Douglas Olsen
International students in the US on an F-1 visa are considered nonresident aliens for tax purposes and are taxed only on US-source income. Depending on their income, some international students may need to mail Form 1042-S, an annual federal tax document issued to non-resident aliens who have received wages exempted from federal and state tax withholding by a tax treaty and received a non-qualified taxable scholarship.
| Characteristics | Values |
|---|---|
| Who will receive Form 1042-S | International students who have received taxable scholarship income or fellowship grants from their school or institution |
| Who will not receive Form 1042-S | International students who only received tuition, required fees, or a book allowance |
| When will Form 1042-S be received | Usually during February of the year after the scholarship was given |
| What is Form 1042-S used for | Reporting income for international persons who have received wage payments, fellowship/scholarship income, independent personal services, or royalty payments |
| What to do if you received Form 1042-S | Use it along with your passport, visa, I-20 or DS-2019, and I-94 to complete the 8843 and 1040-NR forms and file your taxes |
| What if you don't have an ITIN or SSN | You will need to apply for an Individual Taxpayer Identification Number (ITIN) along with your tax return |
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What You'll Learn
International students and tax treaties
International students, scholars, teachers, and researchers who are non-resident aliens in the US can claim tax treaty benefits. These benefits are applicable to students who receive fellowship/scholarship income directly and not through their institution. This also includes any income from personal services performed in the US as an independent contractor or employee.
To claim these benefits, students must submit Form 8233 to each withholding agent from whom amounts will be received. This form must be accompanied by the appropriate statement (shown in Appendix A for students) from Publication 519, U.S. Tax Guide for Aliens. Additionally, if the payee receives payments or income items totalling more than $100,000, they must also file Form 8833.
It is important to note that not all international students will receive a 1042-S form. This depends on the student's tax status and income. A 1042-S form will be issued if the student received wages or salary on which they claimed a tax treaty exemption or received a scholarship or fellowship, regardless of whether tax was deducted.
The IRS website provides general information on tax treaty benefits, and the actual tax treaty text can also be found on their website. Additionally, some universities, such as UC Berkeley, offer advising services and resources to assist international students in understanding their tax obligations and claiming any applicable treaty benefits.
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Mailing address accuracy
To ensure that your Form 1042 is correctly processed, it is important to provide accurate information and include any necessary supporting documents. This includes the withholding agent's name, address, chapter 3 and chapter 4 status codes, and the EIN, QI-EIN, WP-EIN, or WT-EIN. It is also crucial to provide the correct EIN based on whether you are filing Form 1042 as a QI, WP, or WT.
When it comes to mailing addresses for Form 1042, the Internal Revenue Service provides specific instructions. If you choose to paper file Form 1042, it must be sent to the appropriate IRS mailing address:
Internal Revenue Service,
P.O. Box 409101,
Ogden, UT 84409.
However, it is important to note that the IRS requires electronic filing for Forms 1042 and 1042-S if you meet the filing threshold. Financial institutions, in particular, must e-file Form 1042 for the tax year 2024. This can be done through IRS-authorized e-file providers like TaxBandits, ensuring compliance with IRS regulations.
In the case of Form 1042-S, this form serves as a meticulous record of income paid to foreign individuals and entities. It includes the name, address, and taxpayer identification number (TIN) of the recipient, as well as their country of residence for tax purposes. While the form itself contains address information, it is essential to ensure that the address provided is accurate and up to date.
Additionally, if you are a QSL or other withholding agent claiming a credit forward of prior withholding on substitute dividends, you should attach Form(s) 1042-S issued to you. This helps to support your credits, and if a credit is claimed with respect to any U.S. source substitute dividends, you must attach a supporting statement to Form 1042. This statement should include the withholding agent's name, address, and EIN, if known, along with the amount of U.S. source substitute dividends received and the amount of credit forward included on line 67b.
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Tax refunds
International students in the US are considered "nonresident aliens" by the IRS and are taxed in the same manner—they are taxed only on US-source income. International students on F-1 visas are exempt from social security and Medicare taxes. They are also exempt from the Substantial Presence Test for their first five years in the US.
If you are an international student in the US and you earned income during the previous calendar year, you are required to file a tax return. Even if you didn't earn money, you will still need to file Form 8843 with the IRS. You may also need to file a state tax return, depending on the state.
To file your federal tax return, you will need to use Form 1040-NR. If the amount of tax deducted from your payments during the tax year is more than the tax shown on your 1040-NR, you will be due a refund. If you are not required to pay FICA tax, you can apply for a refund with Sprintax.
If you are a nonresident alien, you will need to mail your tax forms to the IRS, as electronic filing is not allowed. You will also need to include any W-2s, 1099s, and 1042-Ss with your tax forms.
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Tax residency status
An individual's tax residency status determines the taxes they pay in a country. Here is a summary of the tax residency rules for Singapore and New Zealand.
Singapore
In Singapore, if your stay is less than 183 days, you will be regarded as a non-resident. Foreigners issued with a work pass valid for at least one year will be treated as tax residents. However, your tax residency status will be reviewed when you cease your employment. If you stay or work in Singapore continuously for three consecutive years, you will be regarded as a tax resident for all three years, even if you are in the country for less than 183 days in the first and third years.
There is also a two-year administrative concession: if your employment period straddles two calendar years and your stay (inclusive of work) in each of those years is at least 183 days, you will be regarded as a tax resident for the years in question.
New Zealand
In New Zealand, you become a tax resident if you have been in the country for more than 183 days in any 12-month period or if you have a permanent place of abode, i.e., a place where you usually live. The 183 days do not need to be consecutive, and parts of days (such as the day of arrival and departure) count as whole days. If you work in New Zealand on a Recognised Seasonal Employer Limited Visa or a Fishing Crew Work Visa, you will not qualify as a tax resident after 183 days as long as you do not establish a permanent place of abode.
If you meet the 325-day rule, i.e., if you are absent from New Zealand for 325 days, your status as a non-resident taxpayer will be backdated to the first of those days. You are still considered a New Zealand tax resident if you are sent overseas to work for the New Zealand government.
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Tax exemptions
Form 1042-S is a crucial document for businesses involved in cross-border transactions, reporting income paid to foreign persons and entities. It is used to report income paid to foreign persons, including non-resident aliens, foreign corporations, and other foreign entities. It also reports tax withheld on certain income, such as wages, scholarships, fellowships, and other types of income paid to foreign individuals or entities. The form provides a comprehensive summary of the income paid to foreign persons and the amount of tax withheld.
If you are a non-resident alien and receive a Form 1042-S, you generally need to report the income on your US tax return. However, if the income is exempt from US tax under a tax treaty, you may not need to do this. Foreign corporations and entities that receive income from US sources may need to report the income on their tax returns in their home country. It is important to consult with a tax professional or refer to the tax laws of your home country to determine the specific reporting requirements.
The Exemption Code on Form 1042-S indicates why the recipient of the income is exempt from US taxation. This applies if the tax rate entered in box 3b or 4b is "00.00". In this case, the exemption code "04" is used to indicate "Exempt under tax treaty". If the tax rate exceeds 0 and is not subject to withholding, enter "00" in Box 4a. In Box 4b, if the tax rate entered is "00.00", you must input the correct exemption codes (13 through 21) in Box 4a.
A non-resident alien's treaty-exempt employment income will be reported on Form 1042-S rather than Form W-2. Reportable scholarship/fellowship amounts are also included on Form 1042-S. Additionally, all other non-employment income paid to non-resident aliens is reported on Form 1042-S, including honorarium, royalties, reimbursed expenses, prizes, awards, and human subject participation income.
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Frequently asked questions
No, not all international students receive Form 1042-S. It depends on your tax status and income.
Form 1042-S is a year-end federal tax document given to a non-resident alien who received wages exempted from federal and state tax withholding by a tax treaty and received a non-qualified taxable scholarship.
If you know that you should have received Form 1042-S but have not received it, you can contact HR Compliance and Immigration Services (HRCIS) at [email protected] or 434.924.1377.
