Filing taxes may not be something very exciting but it’s something you shouldn’t procrastinate about. Due to the ongoing coronavirus pandemic, the last date for filing tax returns has been extended from April 15th to July 15th. Note that taxes must be filed by international students even if they do not earn an income.
Tax Filing For International Students In The USA – What Will You Be Taxed On?
As an international student on an F-1 visa in the USA, you will be taxed on the income earned in the USA. This includes salaries, compensation of any kind, interest earned on bank deposits, tips, scholarship and fellowship grants and awards. Income earned from the student’s home country or non-American sources will not be taxed.
Tax Filing For International Students In The USA – Why Should international Students File Taxes?
The way you handle taxation issues as a student will have long-term effects on your ability to stay in the country. Some of the reasons to file your taxes on time are:
- It will impact your visa application in the future
- It will impact your Green Card application
- It is a legal requirement to maintain your current visa
- You may become ineligible for a visa extension
- You may get a refund if you have paid more than the required amount of taxes.
Tax Filing For International Students In The USA – How To File Tax Returns
Students on an F-1 visa need to file Form 1040NR-EZ or 1040-NR for federal taxes. Depending on the state you live in, you may also have to file state tax returns. Students who do not have any income need to file Form 8843.
To file your returns you need to know the income earned during the last financial year as well as your social security number (SSN) and IRS individual taxpayer identification number (ITIN).
The company employing you will need to provide a Wage and Tax Statement or W-2 form. Most employers should have given this for by the end of January.
If you are on a taxable scholarship such as a housing allowance or stipend, your school will also give you a 1042-S form. If you have worked as an independent contractor or have earned rental income as a student you will also need the 1099 form. All forms are available on the IRS website.
The tax returns will be sent to the Department of the Treasury Internal Revenue Service of your state of residence. Electronic filing is not permitted for international students and hence tax returns must be filed by mail.
Students will have to file their returns independently unless they are married to a US citizen or resident. It is advisable to keep a copy of the forms submitted for your reference. If you owe the government taxes, you could enclose a check for the same with the forms.
There is no fee involved in filing taxes directly. However, if you choose to file taxes through a consultant, the consultant may charge a certain fee.
Deductions On F-1 Tax Returns
Students can lower their taxable income by claiming the State and Local Taxes (SALT) deduction. This can be used as an itemized deduction on the Schedule A, 1040 NR form or 1040 NR-EZ form. These deductions are capped at $10,000.
For the first five years, international students on an F-1 visa are also exempted from social security and Medicare taxes.
Indian students in the USA can also claim standard deduction under Article 21 of the US-India Income Tax Treaty as long as they do not claim itemized deductions.
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