Lori Meadows
International students are required to file tax reports in many countries, including the United States and Canada. In the US, international students are considered “nonresident aliens” for tax purposes and are required to file a tax return with the Internal Revenue Service (IRS) each year they are in the country. This applies to students with income from US sources as well as those without income, who must file a non-employed federal form. International students on F-1 visas are considered “exempt individuals” and are not required to pay FICA tax unless they have been in the US for more than five years. In Canada, international students must determine their residency status, which is based on the residential ties they have established with the country, to understand their tax obligations.
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What You'll Learn
International students in the US must file a tax report
International students in the US are required to file a tax report, even if they have no US-source income. This is because international students are considered nonresident aliens for tax purposes, and they must report their income to the US government. The Internal Revenue Service (IRS) is the US government agency responsible for collecting taxes and enforcing tax laws.
Tax Residency Status
The IRS uses the substantial presence test to determine whether an individual is taxed as a resident or a nonresident alien. US residents are taxed on their worldwide income, while nonresident aliens only report US-sourced income. Nonresident aliens include international students with an F, J, or M visa who have been in the USA for less than five calendar years. Those who have been in the country for more than five years are considered resident aliens.
Tax Returns
International students must complete Form 8843, which is informational and lets the IRS know how long they have been in the US. They may also need to file a state tax return, depending on the state they live or work in. The deadline for filing tax returns is April 15 or the following Monday if it falls on a weekend.
Income
Students with an F-1 visa are not required to pay employment taxes (Social Security and Medicare, also known as FICA) but must pay federal and state income taxes. Students with an M-1 visa are generally not required to pay income tax unless they are paid for practical training. Those with a J-1 visa must pay taxes like US citizens.
Tax Treaties
Some countries have tax treaties with the US, which can reduce or eliminate federal income taxes for international students from those countries. However, income that is not taxable due to a tax treaty must still be reported on a US income tax return.
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F-1 visa students are considered non-resident aliens
International students in the US on an F-1 visa are considered non-resident aliens for tax purposes for the first five calendar years of their stay. This means they are only taxed on their US-sourced income. If you are an F-1 student, you will need to file a US tax return (Form 1040-NR) for any income from US sources. Even if you did not earn any income during your time as an F-1 student in the US, you still need to file a Form 8843 with the IRS before the deadline.
There is no minimum income amount that triggers a filing requirement for a nonresident alien. However, nonresident alien students and scholars who have a taxable scholarship or fellowship grant, income partially or totally exempt from tax under a tax treaty, or any other income that is taxable under the Internal Revenue Code, are required to file taxes. On the other hand, nonresident alien students and scholars who have income only from a US savings and loan institution or US credit union, for example, are not required to file taxes.
F-1 students are exempt from Social Security Tax and Medicare Tax on wages for services performed within the United States. However, they will be subject to these taxes if they become resident aliens. Additionally, F-1 students are usually not required to pay FICA tax, but they will be obligated to pay this tax if they have been in the US for more than five years.
It is important to note that the term ""US Resident"" for F-1 students is generally used only for tax purposes, and they are considered non-immigrants.
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International students in Canada must determine residency status
International students in Canada must determine their residency status to understand their income tax obligations. This is because, in Canada, individuals are responsible for completing and filing their personal tax returns.
Residency status is based on the residential ties an individual has with Canada. Residential ties can include owning a home in Canada, having a spouse or common-law partner, or having a dependent who is moving to Canada to live with you. Other residential ties can include the length of time, purpose, intent, and continuity of the stay while living inside and outside Canada.
If an international student has established significant residential ties with Canada, they are considered a resident for income tax purposes and must follow the filing requirements for newcomers to Canada. This includes students who reside in Canada only part of the year.
If an international student has not established significant residential ties with Canada, they are considered a non-resident for income tax purposes. To be considered a non-resident, the student must also stay in Canada for less than 183 days during the year. If the student stays for 183 days or more, they may be considered a deemed resident.
To get an official opinion on residency status, international students can complete Form NR74 and submit it to the CRA.
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Tax treaties may exempt students from paying taxes
International students in the United States on an F-1 visa are considered nonresident aliens for tax purposes and are required to file a US tax return (Form 1040-NR) for income from US sources. However, they are exempt from paying FICA tax unless they have been in the US for more than 5 years.
Students from countries that have signed a tax treaty with the US may be partially or completely exempt from tax. For example, a student from China with student wages of $6,000 would only be taxed $1,000 because the tax treaty exempts up to $5,000. Additionally, Canadian citizens who are in the US as international students are exempt from tax on any US income received for activities related to education, training, or maintenance.
To claim a tax treaty exemption, students may need to submit Form W-8 BEN to the payer of the grant. If the student does not have a TIN, they must apply for one and attach a copy of Form W-7 or Form SS-5 to Form 8233. It is important to note that the student/trainee and teacher/researcher articles of tax treaties generally contain time limits, after which a treaty exemption may not be claimed.
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International students may be eligible for tax refunds
International students in the United States are typically classified as nonresident aliens for tax purposes. Nonresident aliens are generally only taxed on their US-sourced income. This includes wages, tips, scholarships, and fellowship grants.
If you are an international student in the US, you may be eligible for a tax refund if you meet certain criteria. For example, if you are on an F-1 visa, you are usually exempt from paying FICA tax unless you have been in the US for more than five years. Additionally, if your income is exempt from tax under a tax treaty, you may be eligible for a refund. This applies to both full and partial exemptions.
To get your tax refund, you will need to file a US tax return (Form 1040-NR) and any other relevant forms, such as Form 8843. You can use services like Sprintax to help you prepare your tax documents and ensure you claim the maximum legal tax refund.
It is important to note that each state in the US has its own tax system and regulations, so you may need to file a state tax return and pay state income tax even if you do not need to file a federal return.
In Canada, international students are considered residents for tax purposes if they establish significant residential ties with the country. If you are an international student in Canada, you may need to file a Canadian income tax return, depending on your residency status.
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Frequently asked questions
Yes, all international students are required to file a tax report with the Internal Revenue Service (IRS) each year they are in the United States. However, not all international students will pay taxes to the American government, as they are entitled to certain benefits and exemptions.
International students in the US need to determine their residency status, as this will impact their tax obligations. Most international students on F-1 visas are considered nonresident aliens for tax purposes and are required to file a US tax return (Form 1040-NR) for income from US sources. Nonresident aliens only need to report income from US sources and are exempt from the Substantial Presence Test for the first five years they are in the US. To file taxes, international students will need an Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN). They may also need W-2s, 1099s, and 1042-Ss, which will be provided by their university or employer if applicable.
International students can file their taxes by mailing their tax forms, along with copies of their W-2s, 1099s, and 1042-Ss, and a check for any amount owed to the IRS. The IRS does not allow electronic filing for nonresident aliens. Alternatively, international students can use a professional tax preparation service like Sprintax, which specializes in preparing tax returns for international students.
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