The Office of Visa and Immigration Services is working to help make the filing of the proper tax forms as easy as possible for international students, scholars and faculty at Dartmouth. For liability reasons, however, the Office of Visa and Immigration Services is unable to provide advice about an individual's specific tax situation. We are able to provide only general guidance in form completion, filing dates, and treaty benefits.
Click here to access a brochure on U.S. tax information for non-U.S. citizens courtesy of NAFSA: Association of International Educators.
The rules of U.S. income taxation are confusing and complicated; therefore, it is important to define some basic concepts and terms associated with the U.S tax system, which is based on a dual system of withholding and reporting. When you receive a wage or salary payment, your employer is required to calculate and withhold U.S. income tax at a graduated rate based on the expected amount you will receive from that employment during the tax year. In a similar manner, payments to F or J visa holders of non-qualified scholarships and fellowships are taxed at 14% at the time the payment is made, and prizes and awards and all other payments are typically taxed at 30% at the time of payment.
After the end of the year, you are required to combine the income payments that you received from all sources during the year in order to calculate your U.S. tax liability for that year. This requires the preparation of a federal income tax return. Once the tax return is prepared, if you find that you had more income taxes withheld during the year than you actually owed, you can apply for a refund. And if you have had too little income tax withheld during the year, you must pay additional income tax due.
Non-resident F and J visa holders in the U.S. must file an annual tax return (IRS Form 1040NR-EZ or Form 1040NR) and/or statement (Form 8843) to substantiate non-resident status with the Internal Revenue Service. This includes F-2 and J-2 spouses and children.
Generally, non-resident aliens whose only income during the tax year was from wages and who earned less than the personal exemption ($3,800 for tax year 2012) are not required to file a tax return. However, if any taxes were withheld, they must file a return to claim a tax refund. The $3,800 threshold only applies to wage income. Non-resident aliens are required to file a tax return if they receive any taxable scholarship/fellowship grant, income partially or totally exempt from tax under the terms of a tax treaty, and/or any other income, which is taxable under the Internal Revenue Code. Forms 1040NR or 1040NR-EZ must be filed by April 15, 2013. In addition, non-resident students and scholars who are filing a tax return must file a Form 8843, which is a Statement of Exempt Individuals. The Form 8843 is a one-page document that is returned with the 1040NR or 1040NR-EZ. The purpose of the form is to verify non-resident alien tax status.
Non-resident students and scholars who are not required to file a tax return (because they have no income) must still file Form 8843. F-2 and J-2 spouses and children who earned no U.S. source income during the tax year only file a Form 8843.
In order to do your tax return, you must first determine whether you are a resident or non-resident for income tax purposes. Generally resident aliens are taxed in the same manner as U.S. citizens while non-resident aliens are taxed according to special rules contained in the U.S. tax code. An individual can also be considered a Dual Status Alien if he or she is both a resident alien and a non-resident alien during the same tax year; different rules apply for the part of the year you are a resident alien and the part of the year you are a non-resident alien.
Tax residency rules are based on immigration law, which classifies all aliens (any person who is not a citizen of the United States) into three basic categories: immigrants, non-immigrants and illegal aliens. Aliens, for tax purposes, are either residents or non-residents. You are a resident alien for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 - December 31) for which you are filing a tax return.
The "green card" test is fairly simple. If you are a lawful permanent resident of the U.S. at any time during the calendar year, you are a resident for tax purposes. You generally have this status if the U.S. Citizenship and Immigration Service issued you an alien registration card, which is known as a green card. The "substantial presence test" is more complicated. It is a test that is made each year and, in general, is a calculation of the number of days you have been physically present during the current year, and the two calendar years immediately before the current year. To meet this test and be considered a Resident Alien (for tax purposes) you must be physically present in the U.S. on a least:
a.) all the days you were present in the current year, and
b.) 1/3 of the days you were present in the first year before the current year, and
c.) 1/6 of the days present the second year before the current year.
You do not count any day you were present in the U.S. as an "exempt" individual.
This term does not refer to someone exempt from U.S. tax. An "exempt individual" would be any person who is temporarily exempt from the substantial presence test. You do not count days in the U.S. during which you are an exempt individual. Being in one of the following categories will temporarily exempt a person from the substantial presence test:
For more information about the substantial presence test, see IRS Publication 519, U.S. Tax Guide for Aliens.
Non-residents for tax purposes are subject to different tax rules than U.S. citizens or residents.
The first general rule is that non-residents are taxed only on their U.S. source income. They do not have to report any income that is not considered U.S. source. One exception would be bank interest.
Interest received from deposits held in the "banking business" does not have to be reported on a non-resident tax return. The "banking business" includes commercial banks, mutual savings banks, cooperative banks, credit unions and other savings institutions chartered under federal or state laws. Many banks erroneously report this income on a Form 1099-INT because they do not know the student or scholar is a non-resident. Also, while scholarship/fellowship grant received for room and board is normally taxable, the portion of a scholarship that is received for tuition, fees, books and supplies is not taxable.
Second, income that is excludable under an income tax treaty is not subject to U.S. tax. Treaty exempted income must be reported on a tax return, but it won't be taxed if it properly falls under the terms of the treaty. Non-residents can receive the benefits of the tax treaty when they prepare their tax return even if U.S. income tax was withheld by the payer.
Non-residents are generally limited in how they can file their tax returns. They can claim one of only two types of filing status: Single non-resident and married non-resident. All unmarried non-residents must use the "Single" filing status. Married non-residents must use a married filing status even if their spouse is not present in the U.S. Generally, non-residents can claim only one personal exemption on their tax return. Non-residents from Canada, Mexico, Korea and India may be able to claim an exemption for their spouse. Different rules apply to each of the four countries.
Most non-residents cannot take a deduction for their dependents. The term dependent is reserved for family members other than your spouse. Even if the dependents are U.S. citizens, usually they can not be claimed on a non-resident tax return. Non-residents from Canada, Mexico, Korea and India may be able to claim dependents. Generally, non-residents do not qualify for either the Child and Dependent Care credit or the Child Tax Credit.
There are two types of deductions under U.S. tax rules. First, there is what is known as the standard deduction. The other type of deduction is what is referred to as an itemized deduction. With the exception of students from India, non-resident aliens can not take the standard deduction. They may, however, claim certain itemized deductions, not related to U.S. business activities. Here are several deductions that may be claimed and would be common to non-residents at the College:
Non-residents must combine all their U.S. source income payments received during the tax year in order to determine their U.S. federal tax liability. They will receive statements from their employers and other payer of income summarizing the income they were paid and the taxes withheld. These statements are used to prepare the tax return.
The most common payment form sent to non-residents is the Form W-2 (Wage and Tax Statement). This form is provided by your employer and it will list all wage and salary payments made to you which is subject to U.S. income tax. If you received wages through the Payroll system which were exempted from tax withholding based on an income tax treaty, this income will not be listed on the W-2.
A second commonly issued statement is the Form 1042-S which lists non-wage income payments such as scholarship and fellowship grants, prizes and awards. The 1042-S form will also list wage and salary income which was exempted from federal income tax because of a tax treaty.
Many students and scholars receive both forms, particularly if they are from tax treaty countries. For example, a student from China who worked at the College could receive a 1042-S showing $5,000 in income which was exempted by the U.S. - China tax treaty and a W-2 showing the wages they were paid and which were subject to tax. The total income reported on both forms would equal the total of the payments they received from their campus job during the tax year.
The Form 1099 may also be sent to a non-resident. There are several types of 1099 forms, for example, a 1099DIV which shows reportable income earned on investments, the 1099INT which shows interest earned on Bank checking and savings accounts, and the 1099MISC which shows income earned from various sources other than as an employee.
A tax treaty is an agreement between two governments under which each agrees to limit or modify its domestic tax laws in an attempt to prevent double taxation of income. The US currently has tax treaties in effect with over 60 countries under which residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. income tax, depending on the type of income they receive. Not all tax treaties are relevant to international students and scholars.
Since there are restrictions that may limit who is eligible to receive a treaty benefit or the amount of money that may be exempt from taxation, it is important to carefully review the provisions of the treaty to determine eligibility. For example, most treaty articles require that the individual be a resident of the treaty country immediately prior to coming to the U.S. Residency under the tax treaties is determined primarily by one's "residency" and not by one's citizenship or nationality. Also, generally only a nonresident for tax purposes may use the terms of a tax treaty. However, a few treaties allow exemption from tax to continue for certain types of income even if the recipient has become a resident for tax purposes.
Almost all tax treaties contain provisions (referred to as Articles) that are intended to promote cross-cultural education and exchange. These articles generally provide for a partial or complete tax exemption for scholarship or fellowship grants and for compensation payments received by students, teachers, and researchers.
For more information about the terms and conditions of a particular tax treaty, see IRS Publication 901 U.S. Tax Treaties. This publication contains a summary of the treaty articles related to international students and scholars, however, it should not be relied upon to determine if an individual qualifies for the benefits of a tax treaty. The actual text of the tax treaty should be reviewed to determine if the provisions of a tax treaty apply.
The Internal Revenue Service requires that a taxpayer identification number (either a social security number or an individual taxpayer identification number) be furnished on all tax returns, statements, and other tax related documents. Non-residents who are allowed to work in the U.S. according to their immigration status are eligible to apply for a social security number. J-1 individuals may apply for a social security card as employment in the U.S. is a benefit of their immigration status. F-1 students may apply if they have evidence of a job on campus. Individuals in J-2 status may apply if they have received an Employment Authorization Document. Individuals in F-2 status and F-1 students who are not working on or off campus can not receive social security numbers. These individuals must apply for an Individual Taxpayer Identification Number (ITIN).
To apply for an ITIN, an individual files IRS Form W-7, Application for IRS Individual Taxpayer Identification Number. An original, completed tax return(s) for which the ITIN is needed must be attached to the W-7, unless the applicant qualifies for an exception, and the W-7 must be filed with original or certified proof of identity documents.
Dual-status results if an individual holds both non-resident and resident alien status for tax purposes during the same tax year. This usually occurs in the year you arrive in or depart from the U.S. In determining your U.S. income tax liability for a dual-status tax year, different rules apply for the part of the year you are a resident of the U.S. and the part of the year you are a non-resident. Dual-status individuals must file form 1040NR or 1040NR-EZ and a Form 1040, 1040A or 1040EZ. Information concerning dual-status tax year filing can be found in IRS publication 519. Follow this link: http://www.irs.gov/publications/p519/ch06.html.
Completed IRS forms should be copied for your records, signed and mailed to:
Internal Revenue Service Center
Austin, TX 73301-0215
The deadline for filing these forms for the tax year 2012 is April 15, 2013.
The staff members of the Office of Visa and Immigration Services are not licensed tax experts. We will answer questions from Dartmouth community members relating only to general filing requirements for F and J visa or status holders, however, you should first attempt to file your tax forms using the GLACIER program before contacting us for information.
Last Updated: 1/9/13