Everything you need to know about Non-Resident Tax

Enda KelleherSprintax

Overview:

• Overview of tax for nonresident students and scholars

• Student tax behaviour in 2019• Using Sprintax to prepare your tax returns• Questions

Hands Up…

The aim of this presentation is to provide you with a general understanding of tax principles as they apply to international students and as such is for information purposes only. Each individual has a unique tax position and is responsible for his or her own tax determination and compliance.

Disclaimer

Topics

Who must file a 2019 US tax return?

What tax forms should I receive?

Forms you need to complete and send to IRS

No income - what form do I need to file?

Nonresident spouses (J2, F2, H4)

What is FICA?

What is an ITIN?

What is a 1098-T?

State Tax Returns

What happen if I don’t file?

Items you need to prepare your taxes

2019 tax filling season is for income from:

1st January – 31st December 2019

Filling deadline is Wednesday, April 15th 2020

4 1 5/

Important dates for 2019

Differences between residents and nonresidents

Visa residency status is NOT the same as tax residency status

Generally, most international students & scholars who are on F, J, M or Q visas are considered nonresident for tax purposes.

International undergraduate students on (their first) J1 & F1 visas are automatically considered nonresident for their first 5 calendar years in the US

Scholars/Researchers on (their first) J visas are automatically considered nonresidents for 2 out of the last 6 calendar years in the US

If you’ve been in the US for longer than the 5 or 2 year periods, the Substantial Presence Test will determine your tax residency.

Independent of visa/immigration status

1 8 3

Resident or nonresident for tax?

Summary of exemption from Substantial Presence test

Number of years exempt FICA Exemption

F - 1 5 YF - 2 (Spouse /dependent) 5 YJ1 Student, non degree 5 YJ1 Student, Bachelor’s 5 YJ1 Student, Doctorate 5 YJ1 Student, Masters 5 YJ1 Au pair and EduCare 2 of 6 YJ1 Camp Counselor (summer camp) 2 of 6 YJ1 Student Intern 2 of 6 YJ1 Summer Work/Travel 2 of 6 YJ1 Teacher 2 of 6 YJ1 Trainee 2 of 6 YJ1 Alien Physician 2 of 6 YJ1 Government Visitor 2 of 6 YJ1 International Visitor 2 of 6 YJ1 Professor 2 of 6 YJ1 Short-Term Scholar 2 of 6 YJ1 Specialist 2 of 6 YJ1 Research Scholar 2 of 6 YJ2 (Spouse / dependent) 2 of 6 N

Everyone has some type of

IRS filing obligation…

Received taxable earnings or income over $0 – 2018 no personal exemption amount

Received a taxable stipend, grant or allowance in 2018

Everyone must complete Form 8843 –irrespective of income or days of presence

Who must file for 2019?

Form 8843 – minimum filing requirement for all

Most common:• Employment

• Unearned income • E.g. investment income

• Scholarship covering costs other than tuition and tuition related expenses• Room and Board

How do the IRS define income?

• Singing in a bar!• Gambling winnings• Focus group – gift card• Rental income (over 14

nights)• Selling art/design works• All reportable

Other income?

Scholarship for tuition and related expenses

Scholarship received from outside the US

Money transferred from parents/relatives overseas

Income ‘earned’ in their home country (investment income, rent, job before moving to US, etc.)

Interest on regular savings account

Gift of money from someone in the US*

Income which does not trigger a filing requirement for nonresidents

Withholding tax

As a nonresident, ‘withholding tax’ may be applied to some or all payments made to you at a rate of 30%

65 tax treaties in place to reduce this or to exempt that income

Opportunity to claim refund via year end tax return

Federal requirement – Form 1040NR/EZ

From 1st January 2018 due to significant tax law changes made in 2017 – everything over $0 is taxed!

US Source Income Wages

Taxable Stipend, Grant, Scholarship, Award

Interest, Rental income, Royalties or other income

Wages, Salary, Compensation (Employment Earnings)

1042-S Royalty Payments Scholarship Stipend/Non-Degree Aid Prize/Award/Honoraria

Rental income Investment Income Commissions Independent Contractor Services Other income

W2

1042-S

1099 Series

Tax documents you may receive

Items needed when preparing a return

• Income documents

• Passport

• Visa - I-20, DS-2019, etc.

• Entry and exit dates

• Social security / ITIN

Same filing requirements as visa holder:

No joint returns for Nonresidents

Obligations Minimum is Form 8843 1040NR/EZ if applicable Each dependent should mail them in separate

envelopes

Nonresident can elect to file as resident – when married to a tax resident - but do the math on both options first!

Nonresident spouse and dependents

Nonresident international students and scholars (J1 & F1) should not be paying FICA

H-1B, J-2 and TN visa-holders, are subject to FICA taxes from their first day of employment.

Usually only applied to off campus employment However resident, graduates and on campus OPT do pay

Opportunity to claim back From employer Via Form 843 & Form 8316

FICA taxes

Required when filing Federal return

Most common among scholarship recipients (athletes)

Not needed on Form 8843

Application process is tricky!

CAA may now certify documents (Certified Acceptance Agent)

ITIN- Individual Taxpayer Identification Number

Tuition Statement

Mostly used to claim education tax credit

Significant cause of misfiling for nonresidents

Not relevant for nonresidents

Sometimes - all students with an SSN on file with school will get one – even nonresidents, so it can cause a lot of confusion!

1098 T - Tuition Statement

Form 1095-A: Healthcare coverage purchased through Health Insurance Marketplace – ‘ObamaCare’ Generally not applicable to international students & scholars Can be used in limited circumstances

Form 1095-B: Healthcare coverage provided through insurance provider or self-insured employer You do not need 1095-B for your non-resident return

Form 1095-C: Healthcare provided through employer (generally more than 50 employees) You do not need 1095-C for your non-resident return

1095 A, B & C Series

Resident, part-year resident and nonresident status

Forms and rules vary from state to state

Federation of Tax Administrators websitewww.taxadmin.org/state-tax-forms

State taxes

New York State Tax Return

Resident V Nonresident for New York State Taxes

Most full time undergraduate students (F1’s and J1’s) are considered nonresidents of NY state and city for tax purposes

Most post-graduates, including part time students, J1 international professor, researchers and scholars, and individuals in H4 status are considered NY residents for state and city tax purposes if they both

1) Had a place to stay in NY for at least 11 months

2) Were physically in NY for at least 6 months of the year.

New York State Tax Return

Do I need to file New York state tax return?

You must file a NY Tax Return if:

You are a nonresident with New York source income and your New York adjusted gross income exceeds your New York standard deduction, $8,000 for 2019 tax year

You are resident and you have to file a federal return

You may have additional filing responsibilities if you have Yonkers or New York City income.

Federal 6 weeks - 6 months Contact IRS to follow up

‘Where’s my refund’ https?//irs.gov/refunds

E-filing – kinda, sorta, maybe ?

State Similar but will vary from state

to state

Timelines for a refund

Don’t panic - but do set the record straight

Never filed…. Catch up Can back file at any stage Can only claim a refund for previous 3 years

Misfiled….. 1040X - Amended U.S. Individual Income Tax

Return Simple form, similar to 1040

Missed a year? Or file as resident by mistake?

Implications of not filing

International students are required to comply with all US laws, including IRS

Filing tax forms (even if only 8843) is part of maintaining visa status in US

Not filing could affect future immigration status (like H1B, LPR)

Fines, penalties, interest can accrue if the IRS are owed

Might be missing out on a refund!

Tax scams

IRS issue warnings

Tax scams

Issue effects all international schools and students

International issue……

……and a local issue

Using Sprintax

Email to Students

Login Page

Residency

Income Forms

Other Income

State Taxes

Order summary

Download, review, sign and mail

Your completed IRS Forms

Show me the money!!!!!!!!!!!!!!

2018 Federal & State Refunds

71%Received Refund

Average Refund

$1,087

72%Received Refund

Average Refund

$436

Federal State

Stony Brook - Federal & State Refunds

90%Received Refund

Average Refund

$1,505

79%Received Refund

Average Refund

$443

Federal State

Al Capone

What did they eventually arrest him for?

Not reporting his TAXES!

Please do your taxes!

Americas most wanted criminal

Thank you!