Understanding Non-Resident Alien Status For International Students In Illinois

International students in Illinois are generally considered nonresidents for tax purposes and are therefore classified as nonresident aliens. This classification is separate from one's immigration status, and an individual may be a resident for tax purposes while remaining a non-resident in terms of immigration. F-1 and J-1 nonresident aliens are exempt from FICA (Social Security and Medicare) taxes on wages earned from legal employment in the United States. However, they are required to fill out Form W-4 and may be eligible for exemptions from federal income tax withholding on wages due to tax treaties.

International students with F-1 and J-1 visas are considered non-residents for tax purposes

For federal (US government) taxes, non-resident international students generally use Form 1040-NR. This form is specifically for non-residents for tax purposes, as indicated by the "NR" in the form name. Additionally, all F and J international students and scholars (including dependents) who had no US income must file Form 8843.

Non-resident alien employees are required to fill out Form W-4, and some may be eligible for exemptions from federal income tax withholding on wages due to tax treaties. To claim this exemption, they must file Form 8233 with their employer. If a non-resident alien fails to file or submits an invalid Form W-4, federal income taxes will be withheld at the rates for single status with zero exemptions.

It is important to be cautious of scammers pretending to be the IRS, as they will never contact individuals by email, text, or social media. Instead, the IRS will always reach out by mail if they require any information.

Non-resident aliens are required to fill out Form W-4

In the United States, non-resident aliens are required to fill out Form W-4, Employee's Withholding Certificate, to determine how much income tax should be withheld from their wages. This form must be submitted to their employer or payor.

Before completing Form W-4, non-resident aliens should refer to the special instructions outlined in Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. These instructions are provided by the Internal Revenue Service (IRS) and are specific to non-resident aliens.

It is important to note that non-resident aliens can only claim a "'single' filing status on line 3 of Form W-4, even if they are married. Additionally, they cannot write "exempt" on line 7 of the form. With certain exceptions, they also cannot claim more than one personal exemption on Form W-4.

Non-resident aliens who fail to file or submit an invalid Form W-4 will have federal income taxes withheld at the rates pertaining to single status and zero exemptions. Therefore, it is crucial for non-resident aliens to accurately complete and submit Form W-4 to ensure proper tax withholding.

In the context of international students in Illinois, F-1 and J-1 students are generally considered non-residents for tax purposes for five calendar years, regardless of their date of entry. This period is shortened to two calendar years for J-1 research scholars and professors. However, it is worth noting that tax status (non-resident or resident) is separate from immigration status.

Non-resident aliens are exempt from FICA taxes on wages from US employment

In the United States, non-resident aliens are generally exempt from FICA taxes on wages from US employment. FICA, or the Federal Insurance Contributions Act, encompasses Social Security and Medicare taxes.

Non-resident aliens who are students, scholars, professors, teachers, trainees, researchers, and other non-immigrants in the US on F-1, J-1, M-1, or Q-1 visas are exempt from FICA taxes on their wages for up to five calendar years. This exemption applies to their first five calendar years of physical presence in the US if they are full-time students at a US educational institution. For non-students or those not on F-1, J-1, M-1, or Q-1 visas, the exemption period is limited to the first two calendar years of their presence in the US. After these respective periods, they are typically reclassified as resident aliens for tax purposes and become subject to FICA withholding.

It is important to note that the exemption does not apply to certain individuals, including spouses and children of non-immigrants in specific visa categories (F-2, J-2, M-2, or Q-3). Additionally, the exemption is not applicable if the employment is not allowed or closely connected to the purpose for which the visa was issued.

In the context of Illinois, international students' residency status for tax purposes is determined separately from their immigration status. While F-1 and J-1 students are typically considered non-residents for tax purposes for up to five calendar years, there may be additional requirements and considerations for establishing residency within the state of Illinois for financial aid and grant purposes.

Employers must identify non-US citizens on their payroll and separate them into resident and non-resident aliens

For employers in Illinois, hiring non-US citizens requires some additional procedures. Employers must identify all non-US citizens on their payroll and separate them into two groups: "resident aliens" and "nonresident aliens". This is defined by Internal Revenue Code section 7701(b), which defines residency status for aliens.

Nonresident aliens are exempt from FICA (Social Security and Medicare) taxes on wages earned from legal employment in the United States. However, nonresident alien independent contractors are treated differently from independent contractors who are U.S. citizens or resident aliens. Employers must withhold 30% of the money paid to nonresident alien independent contractors unless they provide proof of a withholding agreement with the IRS.

Nonresident alien employees must fill out Form W-4 in a specific way, as described in "Withholding Exemptions - Personal Exemptions - Form W-4". Nonresident aliens who fail to file, or file an invalid Form W-4, will have federal income taxes withheld at the rates pertaining to single status, with no withholding adjustments. Employers must report wages exempt under a tax treaty paid to a nonresident alien on Form 1042 and Form 1042-S. Any additional wages paid to a nonresident alien over the exempt amount are reported on Form W-2.

Resident aliens are treated the same as U.S. citizens for income tax withholding purposes.

Non-resident aliens can be exempt from federal income tax withholding due to tax treaties

International students on F-1 and J-1 visas are generally considered nonresidents for tax purposes for five calendar years, regardless of their date of entry. This period is shortened to two calendar years for J-1 research scholars and professors. However, one's tax status (nonresident or resident) is separate from their immigration status.

Nonresident aliens are subject to special withholding rules as outlined in IRS Publication 15 (Circular E) and Publication 515, Withholding Taxes on Nonresident Aliens. Nonresident aliens are required to fill out Form W-4 in a specific way, as detailed in Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. They must write "Nonresident Alien" or "NRA" in the space below Step 4(c) on Form W-4. A nonresident alien cannot write "exempt" on line 7 of Form W-4 and may only claim "single" filing status on line 3, even if they are married. With certain exceptions, a nonresident alien cannot claim more than one personal exemption on Form W-4.

Nonresident aliens may be exempt from federal income tax withholding on wages due to tax treaties. To claim this exemption, they must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with their employer. Employers must review and sign Form 8233, indicating acceptance, and forward the form to the IRS within 5 days. Wages exempt under a tax treaty must be reported on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. Any additional wages above the exempt amount are reported on Form W-2, Wage and Tax Statement, in the usual manner.

Even when a nonresident alien's wages are fully exempt from federal income tax under a tax treaty, a Form W-2 is typically still required to report state and local wage amounts and income taxes withheld. In some cases, tax treaties allow alien students and scholars who have become resident aliens of the United States to exempt part or all of their U.S. source wages from taxation. In such cases, block 2 (Federal Income Tax Withheld) of Form W-2 may show zero or a reduced amount due to the tax treaty exemption.

Nonresident aliens who refuse to file a proper Form W-4 as required by IRS regulations will have federal income taxes withheld at the rates for single status with no withholding adjustments. Nonresident aliens can refer to IRS Publication 519, U.S. Tax Guide for Aliens, for instructions on filing their U.S. federal individual income tax return when claiming a tax treaty benefit.

Frequently asked questions