International Students

1. International Students

2. Resident vs Nonresident • Green Card = Resident – file 1040! • Substantial Presence – 31 days this year or 183 days over last 3 years • Exempt are: • Students with F, J, M or Q visas – 5 years exempt • Family of students • Teacher/researcher with J or Q visas – no more than 2 of last 6 years in US • Exempt years are counted by calendar year – if student comes in December then that counts as a full year!

3. Tax Treaties • They are complicated. List of Codes • Form 1042-S instead of a W-2 for income exempted by treaty. • India is the only country allowing students to claim the standard deduction – most countries allow the personal exemption only. • Scholarships – Code 15: List of Countries with limited nontaxable living expenses. • Tuition for Services - taxable

4. Income Codes - 18 • Code 18: Teaching and Research – 2 to 3 years for visiting professors. • Does not apply to spouse’s earnings. • Germany, India, Netherlands, Thailand and UK – exceed the time limit and lose ALL benefits!! Should claim no benefit.

5. Code 19: Student Wages • F-1 students must work on-campus only for the first year. • Spouses of F-1 cannot work. • Income limits by country.

6. Example • Yumiko from Korea earned $4,516 from working at the Case library. Wages $4,516 Treaty $2,000 Subject to Tax $2,516 Exemption $3,650 Taxable $0 Any Withholding should be returned to Yumiko.

7. Other Incomes/Treaties • Personal service or non-related income is not covered by the treaty – except Canada. • Canada – under 10,000 exempt for NR; over 10,000 all taxable. • India – Standard Deduction; Could lose Code 18 scholar benefit if over time limit • China – Treaty is for 3 years though status would switch from Nonresident to Resident. Third Year Form 8833 with 1040

8. Family Issues • Cannot file as Head of Household • Normally cannot claim family members. • If they can be claimed then must have an ITIN – similar to a SSN • Claiming spouses – Canada, Mexico, South Korea and India • Married – usually filing separately.

9. Children • Cannot claim dependents even if they are US citizens • Exceptions are: • Canada and Mexico • South Korea • India (not F-2, J-2 or M-2) • May be able to claim CTC and Child Care Credit but doubtful; Child must be citizen, national or resident alien of US.

10. Spousal Income • F-2 status – should not be working • J-2 status – authorized to work and have to pay social security taxes.

11. Other Income • Taxed at higher rate because not effectively connected with US business – dividends, capital gains, rental income and interest EXCEPT bank interest • Bank interest is excluded from income – it need not be reported.

12. Itemized Deductions • Nonresidents except Indian students are not entitled to the standard deduction • Itemize state and local taxes – Will be income in the following year if a refund!! • Charitable Contributions • Some Job Expenses – Rare • Student Loan Interest difficult to deduct.

13. Credits • Education Credits – No (if nonresident alien) • EITC – No (if nonresident alien)

14. Form 8843 • Helps exempt a nonresident from future substantial presence test. • Should be completed by person filing a tax return • Also, spouse and dependents should each file one too – even without an ITIN or SSN

15. Social Security Tax • Nonresidential Aliens do not pay Social Security and Medicare taxes. • The exception is a J-2 working spouse. • Client should contact employer for a reimbursement. If that doesn’t work then • File Form 843 including • W-2 • Form 8316 • 1040NR • Visa

16. Where to file Mail to: Department of Treasury Internal Revenue Service Austin, TX 73301-0215