Special Topics in Tax Payment
Generally, nonresidents cannot file joint tax returns and cannot claim exemption for spouses and children. However, nonresident aliens from American Samoa, Canada, Japan, Mexico, the Republic of Korea or Northern Mariana Islands, or F-1 students from India may be able to claim this exemption.
To claim the exemption, their spouse must not have received any income during the tax year. If they are from Japan or the Republic of Korea, their spouse must also be present in the U.S. with them to claim the exemption. If you are eligible to claim a exemption for your spouse, he/she will not have to file a separate U.S. tax return.
All dependents must have either a U.S. Social Security Number or an Individual Taxpayer Identification Number.
Barbados, Hungary, Jamaica
Students (not teachers/researchers) from Barbados, Hungary or Jamaica can elect to file a resident tax return (1040, 1040A, 1040EZ). This would allow such individuals to file jointly, claim standard deductions, exemptions for dependents, etc. Such individuals would not be allowed to claim tax treaty exemptions.
Nonresidents (except those from India) can not claim the Standard Deduction.
What to Do If An Extension is Needed On Taxes
If a nonresident owes the IRS money from a tax year and doesn't have the money to pay the amount owed initially, an extension can be granted. They must send in their tax return by April 15 and a letter requesting an installment agreement. They will have to pay penalties and interest on all amounts owed. There is also a fee for requesting an installment agreement. The amount owed must be substantial to qualify for an installment agreement.
How to File Taxes for a Previous Year
If a nonresident failed to file a tax return for a previous year, they can always do so now. They should obtain a copy of the appropriate tax form (1040NR or NREZ) for the year in question and the 8843 for the tax year in question from the IRS website (http://www.irs.gov). Also obtain the 8843 form for the tax year in question. Filing procedures are otherwise the same as for the current year.
If taxes were owed for a previous year, they will be assessed interest and penalties. If they were entitled to a refund, the refund will be paid as long as the tax year in question is not more than 3 years in the past.
Amending a Prior Year's Return
If a nonresident alien discovers an error in a prior year's return, or if it would be advantageous to refile, they may submit an amended Form 1040NR or 1040NR-EZ within three years of filing the original return or two years from the date the tax was paid, whichever is later. To amend a previously submitted Form 1040NR or 1040NR-EZ, partially complete Form 1040X, Amended U.S. Individual Income Tax Return.' They need to provide name, address, and social security number on Form 1040X. Also indicate the IRS office to which they mailed their original tax return and whether or not the ITS has audited the original return. On the back of Form 1040X (Part II), briefly explain the reason for the changes they are making. Instead of completing the entire Form 1040X, attach a corrected Form 1040NR or 1040NR-EZ with 'Amended' written across the top and any documentation needed to support the changes they are making. Mail this package to the Department of Treasury, IRS, Austin, TX 73301-0215. Although not required, they may wish to submit with the amended return a photocopy of the original return and its supporting documentation. They should keep a photocopy of Form 1040X and its attachments for their records.
They may also use Form 1040X if they are a resident alien who erroneously filed a nonresident return or a nonresident alien who submitted Form 1040, 1040A, or 1040EZ.
If necessary, they may request a photocopy of a prior year's return from the IRS. They must complete Form 4506 and mail it with the required fee of $14.00 to the IRS Center where they filed their original return. The IRS will mail a photocopy of the return within 60 days. They may order a transcript of a previously filed tax return from the IRS at no charge. To request a transcript, complete and submit Form 4506, contact the local IRS office, or call 1-800-829-1040.
The U.S. maintains bilateral income tax treaties with over 50 countries in an effort to reduce or alleviate double taxation. It is important to note that each individual treaty is unique and may not contain the same information as another tax treaty. Income tax treaties contain a number of different provisions (referred to as articles). Almost all tax treaties contain articles that are intended to promote cross-cultural education and exchange. These articles generally provide for a partial or complete tax exemption for scholarship or fellowship grants and for compensation payments received by students, teachers, and researchers.
IRS Publication 901 (U.S. Tax Treaties) contains a summary of the provisions related to foreign students and scholars; however, for complete information regarding the exemptions under an income tax treaty, the actual text of the tax treaty should be reviewed. A copy of the actual text of a tax treaty can usually be obtained from your consulate or embassy; most embassies also employ an individual who is familiar with the terms and conditions of the tax treaty benefit and able to provide information regarding U.S. taxation.
To claim a tax treaty benefit a nonresident must file a form 8233 and appropriate letter with their employer. They must file the request for exemption annually. If a nonresident fails to claim the treaty benefit with their employer, CINTAX will prompt the visitor they have a treaty benefit to claim.
Social Security and Medicare Tax
Lawfully employed nonresident F-1, J-1, M-1, and Q visa holders are not subject to social security withholding or reporting requirements until their 6th year in the U.S. (However, the law requires that social security tax be withheld from wages received from unauthorized employment.) Therefore, wages received by nonresident F-1, J-1, or M-1 visa holders working on the campus they are authorized by DHS to attend, performing off-campus work with DHS permission, undergoing approved practical or academic training, and Q visa holders working for their authorized employer are not subject to social security requirements. To claim an exemption from social security tax, they must provide verification of visa status and proof of work permission to the employer.
If an F, J, or M visa holder who is a resident alien for tax purposes, their wages are subject to social security (FICA) and unemployment (FUTA) taxes on the same terms which apply to U.S. citizens. J-2 and H visa holders, whether resident or nonresident, must pay social security tax. Social security taxes and benefits apply to U.S. permanent residents on the same basis as U.S. citizens.
Thus, to summarize, both the Internal Revenue Code and the Social Security Act allow an exemption from social security/medicare taxes to international students who have entered the United States on F-1 or J-1 status and who are still classified as nonresident aliens under the residency rules of the Internal Revenue Code. As discussed above, this means that foreign students in F-1 or J-1 nonimmigrant status who have been in the United States less than all or part of 5 calendar years are still nonresident aliens and are still exempt from social security/medicare taxes. This exemption also applies to any period in which the international student is in practical training allowed by the DHS, as long as the international student is still a nonresident alien under the code.
International students in F-1 and J-1 nonimmigrant status who have been in the United States more than 5 calendar years are resident aliens and are liable for social security/medicare taxes. When measuring an alien's date of entry for the purposes of determining the 5 calendar years mentioned above, the actual date of entry is not important. It is the calendar year of entry which is counted toward the five calendar years respectively. Thus, for example, an international student who enters the United States on December 31, 2009 counts 2009 as the first of his/her five years as an exempt individual.
Occasionally social security tax is withheld in error. Nonresidents may not request a refund on their annual income tax return (Form 1040NR or 1040NR-EZ). Instead, they must contact the employer who withheld the tax for assistance. Tell the employer to issue a refund and correct their Form 941 Employment Tax Return for the quarter(s) in question. If the employer is unwilling to provide a refund, complete IRS Form 843, Claim for Refund and Request for Abatement, and submit it with copies of the Form W-2 for the year(s) in question, a copy of your Form I-94, and proof of permission to work to the Internal Revenue Service Center where the employer files tax reports. If an F or J visa holder, they must also submit Form 8316. If they do not know the location of their employer's IRS service center, submit your request for refund to:
Department of Treasury
International Revenue Service
Austin, TX 73301-0215
They should include a statement from the employer showing the amount of the refund requested and the amount (if any) reimbursed by your employer. If they cannot obtain such a statement, they must verify that they have contacted your employer and that the employer was unable/unwilling to assist with the refund. For more information, see our Social Security & Medicare Refunds page.
The Dual-Status Return
Dual-status results if someone holds both nonresident and resident alien status for tax purposes during any one tax year. Dual residents pay taxes as nonresidents on income earned while they were nonresident aliens, and as residents on income earned after they qualified as tax residents. (Some married aliens may choose to pay taxes as residents for an otherwise dual-status year. See Exception for Married Individuals' later in this section.) It is possible for a nonresident to quality as a dual-status alien if he or she has had a change of status during the year (for example, from nonresident J-1 or F-1 to H status). The following paragraphs will help determine if someone is a dual-status alien and explain some of the ramifications of filing a dual-status return.
The most common instances of dual-status occur when someone:
- passes the Substantial presence Test by changing their immigration status from F, J, M, or Q (individuals exempt from the test) to H or other status eligible to use the test, or
- receives a green card too late in the year to pass the Substantial Presence Test, or
- enters the United States as other than an F, J, M, or Q visa holder and pass the Substantial Presence Test in the year of entry, or
- is eligible for tax treaty benefits for part of a year in which they would otherwise be considered a resident, or
- leaves the United States permanently during a year in which they qualify as a tax resident.
The determination of a residency starting date, the first date on which someone may be considered a tax resident, varies depending upon the way in which he/she qualifies for tax residency. If someone becomes a U.S. permanent resident, they are a tax resident on the day they received Immigration and Naturalization Service permission to remain in the United States. If they pass the Substantial Presence Test in the year of their arrival in the U.S. they are a tax resident from the day of arrival in the U.S. Finally, if they were a nonresident F, J, M, or Q visa holder who changed status to H or other status eligible to use the Substantial Presence Test, AND pass the test in the new status, they become a tax resident on the day the Department of Homeland Security approved their change of status. As a rule of thumb, if they held permanent resident status for less than 183 days in the year, they must file a dual-status return. If they changed from a nonresident F, J, M, or Q to an H visa (or other status eligible to use the Substantial Presence Test), and held that status for 183 days or more during the current year, they are a dual-status taxpayer.
Dual Status individuals must file form 1040NR or 1040NREZ and a 1040, 1040A, or 1040EZ.
Social Security an Individual Taxpayer Identification Number (ITIN)
Nonresident aliens must have either a U.S. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to complete a tax return. If they cannot obtain an SSN (F-2's, H-4's), they must obtain an ITIN from the IRS. This must be done before they file their return. To obtain an ITIN, a Form W-7 must be filed with the IRS.
Individuals needing an ITIN Number should go to the UC International Student Services Office. The ISSO is an IRS approved acceptance agency and can apply for the ITIN on behalf of the visitor. UC International Services is located in Suite 3134 Edwards Center One.
State of Ohio Taxes
If a nonresident alien earned income during a tax year they must complete a State of Ohio Income Tax Form (1040IT). State (and city) taxes are not subject to Tax Treaty Benefits. Students should be instructed that they will need their federal tax return to complete the state return. The website for State of Ohio Tax Forms is www.tax.ohio.gov.