DIFFERENCES BETWEEN NRA and RA FOR TAX PURPOSES

Nonresident Alien (NRA)

Resident Alien (RA)

Federal Tax Documents
and Filing Requirements

1. Generally files IRS Form 1040-NR. See IRS Publication 515 for filing requirements
2. May receive multiple federal tax documents depending on type of income received and whether tax treaty benefits were used

a) IRS Form W-2: Reports taxable wages subject to income tax withholding

b) IRS Form 1042-S:

i) Reports taxable wages received where tax treaty benefits were applied

ii) Reports taxable scholarship/fellowship income regardless of whether tax treaty benefits were applied

c) Does not receive IRS Form 1098-T since generally not eligible to claim higher education tax credits or deductions

 

1. Generally files some variation of IRS Form 1040. See IRS Publication 17 for filing information
2. May receive multiple federal tax documents

a) IRS Form W-2: Reports taxable wages subject to income tax withholding

b) IRS Form 1098-T: Reports payments for qualified expenses for purposes of claiming a higher education tax credit or deduction on the income tax return.

c) Individual will be required to self-report taxable scholarship or fellowship income. It is not reported on any federal tax document as taxable income.

Tax Filing Assistance

May purchase proprietary tax preparation software, employ a tax advisor, or use other resources available to a U.S. person for assistance in completing the U.S. income tax return.

Nonresident alien tax software cannot be used for a resident alien tax return. VITA volunteers are not available at the International Center to assist resident aliens.

Income Tax Withholding
on Scholarship and Fellowship

Income on a student account such as scholarships, fellowships, or fee waivers that are greater than the tuition and other required fees is considered taxable income. This taxable income is subject to federal and state income tax withholding and reporting. The tax withholding charge is posted on the student account.

Immigration status as an F-1 or J-1 student allows for a reduced rate of tax withholding. If the individual is eligible for tax treaty benefits, the tax rate of withholding is reduced to zero.

The taxable income is reported on IRS Form 1042-S.

Income on a student account such as scholarships, fellowships, or fee waivers that are greater than the tuition and other required fees is considered taxable income. This taxable income is NOT subject to federal and state income tax withholding and reporting.

The individual is expected to self-report the taxable income on their income tax return. The individual is responsible for making timely estimated tax payments directly to the taxing authorities.

No federal tax form is issued regarding the amount of taxable income.

Income Tax Withholding
on Wages

How an individual completes the federal withholding certificate, IRS Form W-4, is restricted. Individuals are not permitted to claim additional exemptions for their dependents with a few exceptions.

Individuals are permitted to complete the IRS Form W-4 claiming their dependents as additional exemptions.

Social Security and Medicare taxes on Wages

Nonresidents in F-1, J-1, M-1, and Q-1 immigration status may be exempt from these taxes on wages if the performance of services as an employee of Indiana University is consistent with their primary purpose for visiting the U.S.

Generally subject to these taxes unless the individual meets the student exception:

1. regularly attending and enrolled at an eligible educational institution, and performing service for that same institution
2. not employed in a “career” position eligible for benefits

Regularly attending and enrolled is defined as:

• Graduate: 4 credit hr Fall/Spring , 2 credit hr Summer , or Active Dissertation status with 1 hr G901 or dept equivalent
• Undergraduate: 6 credit hr Fall/Spring , 3 credit hr Summer

Tax Treaty Benefits

The U.S. and certain countries have entered into agreements (income tax treaties) which allow the individual to avoid double taxation (taxed in the U.S. and their tax residence country). The U.S. tax withholding rate can be reduced or completely eliminated by applying for these benefits.

Indiana University does not provide tax treaty benefits for individuals that are resident aliens for tax purposes. If the tax treaty contains a savings clause that allows a resident alien to continue to benefit from the treaty, the individual will need to attempt the claim of those benefits on their income tax return.