Tax information for international students scholars
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Tax Information for International Students & Scholars. Mary Fortier NRA Tax Specialist. Overview. US Tax System – How it Works. Federal Agency Internal Revenue Service State & Local Agencies Comptroller’s Office (Maryland) C entral Payroll Bureau

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Tax Information for International Students & Scholars

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Tax information for international students scholars

Tax Information for International Students & Scholars

Mary Fortier

NRA Tax Specialist


Overview

Overview


Us tax system how it works

US Tax System – How it Works

Federal Agency

Internal Revenue Service

State & Local Agencies

Comptroller’s Office (Maryland) Central Payroll Bureau

Pay taxes as you earn money (fed & state)

  • Per pay period (bi-weekly for wages)

  • By semester (scholarship income)

  • Per payment (independent contractor)

    What you owe is not a precise calculation*

    *Overpay (Refund) versus underpay (Owe)

  • Reason for filing a tax return each year (reconcile)


Tax residency status federal

Tax Residency Status (Federal)

Tax terms -

not immigration

Categories!

  • 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

    • Employer is legally required to determine tax residency status (a person cannot choose)

  • Possible tax status

    • Nonresident alien or resident alien for tax purposes

    • Determined by Substantial Presence Test

    • Applies to federal tax only


Common tax words

Common Tax Words

Tax Withholding – Employer

Employer calculates tax, withholds & sends money to Internal Revenue Service (IRS) on behalf of person

Tax Reporting – Employer, Institution

Employer/institution reports your income each year to IRS

Tax Return- Form

Individual completes & submits to IRS

Tax Filing - Individual

Individual “files” a tax return (send in, submit)


Individual begins work earns income

Tax

Year (2008)

JANUARY

DECEMBER

INDIVIDUALBegins Work/Earns Income

EMPLOYER

Withhold Tax

Next

Year (2009)

JANUARY 31

APRIL 15

EMPLOYER

Report income & tax withheld (For tax year 2008)

INDIVIDUALComplete & submit tax return (For tax year 2008)


Tax withholding

Tax Withholding


Taxable income categories

Taxable Income Categories

Employment income (employee)

  • The money you earn is called compensation or wages and is reported to Internal Revenue Service (IRS)

    Non-employee income (independent contractor)

  • Direct payments w/o tax withholding

  • Anything earned >$600 must be reported to IRS

    Scholarship income (student)

  • Scholarships/grants (money received above amounts for tuition, fees, books)reported to IRS

    Other income (bank account holder)

  • Interest income reported to IRS


Nra employment w2

NRA Employment (W2)

  • Complete FORM W-4 (Form W4/MW 507)

    • Marital status and withholding allowances

      An allowance reduces the amount of wages subject to tax

  • Mandatory withholding of Single, 1, NRA

    • Unless exempt by a treaty

NRAs

  • May not choose withholding allowance & marital status

  • Follow different tax laws

  • US income only is taxed

RAs

  • May choose withholding allowance & marital status

  • Follow same tax laws as US Citizen or PRA

  • Taxed on worldwide income


Nra scholarship 1042s

NRA Scholarship (1042S)

  • 14% mandatory for NRAs

    • Unless exempt by a tax treaty

  • General practice to 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


Tax treaties 1042s

Tax Treaties (1042S)

  • Must submit new Form 8823 to employer each year

  • About 60 treaties in effect. For list go to:

    http://www.irs.gov/businesses/international/article/0,,id=96739,00.html

  • An individual must meet all requirements in order to be eligible

  • A withholding agent (employer) does not have to grant a treaty

    • Instead a treaty can be claimed when filing a tax return

      • Does not mean it will be allowed by IRS

  • Not recognized by some states (Maryland)

  • Treaty income reported on 1042S


Tax reporting

Tax Reporting


Tax obligations

Tax Obligations

Tax Reporting (electronic)

Tax Reporting (mailed forms)

YOU

TAX RETURN

Important to understand in case information is not accurately reported


Reporting deadlines

Reporting Deadlines

Individual Files Return: April 15th


Reporting forms employer

Reporting Forms (Employer)

  • Form W-2 (Employment Income)

    • Employer completes & reports income earned to IRS

    • Must be mailed by 1/31 of each year

    • Request duplicate at 410-260-7964


Reporting forms institution

Reporting Forms (Institution)

  • Form 1042-S (Scholarship Income)

    • Institution completes & reports income earned to IRS

    • Must be mailed by 3/15 of each year

    • Request duplicate at 410-260-7964


Reporting forms institution1

Reporting Forms (Institution)

  • Form 1099- INT

    • Reports interest income - - NOT taxable income

    • Must be mailed by 1/31 each year


Reporting forms institution2

Reporting Forms (Institution)

  • Form 1098-T

    • NRAs cannot claim this deduction

    • But often are sent form


Tax filing

Tax Filing


Federal tax return

Federal Tax Return

www.irs.gov

  • The requirements are:

    • If you earned more than the personal exemption amount

    • Personal exemption for 2008 is $3,500

      (Box 1, W-2; Box 2, 1042S)

  • Federal term for nonresident & resident are not the same as state

  • Federal government recognizes tax treaty benefits


Maryland tax return

Maryland Tax Return

www.marylandtaxes.com

  • If you are Single, under 65 years of age:

    • If you earned less than $8,950 (Box 16, W-2) and

    • No state tax was withheld (Box 17, W-2)

    • You do not have to file MD return

    • Should file if tax withheld (possible refund)

  • If you are Single, under 65 years of age:

    • If you earned more than $8,750 (Box 16, W-2)

    • You must file MD tax return

  • You are a resident of MD if you lived part of all of the year (not same definition as federal)

  • MD does not recognize tax treaty benefits


Why file a tax return

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


Nra tax forms 1040nr ez

NRA Tax Forms – 1040NR-EZ

  • NRA completes Form 1040NR-EZ (short form)

    • Individual claims to IRS income earned in previous year


Nra tax filing highlights

NRA Tax Filing Highlights

  • May claim only one personal exemption

    ($3500 for 2008)

    • Regardless of marital status or children

  • May not claim the standard deduction

    • 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

  • Some exceptions apply


Tax filing terms exclusion

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

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 2008 tax year is $3,500


Tax filing terms deduction

Tax Filing Terms – Deduction

Standard or Itemized Deduction

  • NOT available to NRAs

    *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


Nra tax forms 8843

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


Form 8843 f1 or j1

Form 8843: F1 or J1

  • Form 8843

    • Must file Form 8843

    • Even if you didn’t work

    • Deadline – June 15th

  • If you did work

    • File Form 8843 with tax return

    • Deadline – April 15th


Common errors

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:

    • 1 2 3 4 5 6 7 8 9 0

  • Failure to use the social security spelling of your name

  • Leaving lines blank

    • Enter a straight line or a zero if not applicable


Records

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


Reminders

Reminders

  • April 15th DEADLINE

  • Federal – www.irs.gov

  • State – marylandtaxes.com

  • Complete Federal tax return first; then State

  • Form 8843 for all NRAs


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