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International Students and Scholars Tax Seminar #2 Note: This workshop will explain only the basic rules of resident income tax filing. Income Tax Workshop for “Resident Aliens”. Please Note:.

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International Studentsand Scholars Tax Seminar#2Note: This workshop will explain only the basic rules of resident income tax filing.

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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 2014

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Internal Revenue Service?

  • The taxation agency of the U.S. Government to which you
    • - File your personal Income Tax Return

SPRING 2014

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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 2014

slide6

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 2014

slide7

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 2014

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Do I file as a Non-Resident

Or Resident?

SPRING 2014

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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 2014

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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 2014

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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 2014

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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 2014

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Who is a Resident?

  • 1. Green Card Test
    • Lawful permanent resident of the U.S.

SPRING 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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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 2014

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Residency Starting Date

When both the Substantial Presence Test and Green Card Test apply, use the earlier of the two dates.

SPRING 2014

slide27

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 2014

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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 2014

slide29

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 2014

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What is Taxable Scholarship and Fellowship

You call it:

  • Internal Revenue calls it:

Tuition

Waiver

Non-taxable Scholarship

(No work required)

SPRING 2014

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What is Taxable Scholarship and Fellowship

You call it:

  • Internal Revenue calls it:

Room &

Board

Waiver

Taxable Scholarship

SPRING 2014

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What is Taxable Scholarship and Fellowship

You call it:

  • Internal Revenue calls it:

Teaching

Research asst.

Stipend

Taxable wages

SPRING 2014

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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 2014

slide34

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 2014

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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 2014

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Income Tax Forms

Resident aliens can file Forms

1040, 1040A or 1040-EZ

(See form instructions for any restrictions.)

SPRING 2014

slide38

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 2014

slide39

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 2014

slide40

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 2014

slide41

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 2014

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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 2014

slide43

More Tax Vocabulary (cont.)

  • Personal Exemption: amount deducted from income for yourself and/or your dependents
    • For 2011, the amount is $3,700.

SPRING 2014

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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 2014

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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 2014

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Form 1040-EZ

Box 1 from all W-2(s)

SPRING 2014

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Form 1040-EZ

Add all amounts in box 2 of W-2(s)

SPRING 2014

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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 2014

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2011 tax table

SPRING 2014

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Form 1040-EZ

SPRING 2014

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When do I file a resident income tax return?

  • The filing deadline is
  • April 17, 2012

SPRING 2014

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Where do I file a Resident income tax return?

  • Refund Due
  • Department of the Treasury
  • Internal Revenue Service Center
  • Kansas City, MO 64999-0014

SPRING 2014

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You don’t pay Social Security Tax if-

  • You are a nonresident alien for income tax purposes
  • You are present in the U.S on an F-1, J-1, M-1 or Q-1 visa, AND
  • You perform services that are consistent with your U.S. visa status

SPRING 2014

slide56

You pay Social Security Tax when-

    • You are a Resident Alien for income tax purposes.
    • You are an F-1 student who has been in the U .S. for 5+ years or a J-1 scholar who has been in the U.S. for 2+ years.
    • You hold an H1-B or TN visa.
    • Note: You will always be subject to Social Security and Medicare Taxes (FICA) from the date of arrival.

SPRING 2014

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Exceptions to this rule

  • If you are a student who would otherwise be subject to Social Security and Medicare Taxes (FICA), you will be exempt from paying it if you are working at the school as a full-time student.
  • (This exemption may start and stop periodically due to the individual’s enrollment status )

SPRING 2014

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The exception does not apply in these cases

  • Resident aliens who are participating in full-time Optional Practical Training should pay Social Security and Medicare Taxes (FICA) throughout their OPT work authorization period, and
  • Students who are resident aliens and are not enrolled in 6 or more credits during summer break should pay Social Security and Medicare Taxes (FICA) during summer break.

SPRING 2014

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For more information,

call 1-800-829-1040 OR www.irs.gov

For help in person, visit an IRS office

The closest one to Pratt is:

625 Fulton St.

http://www.irs.gov/localcontacts/article/0,,id=98318,00.html

SPRING 2014

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Web links, Forms and Publications

New York State Department of taxation and finance: http://www.tax.ny.gov/

NY State form IT 203: http://www.tax.ny.gov/pdf/current_forms/it/it203_fill_in.pdf

Instructions: http://www.tax.ny.gov/pdf/2011/inc/it203i_2011.pdf

New Jersey State Department of Treasury: http://www.state.nj.us/treasury/taxation/

NJ State form 1040:

http://www.state.nj.us/treasury/taxation/pdf/current/1040.pdf

Instructions:

http://www.state.nj.us/treasury/taxation/pdf/other_forms/tgi-ee/2011/10_1040.pdf

Connecticut State department of Revenue Services:

http://www.ct.gov/drs/taxonomy/drs_taxonomy.asp

Connecticut State form CT 1040:

http://www.ct.gov/drs/lib/drs/forms/2011forms/incometax/ct-1040.pdf

Instructions:

http://www.ct.gov/drs/lib/drs/forms/2011forms/incometax/ct-1040booklet.pdf

SPRING 2014

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Thank You

SPRING 2014