To all the difficulties of admission, training and adaptation in the United States for international students, one more obligatory and unpleasant procedure is added: cooperation with the tax authorities of the country. All international students studying and/or undergoing internship in the US must file a tax return and pay federal taxes on income and social and medical insurance.
As, perhaps, in the taxation system of any country, the American has its nuances. For international students, these are various forms for filling in, the status of a tax resident or non-resident, the type of income and its amount, as well as the opportunity to issue a tax refund.
TIN and NSO
American taxpayers are assigned TIN and NSO (Social Security Number). You can get an ITIN independently or through an employer.
ITIN, Individual Taxpayer Identification Number is assigned to everyone residing in the United States, regardless of the status and the presence or absence of income. The mandatory assignment is given to international students who have received a scholarship from an American resource. ITIN does not replace NSO.
SSN, Social Security Number is issued to tax residents and officially employed. As a rule, it is made out by the employer.
The tax return on income tax and social charges (Social Security and Medicare) is provided to a tax authority called the Internal Revenue Service (IRS) for the previous calendar year during which the taxpayer resided in the United States. Tax documents are submitted until April 15 of each year in the prior calendar year. The package of securities must be signed personally by the taxpayer and sent by regular mail. It is better to keep copies of documents “on hands”.
Types of income
The following are subject to taxation:
- any income earned in the United States (individual services, employment);
- income from work at the university (all kinds of assistant and other positions on campus);
- the income received at the passage of training (the company pays the trainee the salary);
- income from Work & Travel, Au Pair and others;
- scholarships issued by American sources (funds, corporations, universities).
Taxation for non-residents
International students and trainees in the United States with visas of categories F, J and M are automatically considered tax residents of this country. Students with a visa F are recognized as non-residents for the first five calendar years of their stay in the United States, and with a J visa for the first two years. Nevertheless, the IRS tax return is still required every year, even if there were no income. To do this, you need to fill out a 8843 form, which, first of all, confirms the status of a non-resident.
The action algorithm is as follows: 8843 form can be downloaded, filled manually or online on the IRS website, then printed and sent by regular mail. All members of the student’s family living with him, including young children, should serve it. The documents of each family member must be filled out separately and sent by mail in different envelopes. This procedure does not require the receipt of ITIN or SSN.
If an international student or trainee received any income from an American source during the past calendar year, in addition to 8843 form, you must fill 1040NR form (or 1040NR-EZ). This requires ITIN and SSN. If previously ITIN was not received, you can request it simultaneously with the filing of tax documents, completing the W-7 form. Together with her, you need to provide a copy of the passport, a copy of the visa, a copy of the I-20 questionnaire and an official document from the university confirming the enrollment and/or granting of the scholarship.
How to pay taxes?
The income of a non-resident is, first of all, scholarships, grants and assistance. Whether these types of income are taxed or not depends on the conditions of financial assistance.
The scholarships and grants awarded for academic purposes under academic programs for obtaining a scientific degree (any) are exempt from withholding tax. In this case, the educational institution and its academic program must be accredited by a specialized agency.
If the scholarship, in addition to tuition fees, also covers housing and/or other costs related to the student’s studies and life in the US, most likely, part of the scholarship will be taxed. In this case, when preparing a tax return, you must fill out the 1042S form.
It also happens that the terms of the scholarship oblige the student to work at the university. The income from such employment is a part of the amount being paid out. For example, out of the $ 2,500 paid to a student as funding, only 1,500 is a scholarship for study, and $ 1,000 is the income from working as an assistant or teacher. Then the tax is withheld from only $ 1,000.
Declarations and taxation will not cover income received outside the US, as well as loans secured and interest on deposits in US banks.
Another feature of the status of a non-resident: exemption from social deductions (Social Security and Medicare).
Taxation for residents
Tax residents are those who have lived in the United States for more than five calendar years in a row. This status obliges taxpayers to pay taxes on an equal footing with citizens of the country, even without having a real resident status. During the preparation of the tax return, you need to pass an individual Substantial Presence Test, which automatically calculates the length of stay in the country and determines the tax status.
The primary form for filling and filing by a taxpayer with the status of a resident is 1040 (1040A, 1040EZ), that is the same as for US citizens. All types and sources of income, articles and amounts of tax deductions that a taxpayer can claim (for example, the deduction for medical care and dentistry), part of the income that is not taxable.
It is understood that a tax resident residing in the United States for more than five years is no longer a student (or completing his studies) and can be recruited by American employers (with permission). Consequently, he already has ITIN and SSN, and annual taxes include income tax (from salary) and social deductions. The employer issues W-2 form, which indicates the number of wages and the amount of tax deductions.
As mentioned above, tax non-residents receiving income from work at the university and paid internships are exempt from social deductions. But it happens that the employer mistakenly entered them on the tax return, and they were withheld. In this case, the taxpayer has the right to “refund tax withheld by mistake”.
To properly arrange the return procedure, it is necessary, first of all, to apply to the employer with the appropriate application. If for any reason he can not make a refund, the taxpayer has the right to file a request with the tax authorities independently. This will require the following documents:
- completed 8843 form;
- completed 8316 form;
- a copy of the W-2 form;
- a copy of the visa;
- copy of the migration I-94 card;
- a copy of the front and back of the questionnaire I-20;
- a copy of the document confirming employment;
- a written refusal of the employer to return erroneously withheld deductions.
The full set of documents must be signed personally by the applicant and sent to the tax authorities by regular mail.