foreign student and scholar volunteer tax return preparation › pub › irs-pdf › p4756.pdf ·...
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Publication 4756 (Rev. 8-2019) Catalog Number 53052M Department of the Treasury Internal Revenue Service www.irs.gov
Foreign Student and Scholar
Volunteer Tax Return Preparation
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e-learning Options
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Fact-Gathering Process
Effective Interviewing
Steps to Effective Interviews
Interview Tips
Form 13614-NR (Nonresident Alien Intake and Interview Sheet).
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Standards of Conduct
§ Volunteers have a responsibility to provide quality service and to uphold ethical standards
§ The Standards of Conduct training and certification must be completed by ALL volunteers
§ A signed copy of Form 13615 will be required from all volunteers
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Privacy and Confidentiality Guide
§ Privacy Act of 1974
§ Civil Rights Act of 1964
§ IRC 7216 Disclosure or use of Taxpayer Information
§ Taxpayers can report site/volunteer misconduct through VolTax
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Volunteer Testing and Certification
Assist only with:
§ Returns,
§ Forms, and
§ Supporting schedules
…for which you are trained and certified
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RESIDENCY STATUS FOR FEDERAL TAX PURPOSES
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Determination of Residency Status
Do not confuse residency for federal tax purposes with:
§ immigration residency
§ residency requirements for earning a degree, etc. § residency requirements for state taxes
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Resident or Nonresident
§ Substantial Presence Test (SPT)
§ Green Card Test
§ Residency through Marriage
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Substantial Presence Test
§ 31 days during the current tax year AND
§ At least 183 days* during the three year period ending with the current tax year.
* 183 days or more being calculated as follows:
• All days of (nonexempt) presence in the current tax year, plus
• One-third of the (nonexempt) days of presence in the first preceding year, plus
• One-sixth of the (nonexempt) days of presence in the second preceding year.
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Exempt Individuals
§ F, J, M, & Q student status holders
§ J & Q teacher or trainee status holders
§ Not exempt from taxation on U.S. income
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Exempt Student (F & J)
§ Arrived in the U.S. for primary purpose of studying § 5 years
§ Dependents are generally included
§ All must file Form 8843
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Closer Connection Election for Students (OUT-OF-SCOPE)
If the student meets these four requirements:
1) does not intend to reside permanently in the United States;
2) has substantially complied with the immigration laws and requirements relating to his student nonimmigrant status;
3) has not taken any steps to change his nonimmigrant status in the United States toward becoming a permanent resident of the United States; and
4) has a closer connection to a foreign country than to the United States as evidenced by the factors listed in Treasury Regulation 301.7701(b)-2(d)(1).
The student may elect to continue to be treated as a Nonresident Alien (NRA).
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Closer Connection Election for Students (cont.)
To claim this election, the student must also:
§ File Form 8840 with a statement indicating that they are making the election and meet the four conditions.
§ Send Form 8840 and the statement with Form 1040-NR or 1040-NR-EZ filed at the Austin IRS Campus.
This election is Out-of-Scope.
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Exempt Teacher/Trainee
§ Any two years out of a six-year period
§ Dependents are generally included
§ All must file Form 8843
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Establishing a Closer Connection
(OUT-OF-SCOPE)
§ Present in the U.S. less than 183 days in the current year
§ Have a tax home in a foreign country
§ File Form 8840
§ Can be used by ALL NRA’s
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Green Card Test
§ Date of adjustment to status--not the date “green” card issued
§ No option--if you are a Permanent Resident, you are a resident for tax purposes
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Residency Starting Date
§ Passes Substantial Presence Test (SPT)
§ Granted permanent residence status or green card test
§ When both apply, use the earlier of the two dates
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Residency through Marriage
Nonresident spouse can be treated as a resident if married to a resident alien or US citizen
§ Required to file jointly
§ Must report world-wide income
This election is Out-of-Scope.
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FILING REQUIREMENTS & WHAT TO FILE
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Who Must File?
In the United States,
it is the individual’s responsibility to know what tax forms must be filed with the government.
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Resident Aliens
§ File using U.S. citizen rules
§ IRS Publication 17
§ Extensive number of resources, public and private
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Dual Status Aliens
§ Taxpayer has two residency statuses during the same tax year
§ Must file two returns § Allocate income § Too complex for this training § Publication 519
This is Out-of-Scope.
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How Nonresident is Different
§ Most Credits may not be available (i.e. EITC, American Opportunity Credit, etc.)
§ Generally, pay tax only on US-source income § Interest may be tax free § Two married Nonresidents cannot file jointly
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How Nonresident is Different (cont.)
§ Standard deduction not allowed (except as allowed by treaty for students from India)
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Nonresident Itemized Deductions
Itemized deductions limited to: § State and local taxes withheld ($10,000 limit)
§ Contributions to U.S. charities
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Nonresident Alien (NRA) Filing Requirements
Who? § All F, J, M, and Q status holders must file:
• Form 8843 to substantiate non-residence, and • possibly a tax return
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Nonresident Alien (NRA) Filing Requirements (cont.)
What to File § Form 8843, Statement for Exempt Individuals and
Individuals with a Medical Condition (mandatory for all nonresidents), and possibly
§ Form 1040-NR, U.S. Nonresident Alien Income Tax Return or 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents
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Nonresident Alien (NRA) Filing Requirements (cont.)
When to File § Tax returns by April 15th of the year following the
close of the tax year.
(Form 1040-NR or Form 1040-NR-EZ)
§ Form 8843 only by June 15th of the year following the close of the tax year.
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Nonresident Alien (NRA) Filing Requirements (cont.)
Where to File
If you are not enclosing a payment: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 U.S.A. If you are enclosing a payment: Internal Revenue Service P.O. Box 1303 Charlotte, N.C. 28201-1303 U.S.A.
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1040-NR-EZ Use?
§ No dependents
§ Cannot be claimed as a dependent
§ Under 65
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1040-NR-EZ Use? (cont.)
Types of income limited to: § Wages, salaries, tips
§ Taxable refunds of state/local income taxes, and
§ Scholarships or fellowships
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Additional Limitations of Form 1040-NR-EZ
§ Taxable income less than $100,000
§ Cannot claim any adjustment to income (except scholarship and fellowship grants and student loan interest)
§ Cannot claim tax credits
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Additional Limitations of Form 1040-NR-EZ (cont.)
§ If itemizing, can only claim state income tax deductions
§ The only taxes owed are income taxes
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Consequences of Failure to File
§ If no taxes are owed there is no late filing penalty from the IRS
§ However, nonimmigrant alien status requires that the individual not violate any U.S. laws, including tax laws
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THE EFFECT OF TAX TREATIES
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Treaty Overview
§ IRS Publication 901, U.S. Tax Treaties § www.irs.gov
• Search for “tax treaties”
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Points to Consider
§ Purpose of visit to the U.S.
§ Current and past VISA status
§ Tax residency immediately prior to coming to U.S.
§ Type of Income
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Form 1042-S Common Income Codes
§ Scholarship or Fellowship grants Code 16
§ Compensation for teaching and research Code 19
§ Compensation during studying and training Code 20
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Unique Treaty Provisions
§ India Students
§ Canada
§ China
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FAMILY ISSUES
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Family Issues
§ Generally Nonresident Aliens do not have qualifying dependents
§ Exceptions for nonresidents from Canada, India, Korea and Mexico
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Filing Status & Marital Status
§ Unmarried
§ Married
§ Exceptions for nonresidents from Canada, Mexico, India and Republic of Korea (S. Korea).
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Filing Status & Dependents
§ Even though the nonresident alien may have family members in the U.S., they generally will not qualify as dependents for tax credits.
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Spouse, Children, and Other Accompanying Family Members
§ Each file their own Form 8843
§ All U.S. source income must be reported
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TAXATION OF NONRESIDENTS
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Taxation of Nonresidents
§ Source of Income § Type of Income
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Interest Income
§ Is usually excluded from income
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Qualified Scholarships/Fellowships
§ Candidate for a Degree
§ Qualified Expenses • tuition and mandatory fees
• required fees, books, supplies & equipment
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Other Income
§ Income Not Effectively Connected • 30% (or reduced treaty rate, if applicable)
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FORM 8843 FILING REQUIREMENT
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Form 8843
§ Name & TIN—must match the identification documents of the taxpayer
§ U.S. address only if not filing with 1040-NR or 1040-NR-EZ
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Form 8843 (cont.)
§ Part II, Scholars
§ Part III, Students
§ Signature required only if not filed with 1040-NR or 1040-NR-EZ
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FINISHING THE RETURN
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Finishing the Return
FIRST, Cover with the taxpayer, § Direct Deposit
§ Split refund
§ Method of Payment (if balance due) § QUALITY REVIEW the return
§ THEN,
§ Taxpayer signs the form(s)
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Finishing the Return (cont.)
§ Attach W-2s and 1042-S’s
§ Advise the taxpayer to keep copies
§ Mail 8843 and tax return together
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SOCIAL SECURITY TAX MATTERS
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Social Security Tax
§ Exemption from FICA (Social Security and Medicare taxes)
§ If resident for tax purposes, usually subject to FICA taxes
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Social Security Tax (cont.)
§ Dependents in F-2 or J-2 status are never exempt from FICA (Social Security and Medicare Taxes)
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FICA Refunds
When withheld in error: § FIRST, ask the employer to refund
§ If not refunded by the employer, use IRS Form 843 to request a refund
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STATE INCOME TAX ISSUES
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State Income Tax Issues
§ Although many states base their state returns on the federal adjusted gross income, some states DO NOT honor federal income tax treaty provisions.
§ Contact your state’s tax department for guidance
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Questions?
§ Refer to the publications and forms that have beenmentioned in this presentation.
§ www.irs.gov
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THANK YOU FOR AGREEING TO HELP OTHERS WITH THEIR TAX RETURNS.
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DEPARTMENT OF THE TREASURY Internal Revenue Service
www.irs.gov
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