1. Catholic University: Tax Filing March 2, 2011
Mary Fortier
Nonresident Alien Tax Office

2. Tax Terms Overview
Withholding – The amount of money taken out of your paycheck to pay taxes
Reporting Forms - Ex: W2, 1042-S, 1099
Tax Return - Ex: 1040NR, 1040NR-EZ
Filing – An individual “files” (submits) a tax return
Internal Revenue Service – Federal tax agency
Resident vs. Nonresident – IRS term is different than state term

3. Tax Status

4. Tax Residency Status (Federal)
Tax terms -
not immigration
Categories!
US Citizen
Permanent Resident Alien
Resident Alien for Tax Purposes
Nonresident Alien for Tax Purposes
If a person is not a US Citizen or PRA
Employer is legally required to determine tax residency status (a person cannot choose)
Possible tax status
Nonresident alien or resident alien for tax purposes
Typically if you are in F1 or J1 status for 5 years, you are NRA
Term applies to federal tax only

5. NRA vs. RA
NRAs
May not choose withholding allowance & marital status
Follow different tax laws
US income is only taxed
Mandatory rate of Single, 1, NRA
RAs
May choose withholding allowance & marital status
Follow same tax laws as US Citizen or PRA
Taxed on worldwide income

6. Tax Status: Substantial Presence Test (SPT)
See Decision Tree:
Objective: To determine if you are exempt from counting days using SPT
If F, J, M or Q Full-time Student & compliant with legal status
Years of Presence:
If Student: Have you been in US less than 5 years total?
If Scholar: Have been in US 2 out of the last 6 consecutive calendar years?
If Yes: You are exempt from counting days towards SPT: You are a NRA
If No: You must count days as part of SPT to determine NRA or RA
(see

7. Tax Year

8. INDIVIDUAL Receives Money
JANUARY
DECEMBER
Payment: Any time in 2010
PAYER
Pays individual & withholds tax
INDIVIDUAL Receives Money
2011
JANUARY 1
APRIL 18
Tax Filing: FollowingYear
PAYER
Report income & tax withheld (For tax year 2010)
INDIVIDUAL Complete & submit tax return (For tax year 2010)

9. What is Taxable Income
Payment for Services
Working = Wages = Payment/paycheck
Scholarship
Anything above qualified tuition and fees is taxable income; Payroll Office calculates this and charges student
Other Payments
Travel grants, competitive grants, interest income
For more information see:

10. Working = Form W4
Work Authorization: You can only work for Catholic University
Employment (Working): Taxes must be withheld every time you get paid; to determine how much to withhold, a Form W-4 must be completed by individual and submitted to your employer; otherwise default amount is used
Source:

11. NRA Mandatory Tax Withholding
NRAs must complete:
Single 1
NRA X X X

12. W-4 For Different States
Live in one state, work in another; NRA rate is same for federal
Work authorization only for on-campus employment
Reciprocal tax agreements betweens states
See below at:

13. Tax Treaty: New Form Each Year
Submit new 8233each year: March 15, 2011
Tax Treaty Benefit - For individuals under a tax treaty benefit please be advised that your 8233 is due no later than March 15, If we do not received the current year 8233 your treaty benefits will be suspended until the form has been received and benefits are not retroactive. See:
About 60 treaties in effect. For list go to:
Individual must meet all requirements to be eligible
Withholding agent (employer) does not have to grant
Treaty is also claimed when filing a tax return
Does not mean it will be allowed by IRS
Not recognized by all states, ex: Maryland
Treaty income reported on 1042S

14. Taxable Scholarship 14% mandatory for NRAs
Unless exempt by a tax treaty
General practice - Apply to student account before rebate checks are issued
Which will affect rebate amount
NRAs
Tax must be withheld in the same semester as award is given
RAs
Does not apply

15. Form 8843
Yes

16. Everyone Must File 8843 Requirement Taxpayer ID #
All students in F-1 & J-1 status,
Adult dependents in F-2 or J-2 (ex: spouse)
Taxpayer ID #
No SSN or ITIN required – just leave blank if none

17. Form 8843 Sample Complete Form Interactive Form to Fill Out
For how to complete:
Interactive Form to Fill Out
Find interactive form at:
Mail form to:
Department of the Treasury, IRS Center,
Austin, TX
Deadline: June 15, 2011

18. Income
Employer: Report

19. YOU Tax Reporting Process Tax Reporting Flow (electronic)
Tax Reporting Form (mailed forms)
YOU
1st
Employer/Institution
2nd
Internal Revenue Service
3rd
State Tax Agency 1
TAX RETURN
Important to understand in case information is not accurately reported

20. Employer Reporting Deadlines
Type of Income
Withholding Form
Reporting Form
Mail by Date
Employment income
Form W-4
Form W-2
1/31
Other income
n/a
Form 1099
Scholarship income
Form 1042-S
3/15
Individual Deadline: April 18th

21. Form W-2: Employment Income
Form W-2 (Money for Working)
If Box 1 has # in it – that is your federal income
Federal tax withheld is reported in Box 2
Box 16 will have state wages; Box 17 state tax withheld
If you did not receive yours contact Payroll Office

22. 1042-S: Scholarship Income
See Handout
If Box 1 is blank you have a tax treaty
Box 16 will be complete (maybe 17 if state tax withheld)
Must wait to receive Form 1042-S to file return

23. Reporting Forms (Institution)
Form 1042-S (Scholarship Income)
Institution completes & reports income earned to IRS
Must be mailed by employer by 3/15 of each year
Request duplicate at

24. Reporting Forms (Institution)
Form INT
Reports interest income - - NOT taxable income
Must be mailed by 1/31 each year

25. Reporting Forms (Institution)
Form 1098-T
NRAs cannot claim this deduction
But often are sent form

26. Individual: File Tax withholding is not a precise calculation:
This is why each year you must file a tax return each year
Overpay (Refund) versus underpay (Owe)

27. Federal – Do I Have to File?
Form 1040NR:
2010 Filing Requirement
If you are Single, under 65 years of age:
If you earned less than $3,650 (Box 1, W-2)
No federal tax was withheld = 0 (Box 17, W-2)
You do not have to file return
Should file if tax was withheld (Box 17, W-2) = >$1

28. State – Do I Have to File?
Refer to the state in which you live to determine criteria
Individual income tax
Filing requirement
What type of tax was taken out or did you claim exempt as part of state tax reciprocal agreement
Maryland:
Virginia:
West Virginia:
Pennsylvania:

29. Must File – Which Forms?

30. NRA Tax Forms – 1040NR-EZ NRA completes Form 1040NR-EZ (short form)
Individual claims to IRS income earned in previous year

31. Treaty Forms: 8233

32. NRA Tax Forms
Form 8843
Required of all students in F-1 & J-1 status, and adult dependents in F-2 or J-2

33. Tax Form Terms

34. Tax Filing Terms - Exclusion
An exclusion is income you receive AND is
Not included in your U.S. income
Not subject to U.S. tax
Examples
Interest income (1099-INT)
Qualified scholarships (not reported to IRS)
(tuition, required fees, books)
Foreign source income

35. Tax Filing Terms – Personal Exemption
Reduces taxable gross income
Generally, one personal exemption amount per person/dependent claimed on tax return
Non-residents may typically only claim one exemption (for themselves), even if they have a dependent spouse or children
The amount for 2010 tax year is $3,650

36. Tax Filing Terms – Deduction
Standard or Itemized Deduction
NOT available to NRAs (except students from India)
*This is reason for extra tax withholding (Single, 1, NRA)
Deduction of certain allowable expenses from gross income
Itemized: Must list each expense separately on Schedule A of 1040
Standard: Determined by IRS!
Eliminates need to itemize; use 1040-EZ
Amount varies by filing status

37. Highlights

38. NRA Tax Filing May claim only one personal exemption ($3650 for 2010)
Regardless of marital status or children
May not claim the standard deduction (excepts students from India)
An expense amount listed which is subtracted from total gross income when calculating taxable income
Other deductions are limited (State taxes withheld; charitable contributions)
May not deduct education (1098-T)
File 1040NR or 1040NR-EZ
File as single individual (unless can claim dependents from Canada, Korea, Mexico, India (F1/J1 only), Japan (old treaty), and American Samoa & Northern Mariana Islands
Need to apply for ITIN

39. Common Errors Completing wrong tax form(s) Entries in the wrong line
Mathematical errors
Illegible handwriting
Use block letters and write numbers as shown here:
Failure to use the social security spelling of your name
Leaving lines blank
Enter a straight line or a zero if not applicable

40. Records Keep photocopies of all your tax records for at least 7 years
These records include:
Form 1040NR or 1040NR-EZ
Form W-2, 1042-S, 1099
Form 8843
All worksheets and receipts you used for calculations
Important if you apply to change immigration status
May be required to submit tax records with application

41. Why File a Tax Return? Comply with US regulations
As part of F1 or J1 immigration status
Required (previous years) if you plan to apply for permanent residency or US citizenship
Avoid interest and penalties
Start statute of limitations period (3 yrs)
Obtain tax refund, if any

42. Reminders April 18th DEADLINE Federal – www.irs.gov
Complete Federal tax return first; then State
Form 8843 for all students in F1 or J1 status