Catholic University: Tax Filing March 2, 2011

Catholic University: Tax FilingMarch 2, 2011

Mary FortierNonresident Alien Tax Office

www.towson.edu/nratax

Withholding – The amount of money taken out of your paycheck to pay taxes

Reporting Forms - Ex: W2, 1042-S, 1099

Tax Return - Ex: 1040NR, 1040NR-EZ

Filing – An individual “files” (submits) a tax return

Internal Revenue Service – Federal tax agency Resident vs. Nonresident – IRS term is different than state

term

Tax Terms Overview

Tax Status

Tax Residency Status (Federal) US Citizen Permanent Resident Alien Resident Alien for Tax Purposes Nonresident Alien for Tax Purposes

Tax terms -not immigration

Categories!

If a person is not a US Citizen or PRA– Employer is legally required to determine tax residency status

(a person cannot choose) Possible tax status

– Nonresident alien or resident alien for tax purposes– Typically if you are in F1 or J1 status for 5 years, you are NRA– Term applies to federal tax only

RAs May choose withholding

allowance & marital status Follow same tax laws as US

Citizen or PRA Taxed on worldwide income

NRA vs. RA

NRAs May not choose

withholding allowance & marital status

Follow different tax laws US income is only taxed Mandatory rate of Single,

1, NRA

Tax Status: Substantial Presence Test (SPT)

Objective: To determine if you are exempt from counting days using SPT

If F, J, M or Q Full-time Student & compliant with legal status

Years of Presence: If Student: Have you been in US less than 5 years total? If Scholar: Have been in US 2 out of the last 6 consecutive calendar years?

If Yes: You are exempt from counting days towards SPT: You are a NRA

If No: You must count days as part of SPT to determine NRA or RA (see http://international.cua.edu/taxes/SPT.cfm)

See Decision Tree: http://international.cua.edu/res/docs/taxes/decidesptexempt.pdf

Tax Year

PAYERPays individual & withholds tax

Payment: Any time in 2010

JANUARY DECEMBER

INDIVIDUALComplete & submit tax return (For tax year 2010)

PAYERReport income & tax withheld (For tax year 2010)

JANUARY 1 APRIL 18

INDIVIDUALReceives Money

Tax Filing: FollowingYear

2011

What is Taxable Income

Payment for ServicesWorking = Wages = Payment/paycheck

Scholarship Anything above qualified tuition and fees is taxable income; Payroll Office calculates this and charges student

Other Payments Travel grants, competitive grants, interest income

For more information see: http://www.towson.edu/nratax/ustaxes/incometaxwitholding1.htmhttp://www.towson.edu/nratax/ustaxes/incometaxwitholding3.htm

Working = Form W4Work Authorization: You can only work for Catholic University

Source: http://international.cua.edu/taxes/W4.cfm

Employment (Working): Taxes must be withheld every time you get paid; to determine how much to withhold, a Form W-4 must be completed by individual and submitted to your employer; otherwise default amount is used

NRA Mandatory Tax WithholdingNRAs must complete:

• Single• 1• NRA

X

X

X

W-4 For Different States Live in one state, work in another; NRA rate is same for federal Work authorization only for on-campus employment Reciprocal tax agreements betweens states

See below at: http://treasurer.cua.edu/forms.cfm

Tax Treaty: New Form Each Year Submit new 8233each year: March 15, 2011

Tax Treaty Benefit - For individuals under a tax treaty benefit please be advised that your 8233 is due no later than March 15, 2011. If we do not received the current year 8233 your treaty benefits will be suspended until the form has been received and benefits are not retroactive. See: http://treasurer.cua.edu/payroll/

About 60 treaties in effect. For list go to:http://www.irs.gov/businesses/international/article/0,,id=96739,00.html

Individual must meet all requirements to be eligible Withholding agent (employer) does not have to grant

Treaty is also claimed when filing a tax return Does not mean it will be allowed by IRS

Not recognized by all states, ex: Maryland Treaty income reported on 1042S

Taxable Scholarship

14% mandatory for NRAs– Unless exempt by a tax treaty

General practice - Apply to student account before rebate checks are issued – Which will affect rebate amount

RAs Does not apply

NRAs Tax must be withheld in the

same semester as award is given

Form 8843 Yes

Requirement All students in F-1 & J-1 status, Adult dependents in F-2 or J-2 (ex: spouse)

Taxpayer ID # No SSN or ITIN required – just leave blank if none

Everyone Must File 8843

Form 8843Sample Complete Form

For how to complete:http://www.towson.edu/nratax/docs/Form8843example.pdf

Interactive Form to Fill OutFind interactive form at: http://www.irs.gov/pub/irs-pdf/f8843.pdf

Mail form to: Department of the Treasury, IRS Center, Austin, TX 73301-0215

Deadline: June 15, 2011

Employer: ReportIncome

Tax Reporting Process

1st •Employer/Institution

2nd •Internal Revenue Service

3rd •State Tax Agency

Tax Reporting Flow (electronic)

1TAX

RETURN

YOU

Tax Reporting Form (mailed forms)

Important to understand in case information is not accurately reported

Employer Reporting Deadlines

Type of Income Withholding Form

Reporting Form

Mail by Date

Employment income

Form W-4 Form W-2 1/31

Other income n/a Form 1099 1/31

Scholarship income

n/a Form 1042-S 3/15

Individual Deadline: April 18th

Form W-2: Employment Income Form W-2 (Money for Working)

– If Box 1 has # in it – that is your federal income– Federal tax withheld is reported in Box 2– Box 16 will have state wages; Box 17 state tax withheld– If you did not receive yours contact Payroll Office

1042-S: Scholarship Income See Handout

– If Box 1 is blank you have a tax treatyBox 16 will be complete (maybe 17 if state tax withheld)

– Must wait to receive Form 1042-S to file return

Reporting Forms (Institution) Form 1042-S (Scholarship Income)

– Institution completes & reports income earned to IRS– Must be mailed by employer by 3/15 of each year– Request duplicate at 410-260-7964

Reporting Forms (Institution) Form 1099- INT

– Reports interest income - - NOT taxable income– Must be mailed by 1/31 each year

Reporting Forms (Institution) Form 1098-T

– NRAs cannot claim this deduction– But often are sent form

Individual: FileTax withholding is not a precise calculation:

This is why each year you must file a tax return each year

Overpay (Refund) versus underpay (Owe)

Federal – Do I Have to File?

2010 Filing Requirement

If you are Single, under 65 years of age:⁻ If you earned less than $3,650 (Box 1, W-2)⁻ No federal tax was withheld = 0 (Box 17, W-2)⁻ You do not have to file return

Should file if tax was withheld (Box 17, W-2) = >$1

Form 1040NR: www.irs.gov

State – Do I Have to File?

Refer to the state in which you live to determine criteria

⁻ Individual income tax⁻ Filing requirement⁻ What type of tax was taken out or did you claim exempt

as part of state tax reciprocal agreement

Maryland: www.marylandtaxes.com

Virginia: http://www.tax.virginia.gov/

West Virginia: http://www.wva.state.wv.us/wvtax/default.aspx

Pennsylvania:

http://www.revenue.state.pa.us/portal/server.pt/community/revenue_home/10648

Must File –Which Forms?

NRA Tax Forms – 1040NR-EZ NRA completes Form 1040NR-EZ (short form)

– Individual claims to IRS income earned in previous year

Treaty Forms: 8233

NRA Tax Forms - 8843 Form 8843

– Required of all students in F-1 & J-1 status, and adult dependents in F-2 or J-2

Tax Form Terms

Tax Filing Terms - Exclusion

Exclusion An exclusion is income you receive AND is

– Not included in your U.S. income– Not subject to U.S. tax

Examples– Interest income (1099-INT)– Qualified scholarships (not reported to IRS)

(tuition, required fees, books)– Foreign source income

Tax Filing Terms – Personal Exemption

Personal Exemption Reduces taxable gross income

Generally, one personal exemption amount per person/dependent claimed on tax return

Non-residents may typically only claim one exemption (for themselves), even if they have a dependent spouse or children

The amount for 2010 tax year is $3,650

Tax Filing Terms – DeductionStandard or Itemized Deduction

NOT available to NRAs (except students from India)*This is reason for extra tax withholding (Single, 1, NRA)

Deduction of certain allowable expenses from gross income

– Itemized: Must list each expense separately on Schedule A of 1040

– Standard: Determined by IRS! Eliminates need to itemize; use 1040-EZ Amount varies by filing status

Highlights

NRA Tax Filing May claim only one personal exemption ($3650 for 2010)

– Regardless of marital status or children May not claim the standard deduction (excepts students from

India)– An expense amount listed which is subtracted from total

gross income when calculating taxable income Other deductions are limited (State taxes withheld; charitable

contributions)– May not deduct education (1098-T)

File 1040NR or 1040NR-EZ File as single individual (unless can claim dependents from

Canada, Korea, Mexico, India (F1/J1 only), Japan (old treaty), and American Samoa & Northern Mariana Islands Need to apply for ITIN

Common Errors Completing wrong tax form(s) Entries in the wrong line Mathematical errors Illegible handwriting

– Use block letters and write numbers as shown here: – 1 2 3 4 5 6 7 8 9 0

Failure to use the social security spelling of your name

Leaving lines blank– Enter a straight line or a zero if not applicable

Records

Keep photocopies of all your tax records for at least 7 years

These records include:– Form 1040NR or 1040NR-EZ– Form W-2, 1042-S, 1099– Form 8843– All worksheets and receipts you used for calculations

Important if you apply to change immigration status

– May be required to submit tax records with application

Why File a Tax Return?

Comply with US regulations– As part of F1 or J1 immigration status– Required (previous years) if you plan to

apply for permanent residency or US citizenship

Avoid interest and penalties Start statute of limitations period (3 yrs) Obtain tax refund, if any

Reminders

April 18th DEADLINEFederal – www.irs.govComplete Federal tax return first; then StateForm 8843 for all students in F1 or J1 status