International Tax News: Volume 1 Issue 1, March 1998
Income Tax Information for the International Students of Ohio University
All international students are responsible for compliance with United States income tax regulations and may be required to file an income tax return each year, even if they have no United States source income. Students may be subject to U.S. taxation based on the source and type of income and the number of years they have been present in the U.S. If you work in the U.S. or receive a scholarship or fellowship from a U.S. agency or institution, you may be subject to payment of U.S. income tax.
An income tax return is a statement of all income and scholarships received within the U.S. This tax return must then be submitted to the Internal Revenue Service. Income tax regulations are governed and enforced by the Internal Revenue Service, or IRS, the federal agency which processes tax returns each year. Filing an income tax return does not necessarily mean that income tax is owed. The following publications can be obtained from the Internal Revenue Service Center. These publications will help you understand your tax liabilities and benefits:
- Pub. 513, "Tax Information for Visitors to the United States"
- Pub. 519, "U.S. Tax Guide for Aliens"
- Pub. 520, "Scholarships and Fellowships"
Taxpayer Identification Number
All students using 777-XX-XXXX or 888-XX-XXXX identification numbers issued by Ohio University cannot use these numbers to file tax returns. Effective January 1, 1997, the Internal Revenue Service is requiring that all tax filers have a Taxpayer Identification Number. The IRS will not process tax returns unless the filer has a proper Taxpayer Identification Number.
If you have any questions on how to obtain the proper Identification Number, please contact the Payroll Office or the International Student and Faculty Service Office.
Individuals Working as Employees of the University
University Employees need to complete a W-4 Form, Employee's Withholding Allowance Certificate. These forms can be obtained from most departments on campus or from the University Payroll Office. Generally, non-resident aliens should check "single" as their filing status and may claim only one withholding allowance. No additional withholding allowances may be taken for dependents. Only citizens of Mexico, Canada, India, Japan and South Korea can claim allowances for dependents. International students, who are non-resident aliens, should not claim to be exempt from income tax on the W-4 Form. Non-residents can only claim exempt from income tax if their country has a tax treaty with the United States. The Payroll Office will require a completed I.R.S. Form 8233 for the student to claim the treaty benefits.
The Payroll Office has the necessary forms to claim this exempt status. These forms, once filed, are only valid for the current calendar year.
Employers are required to deduct a certain amount from each employee's paycheck to cover the individual's estimated tax liability. Depending on your income, federal, state and local taxes may be withheld from your paychecks during the year. You are responsible for informing the Payroll Office of any change which might affect your tax status (such as becoming an H-1 temporary worker or a Permanent Resident of the U.S.). An individual is always responsible for complying with the tax laws and filing the appropriate tax forms. All non-resident aliens must file either Form 1040NR or Form 1040NR-EZ. These forms are used to report their wages and either receive a tax refund or pay any balance due that was not paid by their tax withholding.
Form W-2, Statement of Earnings and Taxes will be provided by the University after the end of each tax year. These forms are important documents and will be mailed by January 31. Since, this form is used in preparing your income tax return, you must keep this form and attach it to your completed tax return. You must keep a copy of the forms you file for at least three years.
Individuals Receiving Scholarships or Fellowships
If you are a non-resident alien for tax purposes and you receive a scholarship, fellowship, or fee waiver from the University, this information is reported to the IRS on a Form 1042-S. You will also receive this form by March 15 listing the amounts that you received for the prior year. This information must also be included on your 1040NR, or your 1040NR-EZ tax forms.
Determining Tax Status - Determines Income Tax Liability
A student must determine his or her status as a resident alien or non-resident alien for tax purposes. This status may or may not coincide with their resident or non-resident status with the Immigration and Naturalization Service.
Those who have F, J, or M status are considered "non-residents for tax purposes" for the first five years of their studies. These students must complete IRS Form 1040NR or 1040NR EZ, along with Form 8843 each year after receiving income from U.S. sources. Also, if an individual has no U.S. income or if all income is excludable, they may still need to file the above forms. The amounts received or reported in the preceding calendar year are reported on the IRS forms. These forms must be filed with the Internal Revenue Service Center, Philadelphia, PA, 19255 by April 15 of the following year.
After five years, F-1 and J-1 students may qualify as "residents for tax purposes" and then would file an income tax return using the same forms used by U.S. citizens. For tax purposes, if you meet either the green card test or the substantial presence test, you are considered a resident alien of the United States.
Green Card Test
An individual has been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. This means the individual is a lawful permanent resident of the United States.
Substantial Presence Test
To meet this test, an individual must be physically present in the United States on at least:
- 31 days during the current year,
and - 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
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 you were present in the second year before the current year.
Students who are on a F-1 or J-1 visa are allowed to exclude their first five calendar years in the U.S. from the substantial presence test. Because of this exception to the substantial presence test, most international students will remain non-resident aliens during their stay in the U.S. Only students who remain in the U.S. for more than five calendar years will be subject to the above test. If their days of presence exceed 183, they will be treated as a Resident alien for tax purposes.
Treaty Benefits
The United States has tax treaties with several countries which permit taxation at a reduced rate or exempt certain income altogether. IRS Publication 901 gives a brief summary of the provisions of each treaty. Tax treaty benefits override the U.S. tax code.
Claiming Treaty Benefits
To claim treaty benefits, there are IRS forms which must be completed and renewed each calendar year. These forms (8233 and attachment) are available in the Payroll Office. Many of the treaties have provisions that restrict the benefits to a limited time period or to a specified dollar amount each year.
Additional Assistance
The information in this newsletter is for informational purposes only. Students should read IRS publications 519, 901, and the instructions to the appropriate forms, as well as attending tax workshops sponsored each spring by the International Student and Faculty Service Office. The Internal Revenue Service Center can be reached at the following toll free number, 1-800-829-1040. For complex situations, it would be advisable to contact a reputable tax advisor.
To order free publications and forms, call the IRS toll free number, 1-800-TAX-FORM (1-800-829-3676).
For more information
Information is also available at the IRS web site: . This site contains a comprehensive description of IRS rules and regulations as well as the ability to download IRS forms and publications. Many forms such as the 1040NR and the 1040NR-EZ can be obtained from this site.
The Ohio University Payroll Office can assist in answering general questions. We are not, however, prepared to offer tax advise or assist students in completing their returns. We can assist in directing the student where to find assistance.
