U.S. Federal Income Tax Information

During 1993 the Internal Revenue Service (IRS) clarified instructions and procedures resulting from the regulations finalized in April 1992 that defined resident and nonresident aliens for tax purposes. Two new IRS forms are available to accompany a 1040NR filed by a nonresident alien.

--Form 8840, "Closer Connection Exception Statement," should accompany 1040NRs submitted by non-immigrants who qualify as tax residents, but wish to remain nonresidents.

--Form 8843, "Statement for Exempt Individuals…" verifies F, J, and M visa holders' exemption from tax resident status. The form must be submitted by ALL nonresident aliens present in the U.S., whether or not they had U.S.-source income for 2001.

Because this memorandum cannot address all the tax issues that might affect you, we strongly urge you to obtain and review carefully Internal Revenue Service publication 519, "U.S. Tax Guide for Aliens", catalogue number 15023T. Please see paragraph 10 on how to obtain IRS Forms.

  1. WHO MUST FILE: All nonresident alien students and trainees who were in the U.S. under an F, J, M, or Q visa now need to file a form 1040NR or 1040NREZ with form 8843 ONLY IF they received U.S. source income. Anyone with NO U.S. source income does not need to file a tax return on form 1040NR or 1040NREZ. However, they must still file form 8843 to document their status as a nonresident alien who is exempt from counting days toward the substantial presence.
  2. NONRESIDENT ALIEN OR RESIDENT ALIEN: The following can assist you in determining your status (Nonresident Alien or Resident Alien) and what form to file with Internal Revenue Service.
  3. NONRESIDENT ALIEN (File Form 1040NR or 1040NR-EZ and Form 8843 with IRS): If you have been in the U.S. less than 5 years, you are considered a nonresident alien for tax purposes and considered an "exempt" individual from the "Substantial Presence Test" if you are a student on an 'F' or 'J' visa, and who complies with the requirements of the visa. Also included as nonresident aliens are immediate family members (husband or wife and unmarried children under the age of 21) of 'F' or 'J' visa holders.

    As an "exempt" individual, you do not need to count days present in the U.S. while on an 'F' or 'J' visa status when calculating the 183-day rule. As an "exempt" individual, you qualify to be classified as a nonresident alien for tax purposes.

    Note: If you have been in the U.S. for 5 years or more and do not intend to file a claim for exemption with IRS, you cannot file as a nonresident alien.

  4. HOW TO REQUEST NONRESIDENT STATUS: Individuals who wish to file as a nonresident alien must file Forms 1040NR or 1040NR-EZ and 8843 with IRS every year. The IRS will certify and return Form 8843 to you for your records. Keep the certified form along with a photocopy of your 1040NR or 1040NR-EZ as proof that you completed the tax filing requirements for the year.

    Please Note: If you have been a student on an 'F' or 'J' visa status for 5 years or more, you are considered a resident alien for tax purposes. However, you may wish to continue to be considered a nonresident alien for tax purposes. To do so you must complete and file Form 8840, "Closer Connection Exception Statement," with Form 1040NR or Form 1040NR-EZ.

    Based on the information contained in your Form 8840, the IRS District Director will determine whether or not you qualify to remain a nonresident alien for tax purposes. You must demonstrate to the satisfaction of the IRS District Director that: 1) for the entire year you maintained a tax home in a foreign country and closer connection to a foreign country than to the U.S., 2) you have complied with the terms of your visa status, and 3) you do not intend to remain permanently in the United States.

    Individuals who have taken steps toward permanent resident in the United States cannot establish a closer connection to a foreign country than the U.S.

    Should you not file a Form 8840 or the IRS District Director does not approve your request to remain a nonresident alien, you must file as a resident alien.

  5. WHERE AND WHEN TO FILE YOUR 1040NR OR 1040NR-EZ AND FORM 8840:
  6. Attach your Form 8843 to your completed 1040NR or 1040NR-EZ form and mail them by

    April 15, 2002 to:

    Internal Revenue Service Center

    Philadelphia, Pennsylvania 19255

  7. NONRESIDENT'S TAXABLE INCOME: A nonresident alien usually is subject to U.S. income tax only on income from sources within the U.S. IRS requires a nonresident alien to separate his/her income into 2 categories:
  1. Income that is "effectively connected" with a U.S. trade or business. This income is subject to the regular tax rates that apply to U.S. residents and includes:
  2. --wages
    --partnership
    --other earned income for services performed in the U.S.
  3. Income that is "U.S. source". This is all other income received from U.S. sources such as interest, dividends, and rent. This income is subject to a 30 percent flat tax. Note: Interest income received by nonresident aliens on deposits, not connected with your U.S. trade or business, in a U.S. banking institution is not subject to U.S. income tax.
  1. SCHOLARSHIPS: If you are receiving a scholarship or fellowship grant from your university or another source, we strongly suggest that you meet with your Foreign Student Advisor or the office from which you receive your scholarship to determine what portion, if any, of the scholarship is subject to taxation. You will also need to know what documentation you will need when excluding any amount of your scholarship from your gross income.

Any portion of a scholarship that you receive for services you provide such as teaching, research or other services such as part-time employment is to be included in your gross income and is subject to taxation.

REMINDER: If you were sponsored by the Hariri Foundation for your studies in the United States you received an interest-free loan. You did not receive a scholarship, grant, or fellowship. Your interest-free loan is not taxable.

  1. RESIDENT ALIEN: Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.s. tax and must be reported on their U.S. tax return. Income of resident aliens is subject to the tax rates that apply to U.S. citizens. Complete and file with IRS by April 15, 2002, either Form 1040EZ, Form 1040A, or Form 1040. (Please see return form instructions to determine which form to file.)

  2. DUAL STATUS: It is possible that your tax status changed during the tax year. If you had dual status (both nonresident alien and resident alien) during 2001, you must determine the period of time you were a nonresident alien and file Form 1040NR or 1040NR-EZ for that period of time. In addition, you must also file a 1040 form for the period of 2000 during which you were a resident alien.

  3. STATE INCOME TAX: As income taxes vary from state to state, you should obtain state tax information from the state in which you reside to determine whether you must withhold and report income tax for that state.

  4. IRS PUBLICATIONS AND FORMS: You can request IRS Publication 519 and other IRS forms from the Office of IRS Forms and Publications at 1-800-829-3676 or by writing to the IRS Forms Distribution Center for your state. Please see attached page, "How to Get IRS Forms and Publications". Or visit the IRS Website that provides income tax forms, publications, and tax regulations. Tax forms retrieved from the website maybe printed, filled out, and submitted. The website also provides the 1040NR and instruction, the "U.S. Tax Guide for Aliens", "Statement for Exempt Individuals and Individuals with a Medical Condition" (Form 8843), and "U.S. Tax Treaties". The address for the forms and publications is:

  5. http://www.irs.ustreas.gov/prod/forms_pubs/index.html

  6. CERTIFICATE OF COMPLIANCE (THE "SAILING PERMIT"): Before January 28, 1991, ALL student visa (F and J) holders who had earned money during practical training and were traveling outside the U.S. had to have a Certificate of Compliance that verified that you had paid all taxes up to the date you leave. As of January 28, 1991, holders of F-1, F-2, H-3, H-4, J-1, J-2, M-1, and M-2 visas are exempt from the "sailing permit" requirements if they had NO U.S.-source income other than allowances for payments in kind to cover study expenses (including travel, maintenance, and tuition), or wages from authorized work on- or off-campus (including practical training). If a sailing permit is required, the IRS recommends obtaining it from the District Director having jurisdiction over the place of employment, no less than 14 and no more than 30 days before departure.