Tax Guide for International Students

United States and Massachusetts Taxation

for International Students

Mark Minassian, CPAMinassian CPA, LLC

March 5, 2015

(c) Minassian CPA, LLC, 2015 All Rights Reserved

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DisclaimerThe information contained in these slides is general in nature and cannot be relied upon to address a specific situation.

Pursuant to Internal Revenue Service Circular 230, we are required to advise you that the tax advice contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.


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The Internal Revenue Service• The Internal Revenue Service (IRS) is the revenue

service of the United States government. It is responsible for collecting taxes and enforcing the country’s tax laws.

• The IRS has special rules and tax forms for international students and scholars.

• U.S. individual income tax returns provide information to the IRS showing the amount of income earned during the year, the calculation of tax liability and the amount of payments made to the IRS on your behalf during the year.

• You are responsible for filing your own tax return and for reporting all of your income to the IRS each year.


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The Two Tax Systems in the U.S.

1. U.S. Tax System, which applies to:- U.S. Citizens- U.S. permanent residents (Green Card holders)- Resident Aliens for U.S. tax purposes

2. Nonresident Alien Tax System – Applies to individuals classified as Nonresident Aliens for U.S. income tax purposes

THIS PRESENTATION WILL DEAL PRIMARILY WITH THE NONRESIDENT ALIEN TAX SYSTEM


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Are You a Nonresident Alien?

• If you are not a U.S. Citizen or permanent resident, you must determine if you are a Resident Alien or Nonresident Alien.

• The Substantial Presence Test (SPT) is what determines if you are a Resident Alien or a Nonresident Alien under these circumstances.


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Substantial Presence Test Calculation

Formula for 2014:

# of days present in the U.S. in 2014 (at least 31 days) +

(1/3) x (# of days in the U.S. in 2013) +(1/6) x (# of days in the U.S. in 2012) =SPT days

If SPT days = 183 or more and you were in the U.S. for at least 31 days in 2014, you are a Resident Alien for U.S. income tax purposes for 2014 unless you are an exempt individual.


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Exempt Individuals• The term “exempt individual”

refers to an alien who does not have to count their days in the U.S. under the SPT.

• Being an exempt individual for SPT purposes does not mean that your income is exempt from U.S. taxes.


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Who are Exempt Individuals?• Individuals in the U.S. under a F, J M or Q student

visa get five (5) calendar years in their lifetime that they are exempt from counting days under the SPT.

• Partial years count as full years.• After your five years have elapsed, you may never be

an exempt individual again as a student, but you may be able to claim Nonresident Alien tax status even if you pass the SPT.

• The normal academic year (generally September – May) crosses two calendar years. Since partial years count as full years for determining if you are exempt from the SPT, one full academic year will count as two (2) years under the five (5) year test described above.


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Claiming Nonresident Alien Tax Status After Five Years

After your five years, you may claim Nonresident Alien status even if you pass the SPT if you can demonstrate that you:1. do not intend to permanently reside in the

U.S.;2. have not taken any steps to become a

permanent resident or U.S. Citizen;3. have complied with the immigration laws and

requirements of your student immigrant status;

4. can show a closer connection to a foreign country than to the U.S. (IRS Form 8840)


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Taxable Income for Nonresident Aliens

• A Nonresident Alien is taxed on his or her U.S. source income or income that is connected with a U.S. trade or business.

• The most common types of income that Nonresident Alien students and scholars will report are:– Wages from any U.S. job, either on or off-campus– Consulting fees for work done in the U.S. – Dividends and capital gains from ownership of U.S.

stocks, bonds, mutual funds or other investments– Scholarship and fellowship income that exceeds the

amount of your tuition and mandatory school fees– Any other income earned in the U.S. such as rent,

commissions, royalties and gambling winnings


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Non-Taxable Income for Nonresident Aliens

• The following types of income are not taxable for Nonresident Aliens:– Bank account interest from personal

(i.e. non-business) accounts– Foreign source income– Income that is partially or totally

exempt from U.S. tax under the terms of a tax treaty

– Scholarships that cover only tuition, books and fees


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Tax Treaties• Many countries have tax treaties with the

U.S. that allow their tax residents to earn money in the U.S. without being subject to income tax on those earnings in both countries.

• Under many tax treaties, scholarship and fellowship grants, and a limited amount of compensation received by students may be exempt from U.S. taxation.

• You must still file a U.S. tax return even if your income is exempt under a tax treaty.


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Tax Treaty Countries for Students


Australia Cyprus Hungary Kazakhstan

Norway South Africa

Turkey

Austria Czech Republic

Iceland Latvia Pakistan South Korea

Ukraine

Bangladesh

Denmark

India Lithuania Philippines Spain United Kingdom

Barbados

Egypt Indonesia

Luxembourg

Poland Sri Lanka

Venezuela

Belgium Estonia Ireland Malta Portugal Sweden

Bulgaria Finland Israel Mexico Romania Switzerland

Canada France Italy Morocco Russia Thailand

China Germany

Jamaica Netherlands

Slovak Republic

Trinidad & Tobago

C.I.S. Greece Japan New Zealand

Slovenia Tunisia

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Social Security and Medicare• Social Security is a federal retirement insurance program

funded by contributions to the Social Security Trust Fund through payroll taxes paid by individuals and businesses in the U.S.

• Medicare is a national social health insurance program that guarantees access to health insurance to legal U.S. residents age 65 and older. Like Social Security, Medicare is also funded by payroll taxes paid by individuals and businesses.

• F-1, J-1 and M-1 visa holders are exempt from paying Social Security and Medicare payroll taxes if their work is allowed by the U.S. Citizenship and Immigration Services (USCIS).

• The exemption from Social Security and Medicare taxes does not apply to spouses or children with F-2, J-2 or M-2 visas.


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Filing the Correct Tax Forms• The tax forms that a Nonresident Alien must

file depends on whether you have U.S. source income and if you are covered under a tax treaty.

• Those who received U.S. source income in 2014 and/or who were covered by a tax treaty must submit Form 8843 and Form 1040NR (or Form 1040NR-EZ) by April 15, 2015.

• Those who did not have any U.S. source income must only submit Form 8843 by June 15, 2015.


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Form 1040NR and Form 1040NR-EZ

• Nonresident Aliens who receive taxable income in the U.S. must file either form 1040NR or 1040NR-EZ.

• Form 1040NR-EZ is a simplified version of Form 1040NR, but certain requirements must bet met to file Form 1040NR-EZ.

• Most Nonresident Alien students will be eligible to file Form 1040NR-EZ

• The Windstar tax system will help you determine which form to file.

• If you file either Form 1040NR or Form 1040NR-EZ, you must also File Form 8843.

• You must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) to file Form 1040NR or Form 1040NR-EZ.


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Claiming Exemptions for Your Spouse and Dependents

• You cannot claim exemptions for your spouse or dependents on Form 1040NR-EZ

• You may claim exemptions for your spouse and dependents on Form 1040NR if one of the following situations apply:1. Residents of Mexico and Canada – You may claim an exemption for your

spouse if he or she had no gross income for U.S. tax purposes, lived with you and cannot be claimed as a dependent on another U.S. tax return. You may claim exemptions for your dependents if they qualify based on the same dependency tests for U.S Citizens and Resident Aliens.

2. Residents of South Korea – You may claim exemptions for spouses and dependents if they lived with you in the U.S. at some time during the tax year. You must pro-rate the exemption amounts based on the ratio of your U.S. source income to your worldwide income

3. Students and business apprentices from India - You may claim an exemption for your spouse if he or she had no gross income for U.S. tax purposes, lived with you and cannot be claimed as a dependent on another U.S. tax return. You may claim exemptions for your children if they are U.S. Citizens or Permanent Residents.

• All spouses and dependents claimed must have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to receive an exemption.


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Form 8843• Form 8843 (Statement for Exempt Individuals and Individuals

With a Medical Condition) MUST be filed by any Nonresident Alien present in the U.S. under a F, J or M visa.

• The form must be filed even if you received no taxable income during 2014.

• Form 8843 is not an income tax return. It is an informational statement required by the U.S government. The purpose of the form is to explain why the SPT does not apply to you.

• You do not need a Social Security Number or ITIN to file Form 8843, but if you already have a SSN or ITIN, you need to enter that number on the form.

• If you are not required to file a 2014 tax return, Form 8843 must be filed with the IRS by June 15, 2015.

• If you are filing a 2014 tax return, Form 8843 should be attached to the tax return.


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Social Security Number (SSN)• A Social Security Number (SSN) is issued

by the Social Security Administration and can be obtained if your immigration status allows you to be employed in the U.S. Most foreign students and scholars on F, J and M visas are eligible for a Social Security Number.

• Use Form SS-5 from the Social Security Administration to apply for a Social Security Number.


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Individual Taxpayer Identification Number (ITIN)

• An Individual Taxpayer Identification Number (ITIN) is issued by the Internal Revenue Service and can be obtained by individuals who wish to work in the U.S. and are not eligible for a SSN.

• Use IRS Form W-7 to apply for an ITIN


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Tax Documents You May Receive• W-2: All employees who have taxable income in the U.S.

will receive a W-2 which shows the amount of money you earned and the amount of taxes you had withheld during the year.

• 1042-S: Sent to Nonresident Aliens who receive various types of payments during the year (see next slide).

• 1099-INT: Bank interest received during the year. Bank interest earned from personal accounts is not reportable for Nonresident Aliens.

• 1099-DIV: Dividends earned on investments.• 1099-MISC: Shows money earned from working other

than as an employee.


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Form 1042-SForm 1042-S is used to report various types of payments to Nonresident

Alienstudents.• The most common types of income that will be reported to

Nonresident Alien students on Form 1042-S are graduate financial aid stipends, taxable room and board, prizes and awards for achievements, consulting fees, honorarium payments, wages exempt from tax due to a tax treaty and per diem expenses.

• Wages earned in the U.S. that are not exempt from tax due to a tax treaty will be reported on Form W-2.

• It is possible that you will receive Form 1042-S and Form W-2. You may also receive multiple 1042-S forms for different types of income being reported to you.

• Form 1042-S will be mailed out by March 15, 2015.• You can receive Form 1042-S even if you do not have a SSN or ITIN.

If this is the case, you will need to submit Form W-7 with your tax return to obtain a ITIN


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Where to File Your Tax Return

• Form 8843, Form 1040NR and Form 1040NR-EZ should be mailed to:

Department of the Treasury

Internal Revenue Service Center

Austin, TX 73301-0215(c) Minassian CPA, LLC, 2015

All Rights Reserved

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Massachusetts Tax Returns• Massachusetts imposes its own income

tax separate from the U.S. federal income tax.

• Your MA residency status is not based on your immigration status or your residency status for U.S. income tax purposes.

• Massachusetts qualifications for resident and nonresident status are different than the U.S. federal income tax qualifications.


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Massachusetts Nonresidents• You are a MA Nonresident if:

– You lived in Massachusetts for less than 183 days during the year; AND

– You do not maintain a permanent place of abode in MAOR

– Your legal residence (domicile) is not in MA• Being domiciled in MA requires both a physical residence in MA

and an intention to make MA your permanent place of residence.• In general, if you are a university student and return to your

domicile after the school year, you are considered a Nonresident for MA tax purposes.

• A dormitory room or university-owned student housing is not considered a permanent place of abode in MA.

• Even if you have a job in MA during the year, you can still be a Nonresident based on the above criteria.


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Massachusetts Nonresidents• As a MA Nonresident, you are only taxed on your MA

source income.• MA source income includes:

– Compensation for personal services, including wages, salaries, tips, bonuses, commissions, fees or other compensation relating to a trade or business conducted in MA

– Any lottery winnings in Massachusetts– MA unemployment compensation– Rental and royalty income earned from property located in MA

– Capital gains on the sale of property located in MA– Interest and dividends connected with a business

activity in MA

• Interest and dividends earned from personal bank or investment accounts is not MA source income.


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Massachusetts Tax Forms• MA Nonresidents must file Form 1-NR/PY

each year to report their MA source income.

• The 2014 Form 1-NR/PY is due by April 15, 2015.

• As a MA Nonresident, Form 1-NR/PY generally only has to be filed if your MA source income exceeds $4,400 for 2014.

• The Massachusetts Department of Revenue (DOR) collects MA taxes and enforces the MA tax laws.


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Windstar Online Tax System• Windstar Foreign National Tax Resource (FNTR)

is a free, online tax preparation system that allows U.S. Nonresident Aliens to prepare their U.S. and Massachusetts tax returns.

• Nonresident aliens are not allowed to file their U.S. returns electronically. You must print out your tax return from Windstar and mail it to the IRS.

• Windstar provides assistance with filing your tax return and will help you determine your residency status under the SPT.

• Website: https://trr.windstar.com/


https://trr.windstar.com/

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Documents You Will Need to Prepare Your Tax Return With

Windstar• Passport• Immigration Documents (I-20 or DS-2019)• SSN or ITIN (if you have been assigned one)• Address information (U.S. and foreign)• U.S. entry and exit dates (current and past)• Academic institution information• Forms W-2, 1042-S and/or 1099• A copy of your 2013 federal tax return (if you

filed one)


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Useful Resources & Publications• www.irs.gov – Internal Revenue Service• IRS Pub 17: Federal Income Tax Guide for

Individuals• IRS Pub 519: U.S. Tax Guide for Aliens• IRS Pub 901: U.S. Tax Treaties• IRS Pub 970: Tax Benefits for Education• www.mass.gov/dor – Massachusetts Department of

Revenue• www.ssa.gov – U.S. Social Security Administration• www.uscis.gov – U.S. Citizenship and Immigration

Services• www.hio.harvard.edu – Harvard International Office


http://www.irs.gov/

http://www.mass.gov/dor

http://www.irs.gov/

http://www.irs.gov/

http://www.hio.harvard.edu/

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Obtaining IRS Forms Online or in Person

• www.irs.gov/Forms-&-Pubs - Section of the IRS website where you can search for current and prior year tax forms as well as IRS publications.

• Google – If you know the number of the form or publication you are looking for, the top results in a Google search will almost always return a direct link to the PDF version of the form or publication from the IRS website. Be sure to include the year of the form in your search criteria (i.e. search for “2014 IRS Form 1040NR”).

• Obtaining tax forms in person:– Post Office– Local library or university library– IRS office (the closest IRS office to the Kennedy School

is in the JFK Federal Building at 15 New Sudbury Street in Boston)


http://www.irs.gov/Forms-&-Pubs

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Thank You

Mark Minassian, CPAMinassian CPA, LLC

642 Moody Street, Ste 1Waltham, MA 02453

(781) 891-4114www.minassiancpa.com


http://www.minassiancpa.com/

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