US Income Tax Returns - Individual income & Business tax forms
Every person who files a nonresident income tax return, including dependents and those who earned no money, must provide either a Social Security Number or a Taxpayer Identification Number (TIN). To obtain the TIN, one must submit Form W-7 to the IRS, either in person or by mail, with the supporting documents noted on the Form W-7. Since it may take one month or more to obtain the TIN, it is important to submit the application well in advance of the income tax filing deadline. Please refer to Question #17 for deadline information.
Form 1040NR-EZ (along with Form 8843) can be used by most international students and visiting scholars who are nonresident taxpayers and who earned income from a source in the U.S. last year. It is short and easy to complete. Other nonresident taxpayers who earned income in the U.S. last year must use Form 1040NR (along with Form 8843). Please refer to Question #5 of this Tax Guide to see if you can use Form 1040NR-EZ.
Every individual who is classified as a nonresident alien is required to file Form 8843, even if no income was earned in the U.S. last year. This requirement applies to F-1, F-2, J-1 and J-2 visa holders. Please refer to Questions #2 and #3.
For free federal income taxation assistance please contact the Internal Revenue Service (IRS) for Form 1040NR-EZ and the Instructions for Form 1040NR-EZ, Form 1040NR and the Instructions for Form 1040NR, the free Publication 519 (U.S. Tax Guide for Aliens), the free Publication 901 (U.S. Tax Treaties) and free expert advice.
Individuals required to file federal income tax returns (either Form 1040NR-EZ or 1040 NR) are also required to file State of Nebraska income tax returns. Nebraska state income tax laws generally follow the federal laws but there are exceptions. Individuals should review the instructions in the Nebraska Income Tax Booklet. Forms and booklets are available at the State Office Building, 301 Centennial Mall South, and in the lobbies of many local banks.
1. Why is tax withheld from a pay check?
All employers in the U.S. are required to retain a portion of each salary payment and pay part to the U.S. government and part to the state government in anticipation of income tax obligations. The amount withheld depends on the information reported on Form W-4 when an individual begins employment and the amount expected to be paid during the year by the employer to that individual. If too much is withheld, a refund may be requested with the income tax return filed for that year.
2. Who must file income tax returns?
Every F-1, F-2, J-1 and J-2 visa holder who is a nonresident alien for U.S. income tax purposes and who has earned income from a source in the U.S. (including individuals who received only scholarships, fellowships or tuition remissions and individuals whose income was exempted from federal income tax in whole or in part by treaty or because it is interest on deposits with banks, savings and loans institutions or credit unions) must file two documents with the IRS: (1) either Form 1040NR-EZ or Form 1040NR, the nonresident income tax returns and (2) Form 8843, the statement for F, J and M visa holders who are filing as nonresident taxpayers.
Every F-1, F-2, J-1, and J-2 visa holder who is a nonresident alien for U.S. income tax purposes, including individuals who earned no income in the U.S. and also including spouses and children of international students and scholars, must file Form 8843, the statement for F, J, and M visa holders who are filing as nonresidents. Individuals who earned no income from a source in the U.S. file Form 8843 either with or without a Social Security Number or a TIN.
F and J visa holders who earned any income from a source in the U.S., including scholarships and fellowships, also must file a state income tax return in each state in which they lived last year, except in states that do not have state income taxes.
H-1B visa holders must file a federal income tax return and a state income tax return but not Form 8843.
3. What forms are used to file federal income tax returns?
A. Students Earning Income in the U.S.: F or J students must use the nonresident tax return, either Form 1040NR-EZ or Form 1040NR, and Form 8843, for the first five calendar years they are physically present in the U.S. They may NOT use any of the resident tax returns such as Form 1040, Form 1040A or Form 1040EZ. Thereafter they will be considered residents** for income tax purposes unless they satisfy the IRS that they do not intend to reside permanently in the U.S. and that they have substantially complied with the terms of their visa (by filing Form 8843 along with the appropriate information). See also Question #16 regarding dual status returns.
B. Scholars (Teachers and Researchers) Earning Income in the U.S.:J-1 teaching and research scholars must use the nonresident tax return, either Form 1040NR-EZ or Form 1040NR, and Form 8843, for the first two calendar years they are physically present in the U.S. They may NOT use any of the resident tax returns such as Form 1040, Form 1040A or Form 1040EZ. After that period of time they will be considered a resident** for income tax purposes, unless they were physically present in the U.S. for less than 183 days during the 1998 tax year, they satisfy the IRS that they do not intend to reside permanently in the U.S. and that they have substantially complied with the terms of their visa (by filing Form 8840 along with the appropriate resident tax return). See also Question #16 regarding dual status returns.
H-1B teaching and research scholars who were physically present in the U.S. for less than half of the year must use the nonresident tax return, either Form 1040NR-EZ or Form 1040NR. Those individuals who were physically present in the U.S. more 183 days of the year may qualify as residents for tax purposes and may chose to file Form 1040. Detailed rules regarding the "substantial presence" test are explained in Publication 519 and in the Instructions for Form 1040NR-EZ or Form 1040NR. H-1B scholars who were nonresident taxpayers for part of a year and resident taxpayers for part of a year, including the years of arrival and departure, should file as dual status taxpayers.
C. F-1, F-2, J-1 or J-2 visa holders earning no income in the U.S.: Individuals holding the F-1, F-2, J-1 and J-2 visas who earned no income in the U.S. must file Form 8843. See also Question #2
** Resident taxpayers filing Form 1040, Form 1040A or Form 1040EZ are entitled to the benefits of additional provisions of the federal income tax laws, including personal exemptions for spouse and minor dependent children, the standard deduction, the earned income credit and the child care credit, but they are not eligible for tax treaty benefits.
4. What items are needed to file a federal nonresident income tax return?
For Individuals who Earned Income from a Source in the U.S.
A. Two copies of Form 1040NR-EZ or Form 1040NR, one for a working copy and one to submit to the IRS. (The Instructions for these forms may be helpful.)
B. Forms W-2 sent in January by employers to all persons employed during the previous year. (The employers have reported the income to the IRS.) One copy of each Form W-2 must be submitted to the IRS with Form 1040NR-EZ or Form 1040NR and another copy must be submitted with the Nebraska State income tax return.
C. Letters of award and receipts or canceled checks documenting scholarships and fellowships, qualified educational expenses, contributions to charity and other allowable deductions. See Question #7.
D. Documentation of other income such as refunds of last year's state taxes, sales of property, certain types of interest or dividends.
E. Form 1099 reporting interest from a bank, savings and loan or credit union (if filing Form 1040NR).
F. Form 8843
For Individuals who Did Not Earn Income from a Source in the U.S.
Form 8843 (with or without a Social Security Number or a TIN)
5. What is Form 1040NR-EZ and who may use it?
Form 1040NR-EZ is an easy-to-use nonresident income tax return, Form 1040NR-EZ, is shorter and easier to use than Form 1040NR, the standard nonresident income tax return. You can use Form 1040NR-EZ if you meet all of the following conditions:
You do not claim any dependents
You can not be claimed as a dependent on someone else's return.
You are not a married nonresident alien from Canada, Mexico, Japan, or the Republic of Korea, a U.S. national, or an Indian student who is claiming a spousal exemption.
You were under age 65 on January 1, 2000 and not blind at the end of 1999.
Your taxable income is less than $50,000.
You do not claim any itemized deductions (other than for state and local income taxes).
Your income consists of only wages, salaries, tips, refunds of state and local income taxes, and scholarship or fellowship grants. (If you had taxable interest or dividend income, you cannot use this form.) See Question #6.
You are not claiming any exclusions from income other than scholarship and fellowship grants excluded and income exempted by tax treaty.
You are not claiming any credits except for federal income tax withheld and payment made to obtain a "sailing permit"
You do not have any other federal taxes (other than line 16 Social Security and Medicare tax on tip income not reported to employer and line 17 household employment taxes).
Most single nonresident taxpayers can use Form 1040NR-EZ.
Most married nonresident taxpayers, except those from Canada, India, Japan, Korea or Mexico, can use Form 1040NR-EZ.
There are certain advantages available to nonresident taxpayers from Canada, India, Japan, Korea, and Mexico who are married or who have other dependent family members. These include the ability to claim personal exemptions for dependents, the use of the child care credit and the student loan interest deductions and, for Indians, the use of the standard deduction. Therefore, married taxpayers from Canada, India, Japan, Korea, and Mexico generally should use Form 1040NR. Married taxpayers from India may fine it advantageous to each file Form 1040NR-EZ if both spouses earn income from sources in the U.S.
Nonresident taxpayers who can not use Form 1040NR-EZ must use Form 1040NR.
6. What kind of income is taxable?
Nonresident taxpayers filing Form 1040NR-EZ or Form 1040NR pay tax at graduated rates (see Question #15) on income that is effectively connected with U.S. trade or business, including wages, salary and refunds of state taxes from the previous year.
Interest on deposits with banks, savings and loan institutions and credit unions in the U.S. and dividends from personal investments are not taxable unless it is in connection with a trade or business in the U.S. Tax-exempt interest is not reported on Form 1040NR-EZ but it must be reported in Item L on page 5, although not on line 9b, of Form 1040NR.
Nonresident taxpayers pay tax at the rate of 30% on most other types of income with a source in the U.S.
** Resident taxpayers filing Form 1040, Form 1040A or Form 1040EZ pay tax at graduated rates on all income, whether it had its source in the U.S. or elsewhere.
7. Are scholarships and fellowships considered taxable income?
Generally scholarships and fellowships from sources within the U.S., including WSC, are taxable. Consequently, the value of the entire scholarship or fellowship is reported on line 5 of Form 1040NR-EZ or line 12 of Form 1040NR. However, the portion of a scholarship or fellowship grant used by degree-seeking students for "qualified educational expenses" (tuition, fees, books, supplies, equipment required for enrollment in a particular course) is excluded from taxation. The amount which is excluded is reported on line 9 of Form 1040NR-EZ or line 31 of Form 1040NR as an adjustment to income, effectively subtracting that amount from taxable income. All other funds including amounts provided for room and board (or the value of room and board if provided by the grant), therefore, are taxable. (An itemized list of all "qualified educational expenses" excluded from taxation, including the value of the tuition remitted for graduate research and teachings assistants and the value of fellowships, must be submitted with the tax return.)
Scholarships from foreign governments and international organizations outside the U.S. generally are not taxable and are not reported on Form 1040NR-EZ or Form 1040NR. Awards from U.S. government agencies may be taxable. Contact your sponsor for additional information.
8. Are graduate assistantships taxable?
Yes, the cash stipend (salary portion) of an assistantship, whether a research assistantship or a teaching assistantship, is considered compensation for services rendered, and is fully taxable.
Only the portion of the assistantship which serves as a tuition waiver is considered as a scholarship and is exempt from taxation. Its value, as indicated on Form W-2 or Form 1042S, must be reported on lines 5 and 9 of Form 1040NR-EZ or lines 12 and 31 of Form 1040NR, and will not be taxed. See Questions #5 and #7.
9. How do tax treaties work?
The U.S. has concluded tax treaty agreements affecting nonresident taxpayers about 50 countries. They take precedence over other federal tax regulations. Only about half of these treaties exempt earnings by students from sources within the U.S. Only a few treaties exempt all of the income earned by nonresident students. Most limit the amount of earnings by students that are exempt each year. Treaties generally exempt the income of foreign teachers (and may exempt the income of foreign researchers) for a period of two years, provided they entered the U.S. for that purpose. Some treaties provide exemptions only when the individual is teaching or researching as a result of a specific exchange agreement between the countries or between institutions or on invitation from the U.S. government. Those treaties that provide exemptions may be quite limited as to the amount of income that is exempt from taxation. Some treaties also stipulate that, if the individual remains in the U.S. more than two years, the exemption is lost retroactively and back taxes must be paid. Details are available in IRS Publications 519 and 901.
Graduate research and teaching assistants are considered students, rather than researchers or teachers, with regard to tax treaties.
Whether some or all of your income is exempted by tax treaty, you must file income tax returns. You should exclude tax-exempt income from line 3 of Form 1040NR-EZ or line 8 of Form 1040NR but you must report it on line 6 of Form 1040NR-EZ and in item J on page 2 of form 1040NR-EZ or on line 22 of Form 1040NR and in items L and M on Page 5 of Form 1040NR. See also Questions #10 and #11.
Resident taxpayers may not exempt income by virtue of a tax treaty.
10. What are the most important parts of Form 1040NR-EZ?
Most (but not all) foreign students and scholars who earned income in the U.S. will use this form. To determine which form to use, refer to Question #5. Generally, complete the heading and the following: line 1 or 2; 3; possibly 4 (if a refund of state or city income taxes was received); 5 (if a scholarship or tuition waiver with a graduate assistantship was received); 6 (the amount of your income, if any, that was exempted from tax by a tax treaty); 7; 8 and 9 (if a scholarship or tuition waiver was received); 10; 11; 12; 13; 14; 15; 18; 19; 21 (if you paid tax in order to obtain a "sailing permit" to leave the U.S. during 1998); 22 ... and either 23 and 24 or 26. If you complete lines 23 and 24, you are entitled to a tax refund, which will be sent to you several weeks after you file your Form 1040NR-EZ. You may receive the refund as a check or may chose to have it deposited directly into your bank account, which is both faster and safer. If you want the refund deposited directly, complete lines 24b, c and d. If you complete line 26, you owe tax and must send a check or money order to the IRS when you file Form 1040NR-EZ. All questions on page 2 of Form 1040NR-EZ also must be completed, including Item J if you are excluding any income exempted by a tax treaty between your country and the U.S.
Please note that you can "round off" to whole dollars the amounts you enter on your tax return. Delete amounts under 50 cents and increase amounts from 50 to 99 cents to the next higher dollar.
11. What are the most important parts of Form 1040NR?
Foreign students and scholars who earned income in the U.S. and who do not file Form 1040NR-EZ but who, nevertheless, file as nonresident taxpayers will use this form. Most will complete only certain lines of Form 1040NR, although special rules apply to some individuals from Canada, India, Japan, Korea and Mexico. Generally, nonresident taxpayers complete the heading and the following: lines 2 or 5; 7d; 8 (excluding tax-exempt income); possibly 11 (if a refund of 1998 state or city income taxes was received in 1998), possibly 12 (if a scholarship or a tuition waiver with a graduate assistantship was received); 22 (the amount of your income, if any, that was exempted from tax by a treaty, also must be reported on page 5, Item M); 23; possibly 25(if you are eligible for a student loan interest deduction); possibly 27 (if a scholar can claim moving expenses as set forth in Question #13); possibly 31 (if a scholarship or tuition waiver was received); 32 (if lines 25, 27 or 29 are not completed, enter "0" [zero]); 33; 34; 35 (and Schedule A on page 3); 36; 37; 38; 39 (married individuals must use the "married filing separately" column in the federal tax tables); possibly 41 and 45) if you are from Canada, India, Japan, Korea or Mexico and can claim the child care credit); 46 (if lines 41 and 45 are not completed, enter "0" [zero]); 53; 54; possibly 60 (if you paid some tax in order to obtain a Certificate of Tax Compliance to leave the U.S. during 1999); 63 . . . and either 64 and 65 or 67. If you complete lines 64 and 65, you are entitled to a tax refund which will be sent to you several weeks after your Form 1040NR is filed. You may receive the refund as a check or may chose to have it deposited directly into your bank account, which is both faster and safer. If you want the refund deposited directly, complete lines 65b, c and d. If you complete line 67, you owe tax and must send a check or money order to the IRS when you file Form 1040NR. You must complete Schedule A (page 3 of Form 1040NR) to deduct the amount of state and city taxes withheld from your pay last year, as recorded on Form(s) W-2, and to deduct any contributions you made to certain U.S. charitable organizations. All questions on page 5 of Form 1040NR also must be completed, including Item L if you are excluding any other non-foreign-source income (such as amounts exempted by a tax treaty or tax-exempt interest on deposits with banks, savings and loan institutions or credit unions) and Item M if you are claiming benefits from a tax treaty between your country and the U.S. Nonresident taxpayers, with very few exceptions, may not claim the child care credit (line 40).
Please note that you can "round off" to whole dollars the amounts you enter on your tax return. Delete amounts under 50 cents and increase amounts from 50 to 99 cents to the next higher dollar.
12. May I deduct the cost of tuition, fees and books?
Only if you received a scholarship or fellowship. See Question #7.
13. May I deduct expenses incurred in moving to or within the U.S.?
Nonresident taxpayers who move to and undertake full-time employment in the U.S. may deduct certain moving expenses on Form 3903 and on line 27 of Form 1040NR. Students working on graduate assistantships and post-doctoral fellows may not deduct such expenses because the purpose of their move is education or training, not trade or business.
14. May I deduct any other expenses related to my temporary full-time employment in the U.S.?
Nonresident taxpayers who were employed at home and intend to return home to the same profession may deduct their own but not their family's non-reimbursed expenses (including living expenses of rent and food, professional dues and journal subscriptions, etc.) only if the U.S. education is required by their employer, or by law or regulation, to keep their salary or job or if it keeps or improves the employees' skills required in their work at home, and does not fulfill minimum requirements for their same job or qualify them for a new profession. These deductions are available only if the individual has living expenses at home that are duplicated in the U.S. and the temporary employment away from home is for less than one year. Please note: such miscellaneous deductions, including transportation, lodging, meals and professional expenses, are deductible only to the extent they exceed 2% of the taxpayer's adjusted gross income (line 32 of Form 1040NR). Only 80% of unreimbursed medical expenses may be deducted, subject to the 2% limit. To claim these deductions, Form 2106 must be filed with Form 1040NR and line 9 of Schedule A on page 3 of Form 1040NR must be completed. Travel expenses (transportation, lodging, meals, and professional expenses) may not be deducted if moving expenses are deducted. Certain non-degree-seeking recipients of taxable U.S.-source grants my be able to deduct their educational costs (tuition, fees, and books), subject to the 2% limit, but only if the education is required by their current employer to keep their present job.
15. How much tax must I pay?
This is determined by a graduated scale, which means that individuals with higher incomes will be taxed at a higher percentage of their income. The scales are printed in the instruction booklets for both the federal and the state forms and are based on the computations in those forms.
Generally, individuals who have earned no more than $2750 for the entire 1999 tax year will owe no tax; nevertheless, they are required to file a tax return (and Form 8843) and may be entitled to a complete refund of income taxes withheld.
16. What is a dual status return and how do I prepare it?
An individual who was a nonresident taxpayer for part of a year and a resident taxpayer in the same year must file a dual status tax return. Two examples of dual status taxpayers are individuals who became permanent residents during the second half of the year and H-1B professionals who entered the U.S. in 1999 and were here more than half of the year. A dual status taxpayer prepares both Form 1040 and either Form 1040NR-EZ or Form 1040NR and files them together. A dual resident may be treated as a nonresident taxpayer for purposes of a tax treaty but is treated as a resident taxpayer for other U.S. taxes. See Question #21.
An individual who was a resident taxpayer on the last day of the year files Form 1040 as the primary tax return. On the resident tax return, Form 1040, "Dual Status Return" is marked at the top of the form. This form is used to report income and calculate tax on the portion of the year the individual was a resident taxpayer. On the nonresident return, Form 1040NR-EZ or Form 1040NR, "Dual Status Statement" is noted at the top, reporting the income and calculating the tax for the portion of the year the individual was a nonresident.
Individuals who were resident taxpayers in the U.S. but returned home during the year are also dual status taxpayers. Since they were nonresident taxpayers on the last day of the year, they file Form 1040NR-EZ or Form 1040NR as their primary tax return and Form 1040 as their supplementary statement.
Married dual status taxpayers may file a joint return only if they decide to be treated as resident taxpayers for the entire year. This usually is to the advantage of international students or scholars, unless they earn significant income from non-U.S. sources. A qualified couple who makes this choice files only a joint resident return and attaches a statement with the spouse's name, address, social security number and a declaration that the couple desires to be taxed as residents for the entire year. Both must sign the statement and the return. Such individuals can never again select to be taxed as nonresidents, regardless of changes in circumstances. Couples making the choice to file as resident taxpayers may not benefit from tax treaties and are responsible for U.S. tax on worldwide income.
Certain restrictions apply to dual status returns. A dual status taxpayer cannot claim a standard deduction, but can itemize allowable deductions. Personal exemptions can be claimed for spouse and dependents but the total amount may not exceed the taxable income earned during the period of residence. There are special rules for amending the tax return of a previous year if the taxpayer qualified as a resident taxpayer in the following year, based upon qualifying too late in the previous year to be treated as a resident taxpayer.
Refer to Publication 519 for more information.
17. When and where are federal and state tax returns filed? (Check with IRS for accurate filing dates)
Individuals who earn wage, salary, or tip income in the U.S. must file Form 1040NR-EZ or Form 1040NR and Form 8843 by April 17 with the Internal Revenue Service Center, Philadelphia, PA 19255. Individuals whose only income earned in the U.S. is a scholarship, fellowship, or interest from a bank, savings and loan institution or credit union must file by June 15 with the same office.
Individuals in the F-1, F-2, J-1 or J-2 visa classification who do not earn income in the U.S. must file Form 8843 by June 15 with the same office.
Dual status returns also must be filed by April 17 with the Internal Revenue Service Center, Philadelphia, PA 19255.
Individuals who earn income from a Nebraska source must file the Nebraska Individual Income Tax Return, Form 1040N (including Schedule III, the nonresident tax computation section), by April 17 with the Nebraska Department of Revenue, P.O. Box 94818, Lincoln, NE 68509-4818.
18. Should I keep a copy of the tax returns I file?
Yes, you will need copies of all federal tax returns you have filed to obtain a Certificate of Tax Compliance ("sailing permit") before you leave the U.S. See Question #20. The IRS also selects a certain number of tax returns to review in detail. Having your own copy will prepare you for this discussion. You also should keep a copy of the Nebraska Individual Income Tax Return.
19. Will the IRS send me anything to prove that my tax return was received?
Yes, the Philadelphia IRS office will send you a stamped copy of the Form 8843 you submitted.
20. What is a Certificate of Tax Compliance and how is it obtained?
A Certificate of Tax Compliance, Form 1040C (also known as a "sailing permit"), is a document issued by the IRS as evidence that all federal tax obligations have been met before an alien leaves the U.S. It must be obtained by all H-1B visa holders but only by those F and J visa holders who earned taxable income in the U.S. other than earnings from authorized on-campus or off-campus employment. International Affairs has additional information for H-1B visa holders.