Hello,

I am a Chinese student on F1 Visa. I study in NY State and currently I am doing my internship on CPT in NJ. According to US - China Treaty Article 20c, I am exempt from tax withholding on the first $5000 personal income. And before the internship, I have filed W4 with Form 8233 to my employer.

After reviewing my first paycheck (original $920; federal tax: 13%; NY State tax: 3%; NJ State tax: 4%), I have some questions:

1. Does the treaty apply to both federal tax and NY State tax? I know it does not apply to NJ.

2. What is the percentage of exemption from withholding? I am expected to earn about $10,000 for this internship. I am not sure if 13% federal tax means that the treaty has already applied.

3. If it has not applied, can I keep the income now rather than get the refund?


Thank you very much!


Regards,

Ben

1) The treaty exemption DOES apply to your NY state tax, but NOT New Jersey.

2) If your total taxable income is $10,000, then 13% is about right. If your TOTAL income is $10,000, then you likely will pay less than $200 in taxes, in which case 13% is too high.

3) You can do this by increasing your exemptions, but your employer will probably cap it at 2 under IRS regulations that keep foreign national from claiming more than two exemptions on your W-4.

1) The treaty exemption DOES apply to your NY state tax, but NOT New Jersey.

2) If your total taxable income is $10,000, then 13% is about right. If your TOTAL income is $10,000, then you likely will pay less than $200 in taxes, in which case 13% is too high.

3) You can do this by increasing your exemptions, but your employer will probably cap it at 2 under IRS regulations that keep foreign national from claiming more than two exemptions on your W-4.


Thanks for the reply!

From what I researched and what other people told me, I think that my first $5000 should be taxed only by NJ State. Is that correct?

And I am not sure about what your 3) means. I filled the W4 according to instructions of the IRS, putting "1" for total number of allowance and did not claim exemption on "7: ... claim exemption from withholding...... meet both of the following conditions....". Then I filed a 8233 form which claims exemption from federal tax.

In all, my desired result is that the first $5000 is not taxed by Fed and NY State and keeping the money now rather than getting the refund next year. Thanks again for your help!

No, that is NOT correct about NJ. Your entire salary will be subject to NJ income taxes.

You will be able to claim a credit for the NJ taxes paid on your NY income tax return, though.

You CANNOT claim total exemption from income tax withholding.