Taxes

Income Tax Issues for International Students

#1 – What is subject to income tax?

Non-residents are subject to taxation on income earned in U.S., including compensation for services, scholarships, prizes and awards, honorarium payments, and reimbursement of expenses.

Each international student receives personal exemption of $4,050. One exception is if you are from India, you receive $6,300 standard deduction besides the personal exemption.

#2 – What do I have to do?

All the international students MUST file either Form 1040NR or Form 8843. An international student is not required to file Form 1040NR, however you need to file

Form 8843 in the case you meet all of the following conditions:

1) You have income subject to tax less than $4,050 ($10,350 for Indian students);

2) Your scholarships do not exceed the tuition and books expense; AND

3) You do not have any tax withholding

#3 – Can I use free online software? 

Free online software (ex. Turbo Tax) is NOT designed to handle the special rules for international students; therefore, using the software will give you the wrong tax liability, which could result in PENALTIES! Moreover, free online software offers free federal tax return but requires additional fees to file a state tax return. DO NOT USE THEM!

#4 – Where can I go for help? Volunteer Income Tax Assistance (VITA).

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 your FICA taxes back if employers mistakenly withhold them. You are strongly encouraged to utilize this free service every year.

VITA is a free tax service for Truman students, faculty, and the Kirksville community, sponsored by Beta Alpha Psi. IRS-certified volunteers will be able to help you file federal and state tax returns as well as Form 8843. You are strongly encouraged to use this FREE service every year. For more information, visit vita.truman.edu, call 660-785-6064, or email VITA@truman.edu.

VITA Schedule

*Please check with #2 – What do I have to do – to decide which section you have to go to.

Regular VITA sections (Form 1040NR) are held on the following dates at Violette Hall 1424:

  • Saturday, February 17, 2018, 8:00 a.m. – 3:00 p.m.
  • Saturday, February 24, 2018, 8:00 a.m. – 3:00 p.m.
  • Saturday, March 3, 2018, 8:00 a.m. – 3:00 p.m.
  • Saturday, March 24, 2018, 8:00 a.m. – 3:00 p.m.

Form 8843 Sections are offered on the following dates at Violette Hall 1428:

  • Wednesday, February 21, 2018, 6:00 p.m. – 10:00 p.m.
  • Wednesday, February 28, 2018, 6:00 PM – 10:00 p.m.
  • Wednesday, March 21, 2018, 6:00 p.m. – 10:00 p.m.

What to bring to VITA

  • I-20
  • Photo ID (Truman ID is sufficient)
  • Tax 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
  • Passport (for latest date stamp)

#5 Are scholarships taxable?

You don’t need to worry about this, VITA volunteers will help you.

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 provide 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

You don’t need to worry about this, VITA volunteers will help you.

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?

Please note: All persons (whether international or American) are allowed to earn $4,050 before paying tax.

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.

Se-in’s income is roughly $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 conceived10,000
Less: Exclusion (Tax Treaty)(5,000)
Gross income subject to tax5,000
Personal exemption(4,050)
Taxable income950

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 will only be able to subtract her personal exemption of $4,000, which is available to everyone.

Income broadly conceived10,000
Less: Exclusion (no Tax Treaty)(0)
Gross income subject to tax10,000
Personal exemption(4,050)
Taxable income5,950


#8 How can I tell if my country has a tax treaty with the US? 

  • Use the table below to check. If your country is not listed, there is no treaty in place.

 Tax Treatment of International Students (Pub 901 and 4011)

CountryMaximum

Presence

Salary

Exclusion

Scholarship

Exclusion

CommentsTreaty Article
Bangladesh2 years$8,000No limit21
BelgiumNo limit$9,000N/A19
BulgariaNo limit$9,000N/A19
China, People’s Republic of ChinaNo limit$5,000No LimitDoes not apply to Hong Kong20
Commonwealth of Independent States5 yearsN/ALimitedPersonal services income is exempt if taxpayer stays more than 183 days in US6
Cyprus5 years$2,000No Limit21
Czech Republic5 years$5,000No Limit21
Egypt5 years$3,000No Limit23
Estonia5 years$5,000No Limit20
France5 years$5,000No Limit21
Germany4 years

No limit – scholarship

$9,000No Limit20
Iceland5 years$9,000No Limit19
Indonesia5 years$2,000No Limit19
Israel5 years$3,000No Limit24
Kazakhstan5 yearsN/ANo Limit19
Korea, South5 years$2,000No Limit21
Latvia5 years$5,000No Limit20
Lithuania5 years$5,000No Limit20
MaltaNo limit$9,000N/A20
Morocco5 years$2,000No Limit18
NetherlandsNo Limit- Salary

3 years – Scholarship

$2,000No Limit22
Norway5 years$2,000No Limit16
PakistanNo limit$5,000No Limit13
Philippines5 years$3,000No Limit22
Poland5 years$2,000No Limit18
Portugal5 years$5,000No Limit23
Romania5 years$2,000No Limit20
Russia5 yearsN/ANo Limit18
Slovak Republic5 years$5,000No Limit21
Slovenia5 years$5,000No LimitCan apply to graduate school20
Spain5 years$5,000No Limit22
Thailand5 years$3,000No Limit22
Trinidad & Tobago5 years$2,000No Limit19
Tunisia5 years$4,000No Limit20
Ukraine5 yearsN/ANo Limit20
Venezuela5 years$5,000No LimitCan apply to graduate school21


#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 one 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.


Additional Information:

  • 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/vita/) for information or dates of free income tax preparation.