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Lets talk about Tax Middlebury College 2018.

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Presentation on theme: "Lets talk about Tax Middlebury College 2018."— Presentation transcript:

1 Lets talk about Tax Middlebury College 2018

2 Overview of tax for non-resident students and scholars
Student tax behavior in 2017 Using Sprintax to prepare your tax returns Questions

3 Disclaimer: The aim of this presentation is to provide you with a general understanding of tax principles as they apply to international students and as such is for information purposes only. Each individual has a unique tax position and is responsible for his or her own tax determination and compliance.

4 Topics: Who must file a 2017 US tax return? What is FICA?
What tax forms should I receive? Forms you need to complete and send to IRS No income received- what form do I need to file? Nonresidents for Tax – Spouses (J2, F2, H4) What is FICA? What is ITIN? What is a 1098-T? State Tax Returns What happen if I don’t file my US tax form(s)? Items you need to prepare your Federal and State tax returns

5 Important dates for 2018 Tax year runs from 1st January to 31st December 2017 tax filing season is for income from 1st January – 31st December 2016 Filing deadline is Tuesday 17th April 2018

6 Resident or Non-resident for tax?
Independent of visa/immigration status Generally, most international students who are on F, J, M or Q visas are considered non-resident for tax purposes. International students on J1 & F1 visas are automatically considered non-resident for their first 5 calendar years in the US Scholars/Researchers (and their dependents) on J visas are automatically considered non-residents for 2 out of the last 6 calendar years in the US If you’ve been in the US for longer than the 5 or 2 year periods, the Substantial Presence Test will determine your tax residency.

7 Everyone has an IRS filing obligation
Who must file in 2018? Everyone has an IRS filing obligation If you had no earnings/income in the U.S. – you are still required to declare your non-resident status by completing Form 8843 If you received taxable earnings or income over the personal exemption - $4,050 for 2017 tax year from U.S. sources

8 Form 8843 Form 8843 is the minimum filing requirement for all non-residents “Statement for Exempt Individuals and Individuals with a Medical Condition.” Students in F-1 or J-1 non-immigrant student status as well as their F-2/J-2 dependents, who are Nonresidents for tax purposes, MUST file Form 8843 regardless of whether they received income in the U.S. or not  It is suggested that the person listed on part 3 name/address/etc of director of the academic or other specialized program…be the DSO. Also called, “Statement for Exempt Individuals and Individuals with a Medical Condition.”

9 Withholding tax As a non resident a ‘withholding tax’ may be applied to some or all payments made to you at a rate of 30% 65 tax treaties in place to reduce this or to exempt that income Opportunity to claim refund via year end tax return

10 Requirements for Federal tax filing (Form 1040NR/EZ)
US Source Income Above $4,050 for 2017 tax year Wages Taxable Stipend, Grant, Scholarship, Award Interest, rental, royalty or other income Optional filing Any level of income Claiming a refund Only opportunity to reclaim overpaid tax, is by filing a return If student received any taxable earnings or income over the personal exemption ($4,050 for 2017 TY) from US sources If they worked in the US If they received a taxable stipend, grant or allowance in 2017 Must still file, even if the income is covered by a tax treaty agreement If they want to claim a refund - Only opportunity to reclaim overpaid tax, is by filing a return

11 Income which does not trigger a filing requirement
Scholarship for tuition and related expenses Scholarship received from outside the US Money transferred from parents/relatives overseas Income ‘earned’ in their home country (investment income, rent, job before moving to US, etc.) Interest on regular savings account Gift of money from someone in the US* A scholarship and personal allowance received from a source(s) outside of the US are non-reportable and non-taxable. Scholarship received from US sources are non-taxable and non-reportable to the extent they are used for qualified tuition. Room and board and any other personal expenses are not qualified tuition. Careful ‘gift’ is not really for employment

12 W2 1042-S 1099 Series What tax (income)documents do students receive?
Wages, Salary, Compensation (Employment earnings) W2 Royalty Payments Scholarship Stipend/Non-Degree Aid Independent Contractor Services Prize/Award 1042-S Rent Investment Income Commissions Other income 1099 Series W-4 ? W-8BEN? State Refunds Settlements Fees Services

13 Items needed when preparing a return
Income documents Passport Visa - I-20, DS-2019, etc. Entry and exit dates Social security / ITIN 4 c’s A comfortable Chair Clear desk/table space A strong cup of Coffee Chocolate bar! Save the Cocktail until you’re finished! If student/scholar received any taxable earnings or income over the personal exemption ($4,050 for 2017 TY) from US sources If they worked in the US If they received a taxable stipend, grant or allowance in 2017 Must still file, even if the income is covered by a tax treaty agreement If they want to claim a refund - Only opportunity to reclaim overpaid tax, is by filing a return

14 Income tax forms to be completed
Federal tax 1040 NR: “U.S. Nonresident Alien Income Tax Return” or 1040 NR EZ: “U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents” State tax Income tax return for each state where student resided/earned income during 2017  Tip: They are referred to as “Tax Returns”, because they are used to getting money back!

15 Nonresident Spouse & Dependent(s) filing obligations
Same requirements as visa holder No joint returns for Nonresidents Same filing obligations as visa holder Minimum is Form 8843 1040NR/EZ if applicable Each dependent should mail them in separate envelopes Nonresident can elect to file as resident – when married to a tax resident

16 FICA Taxes Non-resident international students and scholars (J1 & F1) should not be paying FICA H-1B, J-2 and TN visa-holders, are subject to FICA taxes from their first day of employment.  Usually only applied to off campus employment However resident, graduates and on campus OPT do pay Opportunity to claim back Form 843 & Form 8316 Nonresident aliens on F-1 and J-1 visas are exempt from paying FICA taxes until they become tax residents. Students also fall under the student FICA exemption, so generally students do not pay FICA taxes even after they become residents for tax purposes.   All other Nonresidents, including H-1B, J-2 and TN visa-holders, are subject to FICA taxes from their first day of employment.  Most schools know not to take FICA from students, but not all employers know international students are exempt

17 ITIN - Individual Taxpayer Identification Number
Required when filing Federal return Most common among scholarship recipients (athletes) Not needed on Form 8843 Application process is tricky! CAA may now certify dependents (Certifying Acceptance Agent) Filing a 1040NR or 1040NR-EZ with the IRS requires SSN or ITIN ITIN is required for students/scholars who receive taxable income but ineligible for SSN, such as scholarship recipients that are not working ITIN may be applied for at time of filing tax return, but requires sending original passport. May use CAA so don’t have to mail original passport Or use SEVP exception and file ahead of time – unreliable results IRS would prefer CAA; expanding the application window SEVP exception may be eliminated soon

18 1098-T Tuition Statement Mostly used to claim education tax credit
Significant cause of mis-filing Not relevant for nonresidents Often all students with an SSN on file with school will get one – even nonresidents, so it causes lots of confusion! It is generally used by US tax ‘residents’ when claiming educational tax credits, often for a dependent Form 1098-T (the Tuition Statement) concerns US nationals and tax residents only. However it is sometimes issued to all students, regardless of residency. Nonresidents do not need, and cannot use, a 1098-T on their 1040NR/NR-EZ.

19 Tax scams Use caution and common sense
IRS would never ask for personal details without proper communication IRS not seeking to penalize anyone – just want to make sure the fair and correct taxes are paid on time Same format (internationally!) Money owed ‘Instant’ payment will make problem go away Voucher/prepaid credit card reference preferred payment option

20 Resident v Non-resident for NY State Tax
Most full time undergraduate students (F1’s and J1’s) are considered non-residents of NY state and city for tax purposes Most post-graduates, including part time students, J1 international professor, researchers and scholars, and individuals in H4 status are considered NY residents for state and city tax purposes if they both 1) had a place to stay in NY for at least 11 months 2) were physically in NY for at least 6 months of the year.

21 New York State Tax Return
Do I need to file New York state tax return? You must file a NY Tax Return if: You are a non-resident with New York source income and your New York adjusted gross income exceeds your New York standard deduction, $8,000 for 2017 tax year You are resident and you have to file a federal return You may have additional filing responsibilities if you have Yonkers or New York City income.

22 New Jersey State Tax Return
International students, professors and scholars are considered non-residents for NJ state tax purposes unless they had a “permanent home” in NJ. Filing obligation for income over $10,000 Filing deadline is 17th April, 2018

23 1095-A B and C series Form 1095-A: Form 1095-B: Form 1095-C:
Healthcare coverage purchased through Health Insurance Marketplace – ‘ObamaCare’ Generally not applicable to international students & scholars Can be used on a ‘resident’ tax return, in limited circumstances Form 1095-B: Healthcare coverage provided through insurance provider or self-insured employer You do not need 1095-B for your non-resident return Form 1095-C: Healthcare provided through employer (generally more than 50 employees) You do not need 1095-C for your non-resident return

24 Request from Employer/Payer for your ITIN or SSN
Wages Summary Given to an employer so they can tax you correctly (mostly for residents) (BEN) ITIN Applications Document that proves you are a non resident and eligible for a certain tax treaty Request from Employer/Payer for your ITIN or SSN

25 Timelines for a refund Federal Tracking your refund 6 weeks - 6 months
Contact IRS to follow up Tracking your refund ‘Where’s my refund’ Httpss://irs.gov/refunds

26 Missed a year filed as resident by mistake
Don’t panic - but do set the record straight Misfiled: 1040X - Amended U.S. Individual Income Tax Return Simple form, similar to 1040 Never filed Catch up Can back file at any stage Can only claim a refund for previous 3 years

27 FAKE NEWS about taxes I didn’t have a job – I don’t need to file any tax forms WRONG I am not from the US – I don’t need to file any tax forms - WRONG My country has a tax treaty with the US, I don’t need to file and forms - WRONG If I don’t bother doing anything, the IRS will never find out - Do you want to test them, and take that risk?

28 Tax Tips Never received the income documents – follow up now
Keep copies of everything you send Use a tracked mail service Have the refund paid electronically into a bank account Don’t copy what your friend did!

29 Implications of not filing
International students are required to comply with all US laws, including IRS Filing tax forms (even if only 8843) is part of maintaining visa status in US Not filing could affect future immigration status (like H1B, LPR) Fines, penalties, interest can accrue if funds are owed If you don’t owe, claim a refund!

30 Overview of tax for non-resident students and scholars
Student tax behavior in 2017 Using Sprintax to prepare your tax return Questions

31 $54m in Federal Tax Refunds
Federal Refund State Refund $54m in Federal Tax Refunds 90% Received Refund Average Refund $1056 71% Received Refund Average Refund $415 $13m in State Tax Refunds

32 Overview of tax for non-resident students and scholars
Student tax behavior in 2017 Using Sprintax to prepare your tax return Questions

33 to Students

34 Login Page

35 Residency

36 Income Forms

37 Other Income

38 State Taxes

39 Order summary

40 Your completed IRS Forms


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