Foreign nationals moving to the USA as students or scholars can face a lot of exciting as well as daunting challenges. The US tax system is one of the most complex tax systems in the world. A failure to file a USA tax return can result not only in penalties but also immigration issues for international students. However, a proper tax planning and preparation is essential in case of international student taxes.
This is an email from one of our clients, international students, foreign nationals in the USA and green card holders. “I am a Belgian citizen and moved to the USA in 2012 to start my undergraduate program at the University of Chicago. I am on F-1 visa. I read some information about the international student taxes but filing US tax returns is very confusing. Should I file a USA tax return in the first place? Why do I have to file American tax return if I don’t have any income from the USA as a student?”
Let’s review the key basic issues in regards to international student taxes.
1. Requirement to file. International students, scholars as well as their dependents are required to file a USA tax return (at least one tax form) for every year that they reside in the USA. It is important to remember that a US tax return must be filed whether international students or scholars earned any income in the US or not.
2. Tax due. Filing a tax return in the USA does not mean that taxpayers will be required to pay international student taxes. The foreign nationals with following visa types J,F,Q and M might required to file a US tax return on an annual basis even if they are present in the US for several days, however, there is no tax due in most circumstances.
3. Tax Due Date. International students and scholars must file a USA tax return by April 15.
4. US Tax Refund. One of the advantages of filing a US tax return is to receive a refund. Many students and scholars receive a refund after they file a tax return in the USA.
5. Tax Treaty Benefits. International students in United States can significantly decrease the US tax liability by claiming tax treaty benefits. The USA has tax treaty agreements with more than 55 countries. Per these treaty agreements, students are exempt from U.S. income tax on certain types of income from sources in the United States or they are taxed at reduced rates.
6. Penalties and interest. Foreign nationals in the USA can avoid any interest or penalties on international student taxes if they file a US tax return on a timely basis.
7. USA Visa Requirements. International students in United States must remember that a failure to comply with US tax requirements can result in their visa being revoked. Moreover, they will not be able to apply for a green card later if they decide to do so.
8. Statute of Limitations. The IRS can go after a taxpayer within 3 years after a tax return is filed. However, in case of a failure to file an American tax return, the IRS can go after a taxpayer anytime and assess international student taxes.
9. Form 8843. This form is essential for international students in United states because it allows to determine a residency as well as tax requirements by excluding the days of presence for the purposes of the Substantial Presence test.
The students and scholars in the USA should comply with US tax requirements. International students in United States must contact a CPA that specializes in working with foreign nationals in the USA, green card holders and foreign visitors and who understand tax treaty exemptions and benefits as well as international student taxes. The tax experts at Artio Partners are here to help you. To learn more about our services, please click here.