Archive for September, 2019

  • 5 important US tax documents every international student should know

    Tax solutions for nonresidents in the US

    Let’s face it.

    Tax is super boring!

    And when you move to the US as an international student or scholar, the local tax system will likely be the furthest thing from your mind.

    However, boring or not, compliance with the American tax authorities – the IRS – is crucial for any international student. In fact it’s one of the conditions of your visa! And how you handle your US tax affairs can play a big part in the outcome of your future visa or Green Card applications.

    But, by doing some research into US tax when you first arrive, you can save you a lot of hassle down the line.

    Thankfully, your friends at Sprintax are here to help!

    Tax information for nonresidents in USA

    As a nonresident, there are a number of key tax forms and documents that you’ll need to become very familiar with during your time in the US.

    In this blog, you’ll find a guide to five of the most important tax documents including what each form is used for, why you need to file them, and the easiest way to complete each form.

    The documents we will be looking at are:

    • Form SS-5 & W-7
    • W-4
    • W-8BEN
    • Form 8233
    • 1040NR & 1040NR-EZ

    Key Terms

    But before we get started, there are a couple of key terms that you will see popping up in many of the tax forms you will encounter during your time in the US. These terms can often cause considerable confusion for many international students and, with this in mind, we have briefly explained some of the most common terms below.

    Tax year – An American tax year is counted from January 1 – December 31, One of the most important dates during the tax year is April 15 – this is the tax filing deadline. The tax return you file must relate to the previous tax year. In other words, the tax return you file on April 15 2020 will account for the income you earned during the 2019 tax year.

    Residency status – Most international students will be treated differently to US citizens when it comes to tax in America. International students and scholars are usually referred to as ‘nonresident aliens’ for tax purposes in the US.

    Withholding Agent – Usually an organisation that pays your income will also withhold tax from that income. This organisation is known as a ‘withholding agent’. In other words, if you are receiving income from your university, that university will likely be your withholding agent.

    Tax Treaty – A tax treaty is an agreement between two countries about how they tax each other’s residents. Many students can avail of tax treaty benefits and are entitled to reductions in the amount of tax that is deducted from their wages.

    Taxpayer Identification Number (TIN) – A Taxpayer Identification Number (TIN) is a unique number that is used to identify you for tax purposes in the United States. Two of the most common types of TIN include the Social Security Number (SSN) and the Individual Taxpayer Identification Number (ITIN).

    Tax information for nonresidents employed in USA

    (1) Form SS-5 & W-7

    Social Security Number applications Sprintax

    One of the first things that you should do when you arrive in the US is apply for a Social Security Number (SSN) and you expect to work in the US.

    As mentioned above, you cannot work and earn income in the US without a TIN which the IRS can use to identify you. The SSN is the most common type of identifier if you are allowed to work on or off campus in the US.

    Simply put, you will not be able to work in the US as a nonresident student without a number the IRS can use to identify you for tax purposes.

    You can apply for a Social Security Card directly with your local SSA office by completing a Form SS-5. When you are submitting your SS-5 you will also need to bring along some original documentation showing your age, identity, immigration status, and entitlement to work in the US.

    Meanwhile, if you expect to receive taxable Scholarship, Fellowship or Grant Income or any other income that is not employment income, you most probably do not qualify for a Social Security Number (SSN), you must instead apply for an Individual Taxpayer Identification Number (ITIN). ITIN is only used for tax purposes and it is recognized only by the IRS and some state tax offices, but not by SSA.

    You can apply for your ITIN with the IRS directly by completing a W-7 form.

    W-7 Form Sprintax

    (2) W-4

    When you start working and earning income in the US, your employer will give you a W-4 form on your first day in a new job.

    The purpose of this form is to determine how much tax should be withheld from your wages, scholarship, or grant.

    It’s crucial that you complete your Form W-4 correctly. If your W-4 is not right, you may pay too little tax during the year and face a large balancing payment at the end of the tax year.

    Completing a W-4 form

    W-4 Form Sprintax

    In order to fill out your W-4 you will need to provide some personal details including your name, US address, TIN and marital status (tip: enter ‘single’ unless you’re married to a US citizen and filing jointly).

    It’s also important to keep in mind that, as a nonresident, you can only claim one allowance on your W-4 Form – unless you are a resident of Canada, Mexico, India or the Republic of Korea, in which you may case you may be able to claim additional allowances.

    Finally, before submitting your form, it’s always a good idea to double check the form to ensure each detail is correct. Once you are satisfied that your W-4 is accurate, you should print the form, sign and date it and give it to your employer.

    (3) W-8BEN

    W8 BEN Form Sprintax

    The US has lots of different tax treaties with many countries around the world.

    And the good news is that, as a nonresident international student in the US, you may be able to avail of a tax treaty in order to pay a reduced amount of US tax on income you earn from working at a university, your OPT, teaching or research and other types of payments.

    In fact, you may not have to pay any US tax at all, depending on the type of tax treaty!

    In order to claim a tax treaty benefit you must fill out a W-8 Form or 8233 form.

    There are a variety of W-8 forms and each is fairly complex. The W-8BEN is the most common type used by nonresident employees.

    Completing a W-8BEN

    In truth, a W-8 form is fairly complex and it can be tricky to complete.

    Though it requires the basics like name, country of origin and TIN, it also asks for the contacts from which it is receiving the income it reports. Often, a professional is consulted to assist in completing Part II the form, concerning tax treaty eligibility and details.

    For example, determining your tax treaty eligibility is really easy with Sprintax!

    All you have to do is enter your information into our short questionnaire. Our software will then instantly determine whether or not you’re permitted to claim a tax treaty.

    And, if you are entitled to claim a tax treaty, our system will automatically apply it to the calculations on your tax return. It’s that easy!

    Find out more here.

     (4) Form 8233

    Form 8233 Sprintax

    If you receive non-compensatory scholarship or fellowship income and personal services income (including compensatory scholarship or fellowship income) from your university and you want to claim a tax treaty benefit for both and pay a reduced amount of US tax you will need to complete a Form 8233 and submit it to your university.

    You must complete a separate Form 8233:

    • For each tax year (be sure to specify the tax year in the space provided above Part I of the form)
    • For each withholding agent (University)

    and

    • For each type of income

    In order to complete a Form 8233 you will need:

    • Personal information such as your name, TIN and address in your country of residence
    • Details of your US visa type including:
      – The date of your entry to the US (relating to your current non-immigrant status) and the date that your current non-immigrant status expires
      – You may also need to include a copy of your visa
    • A description of the services provided, and the total amount of income earned
    • The exact treaty (and article of the treaty) on which you are basing your claim for tax exemption
    • And more

    (5) 1040NR & 1040NR-EZ

    1040NR-EZ Form

    Every nonresident alien studying in the US is legally required to file a tax return and you do so either by filing a 1040NR or 1040NR-EZ form – depending on your circumstances.

    Which tax return should I file?

    Most nonresident international students will be required to file a 1040NR-EZ tax return.

    You should use 1040NR-EZ instead of Form 1040NR if each of the below sounds like you.

    • Your taxable income is less than $100,000.
    • Your only US source income was from wages, salaries, tips, refunds of state and local income taxes, scholarship or fellowship grants, and non-taxable interest or dividends. Note: If you had taxable interest or dividend income, you must use Form 1040NR.
    • The only taxes you owe are:
    • The tax from the Tax Table

    or

    • Unreported social security and Medicare tax from Form 4137 or 8919
    • You do not claim any tax credits
    • The only itemized deduction you can claim is for state and local income taxes. Note: Residents of India who were students or business apprentices may be able to take the standard deduction instead of the itemized deduction for state and local income taxes.
    • The only exclusion you can claim is the exclusion for scholarship and fellowship grants, and the only adjustment to income you can take is the student loan interest deduction
    • You do not claim a child or child care expenses tax credits
    • You cannot claim any deduction other than the student loan interest deduction and the itemized deduction for state and local income taxes (or, if a resident of India who was a student or business apprentice, the standard deduction)
    • You do not claim any dependents
    • You cannot be claimed as a dependent on another person’s US tax return (such as your parent’s return)
    • If you expatriated or terminated your US residency, or you are subject to the expatriation tax, you must use Form 1040NR if you are required to file that form

    US nonresident students tax questions answered

    In order to complete your 1040NR-EZ you will need…

    • Personal information
      Including your name, address and TIN
    • Details of your wages, salaries, tips, etc.
      Your employer will provide you with a Form W-2 (Wage and Tax Statement) by early February and you will find this document very useful when you are filing your end of year tax return.The form includes important details regarding your total gross earnings including wages, tips and taxable fringe benefits, and the Federal and State tax that is withheld.
    • Details of your scholarship and fellowship grants, if applicable
    • Details of treaty-exempt income
      If you are entitled to avail of tax treaty benefits, you should report all your income that is exempt on your Form 1040NR-EZ
    • Your signature!
      Don’t forget to sign your return. Form 1040NR-EZ is not considered a valid return unless you sign and date it.

    The deadline for filing a 1040NR-EZ is typically April 15.

    Who can help?

    Sprintax Important US tax information for nonresident students

    If you, like many other international students find US tax to be daunting, you may be wondering if anyone can help you complete your tax documents correctly and ensure your compliance with the IRS.

    The answer?

    Simply choose Sprintax!

    Sprintax is the only online self-prep tax software for nonresidents in the US. When you choose Sprintax, you can enjoy a stress-free service from start-to-finish. Plus, if you have any questions, our live chat team are on hand 24/7 to support you.

    When you create your account, the Sprintax software will assist you in preparing fully compliant 1040NR-EZ Federal and State tax returns. Sprintax will also enable you to receive your maximum legal tax refund.

    Find out more here

    Sprintax TDS

    Our Tax Determination Software (TDS) is designed specifically for educational institutions to ensure that nonresident students, scholars, and employees are taxed correctly and that the right amount of tax is withheld from earnings and reported to the IRS. You can easily apply for your SSN, establish your tax residency status and determine your tax treaty entitlement. Sprintax TDS can also be used to easily prepare tax forms such as the SS-5, W-8BEN, 8233 and W-4 and help students to secure their SSN or ITIN.

    Learn more about Sprintax TDS here

    Subscribe to the Sprintax Blog!

    US tax can be confusing. Especially for nonresidents!

    That’s why, if you’re an International Student or J-1 participant in the US, or you work in a University International Student Office, you should subscribe to the Sprintax blog.

    You’ll find tons of useful content for nonresidents. We cover tax, student life, acclimatizing to the US and much more.

    So what are you waiting for? Sign up today and never miss a thing!





  • The International Students Guide to US College Application Letters

    How to write the perfect US college application essay

    If you want to study in the US as an international student, you should probably start thinking about your college application letter.

    Wait, what is a US college application letter?

    In the US, it’s common for colleges and universities to request applicants to submit a personal essay or letter.

    Don’t worry if this is new to you – the Sprintax team is here to help you write an essay that’s guaranteed to get you a place in the US college of your dreams.

     

    But first, what is the aim of a US college application essay?

    Colleges want to find out more about who you are. Your essay should tell the university about you, and convince them that you’re the kind of person who they need at their college. These schools accept students who they believe will contribute something special.

    This might be a challenge, especially if English isn’t your first language, but it’s a positive thing because they’re giving you an opportunity to say something and make a statement about yourself. This is your chance to share your personality with them and impress them beyond your grades.

     

    How to write the perfect US college application essay

    What kind of essay will I be expected to write?

    This will depend on the colleges that you’re applying to, but we’re going to talk about the three most common types of college application essay; The Common Application, The Universal Application and the Individual Institution Application.

     

    1. The Common Application

    This system allows students to complete one application for multiple colleges. A student may send this single application to any college that is a Common Application member. There around 700 member colleges in the US.

    For the essay part of this application, you will choose one of five prompts. A prompt is a title or a topic that you must write about. Think carefully about each prompt. Write down ideas related to each one and decide which topic you believe will result in the most interesting and engaging essay.

    Consider your own personal skills and life experiences and how they relate to the topic. If you’re having trouble choosing, ask people who are close to you for advice, they may think of something that you have overlooked or forgotten about.

    1. The Universal Application

    The Universal application is not very common, in fact, there are currently only around 30 colleges currently accepting this form of application. Much like the Common Application, students only need to complete this application once for all participating colleges.

    For this application, you will be given an essay title and topic to write about.

    1. Individual Institution Application

    Some colleges, especially private colleges, request applicants to submit an application that is specific to their institution. This form of application may require you to answer a question or write an essay on why you would like to attend their college.

     

    What should I write about in my US college application essay?

    Once you’ve chosen a suitable topic you should do what is known in the US as ‘brainstorming’. This is where you take the time to come up with as many ideas as possible around a topic. Sit down somewhere quiet with a pen and paper, or your computer and see what you come up with. It doesn’t matter how silly an idea might seem, write it down anyway. This process is about coming up with as many ideas as you can.

    To get started, think about the following subjects and how they relate to your life. Write down a few sentences for each subject.

    • Sports, school clubs, after school activities.
    • Hobbies and interests (for example; music, art, sports, reading)
    • Vacation, travel and times you’ve been abroad
    • Work experience if you have any
    • People who are close to you like family and friends
    • Special occasions
    • Experiences and events in your life that had a lasting effect on who you are

     

    How do I write an introduction?

    Once you have made a decision about what you will discuss in your essay, you’ll need to write an introduction. The introduction is important because you need to grab the reader’s attention straight away. An exciting or meaningful opening sentence is very important as it will set the tone for your essay.

    Imagine that you are the individual on the admissions faculty. You are reading thousands of application essays every day. It’s important that your letter stands out. You want this person to think ‘yes, this is someone interesting and we would be lucky to have them in our college.’

    It’s recommended that you write the introduction last when you know exactly what you will cover in your essay. Don’t waste the introduction describing what you’re going to talk about. Use it as an opportunity to show them that you’re a unique and interesting person.

    How to write the perfect US college application essay

    Make sure your essay flows well

    Your essay should flow well, meaning it should be consistent and each paragraph should be in an order that makes sense to the reader.

    For example, if you’re writing about an event like ‘The first time I travelled to a new place without my parents’. You could have a paragraph for each of the following:

    • How your parents felt about your trip and the promises or compromises that you had to make with them in order for them to give you permission to go.
    • How did you plan or prepare for the trip? Did you need a visa? Flights? New clothes?
    • How did you pay for the trip? Did you spend pocket money? Save from an after school job?
    • What did the experience teach you? – how to save money, how to be organised, etc.
    • How did the experience improve your understanding of adult life, what skills did you gain from the experience, what happened when you went?

    There will be a limit on how many words you may use. Make sure you don’t go too far over or under the word count. It’s important that you read the guidelines carefully because it will show that you can follow instructions.

    Tell a story

    It’s a good idea to write the same story two or three different ways. Choose the most important points you want to get across and have a strong, clear idea of what you would like to say and write it in 3 different styles. You might find that one way is way more interesting or engaging than another.

    Don’t be afraid to write about yourself in an unflattering light

    Nobody’s perfect! In fact, sometimes it shows courage to write about a time when you failed, when you struggled or even a time when you were embarrassed. Just make sure that you show that you learned from the experience or how it made you stronger. Everyone has their flaws and everyone makes mistakes, the important part is showing that you’ve learned from it in some way.

    Writing a conclusion

    The end of your essay should leave a good impression on the reader. It should summarise what you learned from the experience and how it has made you the person you are today.

    Explain how your experience will help you succeed with the college course and how it has made you a valuable asset to the university.

    It’s a good idea to include a couple of sentences about what your plans for the future are. Do you have a specific career in mind? Is there anything you’re looking forward to learning during your time in university? How will getting into this college help you to achieve your life goals? This will show that you have thought about how you will use your degree after you finish college.

    This exercise is as much about being an interesting person as it is about being an interested person. And what we mean by that is, show some real enthusiasm for the course, the college and even your own hobbies.

    Editing and improving your essay

    No matter how great your essay is, you should always ask friends, family, even teachers to read it and give you feedback. You can use the advice of others to improve your essay and make it the very best it can be.

    It’s also not a good idea to rely on spellcheck and grammar checks that are built into the computer program you’re using. A human can often spot small errors and typos that the spellchecker may have missed. Your essay should be as perfect as possible when it comes to grammar and spelling.

    It is especially important to check if English isn’t your first language. Do you know someone who is particularly good at English or who has English as a first language? Ask them to take a look at what you’ve written and see if it can be improved. A well written, polished essay could be your ticket to studying at the university of your choice in the US.

    In summary, be sure to read the application guidelines carefully, brainstorm and think a lot about what you will write about, edit your essay and ask other people to check it. We hope this helps you write an excellent college application and best of luck from the Sprintax team!

    Subscribe to the Sprintax Blog!

    US tax can be confusing. Especially for nonresidents!

    That’s why, if you’re an International Student or J-1 participant in the US, or you work in a University International Student Office, you should subscribe to the Sprintax blog.

    You’ll find tons of useful content for nonresidents. We cover tax, student life, acclimatizing to the US and much more.

    So what are you waiting for? Sign up today and never miss a thing!





  • How to Prepare for 1042-S Season

    Student international office us university

     

    Preparing a 1042-S isn’t an easy task, and to make matters worse, filing incorrectly can lead to penalties, fines and unnecessary stress. But not to worry, today we will address some of the most common questions associated with filing a 1042-S;

    What is a 1042-S?

    How do I know what income to report?

    What deadlines should I be aware of when filing a 1042-S?

    Should I be aware of any changes in filing regulations since last year? 

     

    What is a 1042-S?

    Let’s start with the basics: what is a form 1042 and a 1042-S?

    Form 1042:      Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

    Form 1042-S:   Foreign Person’s U.S. Source Income Subject to Withholding

    These forms are IRS tax forms that deal specifically with payments from nonresident aliens and other foreign persons.

     

    How do I know if I should file a 1042-S?

    Does your school employ nonresident aliens? If the answer to this question is yes, then you are obliged to file a 1042-S form with the IRS for every single nonresident individual who receives payment of income from your institution. This ‘payment’ may include; scholarships, personal service income, and royalties for example.

    If your institution’s employees are non-US citizens, it’s your responsibility to file on their behalf. This might be a cafeteria worker or a college tutor for example. A copy of the Form 1042-S must also be sent to the nonresident alien individual.

    A Form 1042 summarises the information reported on a 1042-S which you issue to your students and employees. It reports the liability of the withholding agent on the tax they have withheld or should have withheld. You are informing the IRS of the total cumulative amount of payments which you have paid to a non-US person during the tax year.

     

     

    How do I determine if an income should be reported on a 1042-S?

    We’ve established that a form 1042-S allows us to report any payments you pay to a foreign person. However, it’s crucial for the payroll office to understand what kind of income should be reported on a 1042-S. If you have any concerns about this, don’t worry Sprintax is here to help you make sense of it all.

     

    What income should I report on a 1042-S?

    In order for income to be reportable on a 1042-S, it must have been earned in the US by a foreign person or it must be income exempt under tax treaty or other IRC article covering non-US person’s income.

    Do report: Payments like interest and dividends, payments for scholarships and grants, except payments for tuition to a degree candidate, rents and royalties and licensing fees if they were earned from sources inside the US.

    Don’t report: Payment for goods, inventory, equipment, raw materials etc. Money generated from these sources should not be reported when paid to a foreign person.

     

     

    When is the Form 1042-S due?

    A Form 1042-S must be filed with the IRS before 15 March of the next tax year. You also must provide a 1042-S copy to your payees by 31st of January after the year ending.

    Filers may request an automatic 30-day extension by filing Form 8809, Application for Extension of Time to File Information Returns, no later than 15 March of the next tax year. A second extension may be requested with Form 8809, but approval is not automatic.

     

    Furnishing a recipient (payee) copy

    Due date is 31st of January, of the year after the tax year of payment. The filer must provide their students directly with a copy of the form.

    All financial institutions (including investment funds) must file Forms 1042-S electronically through the IRS’s Filing Information Returns Electronically (FIRE) system, regardless of how many forms they file.

    Other entities that file 250 or more forms must file electronically as well. The IRS will confirm within five business days that the transmission was successful. Look to the 2018 IRS Publication 1187 for guidance on electronic filing.

     

    Getting an extension for a 1042-S

    Filers may request an automatic 30-day extension by filing a Form 8809: Application for Extension of Time to File Information Returns, no later than 15 March of the next tax year. A second extension may be requested but approval is not automatic.

    It is possible to request a third or fourth extension but unfortunately, the chances of receiving a response or approval for more than two extensions are slim to none.

     

    How is a 1042-S filed correctly?

    There are certain mandatory fields that you must fill in, in order to correctly file a 1042-S but it’s also important to note that you must assign each form a unique 10-digit numeric identifier number for each 1042-S that you prepare.

    If you have two separate 1042-S if you pay different types of income to a single payee – say for example you’re paying them interest and dividends – you will need to fill out two separate 1042-S forms because you have two different income types. Even though it’s the same payee, you need two separate identifiers. This unique identifier is required if you need to make an amendment to the Form 1042-S, otherwise would be impossible for the IRS to distinguish between forms and understand which form you are amending.

     

    Which fields are mandatory for a 1042-S?

    There are a number of fields that are mandatory on the form but which fields you fill in will often depend on the person whom you’re filing for and their own unique personal circumstances. TDS performs these checks and the population of the forms. Click here to get help from Sprintax TDS.

    Student international office us university

    Have there been any changes to the form for the year 2019?

    Yes, there have been some changes made to the 1042-S for 2018. These changes are as follows:

    • Boxes 7b and 10 have been updated with clarifying language

     

    • Boxes 9 and 11 have been switched and clarifying language has been updated

     

    • Limitation on Benefits (LOB) Treaty Category code for individuals (code 01) has been removed

     

    *Box 13j should be left blank for payments made to an individual who is claiming treaty benefits.

     

    • Box 13i now has its own row.

     

    *note: Format is YYYY/MM/DD

     

     

    Want help with preparation for filing?

    In order to transmit 1042-S informational text files electronically through Filing Information Returns Electronically (FIRE) system, you must have suitable software, a service provider, or an in-house programmer that will create the file in the proper format per IRS requirements and record layouts found in publication 1187.  Unfortunately, a scanned or PDF copy will not be accepted.

    Sprintax TDS is a software solution that creates for you the informational return in text format for filing through the IRS FIRE. You can use your own Transmitter Control Code (TCC) or you can choose Sprintax to be a transmitter for you.

    Sprintax TDS is here to assist you with the more complicated aspects of tax filing prep by simplifying nonresident taxes. From calculating tax withholding for non-resident international students, scholars, and professionals to determining residency for tax purposes, built-in tax treaties and, generating all the relevant tax forms you need. Sprintax TDS means compliant, stress-free tax returns.

     

    Connect with Sprintax today to schedule a free demo for your international office.

    Subscribe to the Sprintax Blog!

    US tax can be confusing. Especially for nonresidents!

    That’s why, if you’re an International Student or J-1 participant in the US, or you work in a University International Student Office, you should subscribe to the Sprintax blog.

    You’ll find tons of useful content for nonresidents. We cover tax, student life, acclimatizing to the US and much more.

    So what are you waiting for? Sign up today and never miss a thing!