In the US, every person who earns "income" must pay income tax and every person regardless of earnings must file a U.S. Income Tax Return. The individual earner usually has their payroll department deduct monthly withholding from paychecks throughout the year. The W-4 Form, as completed by you, determines the amount withheld. You should update your W-4 form whenever there is a change in your specific circumstances.
The U.S. tax year runs on a calendar basis from January 1 to December 31. At the end of the tax year, employers/organizations are required to create a summary statement of how much money each employee earned or was given (I.e. scholarship, grant. Fellowship), and how much tax was withheld during the tax year. The most common types of summary statements are W-2 (for earned income), 1042-S (for scholarships and other types of income), and 1099-INT (for interest earned in bank or investment accounts). The W-2 and 1099 forms must be issued by your employer, bank or other funding organization by January 31 and you will begin receiving them in February, and you should begin receiving this form shortly thereafter. It is then your responsibility to complete and file the correct income tax return forms.
Tax return forms act as a balance sheet, comparing how much you earned, how much was withheld, and determining how much tax is owed. The result may be that an individual owes additional tax or, as is the case of most international students, the income tax returns are mailed to the US Internal Revenue Service (IRS), the government agency charged with overseeing taxation, no later than April 15. In the event this date falls on a weekend or holiday the deadline is the following business day. If and only if the only source of your income is reported on a 1042-S and you have no wages reported on another document, your filing deadline is June 15.
There are many misunderstandings about taxes among international students. Below is a list of facts that many students and US citizens do not know about the tax obligations of non-US citizens:
Some countries have tax treaties with the US, but this dies not mean that taxes do not have to be paid. Each treaty is different; some say that a portion of the income will be exempt from taxes (not taxed). This benefit of a tax treaty is never stated on the W-4 form where is specifically asks if you are exempt from paying taxes. Instead, people who have tax treaty benefits may gave to complete for 8233 at the same time as the W-4 form so that treaty benefits will be counted whom monthly taxes are determined. Also, you will have to prove and explain your tax treaty benefits on form 1040 NR at the end of the tax year.
Employment and Scholarship Tax Paperwork
A W-4 form is given to each US scholarship grant or fellowship recipient. It tells the IRS how much tax to withhold from monthly paychecks or scholarship amounts. Never say that you are exempt on this form. It is a legal document and you will be held responsible for proving that what you write down is true. Or non-residents, instructions for filing out form W-4 to determine your exemptions unless you are a US citizen, US permanent resident, or a "resident for tax purposes.
Nonresident and Resident Status
In general, most F-1 and J-1 students do not qualify for tax residency until they have been in the US more than five years. In their sixth year as a student, they must still be able to pass a "Substantial Presence Test" to see if they can be certified as a "resident for tax purposes". Those who pass this Substantial Presence Test must be treated as residents for tax purposes. The kind of tax return form filled out at the end of the tax year is different for nonresidents and residents for tax purposes. International students who are non resident aliens for income tax purposes must complete a 1040NR or 1040NR-EZ. US citizens, US permanent residents and "residents for tax purposes" complete Form 1040, 1040A, or 1040 EZ. Check IRS Publication 519 to obtain more information about tax resident and to determine your status.
Non-residents do not have to pay tax on certain kinds of interest income at banks. You may be asked to fill out form W-8 at your bank to apply for this benefit. However, you will still have to explain this benefit on the 040NR or 1040NR-EZ at the end of the tax year. Also, if you become a "resident for tax purposes", this benefit is no longer available.
DeductionsScholarship, fellowship and grant recipients should save all receipts, check stubs, and papers showing payment for books, tuition and required fees and school supplies. Everyone should save evidence of costs for plane tickets, meals and hotel expenses to move to Angwin, day care expenses for children; any thefts or losses, un-reimbursed employee expenses and any gifts to US charity. If you are eligible to use them, some of these items will be useful as deductions on your income tax return form and will help you pay less tax. Further information about what items are deductible may be found in IRS Pub. 519.
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