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International Students A basic overview of federal/state taxes

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1 International Students A basic overview of federal/state taxes
2014 Tax Return Filing International Students A basic overview of federal/state taxes

2 Tax Terms Tax Year: January to December
Tax Season: January 31 to April 15 Reportable Income: Income required to be reported to IRS either by payer or individual Compensation: Money earned from working Interest: Either paid or earned (loans, bank account) Tax Reporting Form: Form institution reports income on Example: W-2, 1099, 1098-T Tax Return: Form you file your taxes on Example: 1040NR-EZ, 1040NR Filing Requirement: Amount used to determine if you need to file

3 Tax Return Filing Purpose
You may earn reportable income from various sources during a tax year When you work, you complete Form W-4 to indicate how taxes should be withheld NRAs have a mandatory Single, 1, NRA tax withholding By January 31 of following calendar year – tax reporting forms are filed by institutions and reported & sent to individuals via mail or electronically General Rule: You either have too much tax withheld OR not enough which is why you file a tax return If you over paid = REFUND If you did not have enough tax withheld = you OWE $

4 Federal Tax Internal Revenue Service (IRS) – www.irs.gov
There are 4 tax categories defined by IRS

5 Individual Tax Status If you are an international student working at TU, or received a travel award or scholarship, you need to determine if you are a: Nonresident Alien for tax purposes or Resident Alien for tax purposes If you are not sure, log into your Glacier to see: https://www.arcticintl.com/portal/login.asp If you forgot your login, click on Forgot Login

6 Gather Your Tax Forms Form W2

7 Gather Tax Forms Form 1042-S (not everyone gets one) Is use for..

8 Federal – How to Begin Collect your tax forms! Form W2, 1042-S
2. Do I have to file a tax return? YES - If you earned more than $3,950 in 2014 and tax was withheld (Look at Box 2 on your W2 Form) NO - If you earned more than $3,950 in 2014 and tax was withheld Educate Yourself about How to File It’s your responsibility as F1/J1 student! Review IRS videos on YouTube Read Publications & Instructions for Forms Social Media Updates

9 Filing Requirements Check IRS Website!
8843 = Everyone For all F, J, M, and Q “exempt individuals” Spouse and children (F2/J2) Requirements may change each year Currently no need to file if total income < personal exemption and no tax was withheld If tax was withheld should file for refund State tax return See state tax agency requirements discussed below TRAINER NOTE: Look up filing requirements on IRS website for that particular tax year – and use to quiz participants WHO NEEDS TO FILE? Effective with tax year 2006, Non-residents are no longer required to file a tax return if the total income from wages is less than the personal exemption and there has been no withholding. IF A PERSON NEEDS TO FILE: Participants need to verify their state laws. Some states do not require a return for state tax purposes. Form 8843. Must use form 1040NR or 1040NR-EZ. “Exempt individuals” in F, J, M, and Q status are still required to file the 8843, even if a tax return is not required (even if no income was received). WHEN MUST THE RETURN BE FILED? *Always check on IRS website! For example due to weekends and holidays the deadlines may be extended. June 15 (if only filing an 8843 – no reportable income) June 15 (outside the U.S.) April 15 (in the U.S.)    WHERE MUST THE RETURN BE FILED? Always check the IRS website for any changes WHAT ARE THE PENALTIES FOR NON-COMPLIANCE? You are wearing both hats here. You will have students who will question why they need to bother, especially if they earned nothing or think they will owe money. Penalties for noncompliance with the filing requirement can include: Future requests for change of status (especially to permanent resident) may be denied; Fines and interest will be assessed when money is owed to the IRS. If more than 3 years late in filing the return, any refund owed will not be remitted by the IRS to the taxpayer. Visa renewals at American Consulates/Embassies may be denied; The IRS does not care how you earned the money, with work permission or not, they just want to be sure they are taxing you on it. The immigration service does not care if you were taxed on income or not, they just want to be sure you had permission to do this work. The immigration service is concerned that you will be a model compliant alien while in the US. The IRS will penalize you for tardiness either for late taxes paid, or prevent a refund if filing is too late. Did you follow the rules and file a return? NRA’s need to understand why they need to file a tax return! TRAINER NOTE: What you have covered so far are the main topics that will affect all non-resident aliens for tax purposes. The following topics in this particular subsection should be referred to and not greatly discussed. Participants need to be made aware of these “exceptions to the rules,” but no time and detail should be spent on this, as they are explained in the participant’s Workbook. This is done in the interest of time and to eliminate confusion at this learning stage. The participants should be encouraged to read and refer to the following unique circumstances when they have time. For example, a likely statement to lead you through this to the next subsection could be: To wrap up this discussion on “Filing Requirements” I will say that what we have covered so far affects all Non-Resident Aliens for Tax Purposes. Your Workbook does go into further detail into some topics that may affect certain individuals or populations at your institutions. Because they are unique in nature, I ask you to spend some time looking at the next few topics when you get a chance and be aware of them. But in the interest of time, and not putting you to sleep (stop and grin, here), we will move on to understanding what is needed to file a return. REVIEW: The instructor should review these topics (as they are outlined in the participants Workbook) prior to the workshop being presented so that one is familiar with the topic and what is being explained to the participants. BARBADOS, HUNGARY, JAMAICA – Tax treaty benefits allow them to be treated as residents for tax purposes, even if they are F-1 and just arrived in the U.S. for the first time. MARITAL STATUS AND CHILDREN for the most part, NRA’s cannot financially benefit from having a spouse or children in the U.S. UNLESS the child(ren) born in the U.S. E-FILING – never allowed for Non-resident aliens STANDARD DEDUCTION –Only students from India students can claim the standard deduction EXTENSIONS – Apply to NRAs Every other NRA can only itemize SOCIAL SECURITY TAX (FICA) – There is a NRA FICA exemption. Once this has expired, then they may qualify for the student exemption. TAX TREATY BENEFITS – Provide them the resources to determine if there is one, if they qualify and how to claim benefit. FILE TAXES FOR A PREVIOUS YEAR (late return) – Encourage them to do so. If a return is never filed, the statute of limitations doesn’t apply and so a person can always be audited for that year! Show next slide – Which Tax Return Form to Use?

10 Rules for Signing & Due Date
Form 8843 F, J, M, Q All individuals Rules for Signing & Due Date If submitting with tax return, no need to sign Due April 15th of each year (or required date) ______________________________ If no tax return required, sign and mail to address in instructions Due June 15th of each year (or required date) Things to Note: Put January – December of year If no Tax ID #, leave blank Follow instructions for name & address All individuals complete Part 1 Teachers/Trainees go on to complete Part II Students complete Part III Leave Part IV & V blank (page 2) RAs not required to complete Handout copies of last year’s form – (you should have 2-sided copies enough for everyone) Tell them you are going to give them basic information about the form EXPLAIN: Why Start With 8843? Because all people in F1/F2 and J1/J2 (and M/Q) status need to complete – REGARDLESS IF THEY EARNED INCOME OR NOT! Highlight Which sections to complete based on their primary purpose (teacher/trainer or student) and information on slide Show next slide – Form 8843 – p. 2

11 Signing when not required is not a problem
Form 8843 – p. 2 Signing when not required is not a problem Highlight If only filing 8843 – sign the form. If submitting with tax return, no need to sign the form (no problem if do). Show next slide – Form 1040NR-EZ, p. 1 Sign if filing alone (no tax return) Don’t sign if submitting with tax return

12 Form 1040NR-EZ Page 1 Tips: Reminder - Current Rule:
Tips: Collect all tax reporting forms first! (W2, 1099) Always file federal first, state second Line 3 = Add total wages for all jobs in past year Line 5 = Scholarship income (1042-S) Line 6 = Total amount exempt by treaty (same amount as on p. 2) Students from India may take standard deductions; others cannot Treaty Information: Line 7: Do the math! Tax Table located in Instructions Line 8 & 9: N/A Reminder - Current Rule: If person earns less than personal exemption amount AND no tax withheld (Box 2 of W2) Then no need to file tax return (just Form 8843) If tax was withheld, should file to get full/partial refund If earned over personal exemption amount, must file TRAINER NOTE: Make copies of current year’s form (2-sided) to handout to participants EXPLAIN: Form in participant workbook is from a former year, but the form is the same for current tax year (only difference is date of tax year) First review the forms along with basic guidelines; these will be followed by case studies Highlight Totaling income from all sources. Including treaty exemption (which they will list on p. 2 and on Form 8233). Most NRAs cannot take standard deduction; only personal exemption. That they either get a refund or owe $. (If they owe, suggest they do a new Form W-4 to have more tax withheld). Show next slide – Form 1040NR-EZ – p. 2

13 Determining Taxable Income Source: Congressional Research Review

14 Form 1040NR-EZ Page 2 Tips: Line B
Tips: Line B Where were they living (not visiting) prior to coming to US Line E F, J, M or Q status Line F (for current visit) Ex: J1 to F1 Lines G & H OK to estimate Line I What type of tax return filed in previous year Line J Only those who are eligible for treaty benefits (refer to country list by searching on IRS website) Highlight Totaling income from all sources. Including treaty exemption (which they will list on p. 2 and on Form 8233). Most NRAs cannot take standard deduction; only personal exemption. That they either get a refund or owe $. (If they owe, suggest they do a new Form W-4 to have more tax withheld). Show next slide – Form 1040NR – p. 1

15 NRA Tax Filing: Resources
Internal Revenue Service – NRA VITA Sites IRS Link & Learn for Foreign Students IRS Non Resident Alien Toolkit IRS Publication 901 – US Tax Treaties IRS Publication 519 – US Tax Guide for Aliens Glacier TaxPrep – Software for NRA Tax Filing! (Arctic International) https://www.arcticintl.com/gtp.asp TRAINER NOTE: Review the information on the slide. Show next slide – Additional Practice

16 Tax Agencies: State Comptroller of Maryland – www.marylandtaxes.com
State of Maryland has different definitions for Nonresident Alien Resident Alien – where were you living at end of year MD does not recognize tax treaties

17 State Taxes: iFile www.marylandtaxes.com
Do I need to file a state return? Yes - if taxes were withheld and: Single: Under 65 and you earned > $10,000 Head of Household: < 65 and > $12,850 Married (Jointly): < 65 and > $20,000 Married (Separately): No age and > $3,900


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