US TAXATION OF FOREIGN STUDENTS, TEACHERS, AND RESEARCHERS
Foreign students, scholars, teachers, and researchers in the United States may or may not be required to file a tax return and/or apply for a U.S. Social Security Number (SSN) or International Taxpayer Identification Number (ITIN), depending on their tax status and specific facts and circumstances.
Tax Resident or Nonresident
Foreign individuals can be subject to tax in the United States on their worldwide income if they are classified as ‘resident alien’ under the terms of the Internal Revenue Code (IRC). Alternatively, foreign individuals who are classified as ‘nonresident aliens’ are subject to tax on their income from sources within the United States only.
Foreign individuals can be classified as resident aliens if the number of days they are physically present in the United States during a calendar year exceeds a certain amount (as calculated under the ‘substantial presence test’, which also takes the number of days an individual was physically present in the United States in the two prior calendar years into consideration). However, separate rules and provisions apply to students, scholars, teachers, and researchers who are temporarily present in the United States on a F, J, Q, or M visa, as well as their immediate family members, if they qualify as ‘exempt individuals’.
Students Who Qualify as ‘Exempt Individuals’
Students, scholars, teachers, and researchers who qualify as ‘exempt individuals’ are exempt from the substantial presence test for a specified period of time. As a result, they are generally not classified as resident aliens and therefore not subject to U.S. taxation on their worldwide income. Instead, they are subject to tax on income from U.S. sources only, assuming a tax treaty does not apply.
The IRS (U.S. tax authorities) requires the filing of Form 8843 to claim exempt individual status. The form requires detailed personal information and must be timely filed to avoid losing exempt individual status.
Income Earned While Studying in the United States
Even if all requirements for exempt individual status are met, foreign students are required to file a U.S. income tax return if they earn certain types of income in the United States, such as a taxable scholarship, income that is exempt from tax under the terms of an income tax treaty (even if no tax is due), or any other income that is not specifically exempt under the Internal Revenue Code, such as employment income and compensation for teaching or research. Generally, no tax is due on income from foreign sources, interest income from U.S. financial institutions, or tax free scholarships or fellowships. Furthermore, if the income is below the personal exemption amount ($4,050 for tax year 2016), generally, there is no tax due. However, filing a tax return may still be required when claiming a tax refund, for example because tax was withheld on employment income.
Tax Identification Numbers
Foreign individuals may apply for either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) for use on tax related documents. Most foreign students and scholars on a F-1, J-1, M-1, Q-1, and Q-2 visa are eligible to be employed in the United States, and are therefore eligible to apply for an SSN if they are actually employed. Foreign individuals who are not eligible to apply for an SSN must apply for an ITIN.
US Tax Services for Foreign Students, Scholars, Teachers, and Researchers
If you are a foreign student, scholar, teacher, or researcher and have questions or need help with preparing and filing any of the forms discussed above, please don’t hesitate to contact us. Our tax experts can help you make sure that you are fully compliant with your U.S. tax filing requirements.