It is important for you to remember that you are responsible for assessing and meeting your tax obligations while at the University of Hartford. If you are from a treaty country and your tax treaty exemption expires, if you change status, or if any other action may change your tax liability, you should contact your supervisor and the Payroll Office immediately to change your tax withholding as necessary.  

The information included in this webpage is provided as a service to the international students and scholars of the University of Hartford. U.S. income tax law is complex and constantly evolving, and though reasonable efforts will be made to insure the integrity of this site, its accuracy, application, and interpretative nature cannot be insured. This material is not to be construed as legal advice nor does it create a tax attorney or specialist/client relationship.

The following is general information and is only provided for guidance. Publications of the Internal Revenue Service (IRS) are available and you are encouraged to consult those publications for specific information.

The International Center does not provide consultation on income tax matters, does not provide income tax return services, and is not responsible in any way to assist you on income tax matters.  The collection and payments of U.S. income taxes are your responsibility.

Introduction

Section 1 Overview of U.S. Taxation of International Student

Introduction to Federal and State Income Tax
How to determine tax status
Substantial presence test
What is taxed
Treaty benefits
How income is taxed
Withholding
Scholarships and fellowships
How and when to file an income tax return
What income can be excluded
Deductions / itemized deductions
Tax payments and credits
Social Security and Medicare
State taxes
Additional assistance

Section 2 Income Derived from University of Hartford Sources

The student's responsibility
Nonresident alien students wage payment
Scholarships and fellowships
FICA tax
Nonresident alien student tax compliance chart

Section 3 Appendix

Useful IRS forms and publications
Useful telephone numbers
The World Wide Web
W-7 form (ITIN form)
8233 form
1001 form
CT W-4 form (Connecticut)

Section 4 Does for Country have an Income Tax Treaty with the U.S.

         Tax treaty information

 

Section 1 Overview of U.S. Taxation of International Students

Introduction to Federal and State Income Tax

All international students and scholars who possess an F-1 or J-1 visa must file an income tax return with the U.S. government each year based on income earned from a U.S. source(s) during the previous year. You must file an income tax return form even if you made no income from a U.S. source(s). In addition, international students and scholars must file a State of Connecticut income tax return if your income from a U.S. source(s) is over $12,000 per year. If, while in the U.S., you have earned an income (through on-campus employment, assistantships, scholarships, practical training, dividends or interest from stocks, bonds, or bank accounts, etc.), you may have to pay income tax. Federal government taxation on income is generally based on the amount of money earned, your student status, the number of years you have resided in the U.S., your marital and dependent status, and any tax treaties in force between the United States and your government.

Students who have earned an income must file an income tax return form to the U.S. government by April 15th of each year (for income earned the previous year) . Students who have not earned an income must file a return no later than June 15th of each year.

The U.S. Federal government requires each student to possess an identifying number for income tax purposes. Typically, students have used their University of Hartford student identity number or a U.S. social security number. The use of the University of Hartford identity number is unacceptable. Students who do not have a social security number may apply to the Social Security Administration for a number by completing their SS-5 application form. However, recent changes in U.S. law now prevents many international students and scholars from getting a social security number unless they are employed on or off-campus. If you are unable to secure a social security number, you must apply to the Internal Revenue Service (the government agency in charge of tax collection in the U.S.) who will assign an income tax return identification number (called an Individual Taxpayer Identification Number or ITIN number) to any individual who does not have a social security number. Students may apply to the IRS by completing and submitting a W-7 form and required documentation. The W-7 form is available directly from the Internal Revenue Service, the International Center, or the world-wide web.

Students may be subject to U.S. taxation based on the source and type of income and the number of years they have been present in the U.S. Tax treaties with over 40 countries may alter tax liability. Other forms of taxation include state income tax, state and local sales tax, and Social Security/Medicare. Under the U.S. system, it is the individual's responsibility to determine tax liability and file the appropriate forms in a timely manner.

Effective with the 1992 tax year, all those in "F" or "J" status who are non-residents for tax purposes (including dependents) must file form 1040NR or 1040 NR EZ and form 8843 even if they have no U.S. source income. See IRS Publication 519 for details. IRS Publication 519 and 1040NR instructions should be consulted each year.

How to Determine Tax Status

A key factor in determining an individual's income tax liability is his or her status as a resident alien or non-resident alien for tax purposes. This status may or may not coincide with their resident or non-resident status with the Immigration and Naturalization Service. Many individuals who are in a non-immigrant status are considered resident aliens for tax purposes. Throughout this document, reference to resident or non-resident aliens means for tax purposes only.

Students who are in the United States in F-1 or J-1 status for under five calendar years, including partial years, are exempt from counting days of presence and are automatically considered non-resident aliens for tax purposes. For example, if a student arrived in November 1991, then the 5 year exemption ended on 31 December 1995. After that time, they should use the substantial presence test to determine how to file.

Substantial Presence Test

Once a person is no longer exempt from counting days of presence, the substantial presence test is used to determine resident vs. non-resident status. The individual must have been in the United States for at least 31 days in the current calendar year, AND have been present in the United States for 183 days in the current and two preceding calendar years as follows (the days that one was exempt from counting while in F-1 or J-1 status should not be included): all days from current year + 1/3 of days from last year + 1/6 of days from two years ago. If the total is 183 days or more, the individual may be entitled to file as a resident alien. See "Resident Alien vs Non-Resident Alien" for additional information.

What is Taxed

(Note: This is not a comprehensive list. See IRS Publication 519 for full details).

• only U.S. source income, based on the residence of the payor.
• dividend income from domestic corporations. Note: interest paid by banks, savings and loans and credit unions is not taxed.
• wages and any other compensation for services performed in the United States, including Teaching and Research Assistantships (TA's and RA's). The location of the services determines taxability, so it is possible that wages from a foreign source could be taxed if the services are performed in the United States.
• rental income from property in the United States.
• royalties from patents, copyrights etc.
• profit from the sale of property in the United States (some exceptions for personal property).

Treaty Benefits

The United States has tax treaties with many countries which permit taxation at a reduced rate or exempt certain income altogether. IRS Publication 901 gives a brief summary of the provisions of each treaty. For complete details, the full treaty should be consulted. Tax treaty benefits override the U.S. tax code.

Students who are employed in the United States (including TA's and RA's) and are partially or fully exempt by treaty from U.S. taxation must file form 8233 plus the appropriate attachment with the employer to claim exemption from withholding each year. Students who receive a service-free scholarship or fellowship must file form 1001, which is valid for three years.

How Income Is Taxed

Income that is effectively connected with trade or business in the United States is taxed at the graduated rates that apply to U.S. citizens. Income that is not effectively connected is taxed at a flat 30 percent or lower treaty rate. Some income may be exempt by virtue of tax treaties. Anyone who is in the United States in "F" or "J" status is considered to be engaged in trade or business. Therefore, all income earned by such students is considered to be effectively connected. All income from U.S. sources is treated as effectively connected, even if there is no connection between the business and the income. Scholarship or fellowship income is taxed differently. See "Scholarships and Fellowships" section for details.

All payment for personal services (with some minor exceptions) is considered effectively connected. This includes salary, wages, commissions, fees, per diem allowances, bonuses, services or property. However, payment to a non-resident alien by a foreign employer is not included in gross income (see "What is Taxed" section).

Withholding

Employers are required to deduct a certain amount from each employee's paycheck to cover the individual's estimated tax liability. They must withhold an amount equal to 90 percent of the current year's estimated tax or 100 percent of the prior year s liability, whichever is lower. Withholding is not automatic. Employees must fill in form W-4 and submit it to the employer to declare their tax status (resident or non-resident) and instruct the payroll office how much to withhold. Extreme caution should be exercised in filling out the form, as errors could result in having to pay back taxes, fines or penalties.

Generally, non-resident aliens should check "single" as their filing status and may claim only one withholding allowance. Even if their family members are residing with them in the United States and are wholly dependent upon them, no additional withholding allowances may be taken for dependents. Nationals of Canada, Japan, Korea, Mexico, India and American Samoa enjoy some exceptions from this rule. On line 6 of the W-4, the employer should be instructed to withhold an additional amount per week. The amount changes each year and can be found in Publication 519. This compensates for the standard deduction built into the tax withholding tables for which non-resident aliens are not eligible. Non-wage income should be withheld at a flat 30 percent.

Individuals from treaty countries who wish to claim partial or total exemption from withholding must file additional forms with the employer. Form 8233 must be filed annually to claim treaty exemption from income derived from services performed for the employer. Form 1001 must be filed to claim treaty exemption from service-free grant or scholarship income, and is valid for up to three years.

Those who have income from which no tax is withheld may need to file form 1040-ES(NR) and make regular estimated tax payments. This must be done if the amount withheld is less than either 90 percent of the tax for the current year or 100 percent of the prior year.

Scholarships and Fellowships

All scholarships and fellowships, including payments to third parties on behalf of the grantee, are subject to U.S. taxation unless:

• the income comes from a foreign source, or
• it is excluded by the U.S. tax code, or
• it is excluded by treaty.

Foreign source income is defined by the residence of the payor. A foreign-source grant is not subject to U.S. taxation even if a U.S. agent distributes the funds on behalf of the foreign payor. U.S. source grants are partially subject to taxation. Degree seeking candidates may exclude the following qualified educational expenses:

• tuition
• fees required for enrollment
• fees, books and equipment required for enrollment in a particular course. (receipts should be retained)

Funds to be used for room, board and other living expenses are fully taxable, and are subject to withholding at a flat rate of 17 percent. However, if the tax liability will be significantly lower than 17 percent due to eligibility for certain deductions, the grantee may request reduced withholding by filing form W-4 with the withholding agent each year.

Grants to non-degree students are fully taxable and subject to withholding at a flat 17 percent rate, except for certain business-related deductions.

IRS defines a degree candidate as anyone pursuing a degree at a college or university, or attending "an educational institution that is authorized or accredited to provide a program that is acceptable for full credit toward a bachelor's or higher degree, or to provide a program of training to prepare students for gainful employment in a recognized occupation." Therefore, a special, non-degree student or an exchange student enrolled in a degree-granting institution may benefit from the lower taxation.

Graduate Assistantships are fully taxable as income in return for services. Graduate assistants may not exclude tuition and fees that are considered payment for services. However, service-free tuition awards may be excluded. Grantees who are eligible for either full or partial treaty exemption must file form 8233 annually if the income is for services rendered, or form 1001 if the scholarship is service-free.

How and When to File an Income Tax Return

All F, J, and M visa holders who are non-resident aliens for tax purposes must file form 1040NR each year, along with form 8843, even if they have no U.S. income or if all income is excludable. If part or all of the income is excludable by virtue of a treaty, an additional statement, also detailed in IRS Publication 519, must also be filed.

Those who have wages subject to U.S. withholding must file by 15 April each year. Those with no wages subject to U.S. withholding must file by 15 June. Your income tax return should be submitted to the :

Internal Revenue Service Center

Philadelphia, PA 19255.

What Income Can Be Excluded

• foreign source income, including grants from international organizations
• compensation from foreign employers (this does not apply to employees of foreign governments, unless that government gives the same exclusion to U.S. government employees working in that country)
• some annuity income
• income excluded by treaty. See IRS Publication 901

Deductions/Itemized Deductions

Non-resident aliens may only claim deductions that are effectively connected with their U.S. trade or business. The standard deduction cannot be claimed.

Itemized deductions that may generally be claimed are state and local income taxes, charitable contributions, casualty and theft losses, and possibly some moving, travel, or miscellaneous job expenses. Some non-resident aliens may claim deductions for educational or away from home expenses.

Tax Payments and Credits

Most non-residents are not eligible for tax credits except for the amount of Federal tax that was withheld from wages. Under limited circumstances they may be eligible for child care credit, foreign tax credit or earned income credit.

Social Security and Medicare

During the first five years as non-resident aliens, "F" and "J" students are not required to pay Social Security and Medicare (FICA) taxes if the services performed are to carry out the purpose for which they were admitted. This includes work that is considered a part of the student's program and any other employment that is explicitly authorized by the appropriate authority, including Practical or Academic Training. J-2 dependents who have obtained work authorization from the INS and are working must have these taxes withheld.

State Taxes

Many states have a state income tax (including Connecticut) and U.S. source income of students may be subject to state taxation. It varies by state, and the state tax authority should be consulted. Both resident and non-resident aliens may deduct state income taxes from their federal tax liability. Most states also have state and local sales taxes which are added to the cost of purchases when they are made. These taxes are not deductible from federal taxes.

Additional Assistance

This brief summary of very complex tax regulations is for general informational purposes only. It should not be construed as legal advice. Students should read IRS publications 519, 901, and the instructions to the appropriate form 1040, 1040A, 1040NR, or 1040NR EZ. The university's International Center and Payroll Office may not offer assistance for income tax purposes. The IRS may be able to answer some questions and can be reached at the toll free number 1-800-829-1040. For complex situations, it would be advisable to consult a tax attorney, a certified public accountant, or other reputable tax adviser who is familiar with non-resident taxation.

 

Section 2  Income Derived from University of Hartford Sources

The University's Tax Responsibility

The University's tax responsibilities evolve from its status as a corporate, non profit educational institution, as an employer, and as a provider of student financial assistance. The University is responsible for withholding taxes from paychecks and reporting income to the Internal Revenue Service (IRS). Within the University, the Payroll Department carries out these withholding and reporting responsibilities. No one from the University can act as a representative for an individual dealing with the IRS. However, in the case of a tax question or problem, the University can assist in supplying appropriate support documentation for payments made to individuals.

The Student's Tax Responsibility

Students are responsible for completing the correct tax forms and providing them to the University's Payroll Department (United Technologies Hall, Room 307). If your tax status changes for any reason, (i.e., lapses of treaties, change in deductions, marital status, dependent status) you must notify the Payroll Department of the change immediately.

University Payment Methods

Wages

Wages are payments for services rendered. This includes work provided by degree candidates (undergraduate and graduate students) and non-degree candidates (e.g. post-doctoral students and fellows). These payments are processed through the payroll system and federal, FICA and state taxes are deducted according to the tax forms filed by the student with the University. All of these individuals are considered employees of the University and as such will receive a form W-2 (Wage and Tax Statement) at the calendar year end, reporting their total taxable income and taxes deducted.

Wages received by non-resident alien students for services rendered are taxable and subject to graduated Federal tax withholding. These wage payments are reported on form W-2. You must complete form W-4, (Employee's Withholding Allowance Certificate), and form CT-W4, (Employee's Withholding or Exemption Certificate). However, non-resident alien students from countries with which the United States has a tax treaty may be exempt from Federal income tax withholding. To claim the benefit of a treaty provision, the student is required to complete IRS form 8233 (Exemption from Withholding on Compensation for Independent Personal Services of a Non-resident Alien Individual). This form must be submitted to the Payroll Department as soon as possible after employment has been secured. The exemption is effective for payments made 10 days after the form is submitted to the IRS by the Payroll Department. No payments can be made prior to that ten day period. This form must be re-submitted annually as long as treaty provisions apply.

Stipends

A stipend is payment for services rendered. The Internal Revenue Service classifies stipends as income. Taxes are withheld from the stipend and the University reports these payments to the IRS.

Scholarships and Fellowships

Scholarships and fellowships are payments to students for which no services are rendered or required. these awards are granted for the purpose of off setting the cost of tuition, room and board, fees, and/or other incidental expenses of attending the University. The granting department is responsible for determining the amount of the stipend. The IRS classifies scholarship and fellowship payments as "miscellaneous income." No taxes are withheld from scholarship payments. It is the responsibility of the student to report scholarship and fellowship payments as taxable income when the funds are used for non-tuition payment purposes. Failure to file and make quarterly payments may result in tax penalties

The non excludable portion of scholarship and fellowship grants (not payments for work performed) which are paid to non-resident aliens with "F" or "J" visas are subject to federal income tax withholding at a 14% rate and is also subject to state income tax. The amount of scholarship or fellowship monies received and the amount of federal tax withheld are reported on form 1042S - "Foreign Persons U. S. Source Income Subject to Withholding." However, non-resident alien students from countries with which the United States has a tax treaty may be exempt from federal withholding tax. There is no exemption from state withholding tax. To claim the benefit of a treaty provision, the student should complete IRS form 1001 - Ownership, Exemption or Reduced Rate Certificate. This form must be submitted to the Payroll Department. The exemption certificate is effective for a three calendar year period. If a completed form 1001 is not submitted to Payroll, Federal taxes will be withheld from these payments.

FICA TAX or (Old Age Survivor's Disability Insurance and Medicare)

Student wages are exempt from FICA (Federal Insurance Contributions Act) tax only while the student is enrolled full time and attending classes at the University of Hartford. Scholarships and fellowships are also exempt from FICA Tax.

Non-resident alien students must file an annual tax return on form 1040 NR or 1040 NR EZ - U. S. Non-Resident Alien Income Tax Return on or before April 15. The deadline is extended to June 15 if the wages received were not subject to withholding.

 Form 1040 NR or 1040 NR EZ must be filed even if income is exempt from U. S. tax or if no income was received.

The University of Hartford and the International Center are not responsible for filing your income tax return to the U.S. government: that responsibility is yours. International Center staff members are not trained in the intricacies of tax law and may not aid you in the preparation of your income tax forms or return.

 

Section 3  Appendix

Useful IRS Forms and Publications

1040 NR EZ Individual Tax Return for certain nonresident aliens
1040 NR EZ Instruction booklet
1040 NR Individual Tax Return for Certain Nonimmigrant Aliens
1040 NR Instruction booklet
Pub 520 Scholarships and Fellowships
Pub 501 Exemptions, Standard Deductions and Filing Information
Pub 508 Educational Expenses
Pub 513 Tax Information for Visitors to the U.S.
Pub 519 U.S. Tax Guide for Aliens
Pub 901 U.S. Tax Treaties
Pub 597 Information on U.S.-Canada income tax treaty
8833 Treaty based return position disclosure
8843 Statement for Exempt Individuals and Individuals with a Medical Condition

Useful Phone Numbers

Federal Internal Revenue Service

Toll Free Taxpayer Assistance 1-800-829-1040
Toll Free Forms 1-800-424-3676

When calling the IRS for assistance, you should write down the name of the person assisting you. You may want to phone two or three times to make sure you get the same information from different IRS employees. Also, you may request a written response to your questions from the IRS.

Social Security Administration Taxpayer Assistance 1-800-234-5772

The World-Wide Web

Internal Revenue Service Homepage: http://www.irs.ustreas.gov/prod/
IRS forms and Publications: http://www.irs.ustreas.gov/prod/forms_pubs/index
Tax Treaties: http://www.best.com/%7Eftmexpat/html/taxsites/treaty.html
Social Security Administration Homepage: http://www.ssa.gov/

 

Section 4  Does Your Country Have a Tax Treaty with the United States  

A tax treaty is an agreement entered into between two governments under which each agrees to limit or modify the application of its domestic tax laws in an attempt to avoid double taxation of income. Therefore, an individual who comes from a country with which the United States has entered into a tax treaty must first look to the provisions of that treaty, not U.S. tax law, to determine his or her tax exposure.

Tax treaties contain various provisions (referred to as "articles"), a majority of which are related to commercial trade and business and are designed to facilitate flows of capital and technology between the two treaty countries. For example, under certain circumstances wages paid to a citizen of a treaty country working in the United States will be taxed only by the United States and not by the treaty country. Similarly if a U.S. citizen is working in the treaty country, he or she may be subject to tax only in that country, not in the United States.

Virtually all tax treaties, however, also include specific articles designed to foster educational and cultural exchanges between the two treaty countries. These articles are directed at the taxation of students, trainees, teachers, and researchers and, depending on the individual treaty provision, may totally exempt or restrict U.S. taxation of scholarship/fellowship grants (hereafter simply "grants") and compensation payments made to these individuals.

The United States currently has tax treaties in effect with over 40 countries. Most of these countries have an article that provides an exemption from U.S. tax on certain types of income received by students and scholars. Each treaty is negotiated separately. Therefore, each treaty must be reviewed separately when determining if a person qualifies for treaty benefits.

Generally the treaty benefits fall into one of three general categories:

• gifts from abroad for purposes of maintenance, study, etc.
• grants, allowances and awards from government or tax exempt organizations, or
• income for personal services up to a certain amount.

In addition to the limitations above regarding the types of income covered, there are general restrictions about who may qualify to use the benefits. Most articles require that the person be a resident of the treaty partner (country) immediately before visiting the United States. Thus, someone who is a citizen and resident in the United Kingdom but who has been gone for two years and established residency in a third country could not use any of the benefits under the U.S.-U.K. treaty. However, they potentially could use benefits if the United States had a treaty with the third country.

Students

Most treaties also require that a student's primary purpose or sole purpose in the United States be for study and that they are temporarily present in the United States. Someone in the United States for any other reason or who is not temporarily present for study would not be eligible to claim benefits.

Many treaties also limit the benefits either to a specific number of years or to such time that is reasonably necessary to complete the activity. When no specific time limit is set for students, the facts and circumstances will determine how long is reasonably necessary to complete the education. For example, to obtain an undergraduate degree an appropriate time will generally be four years. For some advanced degrees, the time period may be longer.

Personal Service Income

When applying treaty benefits to personal service income, it is important to examine the specific language of the treaty to determine how the limitation is worded. In most cases, the first "X" amount of dollars is exempt and anything above that amount is taxable. In a few cases, the exemption applies only if the income is below a certain amount. If the income exceeds this amount, none of the income is exempt.

Individuals must be aware that the IRS reports amounts claimed as tax treaty benefits to officials in their home country. Therefore, an exemption from U.S. tax on certain portions of their income may make them liable for home-country tax on those amounts. Before claiming exemption by virtue of a treaty, the nonresident alien may wish to obtain and study a copy of the treaty or consult Internal Revenue Service authorities.

Individuals from treaty countries who wish to claim partial or total exemption from withholding must file additional forms with the employer along with the W-4. Form 8233 must be filed annually to claim treaty exemption for personal services. Form 1001 must be filed to claim treaty exemption from service-free scholarship or fellowship income, and is valid for up to three years. In addition, Form 8833 must be attached to Form 1040NR to meet the treaty disclosure requirement.

IRS Publication 901 provides an excellent summary of the tax treaties in effect in a given year. It is published annually and should be consulted each year, as new treaties are constantly being negotiated and existing ones re-negotiated. If the summary does not provide enough information, the treaty itself should be consulted. On the following page is an IRS list of treaties that were in effect for the 1995 tax year.

It is important to note that some treaties, such as those with the U.K. and Germany, provide for a retroactive loss of benefits if the individual stays beyond the period covered by the treaty. Those who anticipate staying longer than the treaty time limit may wish to refrain from obtaining treaty benefits, as they would be subject to back taxes once the treaty expires.

U.S. Income Tax Treaties in force for 2006 Tax Year

The U.S. maintains tax treaties with the following countries:

Australia
Austria
Barbados
Belgium
Bermuda
Canada
China, People s Republic of
Commonwealth of Independent States 1
Cyprus
Czech Republic
Denmark
Egypt
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Italy
Jamaica
Japan
Korea
Luxembourg
Malta
Mexico
Morocco
The Netherlands
New Zealand
Norway
Pakistan
Philippines
Poland
Romania
Russia
Slovak Republic
Spain
Sweden
Switzerland
Trinidad & Tobago
Tunisia
United Kingdom

The former U.S.-USSR treaty applies to the countries of Armenia, Azerbajian, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldava, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. It does not apply to the Baltic States of Estonia, Latvia and Lithuania.

 

This information on tax treaties is subject to change by the Internal Revenue Service. Please consult IRS Publication 901 for the most current tax treaty information