Who should read this?
All foreign nationals and sponsoring departments. U.S. tax laws are complicated, and it is the individual's responsibility to comply with these laws. Calvin's Financial Services Office cannot act as an advisor to individual taxpayers.
Why do I care if I'm a "non-resident alien" or a "resident alien"?
"Nonresident alien" and "resident alien" are important tax classifications unrelated to immigration.
- A non-resident alien:
- Is taxed on U.S. source income only, not on worldwide income. Generally, a nonresident alien is eligible for only one personal exemption and cannot take the standard deduction on his/her tax return.
- A resident alien:
- Is taxed in the same manner as a U.S. citizen.
- Is a foreign national who either has a green card or meets the "substantial presence test" as defined by the IRS in Publication 519.
Do I need a U.S. Tax Identification Number?
Yes.
In addition, you must have a tax ID number to file a tax return. Do not file returns before March 15 because many nonresident aliens receive both a W-2 and 1042S and the 1042S issue date is March 15. Nonresident aliens should file 1040NR (federal).
- If you are on an F-1, H-1, J-1, or M-1 visa, you are eligible for a social security number (SSN)and should obtain one immediately.
- Apply in person in Grand Rapids at 50 College St. SE between 9:00 a.m. and 4:00 p.m. (616-742-2373)
- Present your passport and Exit Paper (I-94)
- Also bring: F-1 Sponsor Letter (orange) and I-20 Certificate of Eligibility (white) or your J-1 IAP66 Certificate of Eligibility (pink), or your M-1 or H-1 I688B Work Authorization (plastic)
- Any other foreign national (including a spouse or child) should obtain an individual taxpayer identification number (ITIN) by filing IRS Form W-7.
- For further instructions please reference the Social Security Administration website.
Will I be subject to U.S. social security taxes?
Nonresident aliens are exempt from U.S. social security taxes, but resident aliens are subject to these taxes.
Note: Social Security taxes apply to wages and self-employment income, not fellowships.
Will Calvin withhold federal and state income taxes on my payments?
There are no simple answers. Calvin must withhold taxes on all payments to nonresident aliens unless the payment is exempt under the Internal Revenue Code, a tax treaty, or as foreign source income.
Types of Payments:
- Wages: Calvin withholds federal and state taxes using graduated rates.
- Tuition Fellowships : No withholding.
- Non-qualified Scholarships: (e.g., room, board, stipends, living allowances, travel, prizes, awards, emergency funds, etc.) Calvin withholds federal taxes at 14%.
- Fee/Honorarium/Royalty: Calvin withholds federal income taxes at 30%.
- Reimbursed Business Expenses for Employees/Short-term Visitors : No withholding.
What is foreign source income ?
Foreign source income is income earned, and services performed, by foreign nationals in their home country.
Will Calvin report my income to the IRS?
Payments to nonresident aliens are reported to both you and the IRS on Form 1042S or W-2 --but not on 1099. The W-2 is issued by January 31; the 1042S by March 15. Payments to resident aliens are reported on W-2 or 1099--not on 1042S.
Will Calvin report payments to my home country?
Calvin does not report payments to the home country, but it appears that IRS reports income that is exempt under a treaty to the home country.
Should I file a tax return if I receive no U.S. income?
If you are a nonresident alien and have no U.S. source income, IRS indicates that you are not required to file an income tax return. HOWEVER, you must file with IRS form 8843 disclosing information about your nonresident alien status. Resident aliens are taxed on their worldwide incomes and, therefore, must file U.S. income tax returns if they have income from any sources.
Should I file a tax return if I received U.S. income exempt from taxation under a treaty?
In most cases, you should file federal and Michigan tax returns.
Should I file a tax return if I received U.S. income but taxes were withheld on this income?
You should file a federal return to ensure compliance with tax laws, to pay actual tax liability, and to document any tax amounts that need to be refunded to you.
Note: The Internal Revenue Code establishes the rate of withholding, but the withholding rate does not necessarily correspond with a taxpayer's actual year-end tax liability.
How do I know if I qualify for treaty exemption?
To qualify for treaty exemption, you must be a citizen or a permanent resident (generally, a non-citizen who files a resident income tax return) of the "treaty country," and the type of payment must be exempt under that specific treaty. In addition, the IRS requires a U.S. federal identification number, evidence of nonresident alien status (i.e., the substantial presence test), evidence of proper work authorization (i.e., visa), and a properly completed IRS "treaty exemption form" (i.e., Form 8233 for wages, fees, honoraria). Information on tax treaties is available from the IRS (Pub.901).
A permanent resident of the U.S. who claims non-resident tax status under a tax treaty will be deemed by U.S. Citizenship and Immigration Services to have abandoned his or her permanent resident status in the U.S.
Note: Although Calvin only grants treaty exemption to nonresident aliens, some treaties have "tie breaker rules." If a foreign national feels he/she qualifies for treaty exemption in spite of the fact that Calvin withheld taxes, the individual can generally file IRS Form 8833 with his or her tax return and certify to the facts that merit the "treaty-based return position." Calvin cannot act as an individuals tax advisor.
Am I eligible for the Hope Credit or the Lifetime Learning Credit?
These credits are generally not available to nonresident aliens.
Where can I find information about U.S. taxation?
Websites:
Toll-Free Telephone Numbers :
- Federal Tax Issues: 1-800-829-3676 (forms and publications) or 1-800-829-1040 (advice)
- IRS Publications: (available on the internet and by phone), including:
- 505 Tax Withholding/Estimated Tax
- 513 Tax Info. for Visitors to the U.S.
- 515 Withholding of Tax on Nonresident Aliens
- 519 U.S. Tax Guide for Aliens
- 597 Canada Tax Treaty; #901 Tax Treaties
- 970 Education Tax Credits
Should I get a U.S. tax identification number?
Yes. The U.S. taxing authorities (IRS) will not accept a tax return that lacks a number, and most foreign students and scholars are required to file a return. Moreover, your administrative life in the U.S. will be far easier once you've obtained this number.
Which number should I obtain: SSN or ITIN?
The U.S. Social Security Administration has strict eligibility requirements for obtaining a U.S. Social Security Number. Individuals with green cards or H-1 visas are eligible for a SSN. All other foreign nationals, including spouses and dependent children, should obtain an ITIN. |
