ASSOCIATES TAX & ACCOUNTING SERVICES
Young & Associates, LLC presents: US Taxation of International Students and Scholars March 5, 2020
What We Will Cover • Filing Requirements • Residency Status/Taxation • Types of Income • Tax Forms • Completion of Tax Returns • Resources
Filing Requirements
Am I Required to File Anything? YES NO • Present in the US in 2019 • No days of presence in for any length of time the US during 2019 • US source income • No US source income • Exception for tourists
Residency Status
Residency Status Full Year Nonresident Alien Full Year Resident Alien Dual Status (Part-year resident/part-year Nonresident) Occurs in the year of arrival or departure
Residency Status Residency Tests: • US Citizenship • Lawful Permanent Resident (Green Card Holder) • Substantial Presence Test (SPT) Present in the US at least 31 days during the current year, and; If the sum of: 100% of total current year days + 1/3 of first preceding year + 1/6 of second preceding year >183 days = Resident Alien
Residency Status Exceptions to SPT • F or J students receive 5 “exempt” years. Not exempt from tax, but of counting physical days of presence in the US towards the SPT. So, for the first 5 years, the SPT total will be “0”. • J non-students receive 2 “exempt” years (of the past 6 years). Generally, for the first 2 years, the SPT will be “0” – unless individual has had previous entries to the US as an F, J, M or Q visa holder. “Exempt” years are CALENDAR years, not years from date of arrival.
Exempt Individual/ Are you an exempt individual? – Decision Tree Residency If you are temporarily present in the United States on an F, J, M, or Q visa, use this chart to deter- mine if you are an exempt individual for the S ubstantial P resence T est ( SPT ). Student Teacher or Trainee J Visa F, J, M, or Q Visa Are you a full-time student? Are you a student? No Ye s Ye s No Are you in substantial Are you in substantial compliance with your visa? compliance with your visa? No Ye s Ye s No Have you been in the U.S. for You are Have you been in the U.S. for any part of more than 5 calendar an exempt any part of 2 of the preceding 6 years? individual for the calendar years? Ye s No No No Ye s Ye s S ubstantial P resence T est Were you exempt as a teacher, Do you choose to claim a Closer trainee, or student for any part of 3 Connection exception to the (or fewer) of the 6 preceding years, Substantial Presence Test? AND Did a foreign employer pay all your compensation during the tax year No Ye s in question, AND Were you present in the U.S. as a teacher or trainee in In order to claim the exception, all the any of the preceding 6 years, AND following must apply: Did a foreign employer pay all your A. You do not intend to reside permanently in the US compensation during each of the B. You must have complied with your Visa. preceding 6 years you were present in C. You must not have taken steps to become a the U.S. as a teacher or trainee? Resident Alien. D. You must have a closer connection to a foreign country. Ye s No No Ye s * You must apply the S ubstantial P resence T est * Substantial Presence Test (SPT) - You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2019. To meet this test, you must be physically present in the United States on at least: 1. 31 days during 2019 and 2. 183 days during the 3-year period that includes 2019, 2018, and 2017, counting: a. all the days you were present in 2019 and b. 1/3 of the days you were present in 2018, and c. 1/6 of the days you were present in 2017. 1
Nonresident Alien Taxation • Filing status: Single, MFS, or QW • No Personal Exemptions • Must itemize deductions • State and local income taxes • Gifts to US charities • Student/scholar adjustments to income • Scholarship and fellowship grants • Student Loan interest
Resident Alien Taxation • Filing Status: Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Head of Household (HOH), Qualified Widow (QW) • No Personal Exemptions • Income: Worldwide Income • Deductions: Above the line adjustments (Educator expenses, Alimony paid, Expenses of Performing Artists, Student Loan Interest, Tuition & Fees) & Sch A Itemized deductions • Credits: Foreign Tax Credit (FTC), Child Tax Credit (CTC), Earned Income Credit (EIC), Education Credits, Child Care Credit
Residency Status Dual-Status Resident Student/Scholar Exempt Years Exhausted but still in US January December Nonresident prior to SPT applied, resident thereafter Student/Scholar Departure Year January December Resident until departure, Nonresident thereafter
Types of Income
Types of Income Wages/Employment/Compensation Provide services to the University for payment– paid on a monthly, bi- weekly or casual basis Northwestern employment taxes: • Federal – Taxes are assessed by the Income Tax Withholding Table • IL State – 4.95% • FICA/OASDI – 6.20% (only applicable to residents for tax purposes) • Medicare – 1.45% (only applicable to residents for tax purposes)
Types of Income Scholarship/Fellowship/Stipends: Funds given to support education/academic advancement or achievement Northwestern scholarship/fellowship taxes: • Federal – Taxes are withheld at 14% for Nonresidents and 0% for residents. Residents may be required to make quarterly estimated tax payments. • Illinois State – Taxes are not withheld at source, but individuals may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • FICA/OASDI & Medicare – Not applicable
Independent Contractor Similar to Employment, but providing services independently for business under terms of a contract. Northwestern independent contractor taxes: • Federal – Taxes are withheld at 30% for Nonresidents and 0% for residents. Residents may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • Illinois State – Taxes are not withheld at source, but individuals may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • FICA/OASDI & Medicare – Not withheld
Tax Forms
Form W-2: Wage and Tax Statement Mailed to address on file no later than January 31 st unless someone has requested to receive them online by contacting Payroll at (847) 491-7362 or (312) 503-9700 or at (http://www.northwestern.edu/myhr/). 1. Wages 2. Salary 3. Compensation
a Employee’s social security number Safe, accurate, Visit the IRS website at FAST! Use www.irs.gov/efile OMB No. 1545-0008 b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld c Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld 5 Medicare wages and tips 6 Medicare tax withheld 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee’s first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 C o d e 13 Statutory Retirement Third-party 12b employee plan sick pay C o d e 14 Other 12c C o d e 12d C o d e f Employee’s address and ZIP code 15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name Form W-2 Statement Wage and Tax Department of the Treasury—Internal Revenue Service 2019 Copy B—To Be Filed With Employee’s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service.
Form 1042-S: Foreign Person’s U.S. Source Income Subject to Withholding Mailed to address on file no later than March 15 th . Reprints of forms available March 31 st . Contact Payroll at (847) 491-7362 or (312) 503-9700 or at (http://www.northwestern.edu/myhr/). 1. Scholarships 2. Fellowships 3. Foreign Independent Contractor Services 4. Tax Treaty Benefits 5. Foreign Prize/Award/Miscellaneous foreign payments
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