Tax Information
To start filing your tax forms, you must first answer these following questions: - What is your visa status?
- How long have you been in the United States?
- What is your citizenship?
After answering these questions, you are able to determine whether you are a nonresident alien or a resident alien and whether or not your country has a tax treaty with the United States that will be for your benefit. Determining Whether You are a Nonresident Alien or a Resident Alien
If you are student with F-1 or J-1 visa status and you have been in the United States for less than 5 calendar years (regardless of the number of days within the country), you are considered a nonresident alien. If you are a student with F-1 or J-1 visa status and you have been in the United States for more than 5 calendar years (regardless of the number of days within the country), you are considered a resident alien, for tax purposes only. If you are a teacher, scholar or doing research under a J-1 visa status and you have been in the United States for less than two years, you are a nonresident alien. If you are a teacher, scholar or doing research under a J-1 visa status and have been in the United States for more than two years, you are considered a resident alien, for tax purposes only. | Duration of Stay in the United States | F-1 or J-1 student visa status | | Less than 5 years | Nonresident Alien | | More than 5 years | Resident Alien |
| Duration of Stay in the United States | J-1 Teacher, Scholar or Research visa status | | Less than 2 years | Nonresident Alien | | More than 2 years | Resident Alien |
What taxes do you have to pay?
There is a regulation that allows people to earn a certain amount of income without paying federal or state income taxes on it. Any income earned beyond this amount means that an individual must pay income taxes on it (both federal and state taxes). A nonresident alien only pays federal and state taxes on his income beyond this specified amount, but does not pay for social security or Medicare. A nonresident alien pays taxes on US source income only. A resident alien pays US income taxes, state taxes (beyond the amount of income allowed to earn tax free) and also, pays for social security and Medicare. A resident alien pays taxes on worldwide income. A nonresident alien does not have to pay taxes on any scholarships or grants, provided that the amount of financial assistance does not go beyond tuition and school fees. A nonresident alien does not have to pay taxes on interest on savings account either. A resident alien does not have to pay taxes on any scholarships or grants (whether US source of income or worldwide income) provided that the amount does not exceed the tuition and fees costs. Determining the tax treaty and necessary actions
There are several tax treaties (the regulations and laws may change every year) that may affect your taxes in a form of tax exemption (you do not have to pay taxes on your income up to a certain amount). It is the responsibility of the individual to be aware of these treaties and the information can be obtained from IRS. At the time of starting to work, the individual is responsible of filling out the FORM 8233 and returning it to his or her employer, who then sends it to Philadelphia. If the employer does not hear anything from IRS within approximately 10 days, everything is correct and no further action is necessary and the individual can earn income without paying federal or state taxes on it up to the specified limit.
Violating your visa status
If an individual is working in violation of his visa status (without a social security number), he needs to contact the IRS, which will give him a form W-7 and provide an identification number for tax purposes only. This does not necessarily mean that the individual will be reported to INS and deported from the country (IRS and INS are separate institutions). Reporting a tax treaty
After providing a FORM 8233 to the employer upon the time of hiring, the individual should receive the FORM 1042S at the same time with FORM W-2. These forms separate the individual’s income between the total earned income and taxable income. Example: You make $10,000 during the year and your country has a tax treaty with a tax exemption of $2,000. As a result, you will receive a FORM 1042S stating $2,000 (the maximum amount earned under the treaty and not having to pay taxes) and FORM W-2 indicating the remaining $8,000 that you earned. Forms to be filed (without a tax treaty) For nonresident aliens with no dependants: - Federal: 8843, 1040 NR-EZ
- California State: 540 NR
For nonresident aliens with independent businesses or Japanese, Koreans, Canadian or Mexican, who claim their spouses and/or dependants: - Federal: 8843, 1040 NR
- California State: 540 NR
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