Income Tax Obligations of International Students and Scholars

Virtually ALL F or J international students and scholars and their dependents must file an income tax form every year in order to be in compliance with the Internal Revenue Service (IRS) regulations. This is true regardless of whether they earned income while in the United States. Income tax issues for foreigners are complex and confusing. The following is designed to give you a basic understanding of your responsibilities and tell you how to get more information. Do not construe the information presented here as individual tax advice!

A NOTE TO SCHOLARS:
Frequently the choice of a nonimmigrant status for a visiting scholar will be affected by tax considerations. For example, a J-1 exchange visitor is generally considered a nonresident for tax purposes for two years, whereas an H-1B scholar might be able to declare resident status for tax purposes immediately, resulting in a tax advantage, in some cases. Other considerations will also affect a visiting scholar's tax status.

Information about income taxes for visiting scholars can be obtained from the Boulder Campus International Tax Specialist  in the PBS office at 303-735-6500. That office  generally is the repository of income tax information for international employees on  the Boulder campus.

Caution:
Please note that the USCIS (US Citizenship and Immigration Services) and the IRS (Internal Revenue Service) use the terms "resident" and "nonresident" to mean different things. This is enormously confusing to visiting scholars and to sponsoring departments as well. Please call ISSS for clarifications.

Withholdings

Different Kinds of Taxes, Collected at Different Levels

Social Security Tax: Students often have questions about payment of a U.S. tax called "Social Security tax" or "FICA." FICA is a taxation system that provides benefits to retired workers. Most F and J students are not subject to this tax, but H1 scholars and J-2 dependents with work permission are. You can get more information about this tax from your campus payroll office.

Sales tax is similar to the value-added tax collected in many countries, except that in the United States the amount of the tax is not included in the advertised prices of goods. Sales-tax rates vary from state to state.

Personal property tax : a tax on automobiles and other valuable property.

To learn about your state and local income-tax responsibilities, consult local tax authorities after you have arrived in the United States. Check the blue or white pages of the local telephone book for the appropriate government listings. Alternatively, ISSS or the University Payroll Office can provide you with information.

You are generally only taxed on your income based on U.S. sources. Sources of U.S. income include: on-campus employment, scholarships, fellowships, graduate assistantships, practical or academic training, and any compensation received for labor. Note that "income" is not limited to wages paid to you in cash, but also includes that portion of your scholarship, fellowship, or assistantship that is applied to your housing and meal expenses. The portion applied to your tuition fees, books, and supplies is not counted as income. The payroll office on your campus will help you make these distinctions. Be sure to inquire about the applicability of any tax treaty that might exist between your country and the United States.

BANK INTEREST: International students do not have to pay taxes on interest paid to them by U.S. banks.

Reporting Requirements for Dependents:

Important Dates:

June 15: The last day on which nonresident students and their dependents who have no wage income from U.S. sources in the previous year may file their Form 8843 and/or 1040NR-EZ or 1040NR returns.

Helpful Documents:

International Student and Scholar Services has two publications which you may use to guide yourself through your tax forms:

• US Federal Income Tax Guide for Aliens and
• US Federal Income Tax Guide for International Students and Scholars
• IRS Publications:
  • Publication 519: "U.S. Tax Guide for Aliens," an IRS publication. Helpful when preparing a nonresident tax return (1040NR or 1040NR-EZ).
  • Publication 901: "U.S. Tax Treaties," another IRS publication. Essential for individuals from nations having tax treaties with the United States.
  • Form 8843: "Statement for Exempt Individuals and Individuals with a Medical Condition." This one-page document must be completed and returned with the 1040NR and 1040NR-EZ. It verifies nonresident alien tax status.
  • Form 1040NR: "U.S. Nonresident Alien Income Tax Return." The longer version of the return completed by many nonresidents. This form is distinct from the 1040, 1040A, or 1040EZ filed by residents for tax purposes. It is not interchangeable with those forms. The IRS publishes an instruction booklet to accompany the form.
  • Form 1040NR-EZ: "U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents

Some Related Websites:

• Internal Revenue Service
• IRS Forms and Publications
• IRS Tax Topic: Resident and Non-Resident Aliens
  Description of the substantial presence test, exceptions to the test for exempt individuals and tax return filing obligations for nonresidents.

Helpful telephone numbers:
IRS (for general tax information): 1-800-829-1040
To order forms: 1-800-829-3676

U.S. tax laws are difficult to understand, so some students may want to ignore this obligation. Be aware, however, that the amount of information shared by the IRS and USCIS is increasing each year. It is in your interest to meet your tax obligations.