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MU Home » Student Development & Services » International Programs

Taxes

Disclaimer
The resources on this page were prepared by the International Programs Office (IPO) as general guides to assist you in preparing your 2011 tax filing. If your tax situation is complicated, please consult with a tax preparation service, professional tax accountant, or tax attorney who is knowledgeable about nonresident tax law.

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Tax Information for International Students
Income Taxes
Important Tax Figures 2011
Students who earned less than $3,500
Students who earned more than $3,500
Tax Treaty Information
IRS Forms
North Carolina State Income Tax
FAQ about Taxes

TAX INFORMATION FOR INTERNATIONAL STUDENTS
* Please note that the information available on this website is not intended as tax advice. IPO encourages you to seek assistance from the Internal Revenue Service or a qualified tax professional. International Programs staff CANNOT offer personal assistance, advice, or answer individual questions regarding the completion of state and federal tax returns.

**Please be aware that each student/scholar is ultimately responsible for the accuracy of his/her income tax returns and any resulting penalties or interest.

Please visit Nonresident Alien - Figuring Your Tax for more information.

INCOME TAXES
Students who have been in the U.S. less than 5 years (and are therefore nonresidents for tax purposes) and who are on practical training off-campus are not subject to any FICA (Social Security) and Medicare withholdings. The mechanism for the exemptions is found under Internal Revenue Code 3121(b)(19) and is available to persons on F-1, J-1, M-1 and Q immigration status. It is a blanket exemption with the only qualification being that the person be a nonresident for tax purpose and that the work is authorized (CPT, OPT). IRS Publication 519 is a good resource.

Though F-1 students working off campus are exempt from FICA, they are subject to higher federal (and state) withholding for nonresident aliens.
All international students who were in the United States prior to December 31 must submit tax form 8843 to the Internal Revenue Service before April 15. Students who received compensation, prior to December 31, for on-campus work, scholarships, tuition waivers and/or assistantships must file state and federal taxes.

IMPORTANT TAX FIGURES 2011
The Internal Revenue Service announced the amount of personal exemptions and standard deductions* for tax returns in 2010.

Standard deduction is a dollar amount that reduces the amount of income on which you are taxed. You cannot take the standard deduction if you claim itemized deductions. Refer to Publication 519.

Nonresident aliens CANNOT claim the standard deduction. However, students and business apprentices from India may be eligible to claim the standard deduction under Article 21 of the U.S.A.-India Income Tax Treaty. Refer to Publication 519, U.S. Tax Guide for Aliens and to Revenue Procedure 93-20 for more information.

Students who earned less than $5,800*
International students who were in the U.S. prior to December 31 and received compensation for on-campus work, scholarships, stipend, or tuition waivers and/or assistantship less than the amount of one personal exemption $5,800 (in 2011) are NOT required to file for a tax return. However, they must file Form 8843 for themselves. Complete Parts I and III of Form 8843, sign on the back and mail it to the IRS, Austin, TX 73301-0215, U.S.A.

Students who had earned more than $5,800*
You MUST file Form 1040 NR-EZ or 1040 NR in addition to Form 8843 if you

• had earned income in excess of $5,800
• had wages or scholarship income exempt by treaty
• had taxable scholarship income
• are due a refund of taxes

*The amount of the personal exempt changes annually so please check with www.irs.gov for up-to-date information. The $5,800 is the amount of the personal exemption for the year 2011.

TAX TREATY INFORMATION
The United States has income tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.

Exemption on Your Tax Return
If you claim treaty benefits that override or modify any provision of the Internal Revenue Code (and by claiming these benefits your tax is, or might be, reduced), you must attach a fully completed Form 8233 to your tax return. See Exceptions, below, for the situations where you are not required to file Form 8233.

You must file a U.S. tax return and Form 8233 if you claim the following treaty benefits:

1. A reduction or modification in the taxation of gain or loss from the disposition of a U.S. real property interest based on a treaty
2. A change to the source of an item of income or a deduction based on a treaty
3. A credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code

Please visit Claiming Tax Treaty Benefits for more information.

Personal Service Income
Personal Service Income is any income earned from trade or business. In general, any individual who receives payment from an employer is considered to be performing personal service and, as such, is subject to income tax in the United States.

Student Provisions
Most treaties require that a student be in the United States temporarily for the primary or sole purpose of study. Many treaties also limit the benefits either to a specific number of years, or to a time which is considered reasonable and customary to complete the activity. Once a student in F-1 category has been present in the U.S. for 5 years, he/she may qualify to pay income tax as a resident and therefore may no longer qualify under the tax treaty provisions.

Current Tax Treaty Countries

Taxable Scholarships
The Tax Reform Act of 1986 contains provisions regarding the federal income tax treatment of scholarship from the university or from any other source, you should be aware that

1. Under federal tax law, only qualified scholarships or fellowships may be excluded from their recipient's gross income.
2. Under the tax law, the expenses that scholarships are used for fall in to two categories: tuition and living expense. A scholarship that is used for tuition is not taxable, but a scholarship that is used for living expenses is taxable.
3. Qualified scholarships or fellowships are any amount a student receives as a scholarship or fellowship that is used for tuition and fees to enroll in or to attend an educational institution; or to purchase books, supplies, and equipment that are required of the courses at the school the students plans to attend. These items must be required of all students in the course of instruction. Awards in excess of the described expenses are included in the recipient's gross income.
4. You must be a candidate for a degree.
5. RA stipends are wages and thus are taxable.

Current Tax Treaty Benefits for Scholarships

IRS FORMS YOU MAY RECEIVE FROM METHODIST UNIVERSITY
You do not need to complete these forms but they are provided for you to fill out your tax return.

International students will receive the following documents from Payroll Department and/or Accounting Department in order to prepare your tax return:

1. W-2
   This statement of earnings and taxes withheld from the previous tax year is sent to you by January 31 of the current tax year if you paid federal taxes in the previous year.
2. 1042S Document
   This statement is issued for any Foreign National who had a tax treaty from employment income, or who was issued a scholarship or fellowship in the previous tax year

If you will be receiving a 1042S, do not submit your tax return paperwork to the IRS prior to the receipt of the 1042S form. This form is sent out March 15 of every year.

IRS FORMS

Form 8843: All International students, scholars, and dependents who are a nonresident alien must file form 8843, even if you did not have any source of income for the current or previous year. F-1 students must complete part I (Question 1-4) and III (Question 9-14).

Form W-8BEN: If you are from a treaty country, you must complete this form in order to take advantage of the treaty. You must have a U.S. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to complete Form W-8BEN. The form is valid for three calendar years. If you are a registered student for more than three years, you must complete a new form at the expiration date.

Form 8233: If you are from a treaty country and wish to claim a tax treaty-based exemption from federal and state tax withholding on compensation for personal services performed at Methodist University, you must file Form 8233. Form 8233 is valid only for the calendar year in which it is filed and must be re-filed each year.

In order to apply for tax treaty benefits, you must complete Form 8233 correctly and attach a copy of your most recent award letter. These documents should be submitted to the IPO within two weeks of the start of classes. The IPO will review the documents to assure the accuracy and forward it to the MY payroll Office. Please make copies of your documents before you submit it to us. Form 8233 Instructions.

Form 1040 NR: is used by international students and scholars for which the following cases apply:

• claiming dependents (residents of Canada, Mexico, Japan, Korea and students from India only) - Form 1040NR
• received dividends or capital gains from U.S. stocks - Form 1040NR
• received income as independent contractor on Form 1099 - Form 1040NR
• claiming additional itemized deductions such as donations to U.S. charities, professional tax preparation fees from previous years - Form 1040NR
• claiming unreimbursed employee expenses (moving, travel, continuing education) - Form 1040NR
• have additional adjustments to income - Form 1040NR
• only income received was as interest from U.S. bank or credit union - Form 8843

Form 1040 NR-EZ: is the tax return form most frequently used by international students in United States.

You can use Form 1040NR-EZ only if all the requirements below apply to you (most international students meet all these conditions):

• You do not claim any dependents. (Do not claim a wife or children on your tax return.)
• You cannot be claimed as a dependent on someone else's return (ex: spouse, parent).
• You are not claiming any tax credits.
• If you are married, and you do not claim an exemption for your spouse.
• Your taxable income is less than $100,000.00.
• You do not claim any itemized deductions other than for state and local income taxes.
• You are not claiming any adjustments to income other than scholarship and fellowship grants excluded.
• You do not owe any "other taxes"
• Your only U.S. income was from wages, salaries, and tips, refunds of state and local income taxes, and scholarship or fellowship grants.

International students are responsible for your own taxes. IPO staff CANNOT give you individual tax advice. You may download IRS Publication 519 (U.S. Tax Guide for Aliens) and Publication 901 (U.S. Tax Treaty).

NORTH CAROLINA STATE INCOME TAX
In addition to federal taxes, international students are also required to file a North Carolina income tax form (D-400-N.C. Department of Revenue Individual Income Tax Return) if they had earned income that was derived from North Carolina. If you had earned income from another state, you will be responsible for filing a tax form for that particular state.

When filing your state tax return, make sure that you include the proper W-2, 1042-S, etc. form(s). This information is always notated on the W-2, 1042-S, etc. forms that you receive from your employer (i.e. "Attach to any state tax return that you file.").

If, after you complete your state tax return, you determine that you are due a refund of taxes paid, you will mail your return to:

N.C. Dept. of Revenue
P.O. Box R
Raleigh, NC 27634-0001

If you are not due a refund or if you are required to pay state taxes, your return will be mailed to:

N.C. Dept. of Revenue
P.O. Box 25000
Raleigh, NC 27640-0640

FREQUENTLY ASKED QUESTIONS

I'm a new student for the Spring 2011 semester but arrived in the United States in late December 2010. Do I need to file a tax form?
Yes. You need to file Form 8843. This is the only form you will need to complete.

How much tax will I be charged?
The taxable portion of your award will be taxed at a rate of 14% (Federal Rate) and 6% (state). Some foreign students come from countries that have a tax treaty with the U.S. A tax treaty takes procedure over the U.S. tax laws, so that, if your country's treaty exempts your scholarship from tax and you complete a Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) and return it to the IPO, you will not be charged any tax.

• If you are from a treaty country and you complete a Form W-8BEN, then you will NOT be charged any tax. Even though the tax treaty may exempt your scholarship from tax, you may still be required to file an income tax return.
• If you are from a treaty country and you do not complete a Form W-8BEN, then you may be taxed.
• If you are not from a treaty country, then you may be taxed.

I am a full-time student but I also receive a RA stipend. Is the stipend considered to be wages?
Yes, RA stipends are is considered wages. In general, if you receive payment for performing a service, that is considered to be wages and is taxed as income.

I am a student from India, and I've heard that my country's tax treaty allows me to claim the standard deduction, but I can find no additional information about this benefit.
Information on this benefit can be found in IRS Publication 519, US Tax Guide for Aliens, P. 27. Students from India have the choice of itemizing their deductions or taking the standard deduction amount. Since the standard deduction for 2008 is $8500 if you are single, most will take this amount. On Form 1040 NR-EZ, enter $8500 on line 11 if you are single. If you are married, and your spouse also files a return, enter $8500 on line 11.

If my country has a tax treaty with the U.S., does that mean I don't have to file any tax forms?
No. In order to claim tax treaty benefits, you must file federal income tax forms 8843 and either 1040 NR-EZ or 1040 NR.

I've received a form 1042-S. How do I reflect this on my tax return?
It all depends upon the TYPE of income being reported on the 1042-S. Look at the income code in column (a) of the form. An income code of 15 is for a scholarship or fellowship grant, and would be reported on line 5 of Form 1040 NR-EZ or line 12 of Form 1040NR. An income code of 19 refers to a tax treaty amount withheld from wages, and would be reported on line 6 of form 1040 NR-EZ or line 22 of form 1040NR. You would not include this amount as part of your wages on line 3 of form 1040 NR-EZ or line 8 of form 1040 NR.

What is the difference between the 1040 NR and the 1040 NR-EZ?
The 1040 NR is a more comprehensive tax form, totaling five pages, which can be used by any nonresident. The 1040 NR-EZ is a simplified version of the same form, which can be completed by nonresidents who meet certain requirements. Most MU students qualify to file the 1040 NR-EZ. Note: Married students from India whose spouse had no U.S. source income should file the 1040 NR. See the 1040 NR instructions for more information

Once I complete my 1040 NR or 1040 NR-EZ and Form 8843, is there anything else I need to do?
You should staple copy B of your W-2 form(s) and/or copy C of your 1042-S form(s) to the front of page one. You should also include a check if you owe any taxes, made out to the Internal Revenue Service. Finally, be sure to make photocopies of your return and all supporting documents for your personal file. In addition, you must also file state tax forms.