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General Guidelines of U.S. & Hawaii Taxes For Nonresident Aliens

General Guidelines of U.S. & Hawaii Taxes For Nonresident Aliens. General Tax Structure: 1. Everyone in the United States (including foreigners) must report income and pay taxes to the U.S. Federal Government Tax Agency called the Internal Revenue Service (IRS).

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General Guidelines of U.S. & Hawaii Taxes For Nonresident Aliens

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  1. General Guidelines of U.S. & Hawaii Taxes For Nonresident Aliens General Tax Structure: 1. Everyone in the United States (including foreigners) must report income and pay taxes to the U.S. Federal Government Tax Agency called the Internal Revenue Service (IRS). 2. Unlike many countries, in the U.S., it is the individual’s responsibility to report income and pay taxes.

  2. Steps in Tax Compliance: • 1. Obtain a social security number (SSN) (Form SS-5)or individual taxpayer identification number (ITIN)(Form W-7). • 2. Determine your tax residency status • 3. Determine sources of income and proper tax forms • 4. Determine if you are eligible for treaty benefits • 5. Completing the appropriate forms for the year

  3. Step #2: Tax Residency Status of Individual: • U.S. Taxation System for people from foreign countries • 1. Nonresident Alien 2. Resident Alien • (U.S. source income) (worldwide income) • Nonresident Aliens do not pay tax on foreign source income. • State of Hawaii Taxation System for foreigners • 1. Nonresident (200 or 2. Resident (more than 200 day • less days in the year) in the year)

  4. Step #2 (Continue): • A. Resident Alien for federal (U.S.) purposes if: • 1. You have a green card (alien registration card) • 2. You are married to U.S. citizen or resident alien • 3. On a J-1 Status as a teacher or researcher, and present in the United States for two years or “more” in the last six years. (Note: Any part of a calendar year in which the person was present counts as a full year. Therefore, if you arrived on December 31, you have stayed one year). • 4. You have passed Substantial Presence Test (see Links page, below).

  5. Step #2 (Continue): • A. Nonresident Alien for federal (U.S.) purposes if: • 1. You are on J-1 status and have been in the U.S. (any of the 50 States) for “less” than two years in the last six years. • Apply substantial presence test (SPT) if necessary (see Links page, below).

  6. Step #3 Determine Source of Income & Proper Tax Forms • Resident Alien: Tax on worldwide income, from all sources. • Nonresident Alien: Tax on income effectively connected with U.S. trade or business. Except for interest income from Bank, investment income (I.e. interest, dividends, capital gains, rental income) are separately reported on a different section of the tax return.

  7. Step #3 (Continue) • Upon Arrival at U.H.: • 1. For postdoctoral fellow receiving stipends from the University, fill in Form WH-1. If tax treaty is used to exempt taxes from stipends, then prepare form W8-Ben. • 2. For J-1 receiving salary from the University, fill in Form W-4 and HW-4. Claimed only single status and 1 exemption on W-4 unless tax treaty is used. If tax treaty is used, prepare Form 8233.

  8. Step #3 (Continue) • When a year has past, file year end tax forms: • No Income- File a fully completed IRS Form 8843. (see Links page, below) • Have Income: • 1. 1040NR-EZ and form 8843 if: • A. Scholar has no dependents • B. Cannot be claimed as a dependent on someone else’s U.S. tax return. • C. Under age 65 • D. Has only wages / salaries / tips / scholarship / fellowships / or tax refund from previous year. (continue)

  9. Step #3 (Continue) • 1. 1040NR-EZ and form 8843 if: • E. Taxable income is less than $50,000 • F. Unable to claim any tax credit. • G. If married (from Canada, Japan, Mexico, or Republic of India), cannot claim spousal exemption. • 2. 1040NR and form 8843 if: • A. Want to claim spouse exemption if you are from Canada, Japan, Mexico or Republic of India. • B. Have investment income (I.e. dividends, capital gain, rental income etc.) • C. Have high charitable contributions. • D. Have taxable income more than $50,000.

  10. Step #4: Determine if you are eligible for tax treaty benefits • If there tax treaty benefits, it is in your best interest to take advantage and pay less taxes. • See IRS Publication 901 on website (http://www.irs.ustreas.gov/prod/forms_pubs/index.html). Or from IRS office locally. See also handout (“Tax Information for Monthly J-1 Scholar Orientation”) • For easy reading of tax treaties, retrieve from http://www.windstar-tech.com

  11. Step #5: Completing the Appropriate Forms for the year • Before completing the year end forms: • 1. Wait for documents from the University (I.e. Form W-2 if you are on salary, Form 1042-S if you are being paid stipends) • 2. Wait for other pertinent documents from other sources. (For example, banks etc) • Decide which tax form to file (see Step #3) and file by deadline (April 15 if you owe taxes, June 15 if you have no U.S. source income).

  12. University Responsibilities: • The University must comply with federal and State Tax laws with regards to withholding and reporting. • The University is responsible for informing you of your tax obligations. • The University will send out W-2 tax statements to employees by end of January and form 1042-S to fellowship recipients by March 15. • For legal reasons, the University cannot provide personal tax assistance or advice.

  13. Tax workshops and tax return preparation assistance: • Faculty and Scholar Immigration Services will arrange two workshops in March to assist you. One on federal taxes and the other on State taxes. Date and place to be announced. • Also can seek assistance from Internal Revenue Service or State Tax Department, as well as tax preparation service companies such as H & R Block, or Pendleton or with a certified public accountant.

  14. Links to Tax Documents Substantial Presence Test:http://www.hawaii.edu/fsis/downloads/TaxChart1CSPT.pdf WH-1 Statement of Citizenship and Federal Tax Status: http://www.nursing.hawaii.edu/files/WH-12008.pdf W-4:http://www.irs.gov/pub/irs-pdf/fw4.pdf HW-4:http://www.state.hi.us/tax/current/hw4.pdf W-7:http://www.irs.gov/pub/irs-pdf/fw7.pdf W-8BEN instructions:http://www.irs.gov/pub/irs-pdf/iw8ben.pdf W-8BEN:http://www.irs.gov/pub/irs-pdf/fw8ben.pdf Form 8233 instructions:http://www.irs.gov/pub/irs-pdf/i8233.pdf Washington University example:http://www.washington.edu/admin/payroll/8233.html Form 8233:http://www.irs.gov/pub/irs-pdf/f8233.pdf Form 8843:http://www.irs.gov/pub/irs-pdf/f8843.pdf

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