I am currently an international student (with an F-1 visa) at a US university for my master degree program. I came to the US in August 2007 and will graduate in June 2008. Before I came here, I worked with a US company's overseas office for a couple of years and the company promised to sponsor my study in the US in the consideration that I will work with the New York office of the company for some years after I graduate. Due to some reasons, the payment of the sponsorship was delayed and now the company is going to wire the funds to me. My questions is whether I need to pay federal tax and state tax for the funds i am going to receive. If yes, which state tax I should pay, New York or Massachusetts (I am now living in Massachusetts)? If New York, should I also have to pay New York City tax? What is the aggregate tax rate (including federal, state and city)? Is the consequence different if I had received the funds in 2007?

Some other information which might be useful for the answer:
My nationality is China. The amount of the sponsorship is around $25,000. I am currently holding an F-1 visa and my OPT time will begin on August 5, 2008 and end on August 4, 2009. My employer is applying for an L-1B visa for me. I am moving to New York to work with the company in September 2008. I have filed the 2007 tax return as a non-resident.

Thanks.

MukatA

Check with your company, how they will report the payment? Only then you will know how to treat the payment. Mostly, it will be your income and you will pay tax on it.

tessfang

Is there any difference if they report it as a sponsorship or as a signing bonus?

AtlantaTaxExpert

In EITHER case, it is compensation IMHO, and therefore subject to federal and state income taxes.

If you live in Massachusetts, then MA state taxes apply, If you work in NY, NY state taxes also apply, but MA will give you a credit for the NY state taxes paid, which may well completely offset the MA state taxes.

State tax returns will have to be filed for BOTH states.