International Tax Information and Guidelines
For International Students, Teachers, Researchers and Visitors
ALL Foreign Students, Teachers, Researchers and Visitors to the Wesleyan campus are required to provide information on their status and make an appointment with Finance or Payroll to determine their U.S. tax status and to complete required forms necessary to authorize payments, such as payroll, scholarship/fellowship, honoraria or travel reimbursements.
This information may be completed in advance of arrival to campus using the Foreign National Information Form. Upon submission, the form will be electronically submitted to Christine Rodrigue.
Failure to provide the requested information may result in withholding of additional taxes, delay in payment of wages and compensation, or rejection of payment requests.
1. IRS vs. USCIS
The IRS, Internal Revenue Service, is responsible for enforcing tax laws and regulations in the United States. The USCIS, U.S. Citizenship and Immigration Services, is responsible for regulating permanent and temporary immigration to the United States. This includes legal permanent residence status, nonimmigrant status (e.g., tourists or students), and naturalization.
2. Tax Status in the United States
There are four classifications of taxpayers: 1) U.S. Citizens; 2) Permanent Residents; 3) Resident Aliens for tax purposes; and 4) Non resident Aliens for tax purposes. Individual status is determined once the necessary information is provided to Financial Services or Payroll and analyzed.
3. Resident Alien vs. Non Resident Alien Tax Status
Every individual receiving compensation from U.S. sources is subject to income tax rules and regulations of the United States. There are two classifications of foreign taxpayers, Resident Aliens and Non resident Aliens. A Resident Alien is subject to U.S. income tax from all sources of income inside and outside of the United States and cannot claim benefits of a tax treaty (if applicable). Resident Aliens can take advantage of the same types of deductions allowed for U.S. Citizens and are entitled to personal deductions for themselves and their families. Non resident Aliens are subject to U.S. tax on U.S. sourced income only and are able to claim benefits of tax treaties.
4. Residency Determination
A resident for tax purposes is a person who is not a U.S. Citizen and meets the "Green Card" test or the "Substantial Presence Test".
"Green Card" or "Lawful Permanent Resident" Test - An individual is a lawful permanent resident of the United States if given the privilege, according to the immigration laws, of residing permanently in the U.S. as an immigrant. This is often referred to as receiving a "Green Card" or "Permanent Resident Card". The "Green Card" is issued by the USCIS.
Substantial Presence Test - A non-exempt (see exception rule) foreign individual will meet the "Substantial Presence Test" if he or she is physically present in the United States:
- Greater than 31 days during the current (calendar) year, AND
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that. Include:
- All the days present during the current calendar year, plus
- 1/3 of the days present in the first prior year before the current year, plus
- 1/6 of the days present in the second prior year before the current year.
Exception Rule: The days counted toward the "Substantial Presence Test" are disregarded for commuters from Canada and Mexico, medical emergencies, diplomats, employees of international corporations and participants in charitable sporting events. In addition, and important to most visitors to Colleges and Universities, the exception applies to Students, Teachers and Researchers present in the US on an F, J, M or Q visa.
5. Dual status (for Tax purposes)
An individual can be considered a Non resident and Resident Alien within the same tax year. The individual can choose to be treated as a U.S. resident for the entire year if:
- He/She was a Non resident Alien at the beginning of the year,
- He/She was a Resident Alien, Permanent Resident at the end of the year, and
- His/Her spouse was a U.S. Resident or Permanent Resident a the end of the year.
Careful consideration must be made to determine residency status. Whether the individual is a Resident or Non resident Alien determines the necessary withholding percentages, reporting requirements, and whether or not a payment can be issued to an individual.
6. Tax Treaties
Non resident Aliens may be entitled to reduced tax rates or exemptions from tax under a tax treaty between the United States and the individual's country of residence. The U.S. has treaties with approximately 60 countries in the world. Each treaty is different and must be reviewed on a case by case basis. Each treaty has provisions for Students, Teachers, Athletes, Performers, etc. Some treaties have provisions which limit length of stay and amount earned. Wesleyan utilizes software which analyzes an individual's status and situation to take advantage of any tax treaty benefits that are available. Wesleyan also reserves the right to deny tax treaty benefits based on the information provided on a "Foreign National Information Form".
The following forms and/or procedures may be used to claim exemption or reduction of federal income tax. All exemption forms require a US federal tax identification number (SSN or ITIN).
8233 Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual - This exemption may be used by an individual to claim a treaty benefit. The 8233 must include the individual's SSN or ITIN.
W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding - This exemption may be used by a corporation that does not have a permanent establishment in the US. If the corporation has a dependent agent that contracts regularly for work in the US, it would have a permanent establishment in the US. Form W-8BEN parts I and II must be completed to claim a treaty exemption. The foreign corporation must have an EIN and submit a Form 1120F tax return with the treaty claim.
W-8ECI Exemption From Withholding of Tax on Income Effectively Connected With the Conduct of a Trade or Business in the US - This exemption may be used for a corporation that is engaged in a US trade or business. Income that is effectively connected with a US trade or business is often connected with the fact that the foreign corporation has a "fixed base" or "permanent establishment" in the US. That is, it has some sort of permanent office, factory, base of operations, etc. in the US from which it generates income. A payment to a foreign corporation with ECI is treated the same as a payment made to a US corporation. That is, the payment would not be subject to withholding and the income would be reported on a 1099. An ECI foreign corporation would normally file an 1120F income tax return annually. A personal holding company cannot claim a treaty benefit using W-8ECI.
Central Withholding Agent - Foreign athletes and entertainers who are making a tour of the US may wish to enter into a Central Withholding Agreement (CWA) with the IRS for reduced withholding, provided certain requirements are met. Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability. A CWA is an agreement entered into by the NRA athlete or entertainer, a designated withholding agent, and an authorized representative of the IRS. A request for a CWA should be submitted to the IRS 45 days before the agreement is to take effect. For information on applying for a CWA see http://www.irs.gov/business/small/international/article/0,,id=106060,00.html *broke
Note that the State of Connecticut does not recognize U.S. Tax Treaties, therefore state tax is applicable to earnings based on earnings in excess of income thresholds.
7. FICA Tax (Social Security and Medicare tax)
Regardless of citizenship, Social Security and Medicare taxes apply to the payment of wages for services performed as an employee in the United States. However, Social Security and Medicare taxes do not apply to payments made to foreign visitors on F, J, M or Q visa status if the services performed are in accordance with the purpose for which they were admitted to the U.S. and the individual is considered to be a Nonresident Alien for tax purposes. Also, students may claim an exemption from FICA taxes based on student status.
8. Filing an Income Tax Return
All foreign individuals are required to file a U.S. income tax return, even if they are only visiting. See IRS Publication 513, Tax Information for Visitors to the United States, and Publication 519, U.S. Tax Guide for Aliens, for detailed information.
- What to File - A Nonresident Alien must file a form 1040NR (U.S.Nonresident Alien Income Tax Return) or 1040NREZ (U.S.Nonresident Alien Income Tax Return for Certain Nonresident Aliens with no dependents)
- Filing Dates - If a Nonresident Alien had earned income during a tax year, the deadline for filing is April 15th of the following year. If no U.S. income was earned during a tax year, a Nonresident Alien in F, J, M or Q status is required to file an 8843 Form by June 15th of the following year.
- How to file - Wesleyan provides access to tax filing software, CINTAX, for use by all Nonresident Alien visitors. This software is a group use license and accessible through the internet from the end of February through the end of June for the previous tax year. All eligible individuals will be contacted when this software is available. If you do not receive an e-mail, contact Payroll at email@example.com.
All Foreign Visitors are responsible for determining their correct taxable status, ensuring that they have sufficient tax withheld, filing their tax return correctly and on time, and reporting any changes in their tax or immigration status while at Wesleyan.
9. Scholarships and Fellowships
A scholarship, fellowship or stipend, which requires an individual to perform any type of personal service as a condition of receiving it, is fully taxable. Those not requiring personal service as a condition of receipt are also taxable for the portion that is not "qualified". The amount withheld depends on several factors, such as whether the student is a candidate for a degree, the nature of the payments, and tax treaty provisions.
A "qualified scholarship" is not subject to tax or tax withholding. A qualified scholarship is any amount that is used for the following:
- Tuition and fees required for enrollment and attendance at your institution.
- Fees, books, supplies and equipment required for courses and instruction.
Each student is responsible for maintaining the proper records for tuition, fees, books, supplies and other necessary expenses in order to justify these amounts as deductible from their taxable gross income. The taxable portion includes amounts used for living expenses, such as room and board, stipends and other expenses not required for completion of a degree.
This page is maintained by Christine Rodrigue. Please e-mail comments or questions to firstname.lastname@example.org.