Under Internal Revenue laws and regulations your resident or nonresident alien status is determined by either a "Green Card", marriage to a U.S. citizen or resident, or substantial presence test. For the substantial presence test, the number of days in your first five years in the U.S. as a student (F-1 visa) or first two years if you are a teacher/researcher (J-1 visa) are not counted. During this time you are "exempt" from the substantial presence test.
Non-resident aliens are taxed only on income from U.S. sources. During the time you are a nonresident alien, you must fill out either a 1040NR or 1040NR-EZ form if you have U.S. source income and Form 8843 if you are "exempt" from the substantial presence test.
You may get tax forms from the IRS by calling 1-800-829-1040 or 206-442-1040, or from the IRS website.
- If you must file taxes on a 1040NR or 1040NREZ form and your spouse is also working, each of you must file a separate form.
- Always write your social security number, address and telephone number on anything you send to the IRS.
- Attachments may be stapled to your tax return, but your payment should not be attached to your return.
- Make photocopies of everything you send to the IRS, including W-2 forms, tax returns and correspondence. You must keep these copies for at least three years.
- Always respond to any letter sent to you from the IRS before any stated deadline occurs. If you cannot gather all documents before the deadline, send a letter telling the IRS what is delaying your response. Send a photocopy of the IRS letter with your response.
If you receive scholarship and fellowship payments from only non-U.S. sources, no reporting or withholding is required. Therefore, no forms are required and you will not receive a 1042-S from the University of Washington.
The University is no longer required to report students with U.S. source funds that do not exceed the cost of tuition, fees, and an allowance for books as these are considered "qualified" expenses. If all the money you receive is qualified, you will no longer receive a 1042-S form. If the payments you receive are in excess of tuition, fees and a book allowance, these are considered "unqualified". The University will report all unqualified scholarships to the IRS and you will receive a 1042-S form from the Payroll Office no later than March 15 of the following calendar year. If you receive unqualified payments in excess of a personal allowance, you will have tax withheld.
Generally IRS regulations require that 14 percent of non-qualified scholarship and fellowship payments paid to F, J, Q, or M visa holders be withheld as federal income tax, unless you are a resident of a country with which the United States has an applicable income tax treaty.
If a department wanted to make a taxable scholarship payment of a certain amount to a nonresident alien student, how much additional expense would the department incur?
The U.S. tax code requires federal income tax withholding on all U.S. source non-qualified scholarship payments to nonresident alien students. The withholding rate for payments to students on F-1 or J-1 visas is 14%. Non-qualified scholarships are those payments for expenses other than tuition and course-related expenses.
Revenue Procedure 81-48 outlines a formula which may be used to calculate an employee's wages when the employer pays the employees tax. Such a formula could be used in this case as well. The formula is as follows:
W = S / 1 - R
W represents the employee's wages
S is the stated pay
R is the tax rate
For example, if the University wanted to make an after tax non-qualified scholarship payment to a student on an F-1 visa of $1000 it would need to report $1162.79 of pretax income calculated as follows:
W = $1000/ (1-14); (Federal Income Tax Rate)
Gross payment $1162.79
Federal Income Tax withheld (14%) $162.79
Net check $1000.00
In other words, if you want the student to receive $1000, divide the $1000 by .86%. It will be $162.79. The total expenditure to a department paying the tax is $1162.79.
Individuals Not From Tax Treaty Countries
You may be eligible for additional exemptions provided you complete a W-4 claiming those exemptions, along with an attached statement that you have filed a U.S. tax return for the previous year, or will file a U.S. tax return if it is your first time.
- As an international student, what if my country does not have a Tax Treaty Benefit with the U.S.?
Individuals from Tax Treaty Countries
Non-qualified scholarship and fellowship payments made to nonresident aliens claiming exemption from the 14 percent Federal withholding tax because of an income tax treaty are reported by the University to the IRS. The IRS, in turn, reports this income to the applicable country of residence.
If you wish to claim a tax treaty exemption, you must complete IRS Form W8-BEN. You should keep copies of any of these documents. Send the original to Student Fiscal Services, Box 355870. If you are a nonresident alien student and you desire in-depth information, or have an unusual or difficult situation regarding your obligations under the U.S. federal income tax laws, you should direct your questions to:
Internal Revenue Service Assistant Commissioner (International)
Attn: IN:C:TPS 950 L'Enfant Plaza South, SW
Washington, DC 20024
Or contact the local Internal Revenue Service or a tax advisor.
- Do I need to pay taxes if I don’t have a W8-BEN form on file?
- As an international student, if my country has a Tax Treaty benefit with the U.S., do I pay taxes for the scholarship money?
For students without a Social Security Number
If you are not eligible for a social security number, you may get an Individual Tax Identification Number (ITIN). The University of Washington is able to process applications for ITINs, but only if you are unable to obtain a social security number.
Go to the International Student Services Office in 459 Schmitz Hall and get a letter declaring that you may possibly receive assistance from a U.S. source while you are in the United States. You cannot get a social security number without this letter. Complete Form SS-5 and take the form in person to a Social Security Administration office with your passport and original Immigration and Naturalization Service (INS) documents (for example: I-94 Alien Registration Receipt Card IAP66 or I-20). The locations of the nearest Social Security offices are:
|Downtown Seattle||901 Lenora, Suite 100|
|North Seattle||13510 Aurora Ave N, Suite B|
|South Seattle||675 S Lane, Suite 401|
|Bellevue||505 106th Ave NE, Suite 301 Park Plaza|
|Everett||8625 Evergreen Way, Suite 250|
|Kent||1019 W James St, Suite 200|
Or you may use the Social Security website to locate offices.
The addresses to obtain ITIN numbers are:
|Seattle||Federal Building, 915 2nd Ave, Room 456|
520 112th NE, Suite 300