Federal2011 Presentation

7/28/2019 Federal2011 Presentation

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U.S. Taxation for

Foreign Students

and Scholars

Presented by IRS Tax ConsultantJerrie Muir

March 12, 2012


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Aliens

For tax purposes, an alien is an individual who is

not a U.S. citizen

Aliens are classified as nonresidentaliens and resident aliens

Resident aliens generally

are taxed on their worldwide income, the same as U.S. citizens

.


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Aliens

Nonresident aliens are taxed only on their

income from sources within the United Statesand on certain income connected with the conduct

of a trade or business in the United States


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Nonresident and Resident Aliens

Under the residency rules, any alien

who is not a RESIDENT ALIEN is aNONRESIDENT ALIEN. An alienbecomes a RESIDENT ALIEN in one ofthree ways:


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Admitted to the United States as, orchanging status to, a Lawful PermanentResident under the immigration laws- theGreen Card Test


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Passing the Substantial Presence Test-

A numerical formula which measures days ofpresence in the United States


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Making what is called the "First-YearChoice- a numerical formula underwhich an alien may pass the SubstantialPresence Test one year earlier than underthe normal rules


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Even an undocumented (illegal) alien

under the immigration laws whopasses the Substantial Presence Testwill be treated for tax purposes as aRESIDENT ALIEN


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Resident Aliens

Green Card Test

Are you an immigrant (Lawful Permanent Resident) ofthe United States under the immigration laws of the

United States?

Aliens who are Immigrants are Resident Aliens of theUnited States for tax purposes, under the condition thatthey spend at least one day in the United States.


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Aliens

Substantial Presence Test

You must pass both the 31-day and 183-day tests. Present 31 days in current year

A. Current tax year- days in United States x 1 =_____days

B. First preceding tax year days in United States x 1/3 =_____days

C. Second preceding tax year days in United States x 1/6 =_____days

D. Total Days in United States =_____days (add lines A, B, and C) If line D equals or exceeds 183 days, you have passed the test


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Aliens

Substantial Presence Test Nonresident Aliens who claim to beEXEMPT

from the Substantial PresenceTest must file Form 8843, Statement of

Exempt Individuals, with their:

Form 1040NR-EZ/1040NR


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Aliens

Taxpayer Identification Number

SSN or ITIN

Use Form W-7 to apply for ITIN

Publication 1915, UnderstandingYour IRS ITIN


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Aliens and FICA

Social Security and Medicare Taxes General Rule- Aliens performing services in

U.S. are liable to pay FICA taxes

Aliens EXEMPT from FICA: A, D, F, J, M, Q, G, and H Visas

Services must be allowed by USCIS

Includes on-campus employment up to 20

hours a week and off-campus employmentauthorized by USCIS


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Federal Income Tax Reporting andWithholding on Wages

Different rules for withholding for Resident and Nonresident Aliens

Nonresident Aliens CANNOT report EXEMPT in Line 7 of Form W4(Withholding Certificate)

Nonresident Aliens claim SINGLE on Line 3 of Form W4

Nonresident Aliens exempt from federal tax withholding due to a taxtreaty provision file Form 8233, Exemption from Withholding of aNonresident Alien with their payroll office

Payroll offices REPORT wages paid to Nonresidents exempt under tax

treaty on Form 1042 and 1042-S

Wi hh ldi F d l I T


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Withholding Federal Income Tax onScholarships, Fellowships, and

Grants Paid to Aliens

Payments of taxable scholarships, fellowships, and grants toNonresident Aliens are generally reported and subject towithholding

Reported on Form 1042 and Form 1042-S

Qualified Scholarships are NOT included ingross income

Includes payments for tuition, fees, books, supplies, or equipment

Nonresident Aliens who claim a scholarship is EXEMPT from tax due to

a tax treaty must file a Form W-8BEN with their school/university


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Interest Income

Nonresident Aliens are not taxedon certain kinds of interest

Nontaxable interest income is NOTreported on Form 1040NR-EZ

Nontaxable interest income is

reported on Form 1040NR


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Claiming PersonalExemptions

General Rule for Nonresident Aliens-CLAIMS one (1) personal exemption

Exceptions Residents of Canada, Mexico, U.S. Nationals

Residents of the Republic of Korea

Students and Business Apprentices who areresidents of India

-Everyone on tax return MUST have a SSN or ITIN


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Which Form to File

Nonresident Aliens Form 1040NR-EZ or Form 1040NR

Departing Aliens Form 2063, U.S. Departing Alien Income Tax

Statement-SAILING/DEPARTURE PERMIT

Form 1040C, U.S. Departing Alien IncomeTax Return- NOT AN ANNUAL RETURN

After the end of the tax year, fileForm 1040NR-EZ or 1040NR


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Where to File

Department of the Treasury

Internal Revenue ServiceAustin, Texas, 73301-0215

IRS International Tax Law Hotline:

267-941-1000


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Summary

Determine if your are a Resident orNonresident Alien

Address your income situation Take advantage of tax treaty

benefits

FILE A RETURN IF REQUIRED


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Contact Information

Jerrie MuirIRS Tax ConsultantPH: 714-347-9257

Publication 519, U.S. Tax Guide for Aliens

Publication 901, U.S. Tax Treaties

www.irs.gov
http://www.irs.gov/http://www.irs.gov/

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