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					 Internal Revenue
Wage and Investment
  Stakeholder Partnerships,
Education and Communication
        Spring 2010
  International Students &
Scholars Income Tax Seminar

     Note: This workshop will
   explain only the basic rules of
     resident income tax filing.
      Please Note

This workshop is for students on
F-1 or J-1 visas who have been
    in the U.S. for 5+ years.

     It is also for scholars on
    J-1 visas who have been
     in the U.S. for 2+ years
   out of the last 6 years AND
 for employees on H-1B visas.
Internal Revenue Service

• The taxation agency of the U.S.
  Government to which you
  – File your personal Income Tax Return
    State Tax Departments

• The taxation agency of the State
  Government to which you may need to
  – File your personal Income Tax Return
• If you resided in New York State in 2009, you
  may need to file a NYS Income Tax Return.
• If you lived in another State, you may need to
  file that State’s Income Tax Return.
• If you lived in two States, you may need to file
  two State Income Tax Returns.
   Basic Tax Vocabulary
• Alien: generally, any person who is
  not a U.S. citizen
• Student: person temporarily in the
  U.S. on an F, J, Q or M visa
• Scholar: person who is not a student
  & who is temporarily in the U.S. on a
  J or Q visa
Basic Tax Vocabulary (cont.)

• Resident or Non-resident: refers to
  one’s tax filing status (Nothing else!)
• IRS: Internal Revenue Service
• Income Tax Return: statement filed
  (submitted) by individual taxpayer to
  the IRS
Do I file my income tax return as
  a Non-Resident or Resident?
 of Residency Status

     Do not confuse
Federal Tax Residency with

  Immigration Permanent
 New York State Residency
  requirements for in-state
        tuition rates
  Federal Tax Residency Rules

• For Federal Tax purposes, foreign
  nationals are classified as:
     • Resident Aliens OR
     • Nonresident Aliens (anyone who is not a
          resident alien)
• Note: There are also “Dual Status” aliens who are considered as
  residents for part of the year and nonresidents for part of the year.
  This topic will not be covered in this presentation.
Resident or Nonresident?

The following determines whether you are
a resident or nonresident for federal tax
1. Green Card Test
2. Substantial Presence Test
3. Residency through Marriage
Who is a Resident for Tax Purposes?

 1)“Green Card” Test
 Lawful Permanent Resident of the
        Green Card Test

• Your residency starting date for tax
  purposes is based on the date your
  status changed to Lawful Permanent
 Remember: There is no option. If
 you are a Lawful Permanent Resident,
 you are a resident for tax purposes.
Who is a Resident for Tax Purposes?

2) “Substantial Presence” Test
   Calculation that takes into consideration
   your presence in the U.S. during the
   current year and two immediately
   preceding years
”Substantial Presence” Test

   31 days during the current year
  183 days based on a calculation
 that considers presence during the
   current year and two preceding
                Residency Rules
           Substantial Presence Test (2-Part Test)

A.   Current year (2009) days in U.S. x 1     = ___days
     Must have at least 31 days in current year

B.   1st preceding year (2008) days in U.S. x 1/3
                                              = ___days

C.   2nd preceding year (2007) days in U.S. x 1/6
                                              = ___days

D.   Total “Days in U.S.”   A+B+C
                                             = ___days
If Line D equals or exceeds 183, 183-day test is passed.
Must pass both 31-day and 183-day tests.
 Substantial Presence Test

• If Line A equals or exceeds 31 days and Line
  D equals or exceeds 183 days, then you are a
  Resident Alien for federal tax purposes.
• If not, then you are a Nonresident Alien
  for federal income tax purposes and do
  not need this workshop.
     Residency Rules

Some individuals are exempt from
counting days toward the
Substantial Presence Test.
 • Days of an “EXEMPT” individual
 • Commuter from Canada or Mexico
 • Others (see Publication 519)
  Who are Exempt Individuals?

• F, J, M & Q students (who have been
  in U.S. for less than 6 years)
• J & Q Scholars (who have been in U.S.
  for less than 3 years out of last 6
  Note: Not exempt from taxation
Residency through Marriage

3) A nonresident spouse can be
treated as a resident for tax purposes
– You are required to file your income tax
  return jointly with your U.S. Citizen or
  U.S. Resident (for tax purposes) spouse.
– You must report world-wide income.
Establishing a Closer Connection

 If you want to remain a non-resident for
 income tax purposes by claiming a closer
 connection to your country, you can if you:
  – are present in the U.S. less than 183 days in the
    current year AND
  – have a tax home in a foreign country AND
  – file Form 8840.
 Note: There are other criteria. Please see Form
 8840 instructions.
Residency Starting Date
Residency Starting Date

 Residency starting date under
        green card test

If you meet the green card test at any time
during a calendar year, but do not meet the
substantial presence test for that year, your
residency starting date is the first day in the
calendar year on which you were present in
 the U.S. as a Lawful Permanent Resident.
Residency Starting Date

  Residency starting date under
     substantial presence test

Your residency starting date is generally
the first day you were present in the U.S.
         during that calendar year.
 Residency Starting Date

When both the Substantial Presence Test
  and Green Card Test apply, use the
        earlier of the two dates.
Tax Treatment of
 Resident Aliens
Are you required to file a U.S.
    Resident Tax Return?
   What is
Gross Income?
Basic Tax Vocabulary (cont.)

• Compensation/Earnings: wages,
  salaries, tips
• Income: wages, salaries, tips, interest,
  dividends, some scholarship/fellowship
            Gross Income

•   Wages, salaries and tips
•   Bank interest
•   Investment Income (taxable)
•   Taxable Scholarship/Fellowship
Note: These are only a few examples.

• Resident Aliens are taxed on worldwide
  income, just as U.S. Citizens are.
• Resident Aliens may not claim
  exclusions of income based on Tax
  Treaties (with certain exceptions stated
  in some tax treaties).
 Wages, Salaries and Tips

• Amounts you receive from an employer
• You should receive a Form W-2 at the
  end of the year reporting the annual
  amount of wages you received.
    Taxable Scholarship and

• Scholarship and fellowship grants are not
  included in taxable income if used for tuition,
  fees, books, supplies and equipment required
  for courses AND if the student is pursuing a
• Any portion of scholarship or fellowship
  received for room & board or in exchange for
  teaching or research is included in taxable
      What is a Scholarship or

• You call it:    • Internal Revenue calls it:

 Tuition Waiver      Non-taxable
                  (No work required)
    What is a Scholarship or

•You call it:    •Internal Revenue calls it:

Room and Board
                 Taxable Scholarship
        What is a Scholarship or
  •You call it:         •Internal Revenue calls it:

  Teaching or Research
  Assistantship Stipend
(recipient performs work)

                            Taxable Wages
      Do you have to file
     an income tax return?

• If your gross income is over the dollar
  amounts listed on the chart, you must
  file a federal (IRS) Income Tax Return.
• If you have overpaid taxes, you must
  file an income tax return in order to
  receive an income tax refund.
What do I need to do to file
  an income tax return?

First, learn the following tax
vocabulary . . .
           Filing Status

• Single: not married
• Married: married and file income
  Note: U.S. recognizes marriage from U.S.
  states and other countries
• Married filing Separate: married but
  files income alone
       Filing Status (cont.)

• Head of Household: single and pays for
  maintenance of a home for a dependent
 Note: Read the rules for this status carefully
 before claiming it. (IRS Publication 17)
• Qualifying widow(er) with dependent
  child: Able to claim this status for two
  years after the death of the spouse
2009 Filing Requirements
   for Resident Aliens
Income Tax Forms
What forms should I fill out?

   Resident aliens can file Forms
     1040, 1040A or 1040-EZ.
 (See form instructions for any restrictions)
       More Tax Forms
• W-2: Wage and Tax Statement
• 1040 or 1040A: U.S. Resident Alien
  Income Tax Return
• 1040-EZ: U.S. Income Tax Return
  for certain resident aliens who have no
 Note: See IRS Publication 17 to find
 the easiest form for you to file.
     More Tax Vocabulary

• Withholding:
  – U.S. income tax automatically taken from
    your paycheck
    Note: U.S. Social Security and Medicare
    are also taken from your paycheck.
               Forms W-2
•You could have one W-2 or more from
different employers
•The form was prepared by your employer and
mailed to you.
 •You do not write anything on this form.
•You use this form as a reference when you
prepare your income tax return.
•When finished, you attach this form to your
income tax return.
  How do I file a Resident
    income tax return
          (Form 1040-EZ)?
First, learn the following tax vocabulary
. . .
        More Tax Vocabulary

• Standard Deduction: standard amount that
  individuals may subtract from income before
  calculating taxes owed
• Itemized Deductions: allowable amounts that
  individuals may subtract from income before
  calculating taxes owed
  – Examples: charitable contributions, state & local taxes
    withheld, etc.
  Note: No one can have both a standard deduction and
  itemized deductions. You have to choose one.
Standard Deduction Amount
 (for most people under age 65)
•   Single                    $ 5,700
•   Married Filing Joint      $11,400
•   Married Filing Separate   $ 5,700
•   Head of Household         $ 8,350
•   Qualifying Widow(er)      $10,900
    with Dependent Child
 More Tax Vocabulary          (cont.)

• Personal Exemption: amount
  deducted from income for yourself
  and/or your dependents
  For 2009, the amount is $3,650.
          Which Residents can
          use Form 1040-EZ?
• Individuals
  – who do not claim any dependents
  – whose taxable income is less than $100,000
  – who do not claim any itemized deductions
  – who had only wages, taxable scholarship or
    fellowship grants, and whose taxable interest was
    not over $1,500
  – Miscellaneous other reasons (see Form 1040-EZ
        Other Credits and Deductions
             You May Qualify For
    (but not covered in this presentation)

•   Earned Income Tax Credit
•   Dependents
•   Child and dependent care
•   Retirement Saver’s Credit
•   Education Credits
    There are many more deductions and credits listed in
    various IRS publications.
  Let’s look at the
steps for completing
   Form 1040-EZ
       FORM W-2
Used for 1040-EZ Example

   Form 1040-EZ

Box 1 from All W-2(s)
 Form 1040-EZ
 Add all amounts in
 Box 2 of W-2(s)

From worksheet on
back of 1040-EZ
Making Work Pay Credit
          Form 1040-EZ

Read instructions to
see if you qualify     From Tax Table
Tax Table
Form 1040-EZ
   When do I file
    a resident
income tax return?
The Filing Deadline is
    April 15, 2010
Where do I file my Resident
   income tax return?

  Department of the Treasury
Internal Revenue Service Center
 Kansas City, MO 64999-0014
 Social Security

Do I pay it or am
   I exempt?

  That depends.
         You don’t pay
   Social Security Tax if . . .

• You are a nonresident alien for income
  tax purposes
• You are present in the U.S on an F-1,
  J-1, M-1 or Q-1 visa, AND
• You perform services that are
  consistent with your U.S. visa status
 You Pay Social Security Tax
         When . . .

• You are a Resident Alien for income tax
• You are an F-1 student who has been in
  the U .S. for 5+ years or a J-1 scholar who
  has been in the U.S. for 2+ years.
• You hold an H1-B or TN visa.
  Note: You will always be subject to Social
  Security and Medicare Taxes (FICA) from the
  date of arrival.
   Exception to This Rule
If you are a student who would otherwise
be subject to Social Security and Medicare
Taxes (FICA), you will be exempt from
paying it if you are working at the school as
a full-time student.
(This exemption may start and stop periodically due to the
individual’s enrollment status )
    The Exception Does Not Apply
           in These Cases
•    Resident aliens who are participating in full-time
     Optional Practical Training should pay Social Security
     and Medicare Taxes (FICA) throughout their OPT work
     authorization period, and
•    Students who are resident aliens and are not enrolled
     in 6 or more credits during summer break should pay
     Social Security and Medicare Taxes (FICA) during
     summer break.
For more information, call
Thank You!

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