U.S. Tax Return Filings for Resident and Nonresident Aliens
Getting a job in the U.S. as a foreigner is not easy, but equally difficult is filing a U.S. tax return. Many taxpayers fear dealing with the annual tax return filing complexities; especially students who are worried that something could go wrong if they don’t file their tax returns correctly. Review the checklist below to assist in filing your resident and nonresident alien U.S. tax return.
1. Determine if you are a Resident or Nonresident Alien
If you are an alien (not a U.S. citizen), you are considered a nonresident alien unless you meet one of two tests. In general, you are a resident alien of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year. For the substantial presence test, if you are a student temporarily present in the U.S. under an “F”, “J”, “M”, or “Q” visa, or a teacher or trainee under a “J” or “Q” visa and you substantially comply with the requirement of the visa, you can exclude the days of presence in the U.S. because you are considered an exempt individual. More information can be found at Determining Alien Tax Status on the IRS website.
2.What forms are required to be filed?
- Federal Income Tax: Federal Form 1040NR (pages 1 through 5). You should include
- Schedule B if you receive interest or dividend income. Form 1040NR, Schedule OI – Other Information is mandatory. The IRS will need to know your citizenship, your visa type (F-1, J-1, etc.), and the dates you entered and departed from the U.S. An easy way to find your travel history is to request it from the I-94 website.
- State Income Tax: Different states have different forms and schedules. For example, an international student who lives and works in Pennsylvania needs to file Form PA-40, PA Schedule W-2S (to report wages, miscellaneous income and non-employee compensation), PA W-2 RW, and PA Schedule A to report interest income. PA forms can be located at the PA Department of Revenue website and other state forms at their respective State Department of Revenue’s website.
- Local Income Tax: You can download the appropriate form from your local tax collection agency’s website. For additional information regarding where to find your PSD code and your local tax collection agency go to Local Income Tax Information on the PA Department of Community and Economic Development website.
- Federal Income Tax: Resident aliens should file Federal Form 1040. Include Schedule A if you choose itemized deductions and Schedule B if you receive interest or dividend income.
- State Income Tax: The forms for state and local income tax for resident aliens are the same as the forms for nonresident aliens.
3. Do I need to file with my state or locality?
In general, if you receive total gross taxable income that exceeds a certain threshold and you are a resident, nonresident, or part-year resident in the state, you may have a state filing requirement. For example, a summer intern who works in Pennsylvania for one month and receives nonemployee compensation of $1,000 (Form 1099-MISC), must file both a PA income tax return and local return. For information on requirements in other states, visit their respective State Department of Revenue’s website.
4. What forms are needed from employers?
Generally, you need to have W-2 or Form 1099-MISC from the company, organization, or individuals you perform services for.
- You receive a Form W-2 from your employer if you are an employee. Form W-2 reports the wages you received, as well as federal, state, and other taxes withheld from your paycheck. If you are sending your federal income tax return by mail, you should attach a copy of the W-2 on the front of your return.
- If you are an independent contractor or self-employed, you will receive Form 1099-MISC. The form reports rents, royalties, other income, nonemployee compensation, etc. It may also include federal and state income tax withholding amounts, if the taxes have been withheld.
- Form 1099-INT and 1099-DIV report interest, dividends, and other distributions you receive from your investments.
- An individual or entity may request a completed Form W-9 to obtain your taxpayer identification number, such as Social Security Number.
- You employer should request Form I-9 to verify your identity and employment authorization.
- Form 1040NR: If you did not receive wages as an employee subject to U.S. income tax withholding, the due date is the 15th day of the 6th month after your tax year ends (i.e. June 17, 2019 for a 2018 calendar year Form 1040NR). Otherwise, file Form 1040NR by the 15th day of the 4th month after your tax year ends (i.e. April 15, 2019 for a 2018 calendar year for Form 1040NR).
- Form 1040: The due date is the 15th date of the 4th month after your tax year ends (i.e. April 15, 2019 for a 2018 calendar year for Form 1040).
Different states may have different due dates. For example, Pennsylvania PA-40 is due April 15, 2019 for a 2018 calendar year. You may find the due dates of relevant forms on the forms’ instructions located at the various state websites.
Pennsylvania residents with earned income, wages or net profits must file a local earned income tax return online or by mail by April 15, 2019.
You may file a federal extension Form 4868 to get an automatic 6-month extension of time to file for both Form 1040NR and Form 1040. Note that if you owe any tax, you still need to remit the tax by the original due date. The extension to file does not extend the time to pay your tax.
Generally, you file a state application for extension of time to file (e.g. PA Form REV-276) by the original due date with your state. Some states (e.g. PA) grant you the extension of time to file if you have an approved extension for filing your federal income tax return and you don’t owe any taxes.
8. Are you eligible for a tax treaty benefit? If yes, where should you report the tax treaty benefit?
Tax treaty benefits are only eligible for federal taxes and not for state income taxes. Information on tax treaty benefits can be found in Publication 901 U.S. Tax Treaties. For example, a nonresident business apprentice or trainee is exempt from U.S. income tax for personal services performed in the U.S. up to $5,000 for each tax year. This amount should be entered on Form 1040NR, Schedule OI, Question L and on Form 1040NR, Line 22.
9. Is there a lower tax rate on PA local earned income tax for international students?
Yes, nonresident aliens filing PA local earned income tax returns are subject to a 1% tax rate, even if they live in localities with higher earned income tax rates.
10. Do you get a break on Social Security or Medicare tax?
Isn’t it great to be exempt from the 7.65% combined Social Security and Medicare tax (6.2% for Social Security and 1.45% for Medicare)? In general, nonresident aliens such as student, scholars, and professors in F-1, J-1 or M-1 nonimmigrant statuses are exempt from Social Security and Medicare tax. More information can be found at Social Security/Medicare and Self-Employment Tax Liability of Foreign Students, Scholars, Teachers, Researchers, and Trainees on the IRS website.
Also, if you send your tax returns, extensions, or estimated payments by mail, it is strongly recommended that you send the returns and estimates by certified mail with request for return receipts. Keep the return receipts for your record as proof of timely filing.
For more information, please contact us at the form below. Article Prepared By: Ada Zhang.