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Frequently Asked Tax Questions And Answers
Keyword: Nonresident Alien
7.4 Child Care Credit/Other Credits : Hope & Life Time Learning Educational Credits
Can nonresident aliens claim the Lifetime Learning Credit for tuition
paid to go to school?
If you are a nonresident alien for any part of the year, you generally
cannot claim the education credits. However, if you are married and choose
to file a joint return with a U.S. citizen or resident spouse, you may be
eligible for the Hope or Lifetime Learning Credit.
References:
13.1 Aliens and U.S. Citizens Living Abroad: Canadian & U.S. Tax Issues
I am a Canadian citizen living and working in the U.S. for a U.S. employer
on a visa. Do I need to file both a U.S. tax return and a Canadian tax return?
You must comply with both U.S. and Canadian filing requirements. In the United
States, you generally are required to file a return if you have income from the performance
of personal services within the United States. However, under certain circumstances,
that income may be exempt from payment of U.S. tax pursuant to the U.S.-Canada income
tax treaty. You need to determine what type of visa you have, and how that impacts
your residency status in the United States. If, based on the tax code and your visa
status you are treated as a U.S. resident, then your entitlement to treaty benefits
will be impacted.
References:
I am a Canadian citizen who worked in the U.S. for 4 months. Do I have to
file a U.S. income tax return as well as my income tax return in Canada?
In the United States, you generally are required to file a return if you have income
from the performance of personal services within the US. The type of return to file
would depend upon whether you are a resident of the U.S. for purposes of U.S. tax
law. There are several tests to determine residency, including the substantial presence
test, which is based on how many days you are present in the U.S. over a period of
three years. Refer to Tax Topic 851 for information about which return to file.
If you are simultaneously a U.S. resident under U.S. law and a Canadian resident under
Canadian law, you should consult the U.S.-Canada income tax treaty for rules that
would treat you as a resident of only one country. It is also possible that you may
have to file a dual-status return in the U.S. if you qualify as a U.S. resident for
only part of the year. Refer to Tax Topic 852 for dual-status information.
References:
I won money at a Las Vegas casino and my winnings were subject to a 30%
withholding tax. I am a Canadian citizen. How can I get the withholding tax back?
Generally, you must file a tax return after the end of the tax year to claim a
refund of withholding. Gambling winnings by nonresidents of the U.S. are generally
taxed at a flat 30% tax rate. However, under the U.S./Canada Tax Treaty, residents
of Canada may claim gambling losses, but only to the extent of gambling winnings.
You should report both your total gambling winnings and your total gambling losses
on page 4 of Form 1040NR (PDF), U.S. Nonresident
Alien Income Tax Return, on the dotted portion of line 83. If you have net gambling
winnings (after offsetting your total losses against your total winnings), you should
include this net amount on line 83, column (d) of the Form 1040NR. You should also
attach a copy of the Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding,
showing the taxes withheld to your Form 1040NR.
A diary of your losses should be kept for your records.
To file a Form 1040NR you must have a valid identification number. Refer to Tax Topic 857 if you have not already been issued one.
References:
13.3 Aliens and U.S. Citizens Living Abroad: Foreign Income & Foreign Income Exclusion
I am a nonresident alien. Can I take the foreign earned income exclusion
if I meet the bona fide resident test or physical presence test? If yes, what is the
tax form used for nonresident taxpayer?
No, nonresident aliens do not qualify for the foreign earned income exclusion.
Only if you are a U.S. citizen or a resident alien of the United States and live abroad,
may you qualify to exclude up to $80,000 of your foreign earned income for 2003. But,
if you are the nonresident alien spouse of a U.S. citizen or resident alien, you can
elect to be treated as a U.S. resident in order to file a joint return. In this case,
you can take the foreign earned income exclusion if otherwise qualified. Refer to Publication 519 , U.S. Tax Guide for Aliens , for detailed instructions
on how to make this election.
However, nonresident aliens would be able to exclude their foreign earned income
under the dual-status rules. Refer to Tax Topic 852 for dual-status information.
A nonresident alien is generally not subject to U.S. tax on compensation for services
performed outside the U.S.
References:
13.4 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - General
I am a foreign national and came to this country on June 30th of last year.
I have a H-1 visa. What is my tax status regarding residency nonresident alien, or
resident alien?
You were a dual status alien last year. As an H-1 visa holder in the U.S. for
183 days or more, you likely became a resident, for tax purposes, as of June 30th.
For the part of the year you are a resident alien, you are taxed on income from all
sources.
For the part of the year that you are not a resident alien, you are not taxed on
income from sources outside the United States, unless the income is effectively connected
with a trade or business in the United States.
Income from U.S. sources is taxable whether you receive it while a nonresident
alien or a resident alien unless specifically exempt under the Internal Revenue Code
or a tax treaty provision. Generally, tax treaty provisions apply only to the part
of the year you were a nonresident and only if you are a resident for treaty purposes
of a country that has a treaty with the United States.
For that part of the year that you are a nonresident, file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. For that part of
the year you are a resident, file Form 1040 (PDF) . Refer
to Tax Topic 852 for dual-status information.
References:
I was an international student (F-1 visa) until October 1, then my visa
status was changed to H-1. Should I file my income tax return as a dual status or
nonresident alien?
Assuming you were not in the U.S. on your F-1 student visa for over 5 years, you
may file as a nonresident for the entire year or, if you qualify under the first year
choice, you may file as a dual status alien. Please refer to Publication 519, U.S.
Tax Guide for Aliens, for additional information.
References:
I am a nonresident alien with no dependents. I am working with my H-1 visa.
Do I file a Form 1040NR or 1040NR-EZ?
Your H-1 visa suggests that you may in fact be a resident alien or a dual-status
alien. Refer to Tax Topic 851 and Tax Topic 852 for further clarification
of your U.S. residency status, and the appropriate form to file.
A nonresident alien must file Form 1040NR (PDF), U.S.
Nonresident Alien Income Tax Return, or Form 1040NR-EZ (PDF), U.S.
Income Tax Return for Certain Nonresident Aliens With No Dependents, if you are
engaged in a trade or business in the United States, or have any other U.S. source
income on which the tax was not fully paid by the amount withheld.
You can use Form 1040NR-EZ instead of Form 1040NR if all nine of the following
apply.
You do not claim any dependents.
You cannot be claimed as a dependent on another person's U.S. tax return (such
as your parent's return).
Your only U.S. source income was from wages, salaries, tips, taxable refunds of
state and local income taxes, and scholarship or fellowship grants.
Your taxable income (line 14 of Form 1040NR-EZ) is less than $50,000.
The only adjustments to income you can claim are the student loan interest deduction
or scholarship and fellowship grants excluded.
You do not claim any tax credits.
If you were married, you do not claim an exemption for your spouse.
If you itemize deductions, the only deduction you claim is for state and local
income taxes.
The only taxes you owe are the tax from the tax tables, the social security and
Medicare tax on tip income not reported to your employer, and the household employment
taxes.
References:
I live in a foreign country. How do I get a social security number for my
dependent who qualifies for a social security card?
Use form SS-5-FS which may be obtained from the Social
Security Administration
References:
My spouse is a nonresident alien. How can I get a nonworking social security
number for her?
Each foreign person who does not have and cannot obtain a social security number
must use an IRS Individual Taxpayer Identification Number (ITIN) on any U.S. tax return
or refund claim filed. For additional information on ITINs click on Individual
Taxpayer Identification Number.
References:
I am a nonresident alien and invested money in U. S. stock market through
a U.S. brokerage company. Are the dividends and the capital gains taxable? If yes,
how are they taxed?
Generally, capital gains received by a nonresident alien not present in the United
States for 183 days or more are not taxable in the United States. Certain gains, however,
are subject to the 30% withholding rate or if applicable, a reduced tax treaty rate
on the gross amount of the following items:
1. Gains on disposal of timber, coal, or domestic iron ore with a retained economic
interest, unless an election is made to treat those gains as income effectively connected
with a U.S. trade or business,
2. Gains on contingent payments received from the sale or exchange after October
4, 1966, of patents, copyrights, secret processes and formulas, goodwill, trade marks,
trade brands, franchises, and other sale property,
3. Gains on certain transfers of all substantial rights to, or an undivided interest
in, patents if the transfers were made before October 5, 1966, and
4. Certain gains from the sale or exchange of original issue discount obligations
issued after March 31, 1972.
Dividends are withheld upon at the 30% or lower tax treaty rate. If your withholding
is not at the correct rate, a nonresident alien should file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return , to claim a refund
of excess withheld taxes.
References:
13.5 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Tax Withholding
I entered the U.S. in August and I have a J-2 visa with an Employment Authorization
(work permit). Can I be considered as a U.S. resident for tax purposes under the substantial
presence test? Since my visa does not allow me to stay in this country am I subjected
to social security tax and Medicare tax?
You will be considered a U.S. resident for tax purposes if you meet the substantial
presence test for the calendar year. As an exempt individual, a J-2 visa holder will
not initially meet this test.
For purposes of the substantial presence test, certain days of physical presence
do not count, such as the days during which you were an exempt individual . Please
refer to Publication 519, U.S. Tax Guide for Aliens , for a detailed
explanation of this issue.
In general, U.S. social security and Medicare taxes apply to payments of wages
for services performed as an employee in the United States, regardless of the citizenship
or residence of either the employee or the employer. In limited situations, these
taxes apply to wages for services performed outside the United States. This exception
does not apply to a derivative visa holder.
References:
Under my visa as a temporary nonresident alien, I'm not subject to social
security and Medicare withholding. My employer withheld the taxes from my pay. What
should I do to get a refund of my social security and Medicare?
If social security tax and Medicare were withheld in error from pay received which
was not subject to the taxes, you must first contact the employer who withheld the
taxes for reimbursement. If you are unable to get a refund from the employer, file
a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.
You must attach the following to your claim:
a copy of your Form W-2 (PDF) , Wage and Tax Statement,
to prove the amount of tax withheld;
Form I-797, INS Approval Notice, is needed if you have changed your status
from F-1 or J-1 to another status prior to filing the claim;
if your visa status changed during the tax year you should attach copies of the
pay stubs that cover the period of exemption from social security taxes;
a copy of INS Form I-94, Arrival/Departure Record, if you are still in the United
States;
a copy of your valid entry visa;
Form 8316, Information Regarding Request for Refund of Social Security Tax ,
or a signed statement stating that you have requested a refund from the employer and
have not been able to obtain one; and
a copy of Form 1040NR (PDF) , US Nonresident Alien
Income Tax Return (or Form 1040NR-EZ (PDF)), for tax
the year in question. Processing of your claim may be delayed if you submit it less
than six weeks after you filed Form 1040NR or 1040NR-EZ.
In addition to the documentation listed above foreign student visa holders should
also attach the following:
a copy of Form I-20, Certificate of Eligibility, endorsed by your student advisor
and stamped by the Bureau of Citizenship and Immigration Services; and
a copy of the Employment Authorization Document of your Optional Practical Training
(e.g., Form I-766, I-538 or 688B).
if you are an exchange visitor, attach a copy of Form IAP-66 or DS-2019 to your
claim.
File the claim, with attachments, with the IRS where the employer's returns were
filed. If you do not know where the employer's returns were filed, send your claim
to the Internal Revenue Service Center, Philadelphia, PA 19255.
For more information, refer to Publication 519, U.S. Tax Guide for Aliens .
References:
I am a U.K. resident and I need to recover withholding tax on a U.S. capital
gain. Do I need an ITIN?
To claim a refund of U.S. tax withheld you need to file Form 1040NR (PDF) , U.S. Nonresident Alien Income Tax Return . Therefore, you
need to secure an Individual Taxpayer Identification Number, or ITIN. To secure an
ITIN, you must file Form W-7 (PDF), Application for
IRS Individual Taxpayer Identification Number . For detailed information on applying
for an ITIN, go to Tax Topic 857 , Individual Taxpayer Identification Number
- W-7
References:
- Publication 515, Withholding of Tax on Nonresident Aliens and
Foreign Corporations
- Publication 519, U.S. Tax Guide for Aliens
- Publication 1915 (PDF), Understanding Your IRS Individual
Taxpayer Identification Number
- Form W-7 (PDF), Application for IRS Individual
Taxpayer Identification Number
- Tax Topic 857, Individual Taxpayer Identification Number -
Form W-7
- Form 1040NR (PDF) , U.S, Nonresident
Alien Income Tax Return
- Tax Topic 857 , Individual Taxpayer Identification Number
- Form W-7
I am a foreign citizen and resident from the European Union. I plan to buy
U.S. stocks, but what tax will I have to pay if I have earnings on stocks?
U.S. source dividend income is subject to 30% tax rate when paid to nonresident
aliens. A lower rate may apply to residents of a member country with which the United
States has an income tax treaty. The U.S. does not currently recognize the E.U. as
a taxing authority.
References:
I am a nonresident alien. Our broker withholds 30% tax on dividends. Can
I get this tax back since I already owe tax in my residence country on overseas income?
Generally, this type of income paid to nonresident aliens is taxable at the 30%
or lower treaty rate. If your country has a tax treaty with the U.S., you may have
a reduced rate of tax. If that is the case, you should file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return, to claim a refund
of federal income taxes withheld. To avoid future excess withholding, provide your
broker with a completed Form W-8BEN (PDF) , Certificate
of Foreign Status of Beneficial Owner for U.S. Tax Withholding. You may be entitled
to a credit against the tax you owe to your residence country for the U.S. tax that
is withhold from your dividends.
References:
13.6 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Students
I am a foreign national and last year I changed my type of visa from F-1
student to H-1 work visa. Does my visa status change how I file my tax return or what
forms I use?
It depends on whether or not you qualify as a resident alien. As a foreign national
temporarily in the U.S. and now under an H-1 visa, you must file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return and Form 8843 (PDF), Statement for Exempt Individuals and Individuals with a Medical
Condition (if you do not meet the substantial presence test). In order to file
a Form 1040, Individual Tax Return, you must meet the substantial presence test. Please
refer to Publication 519, U.S. Tax Guide for Aliens , for a detailed
discussion of the Substantial Presence Test. You may also qualify to file
as a dual status taxpayer for the year of your visa change. Refer toTax Topic 852 ,
for dual status information.
References:
I am an F-1 student status who was employed during my school studies and
directly afterwards I completed practical training. Do I have to pay FICA taxes? Which
taxes should be taken out of my pay?
Generally, services performed by you as a nonresident alien temporarily in the
United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section
101(a)(15) of the Immigration and Nationality Act are not covered under the social
security and medicare programs if the services are performed to carry out the purpose
for which you were admitted to the United States. This means that there should be
no withholding of social security or Medicare taxes from the pay you receive for these
services. These types of services are very limited, and generally include only on-campus
work, practical training, and economic hardship employment. However, you are covered
under the social security and medicare programs for these services if you are considered
a resident alien, even though your nonimmigrant classification ("F," "J," "M," or
"Q") remains the same. Social security and Medicare taxes will be withheld from your
pay.
Additionally, any student who is enrolled and regularly attending classes at a
school, college, or university may be exempt from social security and Medicare taxes
on pay for services performed for such school, college, or university.
References:
Are nonresident alien students, with F-1 or J-1 visas and employed by a
U.S. company during the summer, required to have federal income taxes withheld from
their paychecks?
The following discussion generally applies only to nonresident aliens. Wages and
other compensation paid to a nonresident alien for services performed as an employee
are usually subject to graduated withholding at the same rates as resident aliens
and U.S. citizens. Therefore, your compensation, unless it is specifically excluded
from the term "wages" by law, or is exempt from tax by treaty, is subject to graduated
withholding. Nonresident aliens must follow modified instructions when completing
Form W-4. Please refer to Publication 519, U.S. Tax Guide for Aliens,
for directions on completing Form W-4 (PDF), Employee's
Withholding Allowance Certificate .
References:
I am a student from the People's Republic of China currently studying in
the United States. How does the income tax treaty between the U.S. and China apply,
especially for students with scholarships and fellowships?
If you are in the United States solely for the purpose of your education, training,
or obtaining special technical experience, you may be able to exclude from your income
grants or awards that you receive from a government, scientific, educational, or other
tax-exempt organization. You also may be able to exclude payments that you receive
from abroad for the purpose of your maintenance, education, study, research, or training
and up to $5,000 of income that you receive from personal services performed in the
United States. Please refer to Publication 901 , U.S. Tax Treaties,
for further details.
References:
13.7 Aliens and U.S. Citizens Living Abroad: U.S. Citizens Overseas
I am a U.S. citizen and married a nonresident alien last year. At that time,
we filed an application with the Bureau of Citizenship and Immigration Services (BCIS,
formerly INS) for my spouse's adjustment of status. We plan to file married filing
jointly. Will I need to use Form 1040NR?
As a U.S. citizen, you cannot file Form 1040NR (PDF), U.S.
Nonresident Alien Income Tax Return. If you make an election to file a joint
return with your nonresident alien spouse (your spouse must, in turn, elect to be
taxed as U.S. resident), file Form 1040 (PDF), U.S. Individual
Income Tax Return (or Form 1040A (PDF) or Form 1040EZ (PDF) if otherwise applicable), and report both incomes from worldwide sources.
You will need to get an ITIN for your spouse. To apply for an ITIN, file Form W-7 (PDF), Application for IRS Individual Taxpayer Identification
Number.
References:
- Form 1040NR (PDF), U.S. Nonresident
Alien Income Tax Return
- Form 1040 (PDF), U.S. Individual Income
Tax Return
- Form W-7 (PDF), Application for IRS Individual
Taxpayer Identification Number
- Tax Topic 857, Individual Taxpayer Identification Number -
Form W-7
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