Douglas Olsen
International students who are employed in the United States are liable for Social Security and Medicare taxes. However, certain classes of foreign employees are exempt from these taxes. To apply for a Social Security Number (SSN), one must obtain valid employment authorization. Non-resident aliens who are not eligible for an SSN may be eligible for a Tax Identification Number (ITIN) to use for filing taxes. International students on F, J, M, or Q visas are considered exempt individuals and are excused from the Substantial Presence Test for their first five years in the US. After this period, they will be subject to the test, which is used to determine if someone was in the US long enough to be considered a resident.
| Characteristics | Values |
|---|---|
| Who needs to claim SSN tax forms | International students who have been in the U.S. for more than 5 years and are considered resident aliens for tax purposes |
| Who is exempt from claiming SSN tax forms | International students who have been in the U.S. for less than 5 years and are considered nonresident aliens for tax purposes |
| What is required to claim SSN tax forms | Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) |
| How to obtain SSN | Obtain valid employment authorization, visit a Social Security Office, and submit application |
| How to obtain ITIN | File a tax return by filling out a W-7 |
| Where to send tax forms | Internal Revenue Service Center, Austin, TX 73301-0215, U.S.A. |
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What You'll Learn
How to get an Individual Taxpayer Identification Number (ITIN)
International students in the United States are subject to special rules with respect to the taxation of their income. Non-resident aliens, including foreign students, are generally liable for Social Security and Medicare Taxes on wages paid for services performed in the United States. However, there are certain exceptions based on their non-immigrant status and the nature of their employment. For example, foreign students in F-1, J-1, or M-1 status for less than five calendar years are typically exempt from these taxes. Additionally, students employed by their school, college, or university where they are enrolled at least half-time are exempt under the "student FICA exemption."
To navigate the tax system, international students may need a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). An ITIN is a nine-digit number issued by the Internal Revenue Service (IRS) to individuals who are not eligible for an SSN but need a U.S. taxpayer identification number for federal tax purposes. It is important to note that an ITIN is primarily used for tax filing and does not authorize legal employment in the U.S.
Step 1: Determine Eligibility
Before applying for an ITIN, international students should assess their eligibility. As mentioned earlier, ITINs are intended for individuals who are not eligible for an SSN but have federal tax obligations or wish to claim tax benefits. If you are an international student with income that is taxable or exempt under U.S. tax laws, you likely need an ITIN.
Step 2: Gather Required Documents
When applying for an ITIN, you will need to submit supporting documents along with your application. The specific documents required may vary depending on your situation, but generally, you will need to provide:
- A completed Form W-7, Application for IRS Individual Taxpayer Identification Number.
- A valid passport or national identity document.
- Any additional documentation that establishes your non-resident alien status and the reason you need an ITIN (e.g., tax treaties, scholarship information, etc.).
Step 3: Submit Your Application
You can submit your ITIN application in the following ways:
- By Mail: Send your completed Form W-7 and supporting documents to the IRS address specified in the form instructions.
- In Person: Visit a Taxpayer Assistance Center (TAC) or select Volunteer Income Tax Assistance (VITA) sites in the U.S. that offer ITIN services. TACs provide free assistance and can authenticate your documents, while VITA sites have Certifying Acceptance Agents (CAAs) who can help with the process.
- Through an IRS-authorized Certifying Acceptance Agent: These are entities or individuals authorized by the IRS to assist with the ITIN application process and can guide you through the required documentation and submission.
Step 4: Wait for Processing
After submitting your ITIN application, you will need to wait for the IRS to process your request. The processing time may vary, but you should allow several weeks, especially during peak tax seasons. If your application is rejected for any reason, the IRS will notify you and return your supporting documents. You may then need to resubmit your application with the necessary corrections or additional information.
Step 5: Receive Your ITIN
Once your ITIN application is approved, the IRS will issue your nine-digit ITIN. This number will be included in your tax return when it is processed. You can then use this ITIN for future tax filings as long as it remains valid. Remember, your ITIN does not authorize employment, but it is essential for accurately reporting your tax obligations as an international student in the United States.
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Understanding the 'Substantial Presence Test'
International students who have been in the United States for more than five calendar years may become resident aliens for US tax purposes if they meet the "Substantial Presence Test". This test determines the resident or non-resident status of a foreign national for tax purposes in the United States. It is calculated based on the number of days of physical presence in the US over a three-year period, including the current year and the two years immediately before that.
To meet the Substantial Presence Test, an individual must be physically present in the United States on at least 183 days during this three-year period. This includes:
- All the days present in the current year
- One-third of the days present in the first year before the current year
- One-sixth of the days present in the second year before the current year
For example, if an individual was physically present in the US for 120 days in 2021, 120 days in 2022, and 120 days in 2023, they would calculate their total days by adding all the days in the current year (120 days in 2023), one-third of the days in the first year before (40 days in 2022), and one-sixth of the days in the second year before (20 days in 2021). This gives a total of 180 days, which is below the 183-day threshold, so they would not be considered a resident under the Substantial Presence Test for 2023.
It is important to note that certain individuals are exempt from the Substantial Presence Test, including foreign students temporarily present in the United States in F-1, J-1, or M-1 status for less than five calendar years, who are generally considered nonresident aliens. These nonresident alien students are exempt from Social Security and Medicare Taxes on wages for services performed within the United States. Additionally, there is a Closer Connection Exception available only to students, which may impact their tax status.
International students who are not eligible for a Social Security Number (SSN) due to their visa status may be able to obtain a Tax Identification Number (ITIN) from the Internal Revenue Service (IRS) for tax filing purposes. This nine-digit number is used to identify individuals who are not eligible for an SSN and does not authorize them to work.
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SSN eligibility requirements
Eligibility for a Social Security Number (SSN) is based upon a person's eligibility to work in the United States. Those eligible for an SSN include US citizens, permanent residents, and qualified foreign nationals—including, in certain circumstances, students in F-1 or J-1 status. Dependents in F-1 status are not eligible for an SSN. However, J-2 dependents with employment authorization will need to have the required documents, including their EAD card, in order to apply for an SSN.
To apply for an SSN, you must first obtain valid employment authorization. Authorization can be based on one of the following:
- On-campus employment: Obtain a letter from your college or university confirming that you have been offered an on-campus job.
- Curricular Practical Training: Obtain an updated Form I-20 from your college or university, showing that you have been authorized to engage in F-1 Curricular Practical Training (CPT) (employment based on an academic internship/fieldwork/practicum) or Optional Practical Training (OPT), or other off-campus employment.
F-1 students must also provide evidence of lawful F-1 employment, such as an on-campus job or authorization for CPT or OPT. Valid immigration documents, including a valid passport, I-20 or DS-2019, and an I-94 card or electronic I-94 notated "F-1 D/S" or "J-1 D/S", are also required.
In general, aliens performing services in the United States as employees are liable for US Social Security and Medicare taxes. However, certain classes of foreign employees are exempt from these taxes. Resident aliens, in general, have the same liability for Social Security and Medicare Taxes as US citizens. Nonresident aliens are also liable for Social Security and Medicare Taxes on wages paid to them for services performed in the United States, with certain exceptions based on their nonimmigrant status. Foreign students temporarily present in the United States in F-1, J-1, or M-1 status for less than five calendar years are generally nonresident aliens and are exempt from Social Security Tax and Medicare Tax on wages paid to them for services performed within the United States.
The United States has also entered into agreements with several nations called Totalization Agreements to avoid double taxation of income with respect to Social Security taxes. These agreements must be considered when determining whether any alien is subject to US Social Security and Medicare tax. A nonresident alien is not liable for self-employment tax. However, once an individual becomes a Resident Alien, they become liable for self-employment taxes under the same conditions as a US citizen.
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Totalization Agreements
International Social Security agreements, often called "Totalization Agreements", are agreements between the United States and several other nations. These agreements aim to prevent double taxation of income with respect to social security taxes. Totalization Agreements are advantageous for both current workers and retired, disabled, or deceased individuals. They eliminate dual contributions to the social security systems of both the United States and another country.
For current workers, Totalization Agreements eliminate the need to pay Social Security taxes to two countries on the same earnings. This situation, known as dual Social Security taxation, occurs when a worker from one country works in another country and is required to pay Social Security taxes to both nations. By avoiding double taxation, Totalization Agreements ensure that individuals do not pay more than necessary in Social Security taxes.
Additionally, Totalization Agreements help fill gaps in benefit protection for workers who have divided their careers between the United States and another country. These agreements ensure continuity of benefits for individuals who have acquired Social Security credits under the systems of both the United States and a foreign country. Under these agreements, workers may qualify for partial U.S. or foreign benefits based on their combined coverage credits from both countries. This is especially beneficial for individuals who may not meet the minimum eligibility requirements for benefits in either country due to their divided careers.
To claim an exemption from U.S. Social Security and Medicare taxes based on a Totalization Agreement, individuals must secure a Certificate of Coverage from their home country's social security agency. This certificate should be presented to their U.S. employer, following the procedures outlined in relevant revenue rulings and procedures.
It is important to note that Totalization Agreements do not exempt all foreign students from Social Security and Medicare taxes. Foreign students in F-1, J-1, or M-1 nonimmigrant status who have been in the United States for less than five calendar years are generally considered nonresident aliens. These students are typically exempt from Social Security and Medicare taxes on wages earned for services performed within the United States. However, students who transition to resident alien status after staying in the country for more than five years may become liable for these taxes.
In summary, Totalization Agreements are international agreements designed to prevent double taxation of Social Security taxes and ensure continuity of benefit protection for workers with careers spanning multiple countries. While these agreements may not directly apply to all foreign students, they can provide exemptions from Social Security taxes for eligible individuals by obtaining a Certificate of Coverage from their home country.
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Non-resident alien student exemptions
Non-resident alien students are exempt from Social Security Tax and Medicare Tax on wages paid to them for services performed within the United States. This exemption applies to foreign students in F-1, J-1, or M-1 nonimmigrant status who have been in the United States for less than five calendar years. The year that a student enters the US counts as their first year, even if they were only present for part of that year.
After five calendar years in the United States, foreign students in F-1, J-1, or M-1 nonimmigrant status generally become resident aliens for tax purposes and are liable for Social Security and Medicare taxes. However, there are certain exemptions that may apply even after becoming a resident alien.
For example, Section 3121(b)(10) of the Internal Revenue Code provides an exemption from FICA (Social Security and Medicare) taxes for all students, regardless of their US tax residency status. Under this special exception, Social Security and Medicare taxes do not apply to services performed by students employed by a school, college, or university where the student is enrolled at least half-time. The student's on-campus employment must be incidental to and for the purpose of pursuing a course of study.
Additionally, the United States has entered into Totalization Agreements with several nations to avoid double taxation of income with respect to Social Security taxes. These agreements must be considered when determining the tax liability of any alien, including non-resident alien students.
It is important to note that non-resident alien students who are not eligible for a Social Security Number (SSN) may be eligible for a Tax Identification Number (ITIN) to use for filing taxes. The ITIN is a nine-digit number issued by the Internal Revenue Service (IRS) to individuals who are not eligible for an SSN.
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Frequently asked questions
SSN stands for Social Security Number. It is a number issued by the Internal Revenue Service (IRS) to individuals who are citizens or permanent residents of the United States, have a valid job offer, or are eligible for legal employment.
To apply for an SSN, you must first obtain valid employment authorization. You can do this by getting a letter from your college department confirming that you have been offered an on-campus job, or by obtaining an updated Form I-20 showing that you have been authorized to engage in F-1 Curricular Practical Training. Once you have this, you can visit a Social Security Office to apply for an SSN.
If you are an international student without an SSN, you may be eligible for a Tax Identification Number (ITIN) to use for filing taxes. This is a nine-digit number issued by the IRS to individuals who are not eligible to obtain an SSN.
First, determine your residence status and whether you had any income from US sources. If you are a non-resident alien, you will need to fill out and
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