U.S Taxation of Students, Scholars and Other Non-Immigrants
Note: UMass Medical School is not responsible for the following information and only
provides it in order to give general information that applies to the majority of foreign
nationals. It is important to read the official Internal Revenue Service (IRS) Publication
519 for full details. Other helpful publications include the instructions for forms 1040,
1040NR, and 1040NR-EZ, Publication 901 on Tax Treaties, and other schedules and
forms pertaining to special situations.
Non-immigrant visa holders (J-1, H-1b, F-1, TNs, J-2s) may be subject to U.S. taxation
based on the source and type of income, immigration status and how long they’ve been
present in the U.S. Tax treaties with over 60 countries may alter tax liability. Other
forms of taxation include state income tax, state and local sales tax, and Social Security.
Under the U.S. system, it is the individual’s responsibility to determine tax liability and
file the appropriate forms in a timely manner.
Effective since 1992, all non-immigrant visa holders including F, J, H or M visa
holders (except B-2 Tourists) must file a federal tax return statement and Form
1040NR even if they have no U.S. source of income or have not worked in the U.S.
TN status aliens are also required to file. See IRS publication 519 for details. Most
international students/scholars file both federal and Massachusetts state income tax
returns. Filing a tax return does not necessarily mean that you have to pay taxes, just
that you are meeting the tax requirements of living in the United States.
Citizens of the U.S, permanent residents (green card holders), H-1B aliens, and J-2s with
employment authorization are generally required to file “resident” tax returns
(form1040). F-1, J-1, M, and Q status holders (applies to students) may file “nonresident” tax return Form 1040NR or “resident” tax form 1040 depending on “days of
presence in the U.S.” Canadians generally file “resident” returns, unless a tax treaty
article applies.
How to Determine Tax Status:
A key factor in determining an individual’s income tax liability is whether his or her
status is considered that of a “resident alien” or “non-resident alien” for tax purposes.
This status may or may not coincide with their resident or non-resident status with the
Immigration and Naturalization Service. Many individuals who are in a non-immigrant
status are considered “resident aliens” for tax purposes. Throughout this document,
reference to resident or non-resident aliens means for tax purposes only.
F-1 students are generally “EXEMPT” (or excused) from paying federal taxes for a
period of five calendar years. After five calendar years, most students will have to pay
taxes on U.S. source income, unless otherwise considered exempt by a Tax Treaty with
their country or some other IRS tax regulation.
F-1 students, however, must file a federal and state return each year during tax season
from January 1 to April 15. If you receive no U.S. source income, you may file your
income tax return no later than June 15 of each year.
Teachers, researchers, and trainees who are in the U.S. on J-1 visa for under two
calendar years, including partial years, are exempt from counting days of presence in
the U.S and are considered “non-resident aliens” for tax purposes.
Generally this means that J-1 professors, researchers and trainees are exempt from
paying the Federal FICA tax for a period of two calendar years. However, other taxes
may apply. A scholar who has been in the U.S. for over two calendar years during the
previous six years on a J-1 visa must start counting days of presence in the U.S. and is
considered a “resident alien” for tax purposes, provided that the substantial presence
test is met. If all income for services performed in the U.S. is from a foreign source, the
person is considered a “non-resident alien” for four years. Tax treaties may allow for
additional exemption.
A calendar year is defined as January 1 through December 31. If someone arrived in
August, that counts as one calendar year. Some treaties may provide additional
exemptions form the date of arrival.
Substantial Presence Test:
Once a person is no longer exempt from counting days of presence, the substantial
presence test is used to determine “resident” vs. “non-resident” status. The individual
must have been in the U.S. for at least 31 days in the current and two preceding years as
follows (the days that one is exempt from counting while in J-1 status should not be
included):
All of the days from the current years + 1/3 of the days from last year + 1/6 of the days
from two years ago. If the total is 183 days or more, the individual must file as a
“resident alien.”
What is Taxed:
Non-Resident Aliens
 Only U.S. source income, based on the residence of the payer.
 Dividend income from domestic corporations. Note: interest paid by bank
savings, loans, and credit unions is NOT taxed.
 Wages and any other compensation for services performed in the U.S. The
location of the service determines taxability, so it is possible that wages from a
foreign source could be taxed if the services are performed in the U.S.
 Rental income from property owned in the U.S.
 Royalties from patents, copyrights, etc.
 Profit from the sale of property in the U.S. (some exceptions for personal
property).
EXEMPT- Income of $3,000 or less paid by a foreign organization or individual to a
non-resident alien who was in the U.S. less than 90 days during the tax year; income
exempt by a tax treaty; and income received by an F, J, H, or M visa holder from a
foreign employer.
Resident Aliens
Worldwide income, same as U.S. citizens. See IRS Form 1040 instructions.
Treaty Benefit:
The U.S has tax treaties with over 40 countries that permit taxation at a reduced rate
or exempt certain income altogether. Since each treaty is independently negotiated,
no general rule applies to all. Although a tax treaty may exempt you from paying
income tax, you are still required to file income tax return. IRS publication 901 gives
a brief summary of the provisions of each treaty. For complete details, the full treaty
should be consulted. Any tax treaty benefits overrule other tax codes. If you intend
to claim a tax treaty benefit, you must file Form 1040, 10NR-EZ or 1040NR with
Form 8843 at the time of filing your return.
Non-Resident Aliens
Teachers and researchers who are employed in the U.S. and are fully or partially
exempt by treaty from U.S. taxation must file form 8233, plus the appropriate
statement with the employer (payroll office) to claim exemption from withholding
each year. Scholars who receive a service-free scholarship or fellowship must file
Form W-8BEN.
Resident Aliens
Individuals who would otherwise be considered resident aliens also may benefit
from some provisions of the treaties and should consult Publication 901 or
Publication 519 and/or the treaty itself.
How is Income Taxed?
Income that is effectively connected with trade or business in the U.S. is taxed at the
graduated rates that apply to U.S. citizens. Income that is not effectively connected is
taxed at a flat 30 percent or a lower treaty rate. Some income may be exempt by
virtue of tax treaties.
Anyone who is in the U.S. on a J-1 is considered to be engaged in trade or business.
Therefore, all income earned by J-1 scholars is considered to be effectively
connected. All income from U.S. sources (except investment income) is treated as
effectively connected, even if there is no connection between the business and the
income. H1-B aliens are typically taxed at the same rate as U.S. citizens.
All payment for personal services (with some minor exceptions) is considered
effectively connected. This includes salary, wages, commissions, fees, per diem
allowances, bonuses, services, or property. However, payment to a non-resident
alien by a foreign employer is not included in gross income (see exclusions above).
Resident Aliens
Income is taxed at graduate rates, same as U.S. citizens.
Scholarship and Fellowships:
Special tax rules apply to scholarship and fellowship grants. The rules for
determining the taxable part of a scholarship or fellowship apply to both resident
and non-resident aliens. They are separate, and in addition to any rules pertaining to
exclusions from income for foreign scholarships or exclusions under a tax treaty. A
qualified scholarship or fellowship grant made after August 16, 1986 is tax-free only
if the student is a candidate for a degree at an educational institution. A qualified
scholarship or fellowship is any amount received by or paid for the student, as a
scholarship or fellowship that is used under the terms of the grant for the following
purposes:
The following apply to U.S. source grants and are non-taxable:
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Tuition and fees required to enroll in or to attend an educational institution
Fees, books, supplies and equipment that are required in order to enroll in a
particular degree in an educational institution
Portion of tuition that is paid for graduate research or teaching assistantship
(does not include payment for services)
Grants from source income paid foreign governments, corporations or public
international organizations (including those that are managed by U.S. agents
on behalf of the foreign payer)
The following apply to U.S. source grants and are taxable:
 Room and board (includes cost of room and board received for work
performed)
 Incidental expenses such as travel
 Money paid for services even if services are required for that particular
degree
Withholding
Employers are required to deduct a certain amount from each employee’s paycheck to
cover the individual’s estimated tax liability. They must withhold an amount equal to
90 percent of the current year’s estimated tax or 100 percent of the prior year’s liability
whichever is lower.
Withholding is not automatic. Employees (those who receive pay from the U.S.
institution) must complete Form W-4 and submit it to the employer (payroll office) to
declare their tax status (resident or non-resident) and instruct the payroll office how
much to withhold. Extreme caution should be exercised in filling out the forms, as
errors could result in having to pay back taxes, fines, or penalties. Sometime in late
January, the employer returns a W-2 statement to the employee that identifies earnings
from U.S. income and the total amount of taxes deducted by the employer.
Non-Resident Aliens
The W-4 was not prepared with non-resident aliens in mind. These individuals should
not use the worksheet and instructions; non-resident aliens should fill out Form W-4
using the following instructions instead of the instructions on the W-4 form:
1. Check only “single” marital status on line 3 (regardless of your marital status)
2. Claim only one allowance on line 5, unless you are a resident of Canada, Mexico,
Japan, or South Korea.
3. Request that your employer withhold an additional amount of $7.60 per week
(for the 2003 tax year) on line 6. If your wages were paid based on a monthly
period, the additional amount would be $33.10. This amount to be withheld
changes each year and can be found in Publication 519.
4. Do NOT claim “Exempt: withholding status on line 7.
Individuals from treaty countries who wish to claim partial or total exemption from
withholding must file additional forms with the employer. Form 8233 must be filed
annually to claim treaty exemption from income derived from services performed for
the employer. Form W-8BEN must be filed to claim treaty exemption from service –free
scholarship or fellowship income.
Those who have income from which no tax is withheld may need to file Form 1040-ES
(NR) and make regular estimated tax payments. This must be done if the amount
withheld is less than either 90 percent of the tax for the current year or 100 percent of
the prior year.
Resident Aliens
Resident aliens must either file form 1040EZ, 1040A or 1040 at the address shown on the
instructions for that form. It must be filled by April 15 each year. Filing extensions may
be possible under certain circumstances.
What Income Tax Can Be Excluded?
Non-Resident Aliens
 Foreign source income, including grants from international organizations
 Compensation from foreign employers (this does NOT apply to employees of
foreign governments, unless that government gives the same exclusion to U.S.
government employees working in that country)
 Some annuity income
 Income excluded by treaty (see official IRS Publication 901)
Resident Aliens
Income excluded by treaty
Deductions/Itemized Deductions
Non-Resident Aliens
Non-Resident aliens may claim only deductions that are effectively connected with their
U.S. trade or business. The standard deduction cannot be claimed.
Itemized deductions that may generally be claimed are state and local income taxes,
charitable contributions, casualty and theft losses, and possibly some moving, travel or
miscellaneous job expenses.
Resident Aliens
Resident Aliens are eligible for the standard deduction and all itemized deductions for
which U.S. citizens are eligible.
Tax Payment and Credits
Non-Resident Aliens
Most non-residents are not eligible for tax credit except for the amount of Federal tax
that was withheld for wages. Under limited circumstances they may be eligible for
childcare credit or foreign tax credit.
Resident Aliens
Resident Aliens are eligible for the same credits as U.S. citizens.
Social Security and Medicare
Non-Resident Aliens
During their first five calendar years in the U.S., F-1 students are not required to pay
Social Security (FICA) taxes.
During their first two calendar years in the U.S., J-1 scholars are not required to pay
Social Security (FICA) taxes if services performed are to carry out the purpose for which
they were admitted. This includes work that is considered to be a part of the J-1’s
program and any other employment that is explicitly authorized by the Exchange
Visitor Program’s Responsible Officer (or Alternate Responsible Officer). H1-B’s are
generally required to pay Social Security taxes (FICA) like U.S. citizens but may also
claim personal exemptions and itemize deductions.
Resident Aliens
J-1 scholars who have been in the U.S. long enough to be considered resident aliens for
tax purposes must pay Social Security and Medicare taxes. J-2 Dependants who have
obtained work authorization from the INS and are working must have these taxes
withheld and are treated like U.S. citizens for tax purposes.
State Taxes
Many states have a state income tax, and U.S. source income of J-1 scholars may be
subject to state taxation. It varies by state, and the state tax authority should be
consulted. Both resident and non-resident aliens may deduct state income taxes from
their federal tax liability.
Most states also have state and local sales taxes, which are added to the cost of
purchases when they are made. These taxes are not deductible from federal taxes.
Massachusetts State Tax:
You are NOT required to file a Massachusetts state tax return if:
 You made less than $2,200 in the tax year
 You are a degree candidate with income from only scholarship or fellowship
(including money for room and board)
 You are Massachusetts resident with gross income of $8,000 or less
 You have a tax treaty which exempts you from U.S. taxation
 If you are non-degree candidate, you are allowed an exemption of up to $300 per
month from your Scholarship or Fellowship, with a 36-month maximum
You are considered a resident of Massachusetts if you spend more than 183 days of the
taxable year in Massachusetts and maintain a permanent place of abode in
Massachusetts. Please note if one or more of the above apply, you are not required to
file a Massachusetts tax return. However, if you do earn any income, it may be
beneficial for you to file, since you may be owed money from the state. Regulations may
change from year to year, so it’s important to obtain a copy of the current Massachusetts
Department of Revenue publications. Massachusetts residents are taxed on their entire
income. A non-resident however, is taxed only on income derived from or connected to
sources in Massachusetts.
A permanent place of abode does not include a dormitory room. An off-campus
apartment is considered a permanent place of abode.
Documents Needed When Filing Income Taxes
 Income statements, if any (W-2, 1042S or 1099MISC)
 Banking interest statements
 Social Security number (You must have a Social Security number or an IRS
tax ID number (ITIN) from the IRS.
 Passport and I-94
 Either Form DS-2019, Form I-20, or Form I-797
 Other forms may be required depending on your individual circumstances
 Tax Treaty Article Number (if applicable)
You must determine whether you are a resident or non-resident alien for tax purposes
and obtain the appropriate federal and state forms. Refer to IRS Publication 519 for
detailed information.
You must have received wage and tax statements (W-2, 1042S, or 1099MISC) from your
employer(s) or sponsor(s). These statements will list your income and any taxes paid
during the tax year. Bank statements may be used to document any interest earned
from your bank account during the year. Bank interest that is not effectively connected
with a trade or business (but personal) is not taxable for non-resident aliens on the
federal tax return.
If you have earned income from a UMass affiliate, you should have received a W-2
form. If you did not work but received a stipend, you should have received a 1042S
Form. Typically, employers issue income statements (W-2, 1042S or 1099MISC) and
banks issue bank statements sometime in January. If by the end of January, you have
not received anything from either your employer or your bank, please contact them.
If you have been participating in a tax treaty exemption, you must have the Tax Treaty
Article Number. Refer to IRS Publication 901 Table 2.
Forms Which May Be Filled Out By All F, J, H, or M Non-Resident Visa Holders Who
Earned Income During the Tax Year (Deadline: April 15):
 1040, 1040NR or 1040NR-EZ
 Form 8843
 Form INR (Massachusetts state tax) only if you earned over $2,200 during the
year
 Other forms may be required, depending on your circumstances
Forms Which Must Be Filled Out By All F, J, or M Non-Resident Visa Holders Who
Did Not Earn Income During the Tax Year (Deadline April 15)
 1040NR or 1040NR-EZ
 Form 8843
 Other forms may be required depending on your individual circumstances
 Note: It is usually not necessary to file a Massachusetts state tax return if you
did not earn any income during the year.
Where to Mail Completed Forms:
Your completed Federal 1040NR stapled to your Form 8843 (along with any required
attachments) should be mailed to:
Internal Revenue Service Center
Philadelphia, PA 19255
Your completed State INR form (along with any required attachments) should be
mailed to:
Massachusetts Department of Revenue
Post Office Box 7054
Boston A 02204
Additional Assistance:
This brief summary of very complex tax regulations is for general informational
purposes only. Foreign Nationals on temporary, non-immigrant visas should read
official IRS publications 519, 901, and the instructions to the appropriate forms 1040NR,
1040, 1040A, or 1040EZ. The UMass International Office may be able to offer some
resources, though there is not a tax expert on staff and only general assistance is
available. The IRS may be able to answer some questions and can be reached at the toll
free number 1-800-829-1040 or 617 -565-4325. For complex situations it would be
advisable to consult a tax attorney, a Certified Public Accountant, or other reputable tax
advisor.
Look for Tax Seminars sponsored by The UMass International Office during tax season
(January through April).