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International Students and Scholars Tax Seminar #2 Note: This workshop will explain only the basic rules of resident i PowerPoint Presentation
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International Students and Scholars Tax Seminar #2 Note: This workshop will explain only the basic rules of resident i
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  1. International Studentsand Scholars Tax Seminar#2Note: This workshop will explain only the basic rules of resident income tax filing.

  2. Income Tax Workshop for“Resident Aliens”

  3. Please Note: These guidelines are for students onF-1 or J-1 visaswho have been in the U.S. for 5+ years These are also for scholars on J-1 visaswho have been in the U.S. for 2 +- years out of the last 6 years . These are also for employees on H-1B visas. SPRING 2012

  4. Internal Revenue Service? • The taxation agency of the U.S. Government to which you • - File your personal Income Tax Return SPRING 2012

  5. 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 2011, 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. SPRING 2012

  6. 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. Resident or Non-Resident:refers only to one’s filing status. SPRING 2012

  7. Basic Tax Vocabulary (contd.) Income:wages, salaries, tips, interest, dividends, some scholarship/fellowship grants. IRS:Internal Revenue Service. Income Tax Return:statement filed (submitted) by individual taxpayer to the IRS. SPRING 2012

  8. Do I file as a Non-Resident Or Resident? SPRING 2012

  9. Determination of Residency Status • Do not confuse Federal Tax Residency with • Immigration Permanent Residency • or • New York State Residency requirements for state tuition rates. SPRING 2012

  10. It is possible for an alien to have an immigration residency status that is not the same as his/her federal income tax residency status. It is also possible for the alien to have a state income tax residency that is different than his/her federal income tax residency. • This lesson covers the determination of residency status for federal income tax purposes. SPRING 2012

  11. 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. This topic will not be covered in the presentation. SPRING 2012

  12. Resident or Non-Resident? • The following determines whether you are a • resident or nonresident for federal tax purposes: • Green Card Test • Substantial Presence Test • Residency Through Marriage SPRING 2012

  13. Who is a Resident? • 1. Green Card Test • Lawful permanent resident of the U.S. SPRING 2012

  14. 1. 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. SPRING 2012

  15. 2. “Substantial Presence” Test Calculation that takes into consideration presence during the current year and two immediately preceding years. 31 days during the current year and 183 days based on a calculation that considers presence during the current year and two preceding years. SPRING 2012

  16. Residency Rules SPT (2-part test) • Current year days in U.S. x 1 = ___days • Must have at least 31 days in current year • 1st preceding year days in U.S. x 1/3 = ___days • C. 2nd preceding year 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. SPRING 2012

  17. Residency Rules SPT (2-part 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. SPRING 2012

  18. Residency Rules SPT (2-part 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) SPRING 2012

  19. 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 SPRING 2012

  20. 3. Residency through marriage • 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. SPRING 2012

  21. 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 • You have a tax home in a foreign country AND • You file Form 8840 • Note: There are other criteria. Please see Form 8840 instructions. SPRING 2012

  22. 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. SPRING 2012

  23. Residency Starting Date Residency starting date under SPT Your residency starting date is generally the first day you were present in the U.S. during that calendar year. SPRING 2012

  24. Residency Starting Date When both the Substantial Presence Test and Green Card Test apply, use the earlier of the two dates. SPRING 2012

  25. Tax Treatment of Resident Aliens SPRING 2012

  26. Are you required to file a U.S. Resident Tax Return? SPRING 2012

  27. Remember Resident Aliens are taxed on worldwide income, just as U.S. Citizens are. Resident Aliens may not claim exclusions of income based on Tax Treaties (with certain exceptions stated in some tax treaties). SPRING 2012

  28. Wages, salaries and tips • Amounts you receive from an employer. • You should receive a Form W-2 at the end of • the year. It reports the annual amount of • wages you received. SPRING 2012

  29. 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. SPRING 2012

  30. What is Taxable Scholarship and Fellowship You call it: • Internal Revenue calls it: Tuition Waiver Non-taxable Scholarship (No work required) SPRING 2012

  31. What is Taxable Scholarship and Fellowship You call it: • Internal Revenue calls it: Room & Board Waiver Taxable Scholarship SPRING 2012

  32. What is Taxable Scholarship and Fellowship You call it: • Internal Revenue calls it: Teaching Research asst. Stipend Taxable wages SPRING 2012

  33. 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. SPRING 2012

  34. Filing Vocabulary Single: not married Married: married and file income together Note: U.S. recognizes marriage from U.S. states and other countries Married filing Separate: married but files income alone SPRING 2012

  35. Filing Vocabulary Head of Household: single and pays for maintenance of a home for a dependent Note: Read the rules for this status carefully before claiming it. (IRS Publication 17) Qualifying widow(er) with dependent child: able to claim this status for two years after the death of the spouse SPRING 2012

  36. 2011 Filing Requirements SPRING 2012

  37. Income Tax Forms Resident aliens can file Forms 1040, 1040A or 1040-EZ (See form instructions for any restrictions.) SPRING 2012

  38. 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. SPRING 2012

  39. 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. SPRING 2012

  40. 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. SPRING 2012

  41. 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. SPRING 2012

  42. Standard Deduction Amount • For most people under age 65 • Single $ 5,800 • Married Filing Joint $11,600 • Married Filing Separate $ 5,800 • Head of Household $ 8,500 • Qualifying Widow(er) $11,600 • with Dependent Child SPRING 2012

  43. More Tax Vocabulary (cont.) • Personal Exemption: amount deducted from income for yourself and/or your dependents • For 2011, the amount is $3,700. SPRING 2012

  44. 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) SPRING 2012

  45. Let’s look at the steps for completing Form 1040-EZ SPRING 2012

  46. Form W2 011-00-0110 16-6000000 964 10,000 State University 345 University St Collegetown, NY 00000 KUMAR DALI 123 UNIVERSITY LANE COLLEGETOWN, NY 00000 NY 16-6000000 10,000 240 SPRING 2012

  47. Form 1040-EZ Box 1 from all W-2(s) SPRING 2012

  48. Form 1040-EZ Add all amounts in box 2 of W-2(s) SPRING 2012

  49. Form 1040-EZ From Tax Table (See next page) Read instructions to see if you qualify (http://www.irs.gov/pub/irs-pdf/i1040ez.pdf) SPRING 2012

  50. 2011 tax table SPRING 2012