Why do I care if I'm a nonresident alien or a resident alien?
A nonresident alien is taxed on U.S. source income only--not worldwide income. Generally, a nonresident alien is eligible for only one personal exemption and cannot take the standard deduction on his/her tax return. A resident alien is taxed in the same manner as a U.S. citizen. Do I need a U.S. Tax Identification Number?
YES. Life in the U.S. is very complicated without a tax ID number. If you are on an F-1, H-1, J-1 or M-1 visa, you are eligible for a social security number and should obtain one immediately. All other foreign nationals (including spouses and children) should obtain an individual taxpayer identification number by filing IRS Form W-7 with original documentation described in the instructions. You can get a W-7 by calling IRS or printing it from IRS's web page. Why is the number necessary?
The U.S. taxing authorities (IRS) will not accept a tax return that lacks a number and most foreign students and scholars are required to file a return. Moreover, your administrative life in the U.S. will be far easier once you've obtained this number. NOTE: There are two types of numbers: social security numbers and ITIN's (Individual Taxpayer Identification Numbers). Should I obtain a social security number or an ITIN?
You should obtain a social security number if you have a U.S. alien registration card ("green card") OR you have entered the U.S. on an F-1, J-1, H-1 or M-1 visa; otherwise you should obtain an ITIN. NOTE: spouses and dependent children should also obtain an ITIN.
How do I obtain a social security number?
Complete form SS-4 that is issued by the IRS. How do I obtain an ITIN?
Complete IRS Form W-7. This form can be obtained directly from IRS's Website: irs.ustreas.gov
. Be sure to read the instructions carefully; IRS requires original or certified copies of documents that substantiate the information on W-7. Will I be subject to U.S. social security taxes?
Nonresident aliens on F-1, J-1 or M-1 visas are exempt from U.S. social security taxes.
For other individuals, the exemption depends upon the type of payment and/or student status. Contact the Payroll Office if you need additional information. Will Colgate withhold federal and state income taxes on my payments?
There are no simple answers. Colgate must withhold taxes on all payments to nonresident aliens unless the payment is exempt under the Internal Revenue Code, a tax treaty, or as foreign source income. Types of Payments
How do I know if I qualify for treaty exemption?
- Wages: Colgate withholds federal and state taxes using graduated rates.
- Tuition Fellowships: No withholding.
- Other Fellowship Support (e.g., room, board, stipends, living allowances, travel, prizes, awards, emergency funds, etc.): Colgate withholds federal taxes at 14%. New York State does not provide a mechanism for withholding on non-wage payments; therefore you must evaluate whether to make quarterly estimated tax payments to cover the state liability.
- Fee/Honorarium Royalty: Colgate withholds federal income taxes at 30%. New York State does not have a mechanism for withholding on these non-wage payments.
- Reimbursed Business Expenses for Employees/Short Term Visitors: No withholding.
In order to qualify for treaty exemption, you must be a citizen or a permanent resident (generally a noncitizen who files a resident income tax return) of the "treaty country" and the type of payment must be exempt under that specific treaty. In addition, Colgate requires a U.S. federal identification number, evidence of nonresident alien status (i.e., the substantial presence test), evidence of proper work authorization (i.e., visa) and a properly completed IRS "treaty exemption form" (i.e.. Form 1001 for fellowships and royalties; Form 8233 for wages, fees, honoraria). Information on Tax Treaties is available from IRS (Pub.901). Note: Although Colgate only grants treaty exemption to nonresident aliens, some treaties have "tie breaker rules." If a foreign national feels he/she qualifies for treaty exemption in spite of the fact that Colgate withheld taxes, the individual can file IRS Form 8833 with his tax return and certify to the facts that merit the "treaty based return position." Should I file a tax return if I receive no U.S. income?
If you are a nonresident alien and have no U.S. source income, IRS now indicates that you are not required to file an income tax return BUT you must file with IRS form 8843 disclosing information about your nonresident alien status. Resident aliens are taxed on their worldwide income and therefore must file a U.S. income tax return if they have income from any sources. Should I file a tax return if I received U.S. income exempt from taxation under a Treaty?
You should file a federal and New York return. Should I file a tax return if I received U.S. income but taxes were withheld on this income?
You should file a federal and a New York State tax return to be sure you comply with tax laws, to be sure you fully pay your actual tax liability, and to be sure you receive any tax refund that is properly yours. Note: The Internal Revenue Code establishes the rate of withholding but the withholding rate does not necessarily correspond with a taxpayer's actual year-end tax liability. If Colgate does not withhold taxes to cover my liability, how should I pay these taxes?
In order to avoid penalties, you should pay these taxes quarterly (April 15th, June 15th, September 15th and January 15th). You can obtain worksheets from the IRS and New York State to help you calculate your quarterly payment. IRS and New York State also provide tax vouchers that should be remitted with the quarterly payment. Will Colgate report my income to the IRS?
Payments to nonresident aliens are reported to both you and the IRS on Form 1042S or W-2 --but not on 1099. The W-2 is issued by January 31st; the 1042S by March 15th. Payments to resident aliens are reported on W-2 or 1099--not on 1042S. What is a 1042S?
The 1042S reports calendar year income to foreign nationals who are nonresident aliens and to the IRS. Effective 2001, we are no longer required to report fellowship support used for tuition or mandatory fees on a 1042S. Colgate is required to mail the 1042S to you by March 15.
CAUTION: Wages are reported on a W-2, not a 1042S. Exception: wages that are exempt from U.S. taxes under a treaty are reported on a 1042S. An individual might receive both a W-2 and one or more 1042S forms. If a foreign national is a resident alien for tax purposes, we generally don’t issue a 1042S. A resident alien is one who has a green card OR meets the substantial presence test.
Will Colgate report payments to my home country?
Colgate does not report payments to the home country but it appears that IRS reports income that is exempt under a treaty to the home country.
Where can I find information about U.S. taxation?
Web sites: 1040.com
(includes federal and state information) irs.gov/formspubs/index.html
Toll-Free Telephone Numbers:
Federal Tax Issues: 1-800-829-3676 (forms and publications) or 1-800-829-1040 (advice)
New York State Tax Issues (forms, publications and advice):1-800-225-5829
IRS Publications (available on Web and by Phone): #505 Tax Withholding/Estimated Tax; #508 Educational Expenses; #513 Tax Info. for Visitors to the U.S; #515 Withholding of Tax on Nonresident Aliens; #519 U.S. Tax Guide for Aliens; #520 Scholarships/Fellowships; #597 Canada Tax Treaty; #901 Tax Treaties; #970 Education