Taxes

 

Tax Bulletin

Please contact the following for tax forms and additional information.

Federal Taxes

U.S. Internal Revenue Service

State Taxes

D.C. Office of the Chief Financial Officer, Taxpayer Services
Maryland Comptroller of the Treasury
Virginia Department of Taxation

Following is general information addressing tax concerns of F-1 and J-1 students, and J-1 scholars. The staff at the ISS are prepared to assist you in obtaining the appropriate tax forms and publications, but cannot advise you on filing your tax forms. This bulletin is not intended as tax advice nor should it be construed as tax advice. Students and scholars should consult tax professionals for specific advice. 

Important Notice

All F-1 and J-1 students, J-1 scholars, and F-2 and J-2 dependents are required to file form 8843 with the U.S. government, even if you did not have any income from the U.S.  See questions 11 and 12 for further information.

1. How does the tax system work in the United States?

Unfortunately it is rather complicated. You may come from a country where the government automatically withholds a given amount of your salary for taxes and no further action is required. The system in the U.S. operates quite differently. 

2. But I do get taxes withheld from my salary, don't I?

Yes, and that is step one of a two-step system. You may remember that when you were hired, you had to complete a form called the W-4 form. This is also known as the "Employee's Withholding Allowance Certificate." 

3. Why is the W-4 form important?

Because through this form, you determine how much of your income should be paid to the government as taxes. If you are a nonresident for tax purposes, there is a suggested manner for completing this form. 

Nonresidents for tax purposes may take only one allowance on line four and no further allowances even if you are married and have children. If you take further allowances, you will end up owing a greater amount of taxes when you file your tax return. In addition, you should have $8 withheld online 6 on a bi-weekly basis, in order to avoid owing the government a large amount of taxes in April. There is an exception to the above rule forcitizens of Canada, Mexico, Japan, and Korea. This is discussed in IRS publication 519. 

4. So once I complete my W-4 form and have my taxes withheld, am I through?

Not quite. You are required to file an income tax return annually. This way, the government can determine whether you paid too much, too little, or the appropriate amount of taxes during the previous year.

5. When do I have to do this? 

You must file by April 15 for the preceding year. In order to file, you need a W-2 form from your employer. The W-2 is the official record of how much tax actually was withheld. Normally, employees receive this in the mail during January. If you do not receive your W-2 by January 31, ask your employer for it. You must have received the W-2 form to be able to file your tax return properly. However, you are required to file a tax return evenif you did not receive your W-2.

6. My friend told me I can file the form 1040EZ. Is that right? 

As a foreign student, it is highly unlikely that you would file the 1040EZ. The reason is that the 1040, 1040A and 1040EZ are for individuals who are considered residents for tax purposes. Generally, F-1 and J-1 students are considered nonresidents for tax purposes, which means they file Form1040NR or in many cases, Form 1040NREZ. 

7. I am a nonimmigrant, so I guess it makes sense that I'm a nonresident. Is that the way it works? 

It is not that simple. It is possible to be a nonimmigrant for immigration purposes, yet be a resident for tax purposes.

8. How do I know what I am? 

Generally, F-1 and J-1 students are considered nonresidents for tax purposes their first five years in the U.S.   Most J-1 researchers and scholars are nonresidents for their first two calendar years in the U.S., unless they are being paid entirely by a foreign employer, in which case this would extend to four years. 

9. What is the Substantial Presence Test? 

The Substantial Presence Test is a formula the Internal Revenue Service (IRS) uses to determine when a nonimmigrant becomes a resident for tax purposes. J-1 researchers and scholars are subject to the substantial presence test after two years, and F-1 and J-1 students after five years. The formula is included as the last page of this handout. 

10. I heard that F-1 and J-1 students are "exempt individuals." Does this mean we don't have to pay taxes?

No. The term "exempt individual" is used to differentiate individuals who must use the Substantial Presence Test to figure out their tax filing status from those who don't. It does not mean a person is exempt from filing the appropriate tax forms and making the required payment. 

11. I am an F-1 student in the U.S. I have not worked here and my sole source of funding is my parents abroad. Do I have to pay taxes in the U.S.? 

Although you would not have to pay taxes in the situation described, all F-1 and J-1 students and J-1 scholars and F-2 and J-2 dependents are required to file form 8843 with the IRS, even if you had no income in the U.S. 

12. What is the deadline for filing this form? 

For individuals with no U.S. income the deadline is June 15. In all other cases, the deadline to file tax forms is April 15.

13. What is the difference between the 1040NR and the 1040NREZ?

The 1040NR is a more comprehensive tax form, totaling five pages, which can be used by any nonresident. The 1040NREZ is a simplified version of the same form, which can be completed by nonresidents who meet certain requirements. Most H.U. students will qualify to file the 1040NREZ. Note: Married students from India whose spouse had no U.S. source income should file the 1040NR. See the 1040NR instructions for more information. 

14. What are the requirements that need to be met to file the 1040NREZ? You must: 

  • be a single nonresident or be a married nonresident who is not a national of the U.S., Canada, India, Japan, Korea, or Mexico. 
  • be under age 65. 
  • have had only wages, salaries, tips, taxable refunds of state and local income taxes and scholarships  fellowship grants as your income. 
  • have a total income under $50,000. 
  • claim only state and local income taxes withheld if you itemize your deductions. 

    Check the instructions of the 1040NREZ for any clarification of the above.

15. Do I have to file any other forms? 

Yes, with the 1040NR or 1040NREZ you are required to file form 8843.

16. Where do I send my tax forms? 

Mail them to the Internal Revenue Service Center, Philadelphia, PA 19255.

17. What about my dependents?

Under the current IRS requirement, all nonresident F and Js, including dependents, must file form 8843, even if they have no U.S. source income.

18. My country has a tax treaty with the U.S.  Does this mean I'm not required to pay taxes?

No. You are required to report your income on the appropriate forms. Treaties are very specific as to what situations they cover. Treaty benefits do not apply to all individuals from a given country.

19. How do I find out if I get any benefits from my treaty? 

You should first consult IRS Publication 901, which is a summary of tax treaties. Be sure to look at the section that pertains to students or your appropriate working classification. The treaty article may protect a portion of your income from tax or it may exempt all of it. Refer to the treaty for the specifics.

20. After looking at publication 901, it appears I am eligible for benefits. What should I do next? 

Your next step would be to get an actual copy of the treaty. You may be able to do this by going to the H.U. Law Library, located at on the Law Campus. Remember that the staff can help you find the treaty, but they cannot explain the content to you.

21. I am an F-1 student.  For the past three years, I have filed the 1040EZ form. Now that I know that is wrong, how should I go about fixing this situation? 

It is possible to file amended returns to correct mistakes from the past. It is best to work with an experienced tax professional in nonresident taxation in this situation. 

22. I have a lot of friends who work and don't file tax returns. Why should I?

There is a legal obligation to do so. Further, failure to comply with the law can cause you difficulties with the INS as well as the IRS in the future. 

23. I have a Graduate Assistantship. Is this considered employment? 

Yes. Normally, a G.A. is payment comprised of tuition remission and a stipend. Under the U.S. tax laws, the tuition remission component is nontaxable income. However, the amount received as stipend would be taxable. For example, if the award was for 18 points of tuition remission plus$9000, $9000 would be subject to taxation.  The university should have sent you a 1099 income statement.

24. Do I have to pay the Social Security tax? 

Social Security (FICA) tax withholding depends on whether you are a resident or nonresident for tax purposes. If you are a nonresident F-1 or J-1student or nonresident J-1 scholar, you do not have to pay FICA. It is also important to note that if you are a resident F-1 or J-1 student but are working on campus (in this case, at H.U.) you do not have to pay the FICA tax. However, if you work without authorization, FICA should be withheld from your paycheck. 

25. Do I have to pay state and local taxes? If so, as a resident or nonresident? 

Generally, you can assume that you will have to file state and local returns if you earned any income in the U.S. Unfortunately, the state and local tax agencies use the words "resident" and "nonresident" with different meaning than the federal government. Resident refers literally to where you reside. The ISS does not carry forms or publications for state or local tax information, but they can often be found in banks, post offices, and libraries. 

26. I have been studying at H.U. for three years and working during the summers. I have not filed a tax return. When I file my return this April, will I have to account for the previous years? If so, how? 

This is a situation that can be rectified, but needs the guidance of an experienced nonresident tax professional. 

27. There are a lot of companies that advertise they prepare tax returns at a low rate. Can I go to one of those? 

It is important to understand that if you qualify to file as a nonresident for tax purposes, you are part of a small group of tax filers in the United States. Many accountants have no working experience in this area of the law. The ISS urges you to discuss with the tax preparer his or her qualifications before contracting for services.

28. What is the difference between how a nonresident and a resident are taxed?

A nonresident is taxed on income from U.S. sources, which includes services performed in the United States. A resident, on the other hand, is taxed on worldwide income. 

29. Once I complete my 1040NR or 1040NREZ and form 8843, is there anything else I need to do? 

You should staple copy B of your W-2 form(s) and/or copy C of your 1042-S form(s) to the front of page one. You should also include a check if you owe any taxes, made out to the IRS. Finally, be sure to make photocopies of your return and all supporting documents for your personal files.

30. The 1040NR and 1040NREZ require a Social Security number. I don't have one. What should I do?

If you are an F-1 or J-1 student, J-1 scholar, or J-2 dependent, you are eligible to obtain a Social Security card with proof of authorized work permission. It takes approximately two weeks for a card to be processed by the Social Security Administration. 

31. What about my F-2 spouse who cannot work legally in the United States. How does s/he obtain a Social Security number? 

The IRS has developed a substitute for individuals who are not eligible to obtain a Social Security number, known as the Individual Taxpayer Identification Number (ITIN). Go to a local IRS office with a passport and appropriate documentation verifying foreign status and identification. Examples of documentation supporting an individual's status include a foreign passport, foreign birth record or current documentation issued by the INS. Examples of evidence supporting identity include driver's license, identity card, school, medical or marriage records, voter or military registration cards, passport, or current documentation issued by the INS. Once piece of identification should contain a photograph. The processing time for an ITIN is approximately six weeks.