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Many international students need help with common misconceptions and face unique challenges when filing U.S. taxes. Whether determining residency status for tax purposes or understanding the forms to complete, the process can be overwhelming. These challenges are compounded by the myths surrounding tax returns for international students – leading to confusion and potential non-compliance.
In this blog we will introduce valuable resources to help you understand taxes in the U.S. One such resource is Sprintax, a renowned company that simplifies the tax filing process for international students by providing expert knowledge and tailored services.
Understanding Your Tax Obligations in the U.S.
The U.S. tax system operates on a universal principle that you have certain tax filing responsibilities if you reside within its borders, regardless of your citizenship. According to Sprintax, a key point to note is that even if you did not earn any income while in the U.S., as long as you were physically present at any time from January 1st to December 31st of the previous year, you are required to file taxes.
International students typically enter the U.S. on various visas, such as F-1 (academic students), J-1 (exchange visitors), or M-1 (vocational students). Holders of these visa types are required to fulfill U.S. tax obligations. Your tax filing requirements are dictated not just by your income but also by your visa status and the duration of your stay in the U.S.
Types of Taxes: Federal, State, and Local
Federal Taxes
The most significant tax obligation is the federal tax. If you earned any taxable income from U.S. sources, you are required to file a federal tax return with the IRS. Taxable income may include income from employment, scholarships, grants, or stipends.
State and Local Taxes
In addition to federal taxes, you may also need to file state and possibly local tax returns, depending on where you lived and worked in the U.S. Each state has its own tax system, and some cities or localities levy additional taxes.
Don’t waste valuable time you could be studying on researching tax law! It’s best to work with a tax professional to determine if you need to file any state and/or local taxes.
Determining Your Tax Status: Resident or Non-Resident for Tax Purposes
One of the initial steps in filing your U.S. taxes as an international student is to determine your tax residency status. Your tax status significantly affects how you file your taxes, the forms you need to use, and the tax rules that apply to you.
The Substantial Presence Test can help you determine if your tax residency status should be non-resident or resident. Most international students and scholars on F, J, M, or Q visas are considered non-residents for tax purposes. Non-residents file their tax returns using Form 1040NR or 1040NR-EZ.
It’s essential to correctly determine your tax status as it affects your tax liabilities, taxable income, and available deductions and credits. So be sure to reach to tax professionals like the ones at Sprintax for help.
Required Documentation and Forms
For international students in the U.S., preparing to file your tax returns involves gathering your documents. These documents are essential for accurately reporting your income, determining your tax residency status, and ensuring compliance with U.S. tax laws. Below are the most common documents you may need to get started.
Required Documents for Tax Filing
There may be other forms needed, so be sure to talk to a tax professional.
Essential Key Tax Forms for International Students
Having all these documents well before the tax filing deadline will make the entire process smoother and help ensure accuracy in your tax filings.
Step-by-Step Guide to Filing Your Taxes
Now that we’ve covered what documentation you need, it’s time to file! So, how does it work?
Various companies and tools are available that help millions of individuals file every year. Below are some resources commonly used by international students and scholars.
Using Tax Software to File
Sprintax: A user-friendly tax software specifically designed for international students and scholars. It guides users through the process, ensuring compliance with U.S. tax laws and maximizing potential refunds. Sprintax can assist with determining tax residency status, handling necessary forms (like 1040NR), and applying for any applicable tax treaty benefits.
IRS Free File: Free tax preparation software for individuals whose income falls below a certain threshold. However, it’s important to note that most Free File options are designed for U.S. residents and may not be suitable for non-resident tax filings.
Additional Tax Filing Resources
University Resources: Many universities provide tax resources for their international students. This can include informational sessions, workshops, or one-on-one guidance. Your university’s international student office is a good starting point to find out what resources are available.
Volunteer Income Tax Assistance (VITA) Program: The VITA program offers free tax help to people who generally make $60,000 or less, persons with disabilities, and limited English-speaking taxpayers. While VITA primarily focuses on U.S. residents, some locations have volunteers trained in non-resident tax issues and can be an invaluable resource for international students.
Sprintax Webinars: Each year, Sprintax hosts several free webinars that explain the annual tax filing process for international students and scholars.
Common Mistakes to Avoid in Tax Filing for International Students
Filing taxes can be a complex process, and naturally, it’s easy to make mistakes. However, being aware of some of the common errors and taking steps to avoid them can save a lot of time and trouble!
Here are some of the most common mistakes to watch out for.
Frequent Errors in Tax Filing for International Students
Missing the Filing Deadline
The deadline for filing annual tax returns in the U.S. is always in April. In 2024, the annual tax return deadline is April 18. If you miss the deadline, you are subject to late-filing penalties.
Incorrect Tax Status
One of the most common errors is misidentifying your tax status as a resident or non-resident. This mistake can lead to using the wrong tax forms and misunderstanding your tax obligations.
Missing or Incorrect Information
Failing to include all necessary documents or providing incorrect information can lead to processing delays or incorrect tax calculations. This includes inaccuracies in personal information, income reported, or missing forms like W-2 or 1042-S.
Not Reporting All Sources of Income
All U.S. source income must be reported, including wages, scholarships, and stipends. Failure to report any source of income can result in penalties.
Overlooking Tax Treaty Benefits
If your home country has a tax treaty with the U.S., you might be eligible for certain exemptions or reduced rates. Not taking advantage of these benefits can mean missing out on potential savings.
Incorrectly Claiming Deductions or Credits
For tax purposes, non-resident aliens are often limited in the deductions and credits they can claim. Claiming ineligible deductions or credits is a common error.
What happens if I don’t file taxes as an international student?
As an international student, complying with U.S. tax laws is part of maintaining your legal status in the country. Inaccurate or late filing can have negative implications on your visa status and even impact your ability to obtain a U.S. green card if you decide to reside and work in the country permanently.
What International Students Should Do After Filing Taxes
Once you’ve navigated the process of filing your tax return in the U.S., be sure to celebrate! But there are also a few important steps to take to ensure everything is in order. From keeping records to dealing with the IRS, here’s what you should do after filing your taxes.
Post-Filing Steps
Keep Copies of Your Tax Return
Always retain a copy of your filed tax return and all accompanying documents for your records. It’s recommended to keep these documents for at least three years. They may be needed for future reference, especially if you apply for a visa renewal or a change in immigration status.
Tracking Your Refund
If you are expecting a refund, you can track its status using the IRS’s “Where’s My Refund?” tool. Refunds typically take about 21 days to process if you filed electronically and longer if you mailed your return.
Dealing with IRS Notices
Understanding IRS Notices
If the IRS needs more information or there is an issue with your return, they will contact you by mail. It’s important to read any notice carefully and understand what is being requested.
How to Respond
If you receive a notice, respond by the deadline given. Include any requested information and a copy of the notice in your correspondence. If you’re unsure about how to respond, seek assistance from a tax professional.
Maintain Communication Records
Keep a copy of any correspondence with the IRS and notes on any phone conversations, including the date and the name of the IRS representative.
Avoiding Tax Scams as an International Student
Recognizing Scams
Be aware that scammers often impersonate the IRS. Remember, the IRS will never initiate contact with taxpayers by email, text messages, social media channels, or phone calls to request personal or financial information.
IRS Communication
The IRS usually communicates through regular mail. If you receive an unexpected call or message claiming to be from the IRS, be very cautious. Do not give out personal information and verify any contact through official channels.
Report Suspicious Contacts
If you suspect a contact to be fraudulent, report it to your international office at school, the Treasury Inspector General for Tax Administration (TIGTA), and the Federal Trade Commission (FTC) using the “IRS Impersonation Scam Reporting” form.
Navigating Tax Compliance as an International Student
Understanding and adhering to U.S. tax laws is not just a legal requirement; it’s an essential part of your journey in the U.S., ensuring that you remain in good standing with both the IRS and immigration authorities.
Starting the tax filing process early is key. This gives you ample time to gather the necessary documentation, understand your tax obligations, and seek help if needed. By planning ahead, you can avoid common mistakes and ensure a smooth filing process.
But always remember that you’re not alone in this process. There are numerous resources available to help you navigate this complex landscape!
We at Lewerglobal understand the unique challenges faced by international students and scholars. That’s why we partner with Sprintax, a service specializing in U.S. tax preparation for non-residents. Sprintax offers reliable, easy-to-understand, and tailored services to make sure that your tax filing is timely, compliant, and stress-free.
To learn more about how Sprintax can assist you and to register for an upcoming free webinar, visit Lewerglobal’s Sprintax page. These webinars are a great opportunity to gain insights into the tax filing process and have your questions answered by experts.
You can navigate this process confidently and successfully with the right information and resources!