TITLE: IRS Draft 2026 Form 1040 Adds a Citizenship and Work Authorisation Question: What It Means for International Founders and SMEs
What the draft Form 1040 question asks
The proposed question appears in the Other Information section of draft Form 1040. It sits alongside the existing digital asset question.
It asks:
“At the time you file your return, are you, and your spouse if filing jointly, a U.S. citizen, U.S. national, or an alien lawfully authorized to work in the U.S.?”
The form provides separate boxes for:
- You: Yes or No
- Spouse: Yes or No
This wording focuses on your status at the time you file the return. It is not simply asking whether you earned income in the United States or whether you own a U.S. company.
The question also does not create a new tax rate. It does not, by itself, determine whether you are a U.S. tax resident. Those decisions still depend on the applicable tax rules, filing status, residency tests, treaty provisions, and the nature of your income.
Important: this is a draft, not a filing requirement yet
The IRS draft forms page clearly states that draft forms:
- Are not for filing.
- Should not be relied upon as final instructions.
- Remain subject to change.
- Require approval through the Office of Management and Budget process before official release.
The draft Form 1040 is marked “DRAFT, DO NOT FILE.” The IRS may revise, remove, or clarify the question before the final 2026 form is published.
You should therefore treat this as a compliance planning update. Do not use the draft form to submit a return.
Check the IRS draft tax forms page and the final Form 1040 page before filing.
Who may be affected in an international business
The question is most relevant to individuals connected with cross-border businesses. It may affect you if you are:
- A non-U.S. founder of a U.S. LLC or U.S. corporation.
- A UK Limited Company owner with U.S.-source income or U.S. business activity.
- A U.S. citizen or resident alien operating an ecommerce or digital business.
- A dual-status alien who was resident and nonresident during different parts of the year.
- Physically present in the United States while running your business or performing services.
- Married to a nonresident alien where a joint-return election is being considered.
- Receiving compensation for services connected with U.S. activities.
Your company’s status and your personal status are separate matters. A U.S. LLC or C-corporation does not answer an individual Form 1040 question. The relevant individual may still need to assess whether a personal U.S. return is required and which form is appropriate.
For example, a UK founder may operate a U.S. LLC while remaining personally resident outside the United States. Another founder may move to the United States during the year and become a resident alien under the substantial presence test. These situations can produce very different filing obligations.
Do not confuse tax residency with work authorisation
The proposed question combines several concepts that should be reviewed carefully:
- U.S. citizenship.
- U.S. nationality.
- Lawful authorisation to work in the United States.
- U.S. tax residency.
- Filing status.
- The source of compensation.
These concepts overlap in some cases, but they are not identical.
For example, a person may be a non-U.S. citizen but lawfully authorised to work in the United States. Another person may be a U.S. tax resident under the substantial presence test but need to review their immigration documentation separately.
Do not answer based only on your visa label, business ownership, or tax residency assumption. Review the final instructions and ensure the answer reflects your actual position when you file.
Review your residency position before preparing Form 1040
The new question makes it even more important to confirm whether Form 1040 or Form 1040-NR is appropriate.
The IRS generally classifies an individual as a U.S. resident for tax purposes if they meet either:
- The green card test.
- The substantial presence test.
Under the green card test, you are generally a U.S. resident if you are a lawful permanent resident at any time during the calendar year.
Under the substantial presence test, you generally need:
- At least 31 days of physical presence in the United States during the current year; and
- At least 183 weighted days during the three-year period covering the current year and the two preceding years.
The weighting calculation generally counts:
- All days in the current year.
- One-third of the days in the first preceding year.
- One-sixth of the days in the second preceding year.
Some people may qualify for an exception, including the closer connection exception, if they maintain a foreign tax home and stronger connections outside the United States. Form 8840 may be required.
Keep a detailed travel-day record. This will support the correct return position and reduce the risk of an inconsistent filing.
The IRS provides further guidance through its pages on the green card test and the substantial presence test.
Check joint-return elections carefully
A nonresident alien spouse will usually need to consider whether the couple can file jointly on Form 1040.
In certain circumstances, a U.S. citizen or resident spouse may elect to treat a nonresident spouse as a U.S. resident for the entire tax year. This election can allow a joint return, but it can also bring the couple’s worldwide income into the U.S. tax calculation.
The election generally requires:
- A joint return.
- A signed statement.
- Correct taxpayer identification details.
- Consistent treatment of the spouse as a U.S. resident for the relevant year.
The proposed question provides separate boxes for each spouse. Therefore, do not assume that selecting a joint filing status automatically produces the same answer for both people.
Keep the following records available:
- Immigration and work-authorisation documents.
- Travel-day calculations.
- Prior U.S. returns.
- Any statement supporting a joint-return election.
- Foreign income and company records.
- Compensation and payroll information.
This documentation will help you avoid a mismatch between your filing status, residency position, and answer to the new question.
Related draft change: Schedule OI Item K and $250,000 compensation
A second developmen
