Transcript International student Income Tax Workshop Agenda

Catholic University: Tax Filing
March 2, 2011
Mary Fortier
Nonresident Alien Tax Office
www.towson.edu/nratax
Tax Terms Overview

Withholding – The amount of money taken out of your
paycheck to pay taxes

Reporting Forms - Ex: W2, 1042-S, 1099

Tax Return - Ex: 1040NR, 1040NR-EZ

Filing – An individual “files” (submits) a tax return

Internal Revenue Service – Federal tax agency

Resident vs. Nonresident – IRS term is different than state
term
Tax Status
Tax Residency Status (Federal)





US Citizen
Permanent Resident Alien
Resident Alien for Tax Purposes
Nonresident Alien for Tax Purposes
If a person is not a US Citizen or PRA
–

Tax terms not immigration
Categories!
Employer is legally required to determine tax residency status
(a person cannot choose)
Possible tax status
–
–
–
Nonresident alien or resident alien for tax purposes
Typically if you are in F1 or J1 status for 5 years, you are NRA
Term applies to federal tax only
NRA vs. RA
NRAs




May not choose
withholding allowance &
marital status
Follow different tax laws
US income is only taxed
Mandatory rate of Single,
1, NRA
RAs



May choose withholding
allowance & marital status
Follow same tax laws as US
Citizen or PRA
Taxed on worldwide income
Tax Status: Substantial Presence Test (SPT)
See Decision Tree:
http://international.cua.edu/res/docs/taxes/decidesptexempt.pdf
Objective: To determine if you are exempt from counting days using SPT

If F, J, M or Q Full-time Student & compliant with legal status
Years of Presence:


If Student: Have you been in US less than 5 years total?
If Scholar: Have been in US 2 out of the last 6 consecutive calendar years?
If Yes: You are exempt from counting days towards SPT: You are a NRA
If No: You must count days as part of SPT to determine NRA or RA
(see http://international.cua.edu/taxes/SPT.cfm)
Tax Year
JANUARY
PAYER
Pays individual & withholds tax
JANUARY 1
DECEMBER
INDIVIDUAL
Receives Money
APRIL 18
PAYER
Report income & tax withheld (For tax year 2010)
INDIVIDUAL
Complete & submit tax return (For tax year 2010)
What is Taxable Income

Payment for Services
Working = Wages = Payment/paycheck

Scholarship
Anything above qualified tuition and fees is taxable income;
Payroll Office calculates this and charges student

Other Payments
Travel grants, competitive grants, interest income
For more information see:
http://www.towson.edu/nratax/ustaxes/incometaxwitholding1.htm
http://www.towson.edu/nratax/ustaxes/incometaxwitholding3.htm
Working = Form W4
Work Authorization: You can only work for Catholic University
Employment (Working): Taxes must be withheld every time you get
paid; to determine how much to withhold, a Form W-4 must be
completed by individual and submitted to your employer; otherwise
default amount is used
Source:
http://international.cua.edu/taxes/W4.cfm
NRA Mandatory Tax Withholding

NRAs must complete:
Single
1
NRA
•
•
•
X
X
X
W-4 For Different States
Live in one state, work in another; NRA rate is same for federal
 Work authorization only for on-campus employment
 Reciprocal tax agreements betweens states

See below at: http://treasurer.cua.edu/forms.cfm
Tax Treaty: New Form Each Year
 Submit
new 8233each year: March 15, 2011
Tax Treaty Benefit - For individuals under a tax treaty benefit please be advised that your
8233 is due no later than March 15, 2011. If we do not received the current year 8233
your treaty benefits will be suspended until the form has been received and benefits are
not retroactive. See: http://treasurer.cua.edu/payroll/
 About 60 treaties in effect. For list go to:
http://www.irs.gov/businesses/international/article/0,,id=96739,00.html
 Individual must meet all requirements to be eligible
 Withholding agent (employer) does not have to grant
 Treaty is also claimed when filing a tax
 Does not mean it will be allowed by IRS
return

Not recognized by all states, ex: Maryland

Treaty income reported on 1042S
Taxable Scholarship
14% mandatory for NRAs
– Unless exempt by a tax treaty
 General practice - Apply to student account
before rebate checks are issued
– Which will affect rebate amount

NRAs

Tax must be withheld in the
same semester as award is
given
RAs

Does not apply
Form 8843

Yes
Everyone Must File 8843
Requirement
All students in F-1 & J-1 status,
 Adult dependents in F-2 or J-2 (ex: spouse)

Taxpayer ID #

No SSN or ITIN required – just leave blank if none
Form 8843
Sample Complete Form
For how to complete:
http://www.towson.edu/nratax/docs/Form8843example.pdf
Interactive Form to Fill Out
Find interactive form at:
http://www.irs.gov/pub/irs-pdf/f8843.pdf
Mail form to:
Department of the Treasury, IRS Center,
Austin, TX 73301-0215
Deadline: June 15, 2011
Income
Employer: Report
Tax Reporting Process
Tax Reporting Flow
(electronic)
1st
2nd
3rd
• Employer/Institution
• Internal Revenue Service
• State Tax Agency
Tax Reporting Form
(mailed forms)
YOU
1
TAX
RETURN
Important to understand in case information is
not accurately reported
Employer Reporting Deadlines
Type of Income
Withholding
Form
Form W-4
Reporting
Form
Form W-2
Mail by
Date
1/31
Other income
n/a
Form 1099
1/31
Scholarship
income
n/a
Form 1042-S
3/15
Employment
income
Individual Deadline: April 18th
Form W-2: Employment Income
 Form
W-2 (Money for Working)
If Box 1 has # in it – that is your federal income
– Federal tax withheld is reported in Box 2
– Box 16 will have state wages; Box 17 state tax withheld
– If you did not receive yours contact Payroll Office
–
1042-S: Scholarship Income
See Handout
–
If Box 1 is blank you have a tax treaty
Box 16 will be complete (maybe 17 if state tax withheld)
–
Must wait to receive Form 1042-S to file return
Reporting Forms (Institution)
 Form
1042-S (Scholarship Income)
–Institution completes &
reports income earned to IRS
–Must be mailed by employer by 3/15 of each year
–Request duplicate at 410-260-7964
Reporting Forms (Institution)
 Form
1099- INT
Reports interest income - - NOT taxable income
– Must be mailed by 1/31 each year
–
Reporting Forms (Institution)
 Form
1098-T
NRAs cannot claim this deduction
– But often are sent form
–
Individual: File
Tax withholding is not a precise calculation:
This is why each year you must file a tax return each year
 Overpay
(Refund) versus underpay (Owe)
Federal – Do I Have to File?
Form 1040NR: www.irs.gov

2010 Filing Requirement
If you are Single, under 65 years of age:
⁻
⁻
⁻
If you earned less than $3,650 (Box 1, W-2)
No federal tax was withheld = 0 (Box 17, W-2)
You do not have to file return
Should file if tax was withheld (Box 17, W-2) = >$1
State – Do I Have to File?

Refer to the state in which you live to determine
criteria
⁻
⁻
⁻
Individual income tax
Filing requirement
What type of tax was taken out or did you claim
exempt as part of state tax reciprocal agreement
Maryland: www.marylandtaxes.com
Virginia: http://www.tax.virginia.gov/
West Virginia: http://www.wva.state.wv.us/wvtax/default.aspx
Pennsylvania:
http://www.revenue.state.pa.us/portal/server.pt/community/revenue_home/10648
Must File –
Which Forms?
NRA Tax Forms – 1040NR-EZ
 NRA
completes Form 1040NR-EZ (short form)
–Individual
claims to IRS income earned in previous year
Treaty Forms: 8233
NRA Tax Forms - 8843
 Form
8843
–Required of
all students in F-1 & J-1 status, and adult
dependents in F-2 or J-2
Tax Form Terms
Tax Filing Terms - Exclusion
Exclusion


An exclusion is income you receive AND is
– Not included in your U.S. income
– Not subject to U.S. tax
Examples
– Interest income (1099-INT)
– Qualified scholarships (not reported to IRS)
(tuition, required fees, books)
– Foreign source income
Tax Filing Terms – Personal Exemption
Personal Exemption

Reduces taxable gross income

Generally, one personal exemption amount per
person/dependent claimed on tax return

Non-residents may typically only claim one
exemption (for themselves), even if they have a
dependent spouse or children

The amount for 2010 tax year is $3,650
Tax Filing Terms – Deduction
Standard or Itemized Deduction

NOT available to NRAs (except students from India)
*This is reason for extra tax withholding (Single, 1, NRA)

Deduction of certain allowable expenses from gross
income
–
Itemized: Must list each expense separately on
Schedule A of 1040
–
Standard: Determined by IRS!
 Eliminates need to itemize; use 1040-EZ
 Amount varies by filing status
Highlights
NRA Tax Filing
May claim only one personal exemption ($3650 for 2010)
– Regardless of marital status or children
 May not claim the standard deduction (excepts students from
India)
– An expense amount listed which is subtracted from total
gross income when calculating taxable income
 Other deductions are limited (State taxes withheld; charitable

contributions)
May not deduct education (1098-T)
 File 1040NR or 1040NR-EZ
 File as single individual (unless can claim dependents from
Canada, Korea, Mexico, India (F1/J1 only), Japan (old treaty),
and American Samoa & Northern Mariana Islands
 Need to apply for ITIN
–
Common Errors
Completing wrong tax form(s)
 Entries in the wrong line
 Mathematical errors
 Illegible handwriting

–
–
Use block letters and write numbers as shown here:
1234 567 890
Failure to use the social security spelling of your
name
 Leaving lines blank

–
Enter a straight line or a zero if not applicable
Records
Keep photocopies of all your tax records for at
least 7 years
 These records include:

–
–
–
–

Form 1040NR or 1040NR-EZ
Form W-2, 1042-S, 1099
Form 8843
All worksheets and receipts you used for calculations
Important if you apply to change immigration
status
–
May be required to submit tax records with application
Why File a Tax Return?

Comply with US regulations
–
–
As part of F1 or J1 immigration status
Required (previous years) if you plan to
apply for permanent residency or US
citizenship

Avoid interest and penalties

Start statute of limitations period (3 yrs)

Obtain tax refund, if any
Reminders
April 18th DEADLINE
Federal – www.irs.gov
Complete Federal tax return first; then State
Form 8843 for all students in F1 or J1 status