The following questions and answers are intended for informational purposes only. SF State and its employees cannot provide or give tax advice. SF State recommends each individual seek tax advice from a professional tax preparation service, professional tax accountant, or professional tax attorney who is knowledgeable about United States nonresident alien tax rules and regulations. The information provided here attempts to address the most frequently asked questions (from SF State international students, staff, and faculty). The information provided is subject to change without notice.
1. General Questions
Who is a Nonresident Alien?
Any person who is not (1) a United States (U.S.) citizen, (2) a lawful permanent resident --green card holder, or (3) who does not meet the green card test or substantial presence test.
What does NRA stand for?
It’s an acronym for Nonresident Alien.
What is an Foreign National Information Form?
A San Francisco State University form designed to collect the information necessary to determine the United States tax-residency status of a non-U.S. citizen.
I am a nonresident alien who will be leaving the United States. What forms do I have to file before I leave?
Before leaving the United States, aliens generally must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. You will receive a sailing or departure permit after filing a Form 1040C or Form 2063.
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2. United States Tax Residency questions:
What is the Substantial Presence Test (SPT)?
It is an Internal Revenue Service tax residency test for nonresident aliens. The SPT is used to determine US tax residency status. The test counts how many days you have been present in the United States. If you have been present in the United States for at least 183 days during a three-year period that includes the current year, you are no longer a nonresident alien for tax purposes. For purposes of this test, each day of your presence in the current year is counted as a full day; each day of presence in the first preceding year is counted as one-third of a day; and each day of presence in the second preceding year is counted as one-sixth of a day.
- All the days present in the current year, and
- 1/3 of the days present in the first preceding year, and
- 1/6 of the days present in the second preceding year.
If you are not physically present for more than 30 days during the current year, you will fail the test, even if the three-year total is183 or more days. A nonresident alien who is considered an “exempt” individual for tax purposes cannot take the SPT because he/she cannot count days of presence for the SPT until he/she qualifies.
Who is an “Exempt” individual?
An individual who is exempt from counting days of presence for the Substantial Presence Test. Students temporarily present in the United States under an F, J, M, or Q visa and who substantially comply with the requirements of the visa are exempt individuals for no more than five calendar years; non-students are exempt for no more than two years.
Note: This term has nothing to do with whether the individual will be exempt from having federal income tax or Social Security and Medicare taxes withheld, or filing a United States tax return.
What is a green card test?
A U.S. residency status test used to determine whether a non-U.S. citizen will be treated as a resident alien for U.S. tax purposes. An individual passes the test if he/she is granted lawful permanent residence in the U.S. as an immigrant by the Immigration and Naturalization Service, and is issued an alien registration card (often called a "green card").
Who is a resident alien for tax purposes?
An individual who has met or passed the "substantial presence test" by virtue of the number of days physically present in the United States or has been granted lawful permanent residence in the United States as permanent resident alien. A resident alien is taxed on his/her worldwide income and in the same manner as a United States citizen.
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3. Tax questions:
Who is a nonresident alien for tax purposes?
An individual who has NOT met or passed the "substantial presence test" by virtue of the number of days physically present in the U.S. or has not been granted lawful permanent residence in the U.S. as permanent resident alien. A nonresident alien is taxed only on his/her income from U.S. sources, using special tax withholding, reporting, and filing guidelines different than those applied to U.S. citizens and resident aliens for tax purposes.
What is the difference between a resident alien and a nonresident alien for tax purposes?
A nonresident alien is taxed only on his/her income from United States sources, using special tax withholding, reporting, and filing guidelines different than those applied to United States citizens and resident aliens for tax purposes. Resident aliens for tax purposes are taxed on their worldwide income, the same as United States citizens.
Where can I find information about nonresident alien taxation?
The Internal Revenue Service (IRS) has produced numerous publications and forms. All of these publications and forms are available at the Internal Revenue Service website (www.irs.gov). The publication that may be helpful to nonresident aliens is: Publication 519 – United States Tax Guide for Aliens.
I am a student with an F-1 (or J-1) visa. I was told that I was an exempt individual. Does this mean I am exempt from paying United States taxes?
No. The term “exempt individual” does not exempt you from paying United States taxes. Every nonresident alien must pay United States taxes. It simply means that a nonresident alien student who is temporarily in the United States on an F, J, M, or Q visa cannot count the days he/she was present in the United States as a student during the first 5 years in determining whether he/she will be a resident or nonresident alien under the substantial presence test.
A non-student under F, J, M, or Q visa cannot count the days he/she was present in the United States as a student during the first 2 years in determining whether he/she will be resident or nonresident alien under the substantial presence test.
I am a nonresident alien. Can I claim any tax treaty benefits?
Yes, if your country of residence has tax treaty with the United States and you meet the requirements set forth in the tax treaty.
My friends inform me that international students are exempt from United States taxes. Is this true?
No, there are no such provisions in the United States tax code.
I am an international student working on campus. Why do I have to pay taxes to the government of the United States and California?
In order to comply with both federal and state tax regulations: Internal Revenue Code Sec. 1-871-1(a) and California Revenue and Taxation Code 17951.
Internal Revenue Code (IRC), Title 26 of the United States Code, governs the federal income tax law. IRC Regulations Section 1-871-1(a) states that nonresident aliens are taxed on their United States source income and on income effectively connected with a United States trade or business. California state government requires NRA income in California to be taxed according to the California Revenue and Taxation Code Sec. 17951.
I am an international student. I did not work in the United States. Do I need to pay taxes to the United States?
No, if you do not have income from sources in the United States, you will not need to file a tax return.
Is the money that my parents send me from abroad taxable in the United States?
No. If it is not United States source income, it is nontaxable.
What type of taxes are deducted from my paycheck and how much?
The income you receive from SF State as an employee (i.e., as a staff, faculty, student assistant, graduate assistant, researcher, etc.) is considered United States source income and taxed according to United States tax laws.
Generally there are four types of taxes withheld from your paycheck:
- Social Security Tax and Medicare (collectively called FICA), F, J, M, Q visa holders are exempt from FICA during their "exempt" individual period
- Federal Income Tax (FIT)
- State Income Tax (SIT)
FIT and SIT rates are based on several factors, such as gross income, frequency of the pay period (monthly, semi-monthly, weekly), marital status, and number of allowances.
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4.Tax Return questions:
What is a W-2?
A W-2 is a record of your earnings and tax withhled for the year. You use a W-2 to file your federal, state and local tax return.
What is a 1042-S and Foreign Person's U.S. Source Income?
Form 1042-S is an information tax statement/form used to report U.S. source income paid to a nonresident alien individual. It is used to report: (a) compensation payments made to employees for which an exemption from tax withholding is claimed based on a tax treaty (b) all non-employee compensation payments made to nonresident aliens; (c) non-service and/or non-qualified scholarship and fellowship grants.
What is tax form 1040NR-EZ and 1040NR?
Please review Office of International Programs (OIP) website under "Taxes" link for this information. The link for these tax forms is listed under: III. Tax Forms: http://www.sfsu.edu/~oip/f1services/Taxes/shouldifile.html
When is my Form 1040NR-EZ or 1040NR due?
If you are an employee and you receive wages subject to United States income tax withholding, you must generally file by the 15th day of the 4th month after the tax year ends. For example, if you file for the 2011 calendar year, your return is due April 15, 2012 or next business day after April 15, 2012 -- Monday, April 16, 2012.
Do I need a Social Security Number to file my taxes?
No, however, you will need an Individual Taxpayer Identification Number (ITIN). If you do not have a Social Security Number (SSN). ITIN’s are issued by the Internal Revenue Service. To file a federal or state income tax return, an individual will need either a SSN or an ITIN.
Can I file a joint return with my spouse?
Yes, if you are married to United States citizen or resident.
I invested money in the United States stock market through a United States brokerage company. Are the dividends and the capital gains taxable? If yes, how are they taxed?
Yes. The following rules apply if the dividends and capital gains are not effectively connected with a U.S trade or business. Capital gains are generally not taxable if you were in the United States for less than 183 days during the year. Dividends are taxed at a 30%(or lower treaty) rate. The brokerage company or payoll of the dividends should withhold this tax at source. If tax is not withheld at the correct rate, you must file Form 1040NR to receive a refund or pay any additional tax due.
If the capital gains and dividends are effectively connected with a United States trade or business, they are taxed according to the same rules and at the same rates that apply to United States citizens and residents. Consult a tax professional to determine the tax consequences.
Do I have to pay taxes on my scholarship?
If you are a nonresident alien and the scholarship is NOT from United States sources, it is not subject to United States tax. If your scholarship is FROM United States sources or you are a resident, your scholarship is subject to United States tax according to the following rules: if you are a candidate for a degree, you may be able to exclude from your income the part of the scholarship you use to pay for tuition, fees, books, supplies, and equipment required by the educational institution. However, any part of the scholarship you use to pay for other expenses, such as room and board, is taxable.
I earned minimal (very little) employment income; am I required to file an annual federal and state tax return?
Yes, the Federal government requires any NRA who generates United States source income to file a United States tax return, regardless of the amount of income or tax liability.
For the California government, generally, if your annual gross income is less than $12,000, you are not required to file, unless you have paid some state income taxes in advance and want to request a refund.
What documents do I need to have to file my tax return?
You will need a W-2. SF State employees should receive their W-2 by February 15th. If you do not receive your W-2, please contact the Payroll Department of Human Resources (ADM 252).
In addition, if you were granted a federal tax treaty exemption, SF State will also prepare a form 1042-S and will mail it to you at about the same time the W-2 is sent to your home. If you do not receive the form 1042-S, please contact Tax Specialist, Young Kim at (415) 338-2325.
Your change of address can cause delay or even loss of the documents during delivery. Notify the Payroll Department if you change your mailing address.
I am a nonresident alien. Can I claim the standard deduction?
Nonresident aliens cannot claim the standard deduction.
I am filing Form 1040NR. Can I claim itemized deductions?
Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim, but only if they have income effectively connected with their United States trade or business.
I am not a United States citizen. What exemptions can I claim?
Resident aliens can claim personal exemptions and exemptions for dependents in the same way as United States citizens. However, nonresident aliens generally can claim only a personal exemption for themselves on their United States tax return. There are special rules for residents of Mexico, Canada, Japan, South Korea; for United States nationals; and for students and business apprentices from India.
I am a nonresident alien student. Social Security and Medicare taxes were withheld from my pay in error. How do I get a refund of these taxes?
If Social Security or Medicare taxes were withheld in error from your pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement.
How much taxes are withheld from my paycheck?
The withholding rates are stipulated in Internal Revenue Code section 1441 for federal taxes and the California Tax and Revenue Code Section 18662 for state taxes.
Federal Income Tax withholding rates:
- Employees – Compensation paid to nonresident alien employees is subject to special graduated withholding rates. Form W-4 (Employees Withholding Certificate) (for SF State, the form is called Employee Action Request Form – EAR) must be completed in the following manner:
- Single (regardless of actual marital status)
- One Withholding Allowance (regardless of actual number of dependents, there are exceptions)
- An additional AMOUNT per month (required by Treasury Regulations and determined by the IRS).
- Non-employees – Compensation and all other payments: 30% Federal tax withholding
- Scholarships/Fellowship Grants – scholarship and fellowship grant payments and/or disbursements: 14% Federal tax withholding. Exceptions: qualified vs. non-qualified amounts.
- State Income Tax withholding rates:
- Employees – Compensation paid to nonresident alien employees is subject to state tax withholding. Form W-4 can be used for the state withholding; if an employee wants to change their state withholding, they must complete a DE-4 – Employee Withholding Certificate (For SF State, the form is called Employee Action Request or EAR form).
- Non-employees – Compensation and all other payments: 7% State tax withholding if payments exceed $1500 in a calendar year.
- Scholarships/Fellowship Grants – payments and/or disbursements: No State tax withholding. Exception: degree candidate vs. non-degree candidates (see question #6 for details).
How can I take advantage of a tax treaty?
You must consult with the Tax Specialist by calling (415) 338-2325 to make an appointment.
Where can I obtain more information on income tax treaties?
Go to the Internal Revenue Service website and search for Publication 901 or you could go to your local Internal Revenue Service office to obtain the information.
Will I automatically receive a refund for the taxes that were withheld from my paycheck or payments?
No, there are no automatic refunds. You must file a tax return to request a refund. The amount of refund you will receive (if any) will depend on your tax liability computed at the end of the year and will be based on your annual income.