EverythingyouneedtoknowaboutNon-ResidentTax

Ryan Ludden Sprintax

Raghuram Sukumar Happy Schools

Overview:

▪ Overview of tax for nonresident students and scholars

▪ The stimulus payment eligibility ▪ Using Sprintax to prepare your tax returns ▪ Quick fire round of questions ▪ Questions

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

Quickpoll…Haveyoufiledyour2019taxesyet?

▪ Yes

▪ No

▪ I’m not sure if I need to file

2019 tax filing season is for income from:

▪ 1st January – 31st December 2019

▪ Filing deadline is Wednesday, April15th2020July 15th 2020*

7 1 5/

Importantdatesfor2019

Differencesbetweenresidentsandnonresidents

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

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

▪ Scholars/Researchers on 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.

Independentofvisa/immigrationstatus

1 8 3

Residentornonresidentfortax?

Residencysummary

NumberofyearsexemptfromSPT FICAExemption

F-1 5 YF-2 5 YJ1 Student,nondegree 5 YJ1 AupairandEduCare 2of6 YJ1 CampCounselor(summercamp) 2of6 YJ1 Intern 2of6 YJ1 SummerWork/Travel 2of6 YJ1 Teacher 2of6 YJ1 Trainee 2of6 YJ1 AlienPhysician 2of6 YJ1 Student,Bachelor’s 5 YJ1 Student,Doctorate 5 YJ1 Student,Intern 5 YJ1 Student,Masters 5 YJ1 GovernmentVisitor 2of6 YJ1 InternationalVisitor 2of6 YJ1 Professor 2of6 YJ1 Short-TermScholar 2of6 YJ1 Specialist 2of6 YJ1 ResearchScholar 2of6 Y J2 2of6 N

Everyone has some type of

IRS filing obligation…

Received taxable earnings or income over $0 – 2019 no personal exemption amount

Received a taxable stipend, grant or allowance in 2019

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

Whomustfilefor2019?

Form8843–minimumfilingrequirementforall

Federalrequirement–Form1040NR/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

▪ 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*

Incomewhichdoesnottriggerafilingrequirement

▪ 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

Taxdocumentsyoumayreceive

Itemsneededwhenpreparingareturn

• 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

Nonresidentspouseanddependents

▪ 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

FICAtaxes

▪ 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-IndividualTaxpayerIdentificationNumber

▪ 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!

1098T-TuitionStatement

▪ Resident, part-year resident and nonresident status

▪ Forms and rules vary from state to state

▪ Federation of Tax Administrators website www.taxadmin.org/state-tax-forms

Statetaxes

▪ Yes

▪ No

▪ I didn’t misfile but I forgot to file for previous years

POLL:Doyouthinkyoueverfiledanincorrecttaxreturn?

▪ 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

Missedayear?Orfileasresidentbymistake?

Implicationsofnotfiling

▪ 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!

Taxscams

Filingyourtaxesfromabroad

IfyouareinyourhomecountryandclosedyourUSbankaccountwhatcanyoudo?▪ YoucanchoosetoreceiveyourtaxrefundeitherasaUSbanktransfer,checkorforwardtheamounttoyour2021

return.

▪ SomeservicesareouttherethatcanassisttocreateUSbankaccountswhileabroad.OptionsonSprintaxtocreatesuchanaccountthroughTransferWise

CARESACTStimulusPayment

AmIEntitledToReceiveIt?

▪ Yes

▪ No

▪ Not sure

POLL:HaveyoureceivedtheUSstimuluspayment?

CanIAvailOfTheCARESAct?▪ Inshort,no,nonresidentaliensarenoteligibletoreceivethis$1200payment.▪ ItisavailableforAmericantaxpayersandresidentaliensonly.▪ ApersonwhoisaqualifyingresidentalienwithavalidSSNiseligibleforthePaymentonlyifheorsheisaqualifyingresident

alienin2020andcouldnotbeclaimedasadependentofanothertaxpayerfor2020▪ YouareconsideredtobearesidentalienfortaxpurposesifyoumeeteithertheGreenCardTestortheSubstantialPresence

Test.

TheGreenCardTest

YouarearesidentalienifyouhaveUSpermanentorconditionalresidence(agreencard).ThismeansthatyouareacitizenofanothercountrybutareauthorizedtoliveandworkintheUSonapermanentbasis.

TheSubstantialPresenceTest

Evenifyoudonothaveagreencard,ifyouspend31daysintheUnitedStatesduringthecurrentyearand183daysduringthethree-yearperiodthatincludesthecurrentyearandthetwoyearsimmediatelybeforethat,youareconsideredaresidentalien.Remembertheresidencyruleswhereyourdaysareexemptfromthesubstantialpresencetestforaperiodoftimedependingonyourvisatype!!ThiscanincludemanypeoplewhoareintheUnitedStatesontemporarynonimmigrantvisatypes.

Ifyoudonotmeeteitherofthesetests,thenyouarelikelyanonresidentalienandyouwillnotbeeligibleforthispayment.

Insummary,ifyouarearesidentalienfor2020,haveasocialsecuritynumber,youcannotbeclaimedasadependentofanothertaxpayerfor2020andearnlessthan$75,000asasingleindividual(orlessthan$150,000marriedfilingjointly)youcanexpecttoavailofCARES.

Summary

▪ NotintendedforInternationalstudentsandscholars▪ IntendedforUScitizenandpermanentresidents▪ Howeverdoesnotexcluderesidentaliens–fortaxpurposes

▪ OnlyalimitedsomeinternationalstudentsandscholarsaretaxresidentsoftheUS▪Mostcontinuetobeclassifiedasanonresidentfortaxpurposes▪ Thereforeineligible

NOTE:Informationbeingupdatedonadailybasis–somakesuretocheckIRSforlatestconfirmedinformation

Nonresidentalienswhofiledincorrectlyasaresident

▪ Ifyoufiledincorrectlyasaresident(1040v1040-NR):

▪ Don’tpanic–butdofixit▪ Fileanamendedtaxreturn-1040-X&1040-NR-forall

incorrectyears▪ Makeanynecessaryamendedpayment

▪ ReturnthestimuluspaymenttotheIRSifyoubelieveyoureceiveditinerror▪ Returnthepaymentseparatetoyouramendedreturn▪ Donotputthemonthesamecheckormoneyorder▪ Includeacovernotetoexplainwhyyouarereturningthe

payment▪ Keepcopiesofeverything-physicalandelectronic▪ Maybeneededaspartofafuturevisaapplication

SprintaxcanassistwithAmendedTaxReturns

ReturningthestimuluspaymenttotheIRS

Ifthepaymentwasapapercheck:

▪ Write"Void"intheendorsementsectiononthebackofthecheck.

▪ MailthevoidedTreasurycheckimmediatelytotheappropriateIRSlocationlistedbelow.

▪ Don'tstaple,bend,orpaperclipthecheck.

▪ Includeanotestatingthereasonforreturningthecheck.

Ifthepaymentwasapapercheckandyouhavecashedit,orifthepaymentwasadirectdeposit:

▪ Submitapersonalcheck,moneyorder,etc.,immediatelytotheappropriateIRSlocation.

▪ Writeonthecheck/moneyordermadepayableto“U.S.Treasury”andwrite2020EIP,andthetaxpayeridentificationnumber(socialsecuritynumber,orindividualtaxpayeridentificationnumber)oftherecipientofthecheck.

▪ IncludeabriefexplanationofthereasonforreturningtheEIP.

▪ Foryourpapercheck,thereisalistofIRSmailingaddressestousebasedonthestatehttps://www.irs.gov/coronavirus/economic-impact-payment-information-center#more

SendingEIPCheckstotheIRSIfyoulivein… thenmailtothisaddressMaine,Maryland,Massachusetts,NewHampshire,Vermont AndoverInternalRevenueService

310LowellSt.Andover,MA01810

Georgia,Iowa,Kansas,Kentucky,Virginia AtlantaInternalRevenueService4800BufordHwyChamblee,GA30341

Florida,Louisiana,Mississippi,Oklahoma,Texas AustinInternalRevenueService3651SInterregionalHwy35Austin,TX78741

NewYork BrookhavenInternalRevenueService5000CorporateCt.Holtsville,NY11742

Alaska,Arizona,California,Colorado,Hawaii,Nevada,NewMexico,Oregon,Utah,Washington,Wisconsin,Wyoming

FresnoInternalRevenueService5045EButlerAvenueFresno,CA93888

Arkansas,Connecticut,Delaware,Indiana,Michigan,Minnesota,Missouri,Montana,Nebraska,NewJersey,Ohio,WestVirginia

KansasCityInternalRevenueService333WPershingRd.KansasCity,MO64108

Alabama,NorthCarolina,NorthDakota,SouthCarolina,SouthDakota,Tennessee

MemphisInternalRevenueService5333GetwellRd.Memphis,TN38118

DistrictofColumbia,Idaho,Illinois,Pennsylvania,RhodeIsland PhiladelphiaInternalRevenueService2970MarketSt.Philadelphia,PA19104

Aforeigncountry,U.S.possessionorterritory*,oruseanAPOorFPOaddress,orfileForm2555or4563,orareadual-statusalien.

AustinInternalRevenueService3651SInterregionalHwy35Austin,TX78741

UsingSprintax

LoginPage

Residency

IncomeForms

StateTaxes

Ordersummary

YourcompletedIRSForms

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

2019Federal&StateRefundsHappySchools

71%ReceivedRefund

AverageRefund

$1,359

72%ReceivedRefund

AverageRefund

$313

Federal State

QuickfireRound:Questions

1.Filingmytaxesfromabroad

IaminmyhomecountryandclosedmyUSbankaccountwhatcanIdotoreceivemytaxrefund?• YoucanchoosetoreceiveyourtaxrefundeitherasaUSbanktransfer,checkorforwardtheamounttoyour2021

return.

• SomeservicesareouttherethatcanassisttocreateUSbankaccountswhileabroad.OptionsonSprintaxtocreatesuchanaccountthroughTransferWise

2.Repatriation/Receiptoffundsfromtheschool

Whenthisstartedhappening,Ineededtogethomeandtheprogram/schoolwereawesome,theyarrangedmyflightsandevenpaidtheairfare!Willtherebeanytaximplications?

▪ Supersuperhelpful….▪ Buttherewillbetaximplications▪ SeenasreportableincomebyIRSandwillneedtobeincludedontaxreturnin2020

3.BonusOnBankAccount

Ireceiveda$100dollarbonuswhenIopenedmyUSbankaccount.DoIhavetopaytaxonthismoney?ManybanksintheUSofferincentivestoencourageyoutoopenabankaccount

Inshort:

▪ Ifyoureceiveabankbonusyouhaveataxfilingrequirement.

▪ Ifthebonusisover$600(unlikely!),thebankisrequiredtoreportitona1099-Miscasan‘award’.

▪ Ifitislessthan$600,youwillberequiredtoreportitas‘otherincome’onyourtaxreturn.

Separately-‘Cashback’(bonusesoranybonusesthatrequirethecustomertospendmoneyasaconditioninordertoreceiveit)arenon-taxableandnon-reportable.

ManybankswillaskforaW8Benfromtheirnoresidents.

4.Refundofaccommodation

Ipaidforafulltermofaccommodation,butthenhadtoleavecampusandtheschoolrefundedmetheportionofunusedrent.

▪ Theeasyansweris▪ It’sarefundofyourownmoney-notincome–nottaxable

▪ Ifyoucontinuetoreceiveanaccommodationstipend,itsmorecomplicated!

5.CanIE-File?

IamanInternationalstudent,whohasreturnedtomyhomecountry,canIe-fileordoIstillneedtomailmydocuments?

Limitede-fileoptionsfornonresidentsoverseas

Recommendations:1. Fileasap2. Usearegistereddeliveryservice

Asyouwillbesendingyourdocumentsfromoverseas,it’salwaysagoodideatousearegisteredmailingservice.Foryourownpeaceofmind!

3. KeepyourbankaccountopenBykeepingyourUSbankaccountopenafteryouleaveyoucanensureyouhavefastaccesstoyourtaxrefundafteryoufileyourreturn!

FreeSubstantialPresenceTestCalculator

GoTo:https://geni.us/sprintax