I. Introduction
The staff of the International Center are not experts on international tax matters. The international staff does not assist in the completion of individual income tax forms, and is unable to explain tax liability issues to international students, scholars or staff. Therefore, we recommend that you consult the U.S. Internal Revenue Service (IRS) or a qualified tax consultant regarding your possible U.S. tax obligations. The following information is provided to help foreign students and scholar obtain the information they need so that they can make informed choices about their tax obligations. The IRS publishes a number of helpful information/instruction booklets, which are available through the IRS Tax Payer Assistance Service (toll free call 1-800-829-3676). Or, you may find a copy of the following useful forms at your local public library for you to reproduce for your use, or access www.irs.ustreas.gov
| IRS Publication 519 | US Tax Guide for Aliens |
| IRS Publication 520 | Scholarships & Fellowships |
| IRS Publication 597 | U.S./Canada Tax Treaty |
| IRS Publication 901 | U.S.Tax Treaties |
| IRS Form 104ONR | Nonresident Alien Tax Return |
| IRS Form 104ONR-EZ | Nonresident Alien Tax Return |
| IRS Form 8843 | Statement for Exempt Individuals |
Windstar Technologies, Inc. has announced the posting of the text of more than 50 international tax treaties in an easy to read format at www.windstar-tech.com. The IRS has posted answers to the most important questions about taxes for foreing nationals on their site for Foreign Nationals.
II. General Information
1. The Tax Reform Act of 1986 (P.L. 99-514) classified all F and J status holders as being nonresidents for tax purposes from the initial date of entry to the U.S. F status holders are defined as nonresidents for tax purposes for five (5) years from the date of entry. J visiting scholars are defined as nonresidents for tax purposes for two years from the date of entry to the U.S.
2. Tax regulations therefore, require all F and J status holders to file income tax returns with the IRS, on the tax form 104ONR, or the simplified version 104ONR-EZ if there is any U.S. source income. U.S. source income does not include income derived in the form of interest from an U.S. bank or other lending institution. However source income generally does include on-campus employment.
3. U.S. source scholarship recipients must file a tax return (e.g., IRS Form 104ONR or the Form 1040 NR-EZ). An amount received as a "qualified" scholarship or fellowship grant may be excluded, but only in the amount paid either to cover tuition and fees required for enrollment or attendance at an educational organization, or fees, books, supplies and equipment required for courses of instruction at the educational institution. Note: the individual is required to "establish " that the amounts claimed were paid for the proper purposes, i.e., "qualified." This clause imposes record-keeping and substantiation obligations - receipts reported to the IRS. Any portion of the scholarship or fellowship used for non-tuition and related expenses (e.g., room and board or a meal allowance) the amounts so specified will not qualify as a "qualified" scholarship deduction and is therefore taxable. Distinguishing the "scholarship/fellowship grant" from "compensation for services rendered.” Section 117 scholarship exclusion will not apply to any amount received in return for performing teaching, research or other services, regardless of whether all candidates for the degree are required to perform such services. These amounts will be treated as compensation for services rendered. If only a portion of the grant is for the performance of teaching or other services, the remaining portion may qualify for the Sec. 117 exclusion from taxable income.
4. If a nonresident alien has no U.S. source income, or only a fully qualified scholarship, he/she will have until June 15th to file the IRS Form 8843 - Statement for Exempt Individuals. No other tax form is required of the IRS under this circumstance.
5. Therefore, all F and J status holders are required to file the IRS Form 8843 with the IRS as a minimum obligation. Individuals with U.S. source income or with amounts not covered as a "qualified" scholarship item will need to additionally file the IRS Form 104ONR or 104ONR-EZ to the IRS by April 15.
6. In general, individuals considered nonresident aliens for tax purposes, will find that they may claim only one personal exemption, regardless of marital status or number of dependents. Other exemptions and deductions are also limited. Therefore, nonresidents may wish to claim "O" exemptions on the W-4 tax withholding form at the Payroll Office. Claiming "O" instead of the one exemption that you are allowed, may make the tax withheld from you salary reflect more accurately the nonresident tax rate, which tends to be somewhat higher than U.S. resident tax rates.
7. After being in the U.S. for better than 5 years on the F status, or two years on the J exchange scholars status, (as well as permanent residents and H status holders) your status for tax purposes becomes resident status for tax obligations. That is, you will be taxed on the same conditions that an U.S. citizen is taxed, which includes tax on the total worldwide income. You will be eligible for the same exemptions and deductions that are allowed citizen taxpayers. You would, therefore, cease in the practice of filing the IRS Form 104ONR series and change over to the IRS Form 1040.
8. Approximately 50 countries have tax treaties with the U.S. that may exempt a part or all of your income from taxes. Certification of all exemptions from tax normally is made with the Controllers Office. All persons utilizing a tax treaty exemption must additionally complete and file the IRS Form 8233 each year. Go to www.windstar-tech.com for additional information. Special Note: It has been noted that the IRS will return the Form 8843 and that the nonimmigrant student/scholar should keep the form indefinitely. If the student/scholar thinks they might file for permanent residence at some future date, they are advised to file a 104ONR-EZ Form along with the Form 8843, even if they have no U.S. source income. This procedure will aid to establish the background of the applicant at the time of the adjustment of status request.
9. Work authorization of short-term scholars expanded. New rules issued by the USIA in April 1999 would permit short-term scholar participants to lecture and consult at institutions not listed on their Form DS-2019. The short-term scholar program allows foreign scholars to enter the U.S. for a period of up to six (6) months to lecture, observe, consult, and participate in seminars, workshops, conferences, study tours, professional meetings, and other similar educational and professional activities. In making its revision, the USIA explained that the overall effectiveness and utility of these exchanges would be enhanced if participants were able to accept invitations to lecture and consult at institutions no listed on their DS-2019. The program sponsor's responsible officer must authorize a participant's acceptance of such an invitation by written authorization. This written authorization must be attached to the participant's Form DS-2019.
10. Academic honoraria for B1/B2 WT/WB nonimmigrants. Legislation enacted in 1998 permits the acceptance of an honorarium payment and associated incidental expenses by a B noninimigrant for an academic activity (such as a lecture series) not lasting longer than nine (9) days at any single institution, and limited to five (5) institutions during the six month period. The legislation essentially establishes an exception to the general rule that a B visa holder cannot engage in productive employment in the U.S. Note: Any payment to a nonresident alien assumes possession of a social security number. The inclusion of this rule may allow the local Administration Office to issue such a number, based upon the written confirmation of conditions under which the honoraria is to be issued.
III. Social Security Tax Information
Lawfully employed F-1 and J-1 status holders are not subject to social security withholding requirements while they are considered as being covered by U.S. tax law as "nonresidents for tax purposes." Therefore, wages received by nonresident F-1 and J-1 status holders working on the campus, performing authorized employment off-campus, or undergoing practical training are not subject to social security requirements. The Human Resources Office arranges all exemptions from social security for on-campus employees during payroll sign-up. If you are an F-1 or J-1 status holder who is considered a "resident for tax purposes," your wages are subject to social security withholding. For example, a J-1 research scholar will begin to pay social security if your stay exceeds two years. The five-year rule is place for the F status holder. H and J-2 status holders are subject to social security withholding on all income earned. If you believe you have had social security mistakenly deducted from your wages, regardless of the employer, you should file the IRS Form 843 directly through the Internal Revenue Service Center, Philadelphia, PA 19255.
