Who is a Nonresident Alien?
Exemptions from Counting Days
Tax Treaties
Employment
Scholarships
Filing Tax Returns
Common Tax Return-Related Forms
Assistance with Tax Returns
ITIN vs. Social Security Number
Contact for Additional Information
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Who is a nonresident Alien? |
Two U.S. government agencies, the U.S. Immigration
and Naturalization Service (now known as BCIS) and the U.S. Internal
Revenue Service (IRS) use the term nonresident alien.
BCIS Definition: Persons who reside temporarily in the United States in non-immigrant
status are known by BCIS as nonresident aliens. The most
common non-immigrant statuses at MU include F-1, F-2, J-1, J-2,
H-1B, and TN.
IRS Definition: For IRS purposes, a nonresident alien is any non-citizen or legal
permanent resident who has not resided in the U.S. for more than
182 days over a three-year period, as evidenced by the Substantial
Presence Test (SPT). Persons who meet the SPT will be taxed
primarily the same as legal permanent residents and citizens,
which may include withholding of FICA from employment compensation.
When counting days of physical presence toward fullfillment of the
SPT, 100% of the current year days are counted, 1/3 of the previous
year days are counted, and only 1/6 of the second previous year days
are counted. Regardless of the results, to be considered a resident, the
individual must be present for at least 31 days during that tax year.
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Exemptions from Counting Days |
Students: Persons in F and J student status are
exempt from counting days
toward the Substantial Presence Test (SPT) for a period of five tax
years throughout their lifetime. Therefore, as NRA's, Social
Security and Medicare withholding (also called FICA tax) willl not be
required and nonresident alien tax returns must be filed on the
Form 1040NR or 1040NR-EZ.
Non-Students: Persons in J-1 non-student status are exempt from counting days
toward the SPT for a period of two tax years out of every 6 years. Therefore, as
NRA's, Social Security and Medicare withholding (also called FICA tax) will not be required
and nonresident alien tax returns
will be filed on the Form 1040NR or 1040NR-EZ.
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Tax Treaties |
The United States currently has tax treaties with more than 50
countries. These treaties are designed to decrease the likelihood
that the NRA will be taxed on the same income both in the U.S.
and the country of tax residency.
Treaty benefits will not be honored unless appropriate treaty
forms are completed and on file with the institutional payroll office, and
the recipient has either a US Social Security Number (SSN)
or an Individual Taxpayer Identification Number (ITIN).
Student Treaties: Tax treaty benefits for students receiving compensation for
employment are generally limited to a specific amount of
income for each tax year (usually between $2,000 and $5,000 per
year). Most treaty benefits will end once the student becomes
a resident alien for tax purposes, so most treaty benefits will
last no more than five years, with only a few exceptions.
Tax treaty benefits for scholarship income may also be available
for students, even if there is not a corresponding treaty for
compensation income.
Non-Student Treaties: Tax treaties for non-students are generally not limited to a
specific amount of income, but are limited by a specific number
of years. In some cases, if a non-student remains in the U.S.
beyond the period covered by the treaty (usually two years from
the date of entry), a "retroactive clause" in the treaty requires
payment of all taxes that were previously exempt. It is,
therefore, important to monitor these dates and treaty benefits
carefully.
Recipients of a research grant may be eligible for tax treaty
benefits on the maintenance allowance provided in the grant,
and should initiate a tax review immediately upon receipt of
the grant.
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Employment |
Most students in F-1 and J-1 immigration status may be
employed for up to 20 hours per week when school is in session
and up to full-time during authorized vacation periods. Employment
is limited to on-campus jobs, without authorization
from either the U.S. Immigration and Naturalization Service (BCIS) or
the Designated School Official in the International Center.
Employment of postdoctoral researchers and others in J-1 non-student
status is also common. Persons in J-1 non-student status are
eligible for full-time employment at MU.
Employment may be authorized for the spouse or dependent of a J-2.
This employment authorization is available from DHS through
application on the I-765. Persons in J-2 immigration status are
ineligible for tax treaty exemptions (except residents of Canada)
and FICA exemptions on their income.
When an NRA ex employed, it is important to meet with NRA Taxation
Specialist as soon as possible after receiving the Social Security
card so that tax treaty and FICA exemption can be identified,
preferably before the first paycheck is issued.
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Scholarships |
Scholarships made to NRA students will be taxable
income for any portions of the scholarship greater than the
student's educational expenses. Educational expenses include
resident and nonresident, student activity, information technology,
and student health fees, and mandatory international student health
insurance premiums.
The portion of scholarship determined to be
taxable will be withheld at a minimum of 14% unless there is a
tax treaty that exempts the scholarship income from withholding.
Scholarship income that is awarded directly to the recipient is
fully taxable, and withholding will occur at a minimum of 14% if the
recipient files no tax treaty exemption forms.
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Filing Tax Returns |
Each year between mid-January and April 15, persons
who have income in the United States (including international
students and researchers) may be required to file income tax
returns. Tax returns provide an opportunity to apply for money
that was withheld in amounts greater than the actual tax liability
to be refunded to the applicant.
A recent change in the tax rules (effective January 1, 2006)
exempts persons who have less employment income than the
personal exemption ($3,400 for 2007) from filing a return if no
withholding has occurred. Taxpayers exempt from filing a US return
on this basis are also exempt from filing a Missouri tax return.
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Common Tax Return-Related Forms |
Form W-2: All employees who have taxable income from employment in the
United States will receive a Form W-2, which is a statement of
earnings. This form will be mailed in mid-January to the employee's
last known address.
Form 1042-S: All nonresident aliens who have taxable scholarship income or
tax treaty exemptions will receive a Form 1042-S, which is a statement
of income received during the year. The NRA will receive this
form no later than mid-March. Therefore persons with the above types
if income may not file a tax return until after they have received
the Form 1042-S documenting this portion of their income.
Form 1099-INT: Documents bank account interest, which is not taxable to nonresidents.
This form will not be used in the tax return process.
Form 1098-T: This form is used by US residents to claim the Hope and Lifetime
Learning tax credits, which are not available to nonresidents
for tax purposes.
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Assistance with Tax Returns |
The United States Internal Revenue Service (IRS) has created a program
to help with tax preparation. This program is called Voluntary
Income Tax Assistance (VITA) and is available in Columbia each
spring. Please check our Cashiers NRA website
for more information about this important tax return preparation
service for both nonresidents and residents for tax purposes.
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ITIN vs. Social Security Number |
A taxpayer identification number is required
before tax treaties can be honored or tax returns can be filed.
The Social Security number is available to all nonresidents who
can document that they are employed. If you cannot document that
you have a paid job and are, therefore, ineligible for an SSN, you
must complete an application for an Individual Taxpayer Identification
Number (ITIN). The ITIN application generally cannot be made
except at the time of the tax return.
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For additional information, please contact: |
Judy L. Todd
Nonresident Alien Taxation Specialist
Qualified Tax Expert and Director
Mizzou LITC: Outreach and Education for Speakers of English as a Second Language
Cashiers Office, 15 Jesse Hall
University of Missouri-Columbia
Columbia, MO 65211-1020
573-882-5509
NRA website
Email: ToddJ@missouri.edu.
Download the LITC brochure
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