040-NR. The system actually scanned my K-1 and highlighted all the boxes that were relevant for my non-resident filing status. Saved me hours of research and confusion since the regular tax software options don't handle non-resident situations very well.

I wanted to follow up about my experience with taxr.ai after my skeptical comment. I decided to try it with my complicated K-1 situation (I have investments in three different LLCs as a non-resident). The system correctly identified that I needed to file even with overall losses, and showed me exactly which schedules I needed to attach to my 1040-NR. It handled my treaty situation correctly too - identifying the reduced withholding rates I was eligible for and explaining how to properly document them. Way better than the general tax software I tried before that kept trying to put me on a regular 1040. Definitely recommend it for other non-US persons with K-1s.

If you need to talk directly with the IRS about your non-resident filing requirements, good luck getting through on their international line. After trying for weeks last year with my similar situation, I found https://claimyr.com and used their service to get through to an IRS agent. You can see how it works at https://youtu.be/_kiP6q8DX5c They basically hold your place in the phone queue and call you when an actual IRS agent is on the line. The IRS specifically confirmed for me that as a non-resident with a K-1 showing losses, I was required to file the 1040-NR with Schedule E to report my share of the partnership losses.

I need to apologize for calling Claimyr a scam. After struggling for another week to reach someone at the IRS about my own non-resident LLC situation, I gave it a try. It actually worked exactly as described - they called me back after about 37 minutes (way faster than I expected) with an IRS agent already on the line. The agent confirmed everything mentioned in this thread - that as a non-resident with a K-1 showing partnership losses, I do need to file Form 1040-NR with Schedule E to report my share of the partnership activity. They also mentioned I needed to include Form 8833 for my treaty position. Definitely saved me days of frustration trying to get through on my own.

Just to add some additional context from my experience as a Canadian with US LLC interests - you might also want to file Form 8833 (Treaty-Based Return Position Disclosure) with your 1040-NR if you're claiming any benefits under a tax treaty with your home country. This is especially important if you're claiming that some of the LLC income or loss should be taxed differently based on treaty provisions. Also, don't forget about Form 8805 if the partnership had any effectively connected income and was required to withhold tax on your behalf (even if your ultimate share ended up being a loss).

Slightly off-topic but related - make sure you check if your home country requires you to report your US LLC interest or allows you to claim the losses on your home country tax return! I'm from Australia, and I have to report my US LLC interest on my Australian tax return too, even though I already file a 1040-NR in the US. Some countries treat US LLCs as corporations while others treat them as flow-through entities like the US does. This "hybrid entity" issue can create tax mismatches where losses get trapped in one country.