15 USA tax questions answered for international students
Tax season is fast approaching and every international student in the USA must file a tax return by the April 15 deadline. The team at MPOWER asked our partner Sprintax some key questions about taxes as they relate to international students in the US.
Which tax return should you file? Are you entitled to any tax credits or deductions? And what happens if you make a mistake on your tax return?
Here’s everything you need to know to survive tax season!
First off, do I have to pay tax in the USA?
Yes! As an international student in the USA, depending on your individual circumstances, you may have to pay taxes on the following types of income:
- Wages and compensation
- Some scholarships/fellowship grants
Do I have to file tax forms?
Yes, again! Non-resident international students studying in the USA must at least file a Form 8843 with the IRS each year, even if you did not earn any income. It’s the law.
If you’ve earned income during the year, it’s likely that you will also have to file a Federal tax return.
When you file your tax return you must report all sources of your income to the government – including the tax you have already paid and what you still owe. It’s also an opportunity to claim any deductions that you may qualify for.
At the end of the process, you calculate the total tax you should have paid. If you paid more than what you owe during the year, you will be entitled to a refund. On the other hand, if you didn’t pay enough, you must pay the difference.
I didn’t earn any income. Do I still have to file tax paperwork?
Yes. Even if you have not earned any income, if you have spent time in the USA as a non-resident alien on an F or J visa, you must complete a Form 8843 and send it to the IRS.
Which tax form should I file?
As an international student, it’s likely you will fall into the ‘non-resident’ tax category which means that the tax return you need to file is a 1040NR or 1040NR-EZ. Alternatively, if you have not earned any USA income, you must complete a Form 8843.
When is the deadline to file my income tax returns?
The filing deadline for individual USA Federal income tax returns is April 15.
How can I determine my residency status?
It’s vital to determine your residency status in order to file a compliant tax return. The most common tax residency statuses are ‘resident’ and ‘non-resident alien.’ Most international students who are studying in the USA on F, J, M or Q visas are considered non-resident aliens for tax purposes, but this depends on your own circumstances.
Will the ‘Tax Cuts and Jobs Act’ affect me?
The ‘Tax Cuts and Jobs Act’ has wide-ranging effects for all USA taxpayers – particularly non-residents such as international students and those in America on a J-1 program.
The primary change relates to the removal of what’s known as the ‘personal exemption.’ This has lead to overall taxable income increasing for all non-residents.
Prior to this Act’s introduction, every non-resident who was working in the USA was entitled to earn up to $4,050 without paying tax, through the personal exemption. However, the personal exemption was reduced from $4,050 to $0 in January 2018.
The removal of the personal exemption means that, for some non-residents, Federal tax refunds will be reduced. However, the USA has tax treaties with over 65 other countries. International students and scholars can also potentially avail of these tax treaties when applying for their Federal tax refund.
Do I need to file a State tax return?
Depending on your personal circumstances, you may also have to file a State tax return(s). This will depend on a number of factors, including – the income you earned in that state, your status in that state as a resident, nonresident or part-year resident and also the filing threshold in that state.
What will I need in order to prepare my tax return?
In order to prepare your USA tax return you will need:
(1) Your residency status
(2) Your Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN)
(3) Your income documents, of which there are 3 main types:
- A W2 form (officially known as a Wage and Tax Statement) is an Internal Revenue Service (IRS) tax form used to report wages paid to employees and the taxes withheld. You should receive this from your employer at the end of January. It will state the previous year’s earnings and tax withheld
- The 1042-S is typically sent if you received some form of taxable scholarship from your school or institution, for example, a stipend or housing allowance
- The 1099 is less common, but you may have this if you received rental income, investment income or if you worked as an independent contractor
What happens if I don’t file a tax return?
If you don’t file a tax return, you may be subject to penalties and interest.
The late filing penalty is 5% of the additional taxes owed for every month your return is late, (up to a maximum of 25%). If you file more than 60 days after the due date, the minimum penalty is $205 or 100% of your unpaid tax, whichever is less.
Failure to comply with your tax obligations may also result in you being denied a USA visa in the future.
I filed an incorrect tax return last year. What can I do?
If you discover that you have filed an incorrect tax return, you will need to correct it by filing an amended tax return (generally Form 1040-X).
I should have filed a tax return for last year. Can I file it now?
Yes, you should file your tax return as soon as possible.
Can I file my tax return with Turbo Tax?
In most cases – no. Turbo Tax offers a service for USA tax residents. Most international students are considered non-resident for tax purposes and so can’t file their tax return with Turbo Tax.
Where can I get help?
Sprintax is the only online Federal and State self-prep tax software for non-residents in the USA.
When you create a Sprintax account, our system will assist you in preparing fully compliant Federal and State tax returns and also enable you to use any tax deduction and benefits that will allow you to maximize your legal tax refund.
They also provide 24/7 live chat assistance to help you with the process.