Navigating Tax Refunds for International Students in the US

As an international student in the United States on an F-1 visa, understanding the US tax system can seem daunting. However, it's essential to navigate this system correctly, as it can potentially lead to a tax refund. Many international students rely on part-time jobs or scholarships to make ends meet, and those can trigger tax filings. This article aims to provide a comprehensive guide to tax refunds for international students, covering everything from determining your residency status to filing the correct forms.

Understanding the Basics of US Taxes

The US tax system operates on a "pay-as-you-go" basis. This means that taxes may be automatically withheld from your paycheck, stipend, or financial aid, reducing your available income. Federal income tax is the tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities. It applies to all forms of a taxpayer’s income, such as employment earnings. When you file your annual tax return in April for the preceding year, you will calculate the exact amount of your tax liability for that calendar year based on your total income and other personal circumstances. The tax year runs from January 1 to December 31 of any given year. Your actual tax liability will be compared to the amount that you had paid so far. If you've overpaid, you are eligible for a tax refund.

Tax obligations may be imposed by federal, state, and even local governments. Many states will collect state income tax in addition to federal income tax. However, nine states don’t have any tax-filing requirements.

Determining Your Tax Residency Status

Generally, most international students and scholars who are on F, J, M, or Q visas are considered nonresidents for tax purposes. However, some can be considered ‘residents’ or ‘resident aliens’. This does not mean that the student is a resident for immigration or other purposes. It is important to file in the correct status. The guidelines below are general guidelines only. If you are still not certain, you should create a Sprintax account as described in our Sprintax page.

To determine your residency status, you need to consider the "substantial presence test." If you do not pass the substantial presence test you will be classified as a nonresident alien for tax purposes. This status is only a tax filing status and does not mean that you are a resident for immigration or other purposes.

Read also: Understanding Tuition Policies

Do International Students Need to File Taxes?

Yes. Every international student is required by law to file a tax return based on the conditions of their visa, but not everyone will have to pay taxes. More often than not, international students-especially those who received taxable income while working-filing a tax return will receive a tax refund for overpaid tax. Even if you only worked a part-time campus job or received a one-time grant, filing your taxes can help you recover money you didn’t need to pay. To be blunt, it’s the law.

Sources of Income for International Students

If you worked on campus, received Curricular Practical Training (CPT) or Optional Practical Training (OPT) wages, or got a scholarship that covered non-tuition costs (like room and board), you may have had taxes withheld. Scholarships exceeding the value of school costs (tuition, fees) are taxable income. Scholarships and Fellowship Grants are also taxable income when paid to nonresident aliens. Some foreign students are eligible for a direct write-off of that part of the scholarship or grant that was used to cover qualified educational expenses. Nonresidents are not entitled to claim educational tax credits. Citizens and residents who qualify for education tax credits, such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). Plan accordingly.

Yes - students with an F-1 visa that are on CPT will not be exempt from Federal Taxes.

Tax Treaties and International Students

The United States has income tax treaties with 65 countries. International students can also benefit from a tax treaty with their home country. Income taxes on certain items of income they receive from sources within the states. In certain cases, F-1 students may be able to claim a tax treaty that can reduce or fully exempt their income from taxes. A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty.

FICA Tax Exemption

The Internal Revenue Code grants an exemption from social security and Medicare taxes to nonimmigrant students in F-1 status. Most F-1 students are not required to pay FICA tax. If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. You can apply for your FICA refund directly with the IRS. Occasionally off-campus employers of international students on OPT/CPT are unfamiliar with this IRC section and withhold Social Security/Medicare tax in error. You must contact the employer who withheld the Social Security/Medicare tax for assistance. If this request is successful, you may stop here.

Read also: Comprehensive Guide to BankMobile

Required Tax Forms for International Students

Filing the correct tax forms is crucial for international students. Here's a breakdown of some of the key forms you might need:

Form W-2 (Wage and Tax Statement): If you had more than one employer you should get a W-2 from each employer. You’ll need your W2 to file your tax return and your employer should give it to you at the end of January. This is an IRS tax form used to report wages paid to employees and the taxes withheld. It is issued by the end of January for the previous year. YES! employer you should have received Form W-2, Wage and Tax Statement that summarizes your previous year’s income and taxes withheld. W-2 documents are sent by the end of January. If you have worked for compensation and not yet received your W-2, please contact your Human Resources department.
Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding): Note: Only Nonresident Aliens receive this form. If your tax status changes to a Resident Alien you will not get a 1042-S. This form reports miscellaneous income.
Form 1098-T (Tuition Statement): Many international students are unsure if they need Form 1098-T (Tuition Statement) when filing.
Form 1040-NR (U.S. Nonresident Alien Income Tax Return): Nonresidents must use Form 1040-NR to request a refund.
Form 8843 (Statement for Exempt Individuals and Individuals with a Medical Condition): You must file a form 8843 (Statement for Exempt Individuals and Individuals with a Medical Condition) with the IRS before the deadline.
Form 1040(s): It is the main form when filing taxes and reporting income. NOTE: This is not a complete list of tax forms.

How to File for a Tax Refund

Determine Your Residence Status: The first step is to determine whether you should be taxed as a resident or a nonresident alien for a specific year.
Gather Necessary Documents: The first thing you will need is your W-2 form, officially known as a “Wage and Tax Statement”.
Determine if You Need an ITIN: Determine whether you need an Individual Taxpayer Identification Number (ITIN). If you do not have an ITIN, Sprintax still can help you!
File Your Tax Return: You can file your tax return yourself directly with the IRS. If you are not able to file your federal income tax return by the deadline, you may be able to get an automatic 6-month extension.

Utilizing Tax Preparation Software

Taxes can be confusing, especially for those unfamiliar with the US system. Fortunately, resources like Sprintax are available to assist international students. Sprintax can help you determine if you are due a tax refund. Sprintax has an online tool specifically designed for international students that you prepare your Federal and State tax return in less than 20 minutes! The Office of Global Services has arranged access to Sprintax for you. The code can be used for Federal taxes. OGS also encourages students to utilize resources on Sprintax’s blog. The code to use Sprintax to prepare your Federal taxes will be sent out to current F-1 students in February.

Sprintax supports e-filing of nonresident federal tax returns. After you finish your federal return, Sprintax will inform you if you need to complete a state tax return. If so, you will have the option to use Sprintax for an additional fee. Depending on your circumstances, you may be able to E-file your Federal tax return. However, this will depend on certain eligibility criteria.

Common Deductions and Credits

Several deductions and credits can reduce your taxable income. The State and Local Taxes (SALT) deduction decreases taxable income by the amount paid to state and local tax government during the tax year. There is a cap on SALT deductions at $10,000, which may not affect the deduction most of the students and scholars are eligible for. Nonresident aliens cannot claim the standard deduction.

What if You Filed the Wrong Tax Return?

The IRS acknowledges that tax code is complex, and that people can make mistakes with their documents. I filed the wrong F-1 tax return last year.

Seeking Professional Assistance

Another way to make sure your taxes are completed correctly is to have an expert prepare them for you. If you have questions about any of the above or other tax-related questions, it will be important for you to contact a qualified tax professional, like those at Sprintax.

FICA Tax Refund Process

If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. You can apply for your FICA refund directly with the IRS.

To apply for a FICA tax refund, you will need:

A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or you authorized your employer to claim.
File Form 843 (with attachments) with the IRS office where your employer’s Forms 941 returns were filed.

This refund application is not a quick process and may take several months.

Disclaimer

DISCLAIMER: The Office of Global Services and Northeastern are NOT permitted to assist any student/scholar with any IRS tax form preparation or tax related questions. The information provided is intended for your benefit. Some students and scholars must also file a state and/or municipal (local) tax form. Sprintax will help determine your State residence status. The information on the Office of Global Services webpage is provided as guidance and is not intended to be legal tax advice. The Office of Global Services staff are not tax specialists and are NOT qualified to answer international students/scholars questions regarding taxes.

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