Frequently Asked Tax Questions 2018 Tax Returns

Transcription

1 Frequently Asked Tax Questions 2018 Tax Returns Q. When is my tax return due? A Federal (U.S. government) tax returns are due by April 15, State of Iowa tax returns are due by May 1, Please note that because of very recent changes in federal tax legislation, 2018 tax returns will not be accepted before January 28, Q. What forms do I need to file? A. That depends on if you are a resident or nonresident for tax purposes. Tax forms and rules are different for residents and nonresidents and it is very important to file the correct forms to avoid legal and financial difficulties. Q. How do I know if I am a resident for tax purposes? A. F-1 and J-1 students are nonresidents for tax purposes for their first five years in the United States. J-1 scholars are nonresidents for their first two years. (Note that partial years count as full years for this calculation.) If you are an F-1 or J-1 student who came to the U.S. in 2014 or later, you are a nonresident for 2018 tax purposes. If you are an F-1 or J-1 student who has been in the U.S. since 2013 or earlier, you must take the Substantial Presence Test (SPT) to determine your residency status for tax purposes. Your residency status for tax purposes can change during your time in the U.S. The Substantial Presence Test (SPT) is used to determine if someone who has been in the U.S. for all or part of more than 5 calendar years as a student or more than 2 calendar years as a scholar is a resident for U.S. tax purposes. To pass the SPT and be considered a resident for 2018 tax purposes, an F-1 or J-1 student must: 1. have been in the U.S. in F or J status every year since 2013 or earlier 2. be physically present in the United States for at least 31 days during 2018, and 3. be physically present in the United States for 183 days during the 3-year period consisting of the tax year and the 2 immediately prior years. The 183 days are calculated as follows: all days of presence in the current tax year plus 1/3 of days of presence in the year immediately before the current year plus

2 1/6 of all days of presence in the year before that. If this total is 183 or greater, you are a resident for tax purposes and can file the same tax forms as a U.S. citizen. Remember that F and J students can use the Substantial Presence Test only for years after their first 5 years in the U.S. J scholars can use the SPT only for years after their first 2 years in the U.S. Here is an example: Excellent Student arrived in the U.S. in F-1 student status on August 10, 2012, and has maintained that status. Mr. Student left the U.S. for the first time since 2012 on May 20, 2018, to visit his family and study abroad in Italy for Fall Semester 2018, returning to the U.S. on January 5, He cannot count any time during his first 5 years in the U.S. (2012 through 2016) when taking the Substantial Presence Test, so his calculation is as follows: 140 days in 2018 (he was gone for 225 days during 2018) days in 2017 (1/3 of the 365 days in 2017) 0 days in 2016 (2016 was his 5 th year in the U.S. so it can t count) His total of ( ) is greater than 183 so Mr. Student passes the SPT for 2018 and will file his taxes using the same forms and rules that apply to U.S. citizens. Q. I am on scholarship. What is my tax obligation? A. If your scholarship is from sources inside the United States, the portion of your scholarship used for room and board as well as for other non-educational expenses is taxed at a flat rate of 14% (or 30% if you have no U.S. Social Security Number or ITIN). Individuals from countries with which the U.S. has negotiated tax treaties may be able to reduce the amount of tax on their scholarships. The portion of your U.S. scholarship granted and used to pay tuition and required fees is exempt from U.S. tax. You will receive Form 1042-S from your sponsor to report the taxable portion of your scholarship. If you are a nonresident for tax purposes and your scholarship is provided by an entity outside the United States you will not pay taxes to the U.S. on any part of your scholarship. Check with your sponsor to determine if you have any U.S. tax obligations on your scholarship.

3 Q. What is a tax treaty and how do I determine if I am eligible? A. The U.S. has negotiated tax treaties with several countries of the world. If you are a resident of a country that has a tax treaty with the U.S., you may be eligible to reduce or eliminate U.S. tax on your income. If you are eligible for a tax treaty benefit, you must file Form 8233 with your employer every year. More tax treaty information can be found here and here: Remember that if you claim a tax treaty benefit you must file a tax return for the year in which you claimed that benefit even if none of your income was taxed. Failure to file the tax return can cause the government to disallow your treaty benefit. Q. My employer deducted taxes from my paychecks. Do I still need to file a tax return? A. Yes. All nonresidents must file a tax return each year they are in the United States. The law requires U.S. employers to withhold a standard percentage of tax from each employee and to pay that tax to the U.S. government. Individuals must file a tax return at the end of each year to determine whether they owe additional taxes or to request a refund from the U.S. government if their employer deducted too much tax during the year. Q. What is Form W-2? A. After the end of each calendar year, U.S. employers must provide Form W-2 to their employees to summarize the amount paid for work with that employer during the year. Your employer must also report on the W-2 how much tax was withheld from your paychecks and paid to the government on your behalf during that same year. You must receive Form W-2 from each U.S. employer for whom you worked during the year. You need the information from all your Forms W-2 to complete your annual tax return and must attach a copy of each W-2 to your tax return. If you did not work in the United States during the year or if all of your income was exempt under a tax treaty (see What is Form 1042-S? below) for which you signed up at the beginning of the year, you will not receive Form W-2. ISU distributes W-2 forms for its employees through the employee tab on AccessPlus. Q. What is Form 1042-S? A. Form 1042-S summarizes taxable scholarships and fellowships as well as income

4 exempt from tax under a treaty benefit. Schools and sponsors mail Form 1042-S in early February. You need the information from all your Forms 1042-S to complete your annual tax return and must attach a copy of each 1042-S to your tax return. ISU sends 1042-S forms via U.S. mail. Make sure your mailing address is correct in AccessPlus. Q. When will I receive my W-2 or 1042-S? A. Employers distribute Forms W-2 to each employee on or before Jan 31 st. Schools and sponsors mail the Form 1042-S in early February. If you are employed by Iowa State University during 2018, your Form W-2 for 2018 is now available online through the Employee tab in AccessPlus. If you worked off-campus during the year and have not received Form(s) W-2 by February 1 st, contact your employer(s) to request a copy. Q. I received Form 1042-S but no Form W-2. What should I do? A. Form 1042-S is used by Iowa State University and U.S. sponsors to report taxable scholarships and income exempt from tax under a tax treaty. You need the information from your Form 1042-S to complete your annual tax return and must attach a copy of the 1042-S to your tax return form. If you did not work in the United States during the year or if you worked but all of your income was exempt under a tax treaty, you will not receive Form W-2. If you worked in the U.S. and not all of your income for the year is reported on the Form 1042-S you received, contact your employer(s) to request a copy of your W-2 form if you have not received it by February 1 st. If you worked off-campus on CPT, OPT, or academic training for part of the year, your former employer may have produced a W-2 form for you, but may not know your current mailing address. Q. What is Form 1095? A. Form 1095 is a report of health insurance coverage that you had or were offered during the previous year as required by the Affordable Care Act ( Obama Care ). This health care form provides information that residents for tax purposes may need when filing their tax return. If you are a nonresident, this form is for your information only and the information from it does not need to be included on your nonresident tax return. Do not attach this form to your tax return. Those who qualify as residents for U.S. tax purposes are subject to the provisions of the Affordable Care Act which require them to have health insurance for themselves and each member of their tax family. Residents for tax purposes will use the information on Form 1095 to prepare their resident tax returns. (See How do I know if I am a resident for tax purposes? at the beginning of this FAQ.)

5 Q. What is Form 1098-T? A. Form 1098-T is a report of payments received, amounts billed or refunds made for tuition and related expenses during the tax year. Nonresident students do not need Form 1098-T and it does not need to be included with a nonresident tax return. Those who qualify as residents for U.S tax purposes may use the information on this form to determine their eligibility for certain education tax credits. (See How do I know if I am a resident alien for tax purposes? at the beginning of this FAQ.) Q. What is Form 1099? A. Form 1099 is a report of income received during the tax year from sources other than wages. Form 1099-INT is a report of interest income earned on deposits with U.S. banks. Nonresidents are exempt from tax on this type of interest income but residents must include the interest earned as shown on Form 1099-INT on their tax returns as taxable income. Forms 1099-B and 1099-DIV report proceeds from the sale of stocks and bonds, dividend income and capital gains. Both nonresidents and residents must pay taxes on income reported on Forms 1099-B and 1099-DIV. Form 1099-G is a report of any State tax refund received for the previous year. This amount may be taxable to both nonresidents and residents to the extent that it was taken as an itemized deduction in the previous tax year. You will need all 1099 forms issued to you during the year in order to properly prepare your tax return. Q. I did not work in the United States this year and had no scholarship from U.S. sources. What should I do? A. All nonresident F and J international students and scholars must file Form 8843, even if they had no income for the year. Dependents in F-2 and J-2 status must also file Form Q. I arrived in the U.S. for the first time in December 2018, and I didn't work. Do I still have to file Form 8843? A. Yes. If you were in the U.S. in F or J status for even 1 day during the tax year (January 1 through December 31), you must file Form 8843 for that year. Q. I did not earn very much money. Do I still have to file a tax return? A. Tax law changes made in December of 2017 require nonresidents to file a tax return with the U.S. government if they earned any U.S. source income during 2018.

6 Q. Which tax form do I use? A. Generally, international students and scholars use form 1040NR-EZ or 1040NR for their Federal (U.S. government) taxes. "NR" means nonresident for tax purposes. Individuals who are residents for tax purposes use the same 1040 forms as U.S. citizens. All nonresident F and J international students and scholars must file Form 8843, even if they had no income for the year. Q. May I file my tax forms electronically? A. An electronic filing option does exist for the long Form 1040NR. Some free electronic filing options are available after January 28, 2018, for those who qualify based on age and income. Two options for free e-filing of both federal and state nonresident tax returns are: OnLine Taxes: TaxAct: The shorter 1040NR-EZ tax returns cannot be filed electronically and must be printed, signed, and mailed to the government with Form However you choose to file, be very certain to complete the correct forms for your tax residency status. Q. Where do I mail my paper tax return? A. If you are due a refund or owe no additional tax, Forms 1040NR-EZ, 1040NR, and 8843 are mailed to: Department of the Treasury Internal Revenue Service Austin, Texas If you owe additional tax, Forms 1040NR-EZ, 1040NR, and 8843 are mailed to: Internal Revenue Service P.O. Box 1303 Charlotte, North Carolina State tax forms should be mailed to the address indicated on the tax form instructions for the State(s) in which you worked during the year. Q. I owe additional tax for the year. How can I pay? A. You may prepare and mail a paper check with your tax return. You may also pay online or by phone. For more information please see

7 Q. What if I am married to a U.S. citizen, legal permanent resident or someone who has met the Substantial Presence Test? A. A nonresident who does not meet the Substantial Presence Test and does not have a green card may choose to be treated as a resident for tax purposes if the nonresident is married to a U.S. citizen, legal permanent resident, or someone who has passed the Substantial Presence Test. This choice can be made if: 1. at the end of the year, one spouse is a nonresident alien and the other is a U.S. citizen or resident, and 2. both spouses agree to file a joint return and to treat the non-resident alien as a resident alien for the entire tax year. To make the election, the married couple must attach a statement to the joint tax return that is filed for the year. The statement should contain the following information: 1. A declaration that one spouse was a nonresident and the other spouse was a U.S. citizen or resident on the last day of the tax year, and that they choose to be treated as U.S. residents for the entire tax year, and 2. Each spouse's name, address, and taxpayer identification number. Remember that tax residents must pay tax to the United States on their total worldwide income. Nonresidents pay tax to the U.S. only on income earned in the U.S. Q. What is a dual-status alien? A. A dual-status alien is a person who is both a resident and a nonresident for tax purposes during the same tax year. This usually occurs in the year a person first arrives in the United States or leaves the United States for the last time. It may also occur if a person's residency status changes during the year. Tax returns for dual-status aliens are generally more complicated. Please review the IRS website here: or speak with a tax advisor for assistance. Q. My young children live with me and one was born in the U.S. Can I claim the Child Care Tax Credit? A. Usually not. Only those students and scholars in nonresident tax status from one of the countries that can claim dependents (Mexico, Canada, South Korea, and Indian students) under tax treaties are eligible for the Child Care Tax Credit. Q. What happens if I do not file a tax return? A. If you do not owe any additional tax, the Internal Revenue Service (IRS) will not financially penalize you except to keep any refund you would have received had you

8 filed your return. However, the terms of your visa require that you stay in compliance with all laws of the United States, including income tax filing. If you want to apply for permanent residence in the U.S. at a later date you may be asked to prove that you have complied with all tax laws. If you are a nonresident with income protected by a treaty or have income from outside the U.S. and fail to file a return, both your treatyprotected and foreign-source income become subject to U.S. tax. If you owe additional tax for the year, you must file a tax return and pay those taxes on time to avoid late fees. The IRS charges substantial interest and penalties on past due taxes. Failure to follow tax rules can also have far-reaching legal consequences. Q. My friend filed Form 1040 as a resident and received a larger refund. Can I do that, too? A. Not legally. If you are a nonresident you must file 1040NR-EZ or 1040NR. Failure to file the correct form is tax fraud and can place your immigration status in jeopardy. The additional money you might receive is not worth the legal and financial trouble. Q. I am a nonresident and my employer withheld FICA taxes from my paycheck. Can I get a refund? A. F-1 and J-1 nonresidents for tax purposes are exempt from FICA (Social Security and Medicare) taxes on wages earned from legal employment in the United States. If your employer withheld FICA taxes in error, you can request a refund. The law requires that you first ask your employer for a refund of the FICA taxes. If your employer cannot help you, file Forms 843 and 8316 with the IRS to request a refund from the government. Attach the following to Form 843: 1. A copy of the Form W-2 showing FICA taxes withheld 2. A copy of your I A copy of your most recent entry visa 4. Completed Form A copy of Form 1040NR-EZ or 1040NR filed for the year in which the FICA was withheld 6. A copy of your I-20 or DS A copy of your Employment Authorization Document (if applicable) 8. If your visa status has changed in the past year attach any USCIS Approval Notices Mail your claim to: Department of the Treasury Internal Revenue Service Center Ogden, Utah

9 More information about Form 843 and Form 8316 can be found on the IRS Website here: pubs or contact a tax advisor for assistance. Note that wages earned by those in J-2 status are not exempt from FICA taxes. Q. How do I prepare my State taxes? A. Tax forms and regulations vary from State to State. In Iowa you will use Form IA1040 to file your state tax return. Guidance on Iowa tax return preparation is available elsewhere on this Website. Q. I worked in another state for part of the year, what do I need to do? A. In addition to your Federal tax return you must complete a tax return for each U.S. State in which you worked during the year. (Exceptions are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming which have no State income tax.) If you worked in both Iowa and another State during the year, you must complete Form IA1040 and attach an IA Form 126 or IA Form 130 depending on your situation. You'll need to file similar part-year resident forms for the other State(s) where you worked during the year. Multiple State tax returns can become complicated because you must report total income earned during the year to both States then calculate a prorated amount of tax applicable to the earnings from each State. If you need assistance please contact a tax advisor. Q. My American friend told me something different than what is written here. Which is correct? A. Do not go to your American friends for tax advice. Chances are they do not understand that the rules for nonresidents are different from the rules that apply to them. Although their advice is well intended, it is often misguided. Please contact a tax advisor for assistance.