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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!