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U.S. Income Tax Seminar for Foreign Students

U.S. Income Tax Seminar for Foreign Students. Rice University OISS Presents:. Andrew Lai attorney certified public accountant. February 26, 2009. Audience. Are you a F or J visa student? In U.S., 1 – 2 years? Over 2 years?. Introduction. Handout and Forms Outline

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U.S. Income Tax Seminar for Foreign Students

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  1. U.S. Income Tax Seminarfor Foreign Students Rice University OISS Presents: • Andrew Lai attorney certified public accountant February 26, 2009

  2. Audience • Are you a F or J visa student? • In U.S., • 1 – 2 years? • Over 2 years?

  3. Introduction • Handout and Forms • Outline • Active Participation • Ask Questions as we go • Presentation – 1.5 hour

  4. Why Pay Tax ？ • It’s the Law • Break the law; it is a criminal offense • Adverse impact on future immigration application

  5. Goals • Correct withholding • Fill 1040NR-EZ by yourself • Understand your tax return • Know your treaty • It’s YOUR responsibility

  6. Due Date • April 15th(Wed) • One Extension to October 15th- Form 4868 • Extend to file, NOT pay

  7. Mail to: • Forms 1040, 1040EZ, 8843, 8840, 1040NR and 1040NR-EZ: • Department of the Treasury • Internal Revenue Service Center • Austin • TX 73301 - 0215

  8. Resident/Non-Resident Taxpayer • Tax Law • Resident alien or • Nonresident alien • Immigration Law • Permanent resident

  9. 图表

  10. Exception A - Exempt Individual • F and J Visas • Follow Visa’s requirements • No need to count days for which you are an exempt individual

  11. Follow Visa’s Requirements • Did not participate in activities • Not allowed under the immigration laws • Lead to loss of visa • F－1 students • Nature of work • Meet the minimum credit hours per semester • Do not break any law • Have not intention to immigrate

  12. Follow Visa’s requirements • What’s expect of a student • Must fileForm 8843 with Form 1040NR or 1040NR-EZ

  13. Exception B to Exception A • An exempt individual for 5 years for F-1, 2 years for J-1 (see Pub 519 App B) • No more exemption • Resident Taxpayer

  14. Exception to Exception B • No intention to stay in U.S., and • No violation of the visa’s requirements • Non-resident Taxpayer

  15. No Intention to Stay in U.S. • Keep close connection with foreign country • In U.S. < 183 days • Tax home in foreign country • Did not file any of the following immigration forms: • Form I-508 • Form I-485 • Form I-130 • Form I-140 • Form ETA-750 • Form DS-230

  16. No Intention to Stay in U.S. • File Form 8840 • File with Form 1040NR or Form 1040NR-EZ

  17. Resident/Non-resident • File the right form • Different tax amounts • Non-resident cannot claim spouse as a dependent • Cannot use standard deduction

  18. FORMS • To your employer • W-4 Employee’s Withholding Allowance Certificate • 8233 Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual • Social Security Number/Taxpayer ID • Social Security Administration: Form SS-5 • IRS: W-7 Application for IRS Individual Taxpayer ID Number • From your employer before January 31st • W-2 • 1042-S

  19. FORMS – file with the IRS • 8843 Statement for Exempt Individuals • 8840 Closer Connection Exception Statement for Aliens, if necessary • 1040NR U.S. Nonresident Alien Income Tax Return, or • 1040NR-EZ U.S. Income Tax Return for Certain Nonresident Aliens with no Dependents

  20. Two Major Steps • 1. Withholding Process • Pay As You Earn • 2. Filing Process • Calculate the final tax amount • Refund/Pay more

  21. 1. Withholding • Pay as you earn • W-2, 1099 or 1042S • Attach W-2 to tax return • Your employer prepares the above based on your • Form W-4 • Form 8233

  22. Form W-4 • All worker • Non-resident, do NOT follow instructions • Only one exemption • Can’t use standard deduction. • Item 3 - “single” • Item 5 - allowance “1” • Item 7 - Don’t fill in “Exempt”

  23. Form 8233 • Part I – Identification • Part II – 11a: description of personal services, e.g. “laboratory assistant, research assistant, …” • 11b: total compensation, e.g. “$30,000” • 12a: “U.S. Tax Treaty with People’s Republic of China, Article 20(c)” • 12b: “$5,000” • 12c: People’s Republic of China

  24. Form 8233 – Item 13a • Noncompensatory Scholarship or fellowship income includes: • Tuition • Fees • Books • Supplies, and • Equipment required by Rice

  25. Form 8233 Item 13 b&c • Item 13b: “U.S. Tax Treaty with _______, Article __(_)” • Item 13c: State the same income in Item 13a, i.e. scholarships are exempt up to $_____. • See Pages 32-37 of Handout.

  26. Form 8233 Item 14 • See Pages 30-31 of Handout for examples

  27. 2. Filing Process • Forms 1040, 1040NR and 1040NR-EZ • Worldwide + U.S. Income • Dependents • Exemption • Standard deduction

  28. Basic Terms • Total Effectively Connected Income (TECI) • Exclusions • Adjusted Gross Income. • TECI – Exclusions = AGI.

  29. Itemized deductions • State tax • Charitable contribution • Accident and theft losses • Job and tax expenses • Others

  30. Basic Terms • Exemption • AGI – Itemized Deductions – Exemption • =Taxable Income (TI) • TI < $8,025, 10% tax rate • TI $8,026 - $32,550, 15% • TI $32,551 - $78,850, 25%

  31. Common Items for Non-resident Taxpayer To IRS: • Non-Taxable Scholarship • Taxable Scholarship • Taxable Wages To You: • Tuition Waiver • Room and Board Waiver • Teaching or Research Assistant Stipend (recipient performs work)

  32. Wages • Do not include non-U.S. wages • Form W-2Box 1 • Tax Treaty • Form 8233 • Reduced by the exempt amount - $5,000 • Incorrect, ask for a revised Form • Explain to IRS

  33. Scholarship - Fellowship • Tax treaties • Up to all scholarship/fellowship exempt • File Form 8843with tax return

  34. Interest • Tax Law: Interest earned by Non-resident taxpayer is non-U.S. source • No tax is due • Investment income – not covered here

  35. Form 1040NR or Form 1040NR-EZ • Non-resident taxpayers • Form 8843 • 2008 income < $3,500 no need to file

  36. Form 1040NR & 1040NR-EZ Important notes • Cannot claim dependents • No exemption for spouse • Cannot be claimed as dependent • Cannot use standard deduction

  37. 1040NR-EZ • All U.S. income is from wages, tips and scholarship/fellowship • Income < $100,000 • Only exclusion – student loan

  38. Special Note #1 • Indian students are eligible for a Standard Deduction and a Personal Exemption. • Unless you are an Indian student, you are only eligible for some Itemized Deductions and a Personal Exemption.

  39. Special Note #2: Exemption Spousal Exemptions available for some Non-Residents • Married individuals from Canada, Mexico, Japan or the Republic of South Korea • Married individuals who are students and are from India

  40. Special Note #3 on Exemption Dependent Exemptions For some Non-Residents • Only individuals from Canada, Mexico, Japan or the Republic of South Korea can claim children who live with them as dependents. • Individuals from Canada and Mexico can also claim children who don’t live with them as dependents. • Students from India may be able to claim exemptions for children. Please call the IRS International Hotline for further information.

  41. Form 1040NR-EZ Example • Box 3：reduced by $5,000 • Box 5：always zero • Box 6：total scholarship/fellowship • Box 8：always zero • Box 13：always $3,500 (2008)

  42. Example • Box 15：use IRS table ONLY • Box 18： • W-2 Box 2 • 1042-S Box 7 • both • Box 24：bank account information • Box 25：Owe tax, make check payable to “U.S. Treasury”

  43. Example • Sign! • Attach Form W-2 to tax return • Page 2 • If say “yes” to B, F, K – find a CPA, tax lawyer • ItemJ，put in name of country and details • $xxx scholarship under Article xx of Treaty • $yyy wages under Article yy of Treaty

  44. Social Security Taxes • 7.65% • No employer should withhold SST from you • If withhold erroneously • Talk to employer • File Form 843, Claim for Refund and Request for Abatement, • Form 8316，Information Regarding Request for Refund of Social Security Tax Erroneously Withheld on Wages Received by a Nonresident Alien on an F, J, or M Type

  45. U.S. Income Tax Seminarfor Foreign Students Q & A Andrew LaiEsq CPA MBA atty.andrew.lai@gmail.com

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