Internal Revenue
Service
Wage and Investment
Stakeholder Partnerships,
Education and Communication
Spring 2012
International Students &
Scholars Income Tax Seminar
#2
Note: This workshop will
explain only the basic rules of
resident income tax filing.
Please Note
This workshop is for students on
F-1 or J-1 visas who have been
in the U.S. for 5+ years.
It is also for scholars on
J-1 visas who have been
in the U.S. for 2+ years
out of the last 6 years AND
employees on H-1B, TN, O, etc. visas.
Internal Revenue Service
• The taxation agency of the U.S.
Government to which you
– File your personal Income Tax Return
State Tax Departments
• The taxation agency of the State
Government to which you may need to
– File your personal Income Tax Return
• If you resided in New York State in 2011, you
may need to file a NYS Income Tax Return.
• If you lived in another State, you may need to
file that State’s Income Tax Return.
• If you lived in two States, you may need to file
two State Income Tax Returns.
Basic Tax Vocabulary
• Alien: generally, any person who is
not a U.S. citizen
• Student: person temporarily in the
U.S. on an F, J, Q or M visa
• Scholar: person who is not a
student & who is temporarily in the
U.S. on a J or Q visa
Basic Tax Vocabulary (cont.)
• Resident or Non-resident: refers to
one’s tax filing status (Nothing else!)
• IRS: Internal Revenue Service
• Income Tax Return: statement filed
(submitted) by individual taxpayer to
the IRS
Do I file as a
Non-Resident or Resident?
Determination
of Residency Status
Do not confuse
Federal Tax Residency with
Immigration Permanent Residency
OR
New York State Residency
requirements for state tuition rates
Federal Tax Residency Rules
• For Federal Tax purposes, foreign
nationals are classified as:
• Resident Aliens OR
• Nonresident Aliens (anyone who is not a
resident alien)
• Note: There are also “Dual Status” aliens, who are considered as
residents for part of the year and nonresidents for part of the year.
This topic will not be covered in the presentation.
Resident or Nonresident?
The following determines whether you are
a resident or nonresident for federal tax
purposes:
1. Green Card Test
2. Substantial Presence Test
3. Residency Through Marriage
Who is a Resident for Tax Purposes?
1)
“Green Card” Test
Lawful Permanent Resident of the
U.S.
Green Card Test
• Your residency starting date for tax
purposes is based on the date your
status changed to Lawful Permanent
Resident.
Remember: There is no option. If
you are a Lawful Permanent Resident,
you are a resident for tax purposes.
Who is a Resident for Tax Purposes?
2) “Substantial Presence” Test
Calculation that takes into consideration
presence during the current year and
two immediately preceding years
”Substantial Presence” Test
31 days during the current year
and
183 days based on a calculation
that considers presence during the
current year and two preceding
years
Residency Rules
Substantial Presence Test (2-Part Test)
A.
Current year days in U.S. x 1
= ___days
Must have at least 31 days in current year
B.
1st preceding year days in U.S. x 1/3
C.
2nd preceding year days in U.S. x 1/6
D. Total “Days in U.S.” A+B+C
= ___days
= ___days
= ___days
If Line D equals or exceeds 183, 183-day test is passed.
Must pass both 31-day and 183-day tests.
Substantial Presence Test
• If Line A equals or exceeds 31 days and Line
D equals or exceeds 183 days, then you are a
Resident Alien for federal tax purposes.
• If not, then you are a Nonresident Alien
for federal tax purposes and do not
need this workshop.
Residency Rules
Some individuals are exempt from
counting days toward the
Substantial Presence Test.
• Days of an “EXEMPT” individual
• Commuter from Canada or Mexico
• Others (see Publication 519)
Residency through Marriage
3) A nonresident spouse can be
treated as a resident for tax
purposes
– You are required to file jointly with your
U.S. Citizen or U.S. Lawful Permanent
Resident (for tax purposes) spouse.
– You must report world-wide income.
Establishing a Closer Connection
If you want to remain a non-resident for tax
purposes by claiming a closer connection to
your country, you can if you:
– are present in the U.S. less than 183 days in the
current year AND
– have a tax home in a foreign country AND
– file Form 8840
Note: See next slide and Form 8840 instructions
for the criteria.
Questions Asked to Determine If You Have a
Closer Connection to a Foreign Country
• Where is your permanent home (must be available all
year)?
• Where is your family?
• Where are your personal belongings (e.g. car, furniture)?
• Where are your current social, political, professional or
religious affiliations?
• Where do you hold a driver’s license or vote?
• Where are the charitable organizations to which you
contribute?
• What country of residence do you designate on forms and
documents?
• What types of official forms did you file (e.g. W-9,
W-8BEN or W-8ECI?)
Residency Starting Date
Residency starting date under
green card test
If you meet the green card test at any time
during a calendar year, but do not meet the
substantial presence test for that year, your
residency starting date is the first day in the
calendar year during which you were present
in the U.S. as a Lawful Permanent Resident.
Residency Starting Date
Residency starting date under
substantial presence test
Your residency starting date is generally the
first day you were present in the U.S. during
that calendar year.
Note: When both the Substantial Presence
Test and Green Card Test apply, use the
earlier of the two dates.
Residency Starting Date
Important Note
If you became a resident for tax purposes after
January 1, 2011, then you have to file two
federal income tax returns.
One would be a nonresident income tax return
for the time period during which you were a
nonresident.
The other would be a resident income tax return
for the time during which you were a resident.
Are you required to file a U.S.
Resident Tax Return?
Basic Tax Vocabulary
(cont.)
• Compensation/Earnings: wages,
salaries, tips
• Income: wages, salaries, tips,
interest, dividends, some scholarship/
fellowship grants
Gross Income
•
•
•
•
Wages, salaries and tips
Bank interest
Taxable Investment Income
Taxable Scholarship/Fellowship
Note: These are only a few examples.
Remember
Resident Aliens are taxed on worldwide
income, just as U.S. Citizens are.
• Resident Aliens may not claim
exclusions of income based on Tax
Treaties (with certain exceptions stated
in some tax treaties).
Wages, Salaries and Tips
• Amounts you receive from an employer
• You should receive a Form W-2 at the
end of the year. It reports the annual
amount of wages you received.
Taxable Scholarship
and Fellowship
• Scholarship and fellowship grants are not
included in taxable income if used for tuition,
fees, books, supplies and equipment required
for courses AND if the student is pursuing a
degree.
• Any portion of scholarship or fellowship
received for room & board or in exchange for
teaching or research is included in taxable
income.
What is a Scholarship
or Fellowship?
• You call it:
Tuition Waiver
• Internal Revenue calls it:
Non-taxable
Scholarship
(No work required)
What is a Scholarship
or Fellowship?
•You call it:
Room and Board
Waiver
•Internal Revenue calls it:
Taxable Scholarship
What is a Scholarship
or Fellowship?
•You call it:
•Internal Revenue calls it:
Teaching or Research
Assistantship Stipend
(recipient performs work)
Taxable Wages
Do you have to file?
• If your gross income is over the dollar
amounts listed on the chart, you must
file a U.S. Federal Income Tax Return.
• If you have overpaid taxes, you must
file an income tax return in order to
receive an income tax refund.
Do you have to File?
First, learn the following tax
vocabulary . . .
Filing Status
• Single: not married
• Married: married and file income tax
returns together
Note: U.S. recognizes marriage from U.S.
states and other countries
• Married filing Separate: married but file
income tax returns alone
Filing Status (cont.)
• Head of Household: single and pays for
maintenance of a home for a dependent
Note: Read the rules for this status carefully
before claiming it. (IRS Publication 17)
• Qualifying widow(er) with dependent
child: able to claim this status for two
years after the death of the spouse
2011 Filing Requirements
for Resident Aliens
(from Form 1040 Instructions, Page 8)
Income Tax Forms
What forms should I fill out?
Resident aliens can file Forms
1040, 1040A or 1040-EZ
(See form instructions for any restrictions.)
More Tax Forms
• W-2: Wage and Tax Statement
• 1040 or 1040A: U.S. Resident Alien
Income Tax Return
• 1040-EZ: U.S. Income Tax Return
for certain resident aliens who have no
dependents
Note: See IRS Publication 17 to find
the easiest form for you to file.
More Tax Vocabulary
• Withholding:
– U.S. income tax automatically taken from
your paycheck
Note: U.S. Social Security and Medicare
are also taken from your paycheck.
Forms W-2
•You could have one W-2 or more from
different employers
•The form was prepared by your employer and
mailed to you.
•You do not write anything on this form.
•You use this form as a reference when you
prepare your income tax return.
•When finished, you attach this form to your
income tax return.
SAMPLE W-2 FORM
How do I file a Resident
income tax return
(Form 1040-EZ)?
First, learn the following tax vocabulary
. . .
More Tax Vocabulary
• Standard Deduction: standard amount that
individuals may subtract from income before
calculating taxes owed
• Itemized Deductions: allowable amounts that
individuals may subtract from income before
calculating taxes owed
– Examples: charitable contributions, state & local taxes
withheld, etc.
Note: No one can have both a standard deduction and
itemized deductions. You have to choose one.
Standard Deduction Amount
(for most people under age 65)
•
•
•
•
Single
Married Filing Joint
Married Filing Separate
Head of Household
$ 5,800
$11,600
$ 5,800
$ 8,500
More Tax Vocabulary
(cont.)
• Personal Exemption: amount
deducted from income for yourself
and/or your dependents
For 2011, the amount is $3,700.
Which Residents can
use Form 1040-EZ?
• Individuals
–
–
–
–
who do not claim any dependents
whose taxable income is less than $100,000
who do not claim any itemized deductions
who had only wages, taxable scholarship or
fellowship grants, and whose taxable interest was
not over $1,500
– Miscellaneous other reasons (see Form 1040-EZ
instructions)
Other Credits and Deductions
for Which You May Qualify
(not covered in this presentation)
•
•
•
•
•
Earned Income Tax Credit
Dependents
Child and Dependent Care Credit
Retirement Saver’s Credit
Education Credits
There are many more deductions and credits listed in
various IRS publications.
Let’s look at the
steps for completing
Form 1040-EZ
FORM W-2
Used for 1040-EZ Example
Form 1040-EZ
Box 1 from all W-2(s)
Form 1040-EZ
Box 2 from all W-2(s)
Form 1040-EZ
Read instructions to
see if you qualify
From Tax Table
2011
Tax Table
Form 1040-EZ
When do I file
a resident
income tax return?
The Filing Deadline is
April 17, 2012
Where do I file my Resident
income tax return?
Refund Due
Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999-0014
Social Security
Do I pay it or am
I exempt?
That depends.
You don’t pay
Social Security Tax if . . .
• You are a nonresident for income tax
purposes
• You are present in the U.S on an F-1,
J-1, M-1 or Q-1 visa, AND
• You perform services that are
consistent with your U.S. visa status
You pay Social Security Tax
when . . .
• You are a resident for income tax
purposes.
• You are an F-1 student who has been in
the U .S. for 5+ years or a J-1 scholar who
has been in the U.S. for 2+ years.
• You hold an H1-B or TN visa.
Note: You will always be subject to Social
Security and Medicare Taxes (FICA) from the
date of arrival.
Exception to this Rule
If you are a student who would otherwise
be subject to Social Security and Medicare
Taxes (FICA), you will be exempt from
paying it if you are working at the school as
a full-time student.
(This exemption may start and stop periodically due to the
individual’s enrollment status )
The Exception Does Not Apply
in These Cases
•
Residents for income tax purposes who are
participating in full-time Optional Practical
Training should pay Social Security and
Medicare Taxes (FICA) throughout their OPT
work authorization period, and
•
Students who are residents for income tax
purposes and are not enrolled in 6+ credits
during summer break should pay Social
Security and Medicare Taxes (FICA) during
summer break.
For more information, call
1-800-829-1040
or
www.irs.gov
Thank You!