Transcript International Students - The Cuyahoga Earned Income Tax Credit

International Students
Resident vs Nonresident
• Green Card = Resident – file 1040!
• Substantial Presence – 31 days this year or 183
days over last 3 years
• Exempt are:
– Students with F, J, M or Q visas – 5 years exempt
– Family of students
– Teacher/researcher with J or Q visas – no more than
2 of last 6 years in US
– Exempt years are counted by calendar year – if
student comes in December then that counts as a full
year!
Tax Treaties
• They are complicated. List of Codes
• Form 1042-S instead of a W-2 for income
exempted by treaty.
• India is the only country allowing students to
claim the standard deduction – most countries
allow the personal exemption only.
• Scholarships – Code 15: List of Countries with
limited nontaxable living expenses.
• Tuition for Services - taxable
Income Codes - 18
• Code 18: Teaching and Research – 2 to 3
years for visiting professors.
• Does not apply to spouse’s earnings.
• Germany, India, Netherlands, Thailand
and UK – exceed the time limit and lose
ALL benefits!! Should claim no benefit.
Code 19: Student Wages
• F-1 students must work on-campus only
for the first year.
• Spouses of F-1 cannot work.
• Income limits by country.
Example
• Yumiko from Korea earned $4,516 from working
at the Case library.
Wages
$4,516
Treaty
$2,000
Subject to Tax $2,516
Exemption
$3,650
Taxable
$0
Any Withholding should be returned to Yumiko.
Other Incomes/Treaties
• Personal service or non-related income is not
covered by the treaty – except Canada.
• Canada – under 10,000 exempt for NR; over
10,000 all taxable.
• India – Standard Deduction; Could lose Code 18
scholar benefit if over time limit
• China – Treaty is for 3 years though status
would switch from Nonresident to Resident.
Third Year Form 8833 with 1040
Family Issues
• Cannot file as Head of Household
• Normally cannot claim family members.
• If they can be claimed then must have an
ITIN – similar to a SSN
• Claiming spouses – Canada, Mexico,
South Korea and India
• Married – usually filing separately.
Children
• Cannot claim dependents even if they are
US citizens
• Exceptions are:
– Canada and Mexico
– South Korea
– India (not F-2, J-2 or M-2)
• May be able to claim CTC and Child Care
Credit but doubtful; Child must be citizen,
national or resident alien of US.
Spousal Income
• F-2 status – should not be working
• J-2 status – authorized to work and have
to pay social security taxes.
Other Income
• Taxed at higher rate because not
effectively connected with US business –
dividends, capital gains, rental income and
interest EXCEPT bank interest
• Bank interest is excluded from income – it
need not be reported.
Itemized Deductions
• Nonresidents except Indian students are
not entitled to the standard deduction
• Itemize state and local taxes – Will be
income in the following year if a refund!!
• Charitable Contributions
• Some Job Expenses – Rare
• Student Loan Interest difficult to deduct.
Credits
• Education Credits – No (if nonresident
alien)
• EITC – No (if nonresident alien)
Form 8843
• Helps exempt a nonresident from future
substantial presence test.
• Should be completed by person filing a tax
return
• Also, spouse and dependents should each
file one too – even without an ITIN or SSN
Social Security Tax
• Nonresidential Aliens do not pay Social Security
and Medicare taxes.
• The exception is a J-2 working spouse.
• Client should contact employer for a
reimbursement. If that doesn’t work then
• File Form 843 including
–
–
–
–
W-2
Form 8316
1040NR
Visa
Where to file
Mail to:
Department of Treasury
Internal Revenue Service
Austin, TX 73301-0215