Frequently Asked Questions for Foreign Nationals
1. Taxes are taken from my paychecks, do I need to file a tax return?
You must file a tax return because the U.S. tax system is based on self-reporting of income. While the Form W-4 allows the university to withhold a certain tax amount each pay period, you must file an income tax return at the end of the tax year to determine whether you owe additional tax money or get a refund.
2. I graduated from American University last spring, and I’m back in my home country. I received a Form W-2 from the Payroll Office. What should I do? Can the Payroll Office help me prepare my tax return?
Whether you are in the U.S. or back in your country, you must file a tax return at the end of the tax year. Please use the CINTAX software available on the website at http://www.my.american.edu. The software is very user-friendly and simple to follow. Once the CINTAX software program is updated for tax year, the ISSS office will e-mail all eligible foreign nationals sometime in February. If you have not received an AU PIN number at that time, please contact or e-mail the ISSS office. Please also refer to IRS Website to get IRS publications and forms. The Payroll Office cannot prepare a tax return for you. If you have unusual circumstances, please consult a professional tax advisor who is familiar with nonresident alien tax matters.
3. I received Form W-2 from the university in late January. Should I go ahead and file my tax return or wait until I receive Form 1042-S later?
Please refer to Section V for types of payments and reporting requirements to find out whether you will be receiving both forms. You must include both Form W-2 and Form 1042-S when you file your tax return with the IRS, which is due April 15.
4. I received Form 1042-S only. When should I file my return to the IRS?
Please file your return by June 15.
5. Many of my friends are filing income tax Form 1040EZ rather than Form 1040NR. Since 1040EZ looks easier, can I use 1040EZ instead?
Only if you are a resident alien for tax purposes. Form 1040EZ can be used by U.S. citizens, permanent resident aliens or resident aliens for tax purposes. Form 1040NR or 1040NR-EZ should be used by nonresident aliens for tax purposes.
6. The dean of my school is hosting an international conference next month. Several foreign visitors have been invited to speak at the conference. Some of them will arrive in the United States on a business or tourist visa. The dean wishes to make honoraria payments to those visitors at the end of the conference. Should I process disbursement requests through Payroll or Accounts Payable?
There are two issues here - a) Are the foreign visitors allowed to work and receive payments from an immigration standpoint? and b) Are there any tax liabilities from an IRS standpoint? Generally individuals on a B-1 or B-2 visa are not authorized to work in the United States. However, a special provision was made for higher education institutions effective October, 1998. A new law permits a university to pay honoraria and incidental expenses for a usual academic activity lasting not longer than 9 days at any single institution. The foreign national may not accept payment or expenses from more than 5 institutions within the previous 6 month period. Therefore, an academic honorarium certification must be completed by the foreign national. We recommend that you obtain the certification from the foreign visitor prior to finalizing a speaking engagement. The foreign national must also present a valid visa and Form I-94, Record of Arrival and Departure, as verification of immigration status.
As far as the taxes are concerned, honoraria payments are subject to 30% tax withholding absent tax treaty language to the country. Therefore, it is important for the foreign visitor to receive assistance from the Foreign National Specialist in the Payroll Office to maximize any tax treaty benefits. The dean may decide to gross up the payment and shoulder the tax liability for the individual. Please send a disbursement request form with the appropriate documents to the Payroll Office.
7. Some of the visitors will receive reimbursements for their hotel and airline ticket expenses, not honoraria. Since these are expense reimbursements, can I process disbursement requests through Accounts Payable instead of Payroll?
Yes, expense reimbursements can be processed through Accounts Payable. Accounts Payable will review the appropriate documents and process your requests. Those expenses are neither reportable, nor taxable as long as all the requirements have been met and those expenses are substantiated under the accountable plan rule defined by the IRS (see the independent personal service section). The same limitations regarding the length and the frequency of an academic activity should apply. Academic honorarium certification must also be completed by the foreign national in this case. We recommend that you obtain the certification prior to finalizing a speaking engagement.
8. I am an international student and all of my tuition and expenses are paid by my family. Do I owe any U.S. taxes and/or need to file an income tax return?
You only need to file Form 8843 if you did not have U.S. source income. Interest earned by your U.S. bank account is not considered U.S source income for nonresidents.
9. I am a graduate student receiving a graduate financial aid award, which pays my tuition and stipend. A certain portion of my stipend is taxed whereas my friend at another university does not have taxes taken out. Why?
If your graduate financial aid award requires a work (e.g., teach a certain number of hours a week) or a learning component, the work/learning component is considered services to be performed; therefore, all or a portion of your financial aid award is taxable as compensation. Your friend at another university may have a different type of award without any service/work requirement.
10. My home country has a tax treaty with the U.S. so do I need to pay any taxes?
An income tax treaty may exempt an individual from paying tax on a portion of his/her income, depending on the type of income received, the amount of income received and the length of time the individual is present in the U.S. Each county has different tax treaty benefits. Please refer to IRS Publication 901.
11. I am in the U.S. in non-immigrant status. Should I file as a nonresident alien?
Not necessarily. Residency status for immigration purposes may not be the same as residency status for tax purposes. Individuals who are in non-immigrant status may be resident aliens for U.S. tax purposes if they meet the substantial presence test.
12. I am a student on an F-1 immigration status. I read the IRS publication on tax treaties, and F-1 and J-1 students or J-1 scholars are “exempt individuals” so I don’t need to pay taxes, correct?
Incorrect. “Exempt individuals” means you are exempt from counting days toward the substantial presence test – generally for 5 years if you are a student and 2 years if you are a scholar. It does not mean that you are exempt from tax liability.