ASSOCIATES TAX & ACCOUNTING SERVICES Young & Associates, LLC Presents
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ASSOCIATES TAX & ACCOUNTING SERVICES Young & Associates, LLC presents: US Taxation of International Students and Scholars April 9, 2020 What We Will Cover • Filing Requirements • Residency Status/Taxation • Types of Income • Tax Forms • Completion of Tax Returns • COVID-19 Impact • Resources Filing Requirements Am I Required to File Anything? YES NO • Present in the US in 2019 • No days of presence in for any length of time the US during 2019 • US source income • No US source income • Exception for tourists Residency Status Residency Status Full Year Nonresident Alien Full Year Resident Alien Dual Status (Part-year resident/part-year Nonresident) Occurs in the year of arrival or departure Residency Status Residency Tests: • US Citizenship • Lawful Permanent Resident (Green Card Holder) • Substantial Presence Test (SPT) Present in the US at least 31 days during the current year, and; If the sum of: 100% of total current year days + 1/3 of first preceding year + 1/6 of second preceding year >183 days = Resident Alien Residency Status Exceptions to SPT • F or J students receive 5 “exempt” years. Not exempt from tax, but of counting physical days of presence in the US towards the SPT. So, for the first 5 years, the SPT total will be “0”. • J non-students receive 2 “exempt” years (of the past 6 years). Generally, for the first 2 years, the SPT will be “0” – unless individual has had previous entries to the US as an F, J, M or Q visa holder. “Exempt” years are CALENDAR years, not years from date of arrival. Are you an exempt individual? – Decision Tree If you are temporarily present in the United States on an F, J, M, or Q visa, use this chart to deter- Residency mine if you are an exempt individual for the Substantial Presence Test (SPT). ExemptIndividual/ Student Teacher or Trainee F, J, M, or Q Visa J Visa Are you a full-time student? Are you a student? No Ye s Ye s No Are you in substantial Are you in substantial compliance with your visa? compliance with your visa? No Ye s Ye s No Have you been in the U.S. for You are Have you been in the U.S. for any part of more than 5 calendar an exempt any part of 2 of the preceding 6 years? individual for the calendar years? Ye s No Substantial No Ye s Presence Test Were you exempt as a teacher, Do you choose to claim a Closer trainee, or student for any part of 3 Connection exception to the (or fewer) of the 6 preceding years, Substantial Presence Test? AND Did a foreign employer pay all your compensation during the tax year No Ye s in question, AND Were you present in the U.S. as a teacher or trainee in In order to claim the exception, all the any of the preceding 6 years, AND following must apply: Did a foreign employer pay all your A. You do not intend to reside permanently in the US compensation during each of the B. You must have complied with your Visa. preceding 6 years you were present in C. You must not have taken steps to become a the U.S. as a teacher or trainee? Resident Alien. D. You must have a closer connection to a foreign country. Ye s No No Ye s * You must apply the Substantial Presence Test * Substantial Presence Test (SPT) - You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2019. To meet this test, you must be physically present in the United States on at least: 1. 31 days during 2019 and 2. 183 days during the 3-year period that includes 2019, 2018, and 2017, counting: a. all the days you were present in 2019 and b. 1/3 of the days you were present in 2018, and c. 1/6 of the days you were present in 2017. 1 Nonresident Alien Taxation • Filing status: Single, MFS, or QW • No Personal Exemptions • Must itemize deductions • State and local income taxes • Gifts to US charities • Student/scholar adjustments to income • Scholarship and fellowship grants • Student Loan interest Resident Alien Taxation • Filing Status: Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Head of Household (HOH), Qualified Widow (QW) • No Personal Exemptions • Income: Worldwide Income • Deductions: Above the line adjustments (Educator expenses, Alimony paid, Expenses of Performing Artists, Student Loan Interest, Tuition & Fees) & Sch A Itemized deductions • Credits: Foreign Tax Credit (FTC), Child Tax Credit (CTC), Earned Income Credit (EIC), Education Credits, Child Care Credit Residency Status Dual-Status Resident Student/Scholar Exempt Years Exhausted but still in US January December Nonresident prior to SPT applied, resident thereafter Student/Scholar Departure Year January December Resident until departure, Nonresident thereafter Types of Income Types of Income Wages/Employment/Compensation Provide services to the University for payment– paid on a monthly, bi- weekly or casual basis Northwestern employment taxes: • Federal – Taxes are assessed by the Income Tax Withholding Table • IL State – 4.95% • FICA/OASDI – 6.20% (only applicable to residents for tax purposes) • Medicare – 1.45% (only applicable to residents for tax purposes) Types of Income Scholarship/Fellowship/Stipends: Funds given to support education/academic advancement or achievement Northwestern scholarship/fellowship taxes: • Federal – Taxes are withheld at 14% for Nonresidents and 0% for residents. Residents may be required to make quarterly estimated tax payments. • Illinois State – Taxes are not withheld at source, but individuals may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • FICA/OASDI & Medicare – Not applicable Independent Contractor Similar to Employment, but providing services independently for business under terms of a contract. Northwestern independent contractor taxes: • Federal – Taxes are withheld at 30% for Nonresidents and 0% for residents. Residents may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • Illinois State – Taxes are not withheld at source, but individuals may be required to pay quarterly estimated tax payments and/or pay taxes when filing a tax return. • FICA/OASDI & Medicare – Not withheld Tax Forms Form W-2: Wage and Tax Statement Mailed to address on file no later than January 31st unless someone has requested to receive them online by contacting Payroll at (847) 491-7362 or (312) 503-9700 or at (http://www.northwestern.edu/myhr/). 1. Wages 2. Salary 3. Compensation a Employee’s social security number Safe, accurate, Visit the IRS website at OMB No. 1545-0008 FAST! Use www.irs.gov/efile b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld c Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld 5 Medicare wages and tips 6 Medicare tax withheld 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee’s first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 C o d e 13 Statutory Retirement Third-party 12b employee plan sick pay C o d e 14 Other 12c C o d e 12d C o d e f Employee’s address and ZIP code 15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name Wage and Tax Department of the Treasury—Internal Revenue Service Form W-2 Statement 2019 Copy B—To Be Filed With Employee’s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Form 1042-S: Foreign Person’s U.S. Source Income Subject to Withholding Mailed to address on file no later than March 15th. Reprints of forms available March 31st. Contact Payroll at (847) 491-7362 or (312) 503-9700 or at (http://www.northwestern.edu/myhr/). 1. Scholarships 2. Fellowships 3. Foreign Independent Contractor Services 4. Tax Treaty Benefits 5. Foreign Prize/Award/Miscellaneous foreign payments Foreign Person’s U.S. Source Income Subject to Withholding OMB No. 1545-0096 Form 1042-S ▶Go to www.irs.gov/Form1042S for instructions and the latest information. 2019 Department of the Treasury Copy B Internal Revenue Service UNIQUE FORM IDENTIFIER AMENDED AMENDMENT NO. for Recipient 1 Income 2 Gross income 3 Chapter indicator. Enter “3” or “4” 13e Recipient's U.S. TIN, if any 13f Ch. 3 status code code 3a Exemption code 4a Exemption code 13g Ch. 4 status code 3b Tax rate . 4b Tax rate . 13h Recipient's GIIN 13i Recipient's foreign tax identification 13j LOB code number, if any 5 Withholding allowance 6 Net income 7a Federal tax withheld 13k Recipient's account number 7b Check if federal tax withheld was not deposited with the IRS because escrow procedures were applied (see instructions) . 13l Recipient's date of birth (YYYYMMDD) 7c Check if withholding occurred in subsequent year with respect to a partnership interest . 8 Tax withheld by other agents 14a Primary Withholding Agent's Name (if applicable) 9 Overwithheld tax repaid to recipient pursuant to adjustment procedures (see instructions) ( ) 14b Primary Withholding Agent's EIN 15 Check if pro-rata basis reporting 10 Total withholding credit (combine boxes 7a, 8, and 9) 15a Intermediary or flow-through entity's EIN, if any 15b Ch. 3 status code 15c Ch. 4 status code 11 Tax paid by withholding agent (amounts not withheld) (see instructions) 15d Intermediary or flow-through entity's name 12a Withholding agent's EIN 12b Ch. 3 status code 12c Ch.