Federal Tax Information Session For International Students

Agenda  Tax Basics  Forms You RECEIVE  Forms You COMPLETE  Tax Residency Status  Tax Filing Information for Non-residents  Treaty Information  Filling out the forms  Completing the Process  State Tax Issues

Tax Basics

DO I HAVE TO FILL OUT TAX FORMS? Aahhh! No Matter What You Have Heard…  All “tax non-residents” are legally required to file at least one federal income tax form for each year they are in the U.S. (by April of following year)  Everyone should copy and keep files for 7 years or until you become a permanent resident (if applicable)

What happens if I don’t?  You may be overpaying your taxes (i.e., giving away your hard-earned money)  Non-filing of taxes may affect a future application for U.S. Permanent Residency (i.e., “green card”)  If you owe money, you could be subject to substantial monetary fines  In extreme cases involving fraud, you could lose your legal immigration status in the U.S.

Which Income Taxes?  Federal  State  Local (not in Albuquerque)  If you have income you are normally responsible for completing tax forms for ALL relevant governments  This presentation only covers FEDERAL (US) taxes collected by the Internal Revenue Service (IRS) with some state at the end

3 Important things to remember: 1)This is NOT a conspiracy against you! (It’s just a pain for everyone!) 2)The rules are NOT logical! 3)YOU are responsible for doing it correctly and YOU suffer the consequences even if you were misinformed. This is more unfair for internationals as very few people know non-resident tax laws, including IRS

Who Is This Presentation For?  International Students: Full-time students in F-1 or J-1 Student Status (individuals in degree programs, CELAC, exchange students)  Dependents: Those who are here in F-2 and J-2 status with no income. Most dependents CANNOT be claimed, but if so will need an SSN or ITIN# (requires form W-7 and supporting documents)

Other Presentation Information  For students with income typical at UNM. Otherwise seek professional tax advice from a qualified accountant or attorney  Rules for students and scholars are different  Special Cases: Anyone whose total stay will be less than one year; special treaties: Canada, India, Korea, Mexico (we will discuss these at the end)

What happens if I have questions later? Come to the Tax Volunteer Site! "Volunteers in Tax Assistance" (VITA) Site Volunteers will be available to help you on Fridays from 2:00 – 4:30, from March 14 through April 11 th. WHERE: Language Learning Center, Ortega Hall, 1 st floor. Will have tax software to help.

You Can Also Consult:  Internal Revenue Service (IRS): or call , Press 4 and then 4 again for an International Tax issue for individuals. Tax treaties and forms are online.  Commercial sites: offer information and paid tax return preparation  Residents for Tax Purposes: Go to CNM website for appointment with the Resident tax volunteers, or seek paid preparers

Overview of Tax System:  U.S. tax system = Employer “withholding” + individual “reporting” at end of year. They take money out based on forms you fill out (W-4, 8233)  At year end YOU need to do the accounting; if the calculation was incorrect then either YOU or the GOVERNMENT will owe money  If you worked at UNM all year, completed employment forms correctly, and your situation did not change, the tax withheld should be “near” correct (RAs and PAs may owe money)

Forms you RECEIVE Copies to be sent to IRS with your tax returns Copies to be sent to IRS with your tax returns

Forms From Employer/School W-2: lists wage income and tax taken for federal, state, and local governments (if applicable); must be sent to you by 1/ S: lists scholarship and treaty income; must be sent by 3/ T: lists school tuition paid; cannot be used as deduction by tax non-residents This information is also sent to IRS

Box 1 = Wages Box 2 = Federal Tax Withheld Box 17 = State Tax Withheld Non-residents should not have amounts taken in 5 &6 Money taken out of your pay Gross Earned Income

Box 1 = Income Code/Type Box 2 = Income exempt from tax Box 7 = Federal Income tax withheld Box 23 = State Income tax withheld Income Type (key attached) Gross Income Federal tax taken State tax taken

Other Forms You May Receive 1099-INT: Interest report (Bank sends to you if over $10) 1099-DIV: Dividend report (Financial institution sends to you – if you have this you will use 1040NR) 1099-MISC: Honoraria or contractor income report This information is also sent to IRS

Forms you COMPLETE Make copies for your files! Make copies for your files!

Forms You Send to IRS 8843: Must be completed by all F and J students, scholars, and dependents who are “tax non-residents.” This form is also called, “Statement for Exempt Individuals and Individuals with a Medical Condition.”

Forms You Send to IRS (Continued) 1040NR: “U.S. Nonresident Alien Income Tax Return” OR 1040NREZ: “U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents” These forms must be completed by tax non- residents with U.S. income. They are also called “Tax Returns” (“Return”  you get money back)

Important Tax Treaty Form 8233: Must be completed and given to the payroll office every year if you want to benefit from a tax treaty in advance (i.e., you don’t want them to take extra money from each paycheck) You can still get the benefits of any treaty at the end of the year even if you did not complete this form

IRS Publications Publication 519: U.S. Tax Guide for Aliens Publication 901: U.S. Tax Treaties These publications have additional information for those with unusual situations or for whom a tax treaty exists between the U.S. and the country of permanent residence

Tax Residency Status

Am I a Resident or Non-resident for Federal Tax Purposes?  Tax residency determines your basic obligations under U.S. “federal” tax law (state is different)  You CAN be a “tax resident,” even if you are not a "permanent resident" of the US (green card)  If you are a resident taxpayer you must pay federal income tax on your worldwide income. However, you do not have to file a "tax return," unless your worldwide income exceeds a certain amount (This year: $10,000 if single and $20,000 if married)

Resident or Non-resident for Tax Purposes? (Cont’d)  If you are a nonresident taxpayer, you pay federal income tax only on the income you receive from U.S. sources, but you must file an annual income tax form, even if you had no income  Most F and J students at UNM are “tax nonresidents”  If you were in a status other than F or J since your arrival, please see pp of IRS pub 519, U. S. Tax Guide for Aliens you may be “Dual Status”

Residency Test for Students STUDENTS (F-1 or J-1): How many years have you been in the U.S. in F, J, M or Q status? Less than 5 years (e.g., You arrived AFTER 12/31/2008 and you were never in the US before on F, J, M, or Q status) More than 5 years (e.g., You arrived BEFORE 1/01/2009 or you were in the US for more than 5 years total in F, J, M, or Q status since 1985) You were probably a “nonresident for tax purposes” in 2013 You were probably a “resident for tax purposes” in 2013

Tax Residents  “Residents for tax purposes” will need to go elsewhere for tax information  You would file: 1040EZ OR Form 1040A OR Form 1040  Get help from the resident volunteers at CNM

Tax Residents  Those who were single and earned less than $10,000 worldwide income in 2013 (or married and earned less than $20,000) do not have to file a federal tax return, but may want to get a refund if taxes were taken

Filing Information for Non-Residents

Which federal forms do TAX Non-residents fill out? Form #Who Completes? 8843ALL non-resident students and scholars and their dependents. If you did not have any US income you ONLY need to complete this form 1040NRIf you received money from a US source, you also MUST complete form 1040NR if: a.Your income was $100,000 or more, OR b.You had dividend, capital gains or other US income that his not wage or scholarship YOU MAY ALSO WANT TO COMPLETE FORM 1040NR IF: c.You were married and you can claim an exemption for your spouse (you can claim an exemption for your spouse ONLY if your spouse did not work AND you are from Canada, Mexico or Korea)(US-born children ask) OR IF: d. You can claim educational, travel, or living expenses* 1040NREZIf you received money from a US Source and none of the conditions for 1040NR above apply fill out this form with 8843

8843 Every Tax Non-resident fills out this form, even dependents

8843 Student Sample SSN or ITIN otherwise write “None”

8843 Student Sample Number of days you were in student status

University of New Mexico, MSC , Albuquerque, NM Linda Melville, Global Education Office, MSC University of New Mexico, Albuquerque, NM Student Sample

Diversity Visa Lottery does NOT count

Sign here if no tax return

No Income?  If you had no US income in 2013 and you are a non-resident you are DONE!  Make a copy for your files and mail before June 15, 2014

Mailing Address Internal Revenue Service Center Austin, Texas

Have Income??? Deductions and Exemptions to Income Remember you will never get back more than they took, so there is no need to claim these if you will get all your money back

Can I deduct educational expenses?  Students can deduct educational expenses only if they already worked in the field that they're studying now (before beginning studies) and if the current studies will not prepare them for a new field e.g., if you have a BS in Architecture, have worked as an architect, and are studying for the MS in Architecture, you may be able to deduct your educational expenses from your income  NO NEED IF YOU WILL GET ALL YOUR MONEY BACK!

Can I deduct educational expenses?  If you think you may be able to deduct your educational expenses, please see IRS Publication 970 (beginning on P. 59), “Tax Benefits for Education;" if you decide that you can deduct educational expenses you may need a copy of IRS Form 2106, "Employee Business Expenses," in addition to your other tax forms  NO NEED IF YOU WILL GET ALL YOUR MONEY BACK!

Can I deduct travel or living expenses?  Students can only deduct travel or living expenses if they are a federal tax nonresident and the entire educational program/stay in the U.S. lasts less than one year (365 days);  In this case, you may be able to treat your stay in the U.S. as a "business trip" and deduct your airfare, rent, local transportation expenses and part of a daily allowance for food from your income. If you will be in the U.S. for a total of less than one year and your expenses are more than 2% of your income, get Form 2106 from the IRS website, complete it and list your expenses on page 3, line 9 of form 1040NR.

Income types we WILL cover:  Non-service scholarship or fellowship grants from U.S. sources Amounts granted to cover tuition and fees are not taxable; these amounts do not have to be reported on your tax return) Amounts granted to cover tuition and fees are not taxable; these amounts do not have to be reported on your tax return) The University or other granting institution should report any portions which are not tuition or educational expenses to you on IRS Form 1042-S (e.g., Athletic scholarships at UNM) The University or other granting institution should report any portions which are not tuition or educational expenses to you on IRS Form 1042-S (e.g., Athletic scholarships at UNM)

Income types we WILL cover:  Wages from any U.S. job, including a teaching assistantship or a research assistantship ALL income that your employer(s) reported to you on Form W-2 ) ALL income that your employer(s) reported to you on Form W-2 ) Any amount reported on Form W-2 cannot be considered non-service scholarship or fellowship income but might be treaty exempt income Any amount reported on Form W-2 cannot be considered non-service scholarship or fellowship income but might be treaty exempt income  Bank interest

Income types we will NOT cover (These are also subject to tax)  Dividends or capital gains from U.S. mutual funds, stocks or bonds  Any other income (such as rent, royalties, copyright earnings) from U.S. sources  If you had these types of income you will need form 1040NR and you may want to seek professional advice in preparing your return

Treaty Information

General Treaty Information  Some countries have tax treaties with the U.S. which may save you money on your federal income tax. You can get the treaty benefit even if you did not complete the 8233 in 2013  Treaty benefits depend on country of last tax residence, not citizenship  Benefits are different for each country and depend on your activity in the U.S. (e.g., student or scholar) and type of income

Student Treaty Information  For students, these benefits often last for 5 years (the same amount of time you are a tax non-resident – China is an exception)  Type of Income Important: one chart for wages and one for non-service scholarship

Student Treaty Information  The numbers or Roman numerals in the third column identify the relevant treaty article and paragraph numbers (you will need these for your income tax return)  Also note any letters next to the name of your countries; there is a key at the end of the chart

Student Tax Treaty Summary For WAGES

Student Tax Treaty Summary For NON- SERVICE SCHOLARSHIP

Filling out the Tax Returns

Completing the “Tax Returns”  Always look to complete the easiest form first. If you can get all your money back, there is no reason to complete the long form  We will cover form 1040NREZ; if you need to do 1040NR come to the VITA site

Form 1040NREZ  Complete this form first unless you have non-wage income  If you get all your money back, you will send this form  If you have other income or deductions (such as contributions to US charities), the 1040NR may help you get a larger return

Earnings Information  Look carefully at all W-2 and 1042S forms: is all your income included here?  Is there any treaty income listed on the W- 2 that should have been on the 1042S?  Do you have any questions about what is on these forms?  Contact payroll:

Earnings Information  Add all of your earnings income together from these forms (interest and dividend income are separate)  Subtract all of the income that should have been covered by the treaty  The remainder is your taxable wages

1040NREZ Student Sample Use a US address unless you won’t be here through June

1040NREZ Student Sample

Put this amount on line 6 on front of form 1040NREZ Student Sample

Sample for student with treaty $5,000

Treaty Income  Make sure you add all your income together from all forms (W-2 and 1042S)  Then subtract your treaty income from the total  The amount covered by the treaty goes on line 6  The remainder goes on line 3 unless you have a non-service scholarship (e.g. althletes) which goes on line 5

Put Treaty income on line 6 Put all income NOT covered by treaty on line 3 Non-service scholarship income goes on 5 (should be on 1042S)

Put any scholarship income used to buy books or other educational materials on 8 (you can only put this if you have a scholarship on line 5)

Total State Tax amount taken goes here – From W2 box 17 and 1042S box 23 unless you are a student from India (then put $6,100)

EVERYONE: Put $3,900 here This is your taxable income, look at tax table in instructions beginning on page 23, find the amount and look to the right for your tax. Write the tax in 15 Tax from table

Enter amount of federal tax taken from box 2 of W-2 Enter amount of federal tax taken from box 7 on the 1042S, if any Enter total here

Amount Owed  If line 21 is more than line 17, you overpaid: Subtract line 17 from line 21 and write the remainder on line 22.  If line 17 is more than line 21 you owe money: Subtract line 21 from line 17 and write the remainder on line 25. This is what you have to pay by check to IRS.

Amount to be refunded Amount Owed

Enter UNM Site ID#

Completing the process  Copy all documents for your files  Mail Together:  8843  1040NREZ  Copy of W2  Copy of 1042s  Copy of any other earnings forms

Mailing Address   If you do NOT need to pay any additional federal tax, mail to:   Department of the Treasury   Internal Revenue Service   Austin, TX   If you DO NEED to pay additional federal tax mail with payment to:   Internal Revenue Service   P.O. Box 1303   Charlotte, NC

1040NR Come to the volunteer hours:  For students with dependents from Canada, Mexico, India or South Korea who cannot get all their money back from completing form 1040NREZ  For students with income other than wage  For students with income more than $100,000  For students who have other deductions (charities, losses, etc.)

NM State Tax  Once you complete your federal tax you can complete the state tax forms  You will need the “Adjusted gross income”, “Itemized deduction” and “exemption” amounts to do your forms (see handout)  Forms and instructions are on the website:  Forms and instructions are on the website: onal-Income-Tax-Forms onal-Income-Tax-Forms

NM State Tax  People who reside in New Mexico for more than 185 days are residents for state tax  Not supposed to e-file as the on-line program may not allow you to put less than standard deduction (and internationals usually don’t get this much unless you area a student from India)

NM State Tax  If all your income was exempt by treaty and was on a 1042S (not a W2) you do need to file state forms  If more than $10,000 of your income was on a W-2 OR if you had state taxes withheld and you want the money back, you will need to file state tax forms

NM State Tax  If you will file state tax forms, and you have a treaty, you should include copies of the federal forms with your state tax forms  You may also want to include a letter stating that you are a federal tax non- resident and that some of your income is not taxable because of the treaty (it would not hurt to include the relevant text from the treaty (available at

Happy Tax Preparing!!! Come to our VITA site for help! Fridays, March 14 th – April 11 th 2:00 – 4:30 pm Language Learning Center Ortega Hall, 1 st Floor

Happy Tax Preparing!!! OR:     Access Code: 85N8BLEN6LEG