Frequently Asked Tax Questions from Foreign Persons
Summarized below are some frequently asked questions that Foreign Nationals have regarding their taxes in the United States.
Q: What is the difference between a resident alien and nonresident alien for tax purposes?
A: For tax purposes an alien is an individual who is not a U.S citizen. Aliens are classified as resident aliens and nonresident aliens. Resident aliens are taxed the same as U.S citizens. Nonresident aliens are subject to special taxation rules on their income. This classification has nothing to do with your immigration status. If you are determined to be a resident alien for tax purposes this does not change your immigration status.
Q: How do you determine if I am a resident or nonresident alien for tax purposes?
A: There are two tests used to determine if an alien is a resident alien for tax purposes, the green card test and the substantial presence test. If you have been granted a lawful permanent residence in the U.S and been granted or will receive an alien registration card (green card) you will be considered a resident alien for tax purposes. The other is the substantial presence test. Once you have been in the U.S for 31 days in the current year and 183 days in the past 3 years (subject to the applicable formula) you are considered a resident alien for tax purposes for that entire calendar year when the test is passed. Please note that F, J, M, or Q visa holders are entitled to a certain number of “exempt years” where your days of presence are not counted toward the substantial presence test.
Q: What is FICA tax and how is it different from other taxes?
A: FICA tax is the acronym for the social security and medicare taxes that all U.S employees are subject to pay. There are basically two types of taxes that will affect you here, income taxes and FICA taxes. You are subject to the FICA taxes once you have become a resident alien for tax purposes. The income taxes you are subject to regardless of being a resident or nonresident alien unless you are exempted from a treaty benefit. Tax treaties do not cover FICA taxes.
Q: I know there is a tax treaty with my country and the U.S. so why am I being told that I may not qualify for it?
A: Do not assume that just because there is a treaty with your country and the U.S. that you will be receiving a tax treaty benefit on your payments from The Rockefeller University. Qualifying for a tax treaty depends on many factors, such as your visa type, the primary purpose for your visit, if you’ve every claimed a treaty benefit before, and the type of payment you are receiving from the University. Every tax treaty benefit determination is done on a case by case basis by the alien taxation specialist and the outcome can vary depending on your own individual information.
Q: How will I know what forms to file if it’s determined that I am eligible for a treaty?
A: If it is determined you are eligible for a treaty the Alien taxation specialist will notify you and send you all appropriate forms to fill out in order to allow the University not to withhold taxes on your payments. Please note: An income tax treaty exemption is actually claimed at the time you file your annual tax return with the Internal Revenue Service after the end of the Calendar year. The forms you are given now simply allow the University to not withhold the taxes from your payments.
Q: I have a treaty benefit and no taxes were withheld from my payments from the University. Since I didn’t pay in any taxes I don’t have to file a tax return right?
A: WRONG!! If you received payment from the University you must file an income tax return annually. You actually do not claim the tax treaty until you file your income tax return. You will receive official documents from the University reporting the payments you have received in time to prepare your annual tax returns. W-2 forms are received by January 31st following the tax year and 1042s’s are received by March 15th.