Experts in Non Resident Taxation - File Form 1040NR.
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Non Resident Taxes - F1, J1, H1B and TN visa taxes

Non Resident Taxes - F1, J1, H1B and TN visa taxes


All F and J nonimmigrants are required to file tax return forms for each year they have been present in the U.S., regardless of whether they have earned income or not. If you do have income or a fellowship stipend during your stay at the university, you should familiarize yourself with the following information.

Resident vs. Nonresident for Tax Purposes

Your first task is to consider whether your are a resident or nonresident for tax purposes. Do not confuse the visa designations of "nonimmigrant" and "immigrant" with the tax designations of "resident" and "nonresident." In many cases, they are unrelated. In general, the following guidelines apply: F-1 students and J-1's in the student category only are considered nonresidents for tax purposes in their first five years of study. After five years, F-1 and J-1 students are presumed to be residents for tax purposes by the IRS. J-1 visa holders other than students in degree-granting programs are considered nonresidents for tax purposes during their first two years in the United States. J-2 visa holders have the same tax status as the J-1 principle.Individuals holding H-1B status are subject to the "substantial presence test" as defined in IRS publication 519 to determine residence status for tax purposes. Generally speaking, individuals who have been in the United States for more than 183 days of the tax (calendar) year are likely to be classified as residents for tax purposes. Tax treaty benefits take precedence over other criteria in determining resident/nonresident tax status. Individuals who claim exemption from taxation based on a tax treaty file as nonresidents for tax purposes regardless of visa type.

Taxation of Residents

If you are a resident for tax purposes, you: pay tax on your entire worldwide income pay U.S. social security tax (FICA) - except F-1 and J-1 visa holders may claim all of your dependents may take the standard deduction or itemize deductions file form 1040 or one of its derivatives may not claim tax treaty benefit

Taxation of Nonresidents

If you are a nonresident for tax purposes, you: pay tax only on income earned in the United States may claim only yourself as a personal exemption regardless of the number of accompanying dependents (citizens of Canada, Mexico, Japan, and Korea excepted) may not take a standard deduction; must itemize deductions file form 1040NR may claim tax treaty benefitsJ-1 and F-1 nonresidents are also exempt from social security tax (FICA)

Federal Income Tax

Collection of Federal Income Tax in the United States is the responsibility of the U.S. Internal Revenue Service (IRS). Nonresidents for tax purposes employed in the United States are subject to federal income taxation on any wages earned in the United States unless they are exempt based on a tax treaty. The following is a summary of U.S. government requirements; for more detailed information regarding your tax obligations, obtain the following publications: 519 (U.S. Tax Guide for Aliens), 520 (Scholarships and Fellowships), and 901 (Tax Treaties). These publications and general information are available from the local IRS office in Wyck Plaza on Route 1 in Edison and at the Center for International Faculty and Student Services. The federal tax obligations of foreign nationals are determined by several factors: visa type, length of residence in the U.S., purpose for being in the country, intent to return to the home country or to remain for an extended period in the United States, country of citizenship, and type of income. Different combinations of these factors result in different tax obligations. Taxable Income: Students, Post-Doctoral Fellows, Faculty and Others Being Paid by Rutgers

Recipients of assistantships, graduate fellowships, or post-doctoral fellowships are not exempt from paying federal income tax unless a tax treaty benefit applies to their income. The same holds true for employees in academic (teaching or research) positionsand for individuals working for hourly ("casual") wages.

Withholding of Tax by Employer

All employers in the United States are required to "withhold" tax from those employees who have a tax obligation. Each employee is required to complete a Form W-4 for proper withholding. Withholding tax is not the same as paying tax. The employer withholds a certain percentage of your income until the end of the tax year, at which time the withheld tax is turned over to the Internal Revenue Service. During tax filing season (January 1 - April 15 of the next year) you file your tax returns for the previous tax year. If you have had more money withheld that you are required to pay, you will receive a refund. If you are required to pay more than was withheld, on the other hand, you will have to pay the rest of what you owe at the time you file your tax return. Exceptions to General Withholding Rule

Exception #1:

Fellows who are Residents for Tax PurposesWhile fellowships are taxable just like any other income, tax laws do not require an employer to withhold taxes on fellowships of resident taxpayers, since fellows are not technically "employees." (Taxes must be withheld on "employees.") However, the tax law does require withholding of taxes on fellowships for those fellows who are nonresidents for tax purposes. For U.S. citizens, perma- nent residents and all other fellows who are listed in the payroll computer system as residents for tax purposes, the Rutgers payroll does not withhold taxes. Therefore, fellows who are residents for tax purposes must make estimated tax payments to the IRS every quarter (just as U.S. citizen and permanent residents with fellowships do). Information and forms needed to make these payments on a quarterly basis may be obtained at any Internal Revenue office.

Exception #2:

Employees Who Claim a Tax Treaty Benefit Prior to Withholding

Employees who are both eligible to claim exemption based on a tax treaty and who hold regular appointments (with benefits) at the university may complete treaty claim forms requesting the university not to withhold on the amount of income which is exempt by treaty. (See following section on Tax Treaties.) The university will not accept treaty claim forms from individuals working on an hourly or "casual" basis; those individuals, if eligible for treaty benefits, will have to request a refund on the exempt amount when they file their tax returns (see section VII, next column).

Tax Treaties

The United States has tax treaties with 39 countries. Although there are certain basic similarities among them, the treaties vary in significant ways in the benefits they offer, the types of income covered, the total amount of the exemption, and the number of years one can claim the benefit. Different treaties exempt different types of income. The existence of a tax treaty with your country does not automatically mean you do not have to pay taxes. Rutgers withholds tax on your earnings unless you you hold a regular appointment at the university AND you make a claim stating that your income is exempt by treaty. The Center for International Faculty and Student Services has copies of IRS Publication 901 which gives details about all existing tax treaties between the U.S. and foreign governments. The staff of the center does not interpret the treaties for you, however. For a full analysis you must consult a tax accountant or your consulate. Claiming Exemption from Taxes Based on a Tax Treaty

Everyone earning income in the U.S. is required to complete and file a Form W-4; however, tax treaty benefits are generally not claimed on the W-4 form itself. (F and J student fellowship recipients whose award is exempt by treaty must follow special instructions for completing the W-4 and attachments.) Individuals who are sure they are eligible for treaty benefits must complete in duplicate a claim form to be submitted to the Payroll office. Individuals are responsible for their own tax decisions as well as for notifying Payroll when their tax treaty benefit ends (in some cases, the benefits end after two years).If you are unsure as to whether you are eligible for tax treaty benefits, you may consult with a tax attorney for advice, or you may do the following: do not claim exemption from withholding; the Payroll office will withhold your tax, and when you file your tax return, request a refund, based on the treaty, of all taxes withheld. If the IRS determines you are ineligible for treaty benefits, your withheld taxes will not be returned, but you will not have to pay the penalty.

Filing Tax Returns

Everyone in F or J status -- even those with no earned income or fellowship stipend in the U.S. -- must file a U.S. tax return and an accompanying statement providing information required by the Internal Revenue Service. Everyone in H-1B status must also file a tax return.Filing of all tax returns is done between January 1 and April 15 for all income or stipends earned in the previous tax year. A tax year is the same as a calendar year, i.e., it includes all income for the period January 1 to December 31.

By Tax Expert    February 20th, 2020