Who is an nonresident alien for tax purposes?
There are several ways to define a nonresident alien for tax purposes. Generally, any F-1 or J-1 full time student who has been in the U.S. for five calendar years or less is considered to be a nonresident alien for tax purposes.
Any J-1 teacher/researcher who has been in the U.S. for two calendar years or less, out of the last six calendar years, is considered to be a nonresident alien for tax purposes.
Generally, any other visa holder (e.g. H1-B) who is in the U.S. for less than 183 days during his/her first visit here, would be a nonresident alien for tax purposes in that year. Visits in the subsequent year count toward testing for tax residency status. The Glacier™ Online Tax Compliance System will make this determination using the information collected from each individual.
Once you become a resident alien for tax purposes, you are subject to the same taxes as a U.S. citizen. A nonresident alien is taxed differently than a U.S. citizen or resident alien. For example, a nonresident alien is not entitled to the standard deduction that is available to U.S. citizens and resident aliens.
I am a new international student who has just arrived on campus. What should I do first?
If you expect to work on campus or receive a graduate student appointment, we suggest that you first visit your department head or cost center administrator and obtain the necessary paperwork to have you entered into the HR system. A personnel action form (PAF) is required.
Does the nonresident alien designation for tax purposes have anything to do with my visa or immigration status?
No. Being a nonresident alien for tax purposes has no effect on your immigration status. We do, however, consider your immigration status in determining your tax status.
What is FICA tax and why do I have to pay it?
FICA is also called Social Security tax and is comprised of two parts. One portion is called OASDI, which funds pension payments for retired persons in the U.S, and the other portion is called Medicare Tax, which funds medical insurance for retired persons.
Generally, F-1 and J-1 nonresident alien students and J-1 nonresident alien teacher/researchers are exempt from this tax. However, if you become a resident alien for tax purposes, you would be subject to FICA tax. U.S. tax law requires that you pay the tax based on your tax residency status, regardless of whether or not you ever derive any benefits from the FICA taxes you pay.
Why do I have to pay tax when my country has a tax treaty with the U.S.?
The existence of a tax treaty does not automatically entitle anyone to tax exemption. The treaties have different provisions, requirements and limitations. Each person's situation must be analyzed to determine whether any treaty benefits apply to that particular individual.
I entered the U.S. with a B1/B2, F-2, J-2 or H4 visa. Can I change my visa status to F-1 or J-1 and use a student or teacher treaty exemption?
Generally, no. The IRS does not allow treaty exemptions for students who change visa status after entering the U.S. You must enter the U.S. with an F-1, J-1, or H-1B visa and be able to demonstrate that you were a resident of the treaty country immediately before visiting the U.S. for your primary purpose. If you are in the U.S. on a dependent visa, you cannot demonstrate the necessary primary purpose for treaty exemption purposes.
I used my country's treaty as a student, I am now a teacher. Can I use the treaty as a teacher also?
It depends on the country. Some treaties allow "back-to-back" exemptions. That is, you can use the student exemption and then use the teacher/researcher exemption without leaving the U.S. Some require you to leave the U.S. for a period of time (generally a year) to reestablish your residency in your home country before you can reenter the U.S. and use the teacher/researcher exemption. Most treaties limit the total amount of time you may use either or both exemptions to a certain number of years.
Do I have to file a tax return since I am not a U.S. citizen?
Yes. Anyone who works and earns income in the United States must file an income tax return each year. Nonresident alien taxpayers file either the form 1040NR-EZ or the 1040NR. If you worked in the U.S. during the calendar year, your return is due by April 15. In some cases, you may file your federal tax returns by June 15. In some cases you don't have to file any federal tax return. In all cases, nonresident aliens must file Form 8843.
Does Drexel provide individual tax assistance?
No. We do not prepare individual tax returns or give tax advice to individuals. Individuals seeking assistance in preparing their tax returns should contact Taxpayer's Assistance at the IRS Office at 600 Arch Street, Philadelphia, PA.
Is my financial aid from Drexel University taxable?
It depends on the type of aid you receive. Qualified Scholarships or fellowship grants that cover your basic tuition, fees and books, generally are not taxable.
Some examples of taxable aid would be:
- housing assistance
- free meal plans
- reimbursed travel expenses
This includes travel expenses paid for you by your department and expenses reimbursed directly to you. In either case, you are still liable for the tax.
In all cases where financial aid is taxable to nonresident aliens, we are required to withhold 14% Federal Income Tax on those payments. The tax withholding on financial aid will be deducted from check payments. In some cases, where applicable, the tax will be added to your student account and become part of your overall financial responsibility to Drexel.
If I am working for Drexel University but I am not actually in the U.S., do I have to pay income taxes?
No. If you are a nonresident alien, you are not taxed on foreign source income. If you spend some time in the U.S. and some time outside of the U.S. working for Drexel during the calendar year, you are taxed on a portion of the income earned in the U.S.
What is the IRS definition of prizes and awards and the criteria under which they would not be taxable?
Prizes and awards are amounts received primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, or are received as the result of entering a contest. A prize or award is taxable at 30% to the recipient unless all of the following conditions are met:
- The recipient was selected without any action on his or her part to enter the contest or proceeding
- The recipient is not required to render substantial future services as a condition to receive the prize or award
- The prize or award is transferred by the payer to a governmental unit or Tax-exempt charitable organization as designated by the recipient.
Nonresident Alien – Is a Non U.S. person who has not passed the substantial presence test based on the number of days physically present in the U.S. or they have not been granted permanent residency.
Resident Alien – Is an individual who has met the substantial presence test or they were granted permanent residency In the U.S.
Substantial Presence Test – A calculation of the number days an individual is physically present in the U.S. over a period of 3 calendar years.
Employment Authorization Document (EAD) – They are issued to non U.S. citizens or a lawful permanent resident. An EAD provides proof that a non Citizen or Permanent resident has authorization to work in the U.S.
I-94 (Arrival/Departure Card) – This card contains an individual visa classification and a period of lawful stay in the U.S.
Optional Practical Training (OPT) – Is available to foreign students who are granted a period of authorized employment relating to his/her studies.