Transcript Slide 1

Internal Revenue
Service
Wage and Investment
Stakeholder Partnerships,
Education and Communication
Spring 2008
Income Tax Workshop
for Resident Filers
Note: This workshop will
explain only the basic rules of
resident income tax filing.
Please Note
This workshop is for students on
F-1 or J-1 visas who have been
in the U.S. for 5+ years.
It is also for scholars on
J-1 visas who have been
in the U.S. for 2+ years
out of the last 6 years AND
for employees on H-1B visas.
Internal Revenue Service
• The taxation agency of the U.S.
Government to which you
– File your personal Income Tax Return
State Tax Departments
• The taxation agency of the State
Government to which you may need to
– File your personal Income Tax Return
• If you resided in New York State in 2007, you
may need to file a NYS Income Tax Return.
• If you lived in another State, you may need to
file that State’s Income Tax Return.
• If you lived in two States, you may need to file
two State Income Tax Returns.
Basic Tax Vocabulary
• Alien: generally, any person who is
not a U.S. citizen
• Student: person temporarily in the
U.S. on an F, J, Q or M visa
• Scholar: person who is not a student
& who is temporarily in the U.S. on a
J or Q visa
Basic Tax Vocabulary (cont.)
• Resident or Non-resident: refers to
one’s tax filing status (Nothing else!)
• IRS: Internal Revenue Service
• Income Tax Return: statement filed
(submitted) by individual taxpayer to
the IRS
Basic Tax Vocabulary
(cont.)
• Compensation/Earnings: wages,
salaries, tips
• Income: wages, salaries, tips, interest,
dividends, some scholarship/fellowship
grants
Do I file as a
Non-Resident or Resident?
Residency Rules
for Filing
U.S. Income Tax Returns
Determination
of Residency Status
Do not confuse
Federal Tax Residency with
Immigration Permanent Residency
OR
New York State Residency
requirements for in-state tuition
rates
Federal Tax Residency Rules
• For Federal Tax purposes, foreign
nationals are classified as:
• Resident Aliens OR
• Nonresident Aliens (anyone who is
not a resident alien)
• Note: There are also “Dual Status” aliens who are
considered as residents for part of the year and
nonresidents for part of the year.
Resident or Nonresident?
The following determines whether you are
a resident or nonresident for federal tax
purposes:
1. Green Card Test
2. Substantial Presence Test
3. Residency Through Marriage
Who is a Resident for Tax Purposes?
1)
“Green Card” Test
• Lawful Permanent Resident of the
U.S.
Green Card Test
• Your residency starting date for tax
purposes is based on the date your
status changed to Lawful Permanent
Resident.
Remember: There is no option. If
you are a Lawful Permanent Resident,
you are a resident for tax purposes.
Who is a Resident for Tax Purposes?
2) “Substantial Presence” Test
Calculation that takes into consideration
presence in the U.S. during the current
year and two immediately preceding
years
”Substantial Presence” Test
How Do I Count?
31 days during the current year
and
183 days based on a calculation
that considers presence during the
current year and two preceding
years
Substantial Presence Test
A.
Current year (2007) days in U.S. x 1 = ___days
Must have at least 31 days in current year
B.
1st preceding year (2006) days in U.S. x 1/3
= ___days
C.
2nd preceding year (2005) days in U.S. x 1/6
= ___days
D. Total “Days in U.S.” A+B+C
= ___days
If Line D equals or exceeds 183, 183-day test is passed.
Must pass both 31-day and 183-day tests.
Substantial Presence Test
• If Line A equals or exceeds 31 days and Line
D equals or exceeds 183 days, then you are a
Resident Alien for federal tax purposes.
• If not, then you are a Nonresident Alien
for federal tax purposes and do not
need this workshop.
Substantial Presence Test
Some individuals are exempt from
counting days toward the
Substantial Presence Test.
• Days of an “EXEMPT” individual
• Commuter from Canada or Mexico
• Others (see Publication 519)
Who are Exempt Individuals?
• F, J, M & Q students (who have been
in U.S. for less than 6 years)
• J & Q Scholars (who have been in U.S.
for less than 3 years out of last 6
years)
Note: Not exempt from taxation
Residency through Marriage
3) A nonresident spouse can be treated
as a resident for tax purposes
– You are required to file jointly with your U.S.
Citizen or U.S. Resident (for tax purposes)
spouse.
– You must report world-wide income.
Duel-status Aliens
Dual-status Aliens
•
•
Taxpayer has two residency statuses
during the same tax year
Therefore, taxpayer
– Must file two income tax returns AND
– Split income between the two income tax
returns based on residency status.
Note: See Publication 519 for more information.
Establishing a Closer Connection
If you want to remain a non-resident for tax
purposes by claiming a closer connection to
your country, you can if you:
– are present in the U.S. less than 183 days in the
current year AND
– have a tax home in a foreign country AND
– file Form 8840.
Note: There are other criteria. Please see Form
8840 instructions.
Residency Starting Date
Residency Starting Date
Residency starting date under
green card test
If you meet the green card test at any time
during a calendar year, but do not meet the
substantial presence test for that year, your
residency starting date is the first day in the
calendar year on which you were present in
the U.S. as a Lawful Permanent Resident.
Residency Starting Date
Residency starting date under
substantial presence test
Your residency starting date is generally the
first day you were present in the U.S.
during that calendar year.
Residency Starting Date
When both the Substantial Presence Test
and Green Card Test apply, use the
earlier of the two dates.
Tax Treatment of
Resident Aliens
Tax Treatment of
Resident Aliens
• Resident Aliens are taxed on worldwide
income, just as U.S. Citizens are.
• Dual Status Aliens are taxed as either
residents or nonresidents depending on
which part of the year their income was
realized.
Tax Treatment of
Resident Aliens
WHICH INCOME DO I REPORT?
• Are you a Resident Alien for tax
purposes?
Resident Aliens report their entire
worldwide income like U.S. Citizens.
Resident Aliens may not claim exclusions of
income based on Tax Treaties (with some
exceptions stated in some tax treaties – visit:
www.irs.gov/businesses/international/article/0,,id=96739,00.html
WHICH INCOME TO REPORT? (cont.)
• Are you a Dual Status Alien?
o Dual Status Aliens report their entire
worldwide income for that portion of the
year during which they are Resident Aliens,
and report only income that is sourced in
the U.S. or that is effectively connected
with a U.S. trade or business for that
portion of the year in which they are
Nonresident Aliens.
Are you required to file a U.S.
Resident Tax Return?
Do you have to file?
• If your gross income is over the dollar
amounts listed on the chart, you must
file a U.S. Federal Income Tax Return.
• If you have overpaid taxes, you must
file an income tax return in order to
receive an income tax refund.
2007 Filing Requirements
for Resident Aliens
What is
Gross Income?
Gross Income
•
•
•
•
Wages, salaries and tips
Bank interest
Investment Income (taxable)
Taxable Scholarship/Fellowship
Note: These are only a few examples.
Wages, Salaries and Tips
Amounts you receive from an employer
• You should receive a Form W-2 at the
end of the year reporting the annual
amount of wages you received.
Taxable Scholarship and
Fellowship
• Scholarship and fellowship grants are not
included in taxable income if used for tuition,
fees, books, supplies and equipment required
for courses AND if the student is pursuing a
degree.
• Any portion of scholarship or fellowship
received for room & board or in exchange for
teaching or research is included in taxable
income.
What is a Scholarship or
Fellowship?
• You call it:
Tuition Waiver
• Internal Revenue calls it:
Non-taxable
Scholarship
(No work required)
What is a Scholarship or
Fellowship?
•You call it:
Room and Board
Waiver
•Internal Revenue calls it:
Taxable Scholarship
What is a Scholarship or
Fellowship?
•You call it:
•Internal Revenue calls it:
Teaching or Research
Assistantship Stipend
(recipient performs work)
Taxable Wages
Income Tax Forms
What forms should I fill out?
• Resident aliens file Forms 1040,
1040A or 1040-EZ.
More Tax Forms
• W-2: Wage and Tax Statement
• 1040 or 1040A: U.S. Resident Alien
Income Tax Return
• 1040-EZ: U.S. Income Tax Return for
certain resident aliens who have no
dependents
Note: See IRS Publication 17 to find
the easiest form for you to file.
More Tax Vocabulary
• Withholding:
– U.S. income tax automatically taken from
your paycheck
Note: U.S. Social Security and Medicare
are also taken from your paycheck.
Forms W-2
•You could have one W-2 or more from
different employers
•The form was prepared by your employer and
mailed to you.
•You do not write anything on this form.
•You use this form as a reference when you
prepare your income tax return.
•When finished, you attach this form to your
income tax return.
SAMPLE W-2 FORM
010-00-0101
16-0000000
6000
STATE UNIVERSITY
345 UNIVERSITY ST
ALBANY, NY 12700
JOY KIM
123 UNIVERSITY LANE
COLLEGETOWN, NY 00000
NY 16-6000000
6000.00
240.00
540
How do I file a Resident
income tax return
(Form 1040-EZ)?
First, learn the following tax vocabulary
. . .
More Tax Vocabulary
• Standard Deduction: standard amount that
individuals may subtract from income before
calculating taxes owed
• Itemized Deductions: allowable amounts that
individuals may subtract from income before
calculating taxes owed
– Examples: charitable contributions, state & local taxes
withheld, etc.
Note: No one can have both a standard deduction and
itemized deductions. You have to choose one.
Standard Deduction Amount
(for most people)
•
•
•
•
•
Single
Married Filing Joint
Married Filing Separate
Head of Household
Qualifying Widow(er)
with Dependent Child
$ 5,350
$10,700
$ 5,350
$ 7,850
$10,700
More Tax Vocabulary
(cont.)
• Personal Exemption: amount
deducted from income for yourself
and/or your dependents
For 2007, the amount is $3,400.
Which Residents can
use Form 1040-EZ?
• Individuals
– who do not claim any dependents
– whose taxable income is less than $100,000
– who do not claim any itemized deductions
– who had only wages, taxable scholarship or
fellowship grants, and whose taxable interest was
not over $1,500
– Miscellaneous other reasons (see Form 1040-EZ
instructions)
Let’s look at the
steps for completing
Form 1040-EZ
FORM W-2
Used for 1040-EZ Example
010-00-0101
16-0000000
6000
STATE UNIVERSITY
345 UNIVERSITY ST
ALBANY, NY 12700
JOY KIM
123 UNIVERSITY LANE
COLLEGETOWN, NY 00000
NY 16-6000000
6000.00
240.00
540
FORM W-2
Used for 1040-EZ Example
010-00-0101
16-0000000
1
4000
UNIVERSITY of CALIFORNIA
456 UNIVERSITY ST
COLLEGETOWN, CA 00000
JOY KIM
789 UNIVERSITY AVE
COLLEGETOWN, CA 00000
CA
45-6000000
4000.00
200.00
424
Form 1040-EZ
Do You Qualify for Earned
Income Tax Credit?
You must be a Resident
all year!
Earned Income Tax Credit
• If you qualify for Earned Income
Tax Credit, consult the chart on
page 14 in the Form 1040-EZ
Instructions booklet to find out
how much.
Form 1040-EZ
1040-EZ 2007 Tax Table
When do I file
a resident
income tax return?
The Filing Deadline is
April 15, 2008
Where do I file my Resident
income tax return?
For more information, call
1-800-829-1040
or visit
www.irs.gov
www.buffalo.edu/intlservices/tax.html