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Income Tax Issues for International Students
#1 – What is subject to income tax?
Non-residents are subject to taxation on U.S. source income. Income can include compensation for services, scholarships, prizes and awards, honorarium payments, and reimbursement of expenses.
An international student does not receive the standard deduction that U.S. citizens receive, unless the student is from India, where the tax treaty specifies that Indian students receive the standard deduction. In other words, an Indian student would get BOTH a standard deduction of $6,300 AND a personal exemption of $4,000; therefore, her threshold is $10,300, whereas any other international student only gets a personal exemption of $4,000.
Note that there are special rules provided by tax treaties, but the rules vary from country to country. Depending on the tax treaty that the US has with your country, you may be exempt from tax on scholarship (see the last part of this document).
#2 What do I have to do?
ALL international students must file either Form 1040NR or Form 8843 (*VITA is offering special Form 8843 sessions this year. See #4 for additional information). Failure to file a tax return correctly may endanger a student’s immigration status.
If your income subject to tax is more than $4,000 OR you have tax withholdings – you file 1040NR before April 18, 2016.
If your income subject to tax is less than $4,000, your scholarships do not exceed your tuition and books expense AND you do not have any tax withholdings – you file 8843 before April 18, 2006.
U.S. tax law requires all individuals on an F or J visa who have US income over $4,000 annually to file income tax returns on the form 1040NR each year. Form 1040NR can only be mailed to the IRS and cannot be e-filed online.
#3 – Can I use free online software?
Free online software is NOT designed to handle the special rules for international students; therefore, using this will give you the wrong tax liability, which could result in PENALTIES! Moreover, free online software offers free federal tax return but require additional fees to file a state tax return. DO NOT USE THEM!
4 – Where can I go for help? Volunteer Income Tax Assistance (VITA).
Tax returns are fairly complex and online tax programs generally do not have free 1040NR filing, therefore, doing tax returns yourself is not the best option.
Every spring semester, Beta Alpha Psi (BAP) (an on-campus association of accounting students) offers FREE income tax preparation assistance by the Volunteer Income Tax Assistance (VITA) program. This is the single best resource international students have to fulfill the annual tax filing requirements. IRS-certified volunteers will be able to help you file federal return 1040NR or form 8843 and state return MO-1040, claim your salary or scholarship exemptions, and get back your FICA taxes if employers mistakenly withheld them. You are strongly encouraged to utilize this free service every year.
The schedule for VITA sessions in spring 2016 is as follows:
Location: Truman State University Violette Hall 1424.
- Saturday, February 6, 2016, 8:00 AM – 3:00 PM
- Saturday, February 13, 2016, 8:00 AM – 3:00 PM
- Saturday, February 20, 2016, 8:00 AM – 3:00 PM
- Saturday, February 27, 2016, 8:00 AM – 3:00 PM
- Saturday, March 19, 2016, 8:00 AM – 3:00 PM
(*) Additional sessions for filing form 8843: If your income subject to tax is less than $4,000, your scholarships do not exceed your tuition and books expense, AND you do not have any tax withholdings, you are not required to file form 1040NR at one of the five sessions above. Instead, you can file Form 8843 at one of the following 8843 Sessions at Violette Hall 1428:
- Wednesday, February 10, 2016 6:00 PM – 10:00 PM
- Wednesday, February 24, 2016 6:00 PM – 10:00 PM
- Wednesday, March 16, 2016 6:00 PM – 10:00 PM
What to bring to VITA:
- Photo ID (Truman ID is sufficient)
- Income Forms (such as a W-2 for wages, 1099 for investment income, etc.)
- Bank routing number and account number for direct deposit
- A copy of last year’s federal and state tax returns if available
#5 Are scholarships taxable?
The rules for scholarships are as follows: scholarships are not taxable if:
- The taxpayer is seeking a degree and:
- Scholarships are used for tuition, books, etc., but NOT for lodging and meals, and
- The taxpayer is not expected to render any service in return. Note: “Scholarship hours” worked by students at Truman ARE taxable and the taxable portion is reported on a W-2.
Scholarships in excess of tuition and books are taxable income. In other words:
- Scholarship > Tuition, books, etc. – The excess scholarship is taxable.
- Scholarship < Tuition, books, etc. – No tax on scholarship.
# 6 What about FICA taxes? Exemptions from FICA Taxes
Lawfully employed F-1 and J-1 visa holders with non-resident tax status are not subject to Social Security and Medicare (FICA) tax withholding. Certification of all exemptions from FICA taxes must be made with your employer. To prove to your employer that you are not subject to FICA – direct them to Publication 519. This exemption ends after five calendar years when an individual on a student visa meets the substantial presence test by being physically present in the United States for more than 182 days in the sixth calendar year.
Note: If Social Security tax has been withheld in error from your wages, you should first request a refund from your employer. If you are unable to get a refund from your employer, you will need to file Form 843 and Form 8316 to request a refund
#7 Can you provide examples?
Se-In is from South Korea and has a salary of $7,000 from a summer internship and a scholarship of $11,000 and pays tuition of $8,000. She is unmarried with no dependents. All persons (whether international or American) are allowed to earn $4,000 before paying tax.
Se-in’s income broadly conceived is $10,000 ($7,000 salary and $3,000 of scholarship above her tuition). Referring to the table at the end of this document, we see that under the South Korean/US tax treaty $2,000 of her salary is tax-exempt and all of her taxable scholarship ($3,000) is exempt. Thus, she will have to pay tax on only $1,000 ($9,000 minus her exclusions of $5,000 minus her personal exemption ($4,000).
|Income broadly conceived||10,000|
|Less: Exclusion (Tax Treaty)||(5,000)|
|Gross income subject to tax||5,000|
Trang is from Vietnam and has the same income as Se-In. However, referring to the treaty table at the end of this document, the US does not have a tax treaty with Vietnam; therefore, she will be taxed on her salary of $7,000 plus her taxable scholarship of $3,000 but only get to subtract her personal exemption of $4,000, which is available to everyone.
|Income broadly conceived||10,000|
|Less: Exclusion (no Tax Treaty)||(0)|
|Gross income subject to tax||10,000|
#8 How can I tell if my country has a tax treaty with the US?
Tax Treatment of International Students (Pub 901 and 4011)
|Bangladesh||2 years||$8,000||No limit||21|
|China, People’s Republic of China||No limit||$5,000||No Limit||Does not apply to Hong Kong||20|
|Cyprus||5 years||$2,000||No Limit||21|
|Czech Republic||5 years||$5,000||No Limit||21|
|Egypt||5 years||$3,000||No Limit||23|
|Estonia||5 years||$5,000||No Limit||20|
|France||5 years||$5,000||No Limit||21|
No limit – scholarship
|Iceland||5 years||$9,000||No Limit||19|
|Indonesia||5 years||$2,000||No Limit||19|
|Israel||5 years||$3,000||No Limit||24|
|Kazakhstan||5 years||N/A||No Limit||19|
|Korea, South||5 years||$2,000||No Limit||21|
|Latvia||5 years||$5,000||No Limit||20|
|Lithuania||5 years||$5,000||No Limit||20|
|Morocco||5 years||$2,000||No Limit||18|
|Netherlands||No Limit- Salary
3 years – Scholarship
|Norway||5 years||$2,000||No Limit||16|
|Pakistan||No limit||$5,000||No Limit||13|
|Philippines||5 years||$3,000||No Limit||22|
|Poland||5 years||$2,000||No Limit||18|
|Portugal||5 years||$5,000||No Limit||23|
|Romania||5 years||$2,000||No Limit||20|
|Russia||5 years||N/A||No Limit||18|
|Slovak Republic||5 years||$5,000||No Limit||21|
|Slovenia||5 years||$5,000||No Limit||Can apply to graduate school||20|
|Spain||5 years||$5,000||No Limit||22|
|Thailand||5 years||$3,000||No Limit||22|
|Trinidad & Tobago||5 years||$2,000||No Limit||19|
|Tunisia||5 years||$4,000||No Limit||20|
|Venezuela||5 years||$5,000||No Limit||Can apply to graduate school||21|
#9 The CIS staff cannot assist with tax preparation!
The CIS staff does not assist in the completion of personal income tax forms for international students or staff. We urge each of you to utilize the Volunteer Income Tax Assistance (VITA) service provided by Beta Alpha Psi in the spring semester. We especially urge you to contact a competent tax consultant before responding to the IRS if you receive an IRS letter declaring that you have a tax liability. The IRS publishes information booklets which are available through the IRS public service system (or http://www.irs.ustreas.gov/).
- 519 U.S. Tax Guide for Aliens
- 901 U.S. Tax Treaties
- 8843 Statement for Exempt Individuals (with instructions)
- 1040NR Non-Resident Alien Income Tax Return (with instructions)
- 1040NREZ U.S. Non-Resident Alien Income Tax Return (with instructions)
Forms for State of Missouri Tax Returns can be found at http://dor.mo.gov/.
Please check the Beta Alpha Psi website (http://bap.truman.edu/) for information or dates of free income tax preparation.
"The atmosphere at Truman is warm. People here are friendly and are willing to help you whenever you need it. Also, there are plenty of organizations available to help international students to make new friends, understand new cultures, and enjoy life in America."
– Anh Duc M., Mathematics & Economics, Vietnam