General Guidelines of U.S.

1
General Guidelines of U.S. Hawaii Taxes For
Nonresident Aliens
General Tax Structure 1. Everyone in the
United States (including foreigners) must report
income and pay taxes to the U.S. Federal
Government Tax Agency called the Internal Revenue
Service (IRS). 2. Unlike many countries, in
the U.S., it is the individuals responsibility
to report income and pay taxes.
2
Steps in Tax Compliance

• 1. Obtain a social security number (SSN) (Form
  SS-5)or individual taxpayer identification number
  (ITIN)(Form W-7).
• 2. Determine your tax residency status
• 3. Determine sources of income and proper tax
  forms
• 4. Determine if you are eligible for treaty
  benefits
• 5. Completing the appropriate forms for the year

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Step 2 Tax Residency Status of Individual

• U.S. Taxation System for people from foreign
  countries
• 1. Nonresident Alien 2. Resident
  Alien
• (U.S. source income) (worldwide
  income)
• Nonresident Aliens do not pay tax on foreign
  source income.
• State of Hawaii Taxation System for foreigners
• 1. Nonresident (200 or 2. Resident
  (more than 200 day
• less days in the year) in the
  year)

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Step 2 (Continue)

• A. Resident Alien for federal (U.S.) purposes
  if
• 1. You have a green card (alien
  registration card)
• 2. You are married to U.S. citizen or
  resident alien
• 3. On a J-1 Status as a teacher or
  researcher, and present in the United States for
  two years or more in the last six years.
  (Note Any part of a calendar year in which the
  person was present counts as a full year.
  Therefore, if you arrived on December 31, you
  have stayed one year).
• 4. You have passed Substantial Presence
  Test (see attachment 1).

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Step 2 (Continue)

• A. Nonresident Alien for federal (U.S.) purposes
  if
• 1. You are on J-1 status and have been in
  the U.S. (any of the 50 States) for less than
  two years in the last six years.
• See flow chart (attachment 2). Apply
  substantial presence test (SPT) if necessary.

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Step 3 Determine Source of Income Proper Tax
Forms

• Resident Alien Tax on worldwide income, from
  all sources.
• Nonresident Alien Tax on income effectively
  connected with U.S. trade or business. Except
  for interest income from Bank, investment income
  (I.e. interest, dividends, capital gains, rental
  income) are separately reported on a different
  section of the tax return.

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Step 3 (Continue)

• Upon Arrival at U.H.
• 1. For postdoctoral fellow receiving
  stipends from the University, fill in Form WH-1.
  If tax treaty is used to exempt taxes from
  stipends, then prepare form W8-Ben.
• 2. For J-1 receiving salary from the
  University, fill in Form W-4 and HW-4. Claimed
  only single status and 1 exemption on W-4 unless
  tax treaty is used. If tax treaty is used,
  prepare Form 8233.

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Step 3 (Continue)

• When a year has past, file year end tax forms
• No Income- File a fully completed IRS Form 8843.
  (see attachment)
• Have Income
• 1. 1040NR-EZ and form 8843 if
• A. Scholar has no dependents
• B. Cannot be claimed as a dependent
  on someone elses U.S. tax return.
• C. Under age 65
• D. Has only wages / salaries / tips
  / scholarship / fellowships / or tax refund from
  previous year. (continue)

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Step 3 (Continue)

• 1. 1040NR-EZ and form 8843 if
• E. Taxable income is less than
  50,000
• F. Unable to claim any tax credit.
• G. If married (from Canada, Japan,
  Mexico, or Republic of India), cannot claim
  spousal exemption.
• 2. 1040NR and form 8843 if
• A. Want to claim spouse exemption
  if you are from Canada, Japan, Mexico or Republic
  of India.
• B. Have investment income (I.e.
  dividends, capital gain, rental income etc.)
• C. Have high charitable
  contributions.
• D. Have taxable income more than
  50,000.

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Step 4 Determine if you are eligible for tax
treaty benefits

• If there tax treaty benefits, it is in your best
  interest to take advantage and pay less taxes.
• See IRS Publication 901 on website
  (http//www.irs.ustreas.gov/prod/forms_pubs/index.
  html). Or from IRS office locally. See also
  handout (Tax Information for Monthly J-1 Scholar
  Orientation)
• For easy reading of tax treaties, retrieve from
  http//www.windstar-tech.com

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Step 5 Completing the Appropriate Forms for
the year

• Before completing the year end forms
• 1. Wait for documents from the University
  (I.e. Form W-2 if you are on salary, Form 1042-S
  if you are being paid stipends)
• 2. Wait for other pertinent documents from
  other sources. (For example, banks etc)
• Decide which tax form to file (see Step 3) and
  file by deadline (April 15 if you owe taxes, June
  15 if you have no U.S. source income).

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University Responsibilities

• The University must comply with federal and State
  Tax laws with regards to withholding and
  reporting.
• The University is responsible for informing you
  of your tax obligations.
• The University will send out W-2 tax statements
  to employees by end of January and form 1042-S to
  fellowship recipients by March 15.
• For legal reasons, the University cannot provide
  personal tax assistance or advice.

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Tax workshops and tax return preparation
assistance

• The Office of International Education will
  arrange two workshops in March to assist you.
  One on federal taxes and the other on State
  taxes. Date and place to be announced.
• Also can seek assistance from Internal Revenue
  Service or State Tax Department, as well as tax
  preparation service companies such as H R
  Block, or Pendleton or with a certified public
  accountant.