Hi all,

I was wondering if anyone can help me with what forms I need to file for my 2004 taxes. THis process has really been so overwhelming for me and I have been reading contradictory advice. Maybe someone has a similar situation to mine.

Basically, I have been in F1 status since aug 99 and haven't left USA since then. Last year I worked as a Research Assistant and was paid stipend $11,000 and a tuition waiver which reduced my yearly tuition payment to $2000. For the tuition waiver I received fomr 1098-T from my school which lists my tuition expenses and the scholarship/tuition waiver.

On the W-2, some $1000 was cut in federal taxes, $240 in NY state and $200 in NYC taxes.

Now, some say that I should file non-resident form because I am still in F1 while some say that I am in resident status because I have been in USA way too long.

Plus, I also heard that I can use my country's tax treaty and try to reduce the taxes withheld though I highly doubt if my taxes will be reduced as my income wasn't that much.

My country's tax treaty says the following:

"The income exempt in these cases is any pay for personal services of not more than $5,000 for any tax year."

The tax treaty doesn't say anything regarding scholarhips.


So, given this situation:
1. Am I a non-resident or resident for tax purposes and which forms I should file?

2. Will my tuition waiver be considered as income?

3. Can I use my tax treaty to reduce my taxes?

4. Is there any other way I can reduce my taxes and get some kind of refund?

I would really appreciate any answers or comments.

Thanks in advance..
Peace

Falcon1:

Since you cite a $5,000 standard deduction, I suspect you are Chinese. Please correct me if I am wrong.

In my opinion, you should file as a nonresident alien. Even though you have been in country for quite a bit of time, your F-1 visa is still probably valid as you are still a student. This fact is reinforced if, as implied below, your W-2 had city, state and federal income taxes withheld, yet no Social Security nor Medicare taxes were withheld. To answer your questions:

1) File Form 1040NR or Form 1040NR-EZ.

2) The tuition wavier is not considered income.

3) The Chinese tax treay allows you to claim a standard deduction of $5,000.

4) If you have expenses associated with the production of your income, you can claim them, but only if these expenses, combined with the NY state and NY city income taxes withheld, exceed $5,000 (your standard deduction).

Hi there,

thanks for the detailed reply. I really appreciate it. I am new to this tax process as 2004 was really my first year in which I had a decent paying job. No, I am actually from Pakistan and the text I quoted was from the tax treaties publication.

First of all, I want to understand what that means. Does it mean that in order to be exempt from any taxation from IRS, state and city tax agencies, my total income should be less than 5000?

Or does it mean that IRS, state and city tax agencies should charge tax on 11K (my stipend income) - 5K (tax treaty) = 6K. That I would imagine lower my taxes and I would expect a refund.

Does the tax treaty only apply to federal taxes or one has to tell the state and city agencies about this tax treaty too? I couldn't find any field related to tax treaties on the NY state and city forms.

thanks again..

Falcon1:

The income (which I assume is your stipend) reported on your W-2 is NOT exempt from state or local income taxes. Provisions of the tax treaty do not apply to state or local income taxes. The courts ruled on this issue some time ago (back in the 1950s, I believe).

Assuming the citation you quote is accurate, all the tax treaty does is allow for a standard deduction of $5,000 on your federal tax return. Any amount over that $5,000 standard deduction is subject to federal income taxes at the rate specified by the IRS for non-resident aliens.

If your income was below $5,000, then an argument could be made that you have no need to file a tax return. However, since your income appears to be over $5,000, file the federal return as I specified in my earlier posting. Be sure to file by 15 April 2005. More than likely, you will receive a refund.

The state of New York does not distinguish between resident and nonresident aliens. You should file the normal state tax return with NY state and New York City (the NYC return is embedded in the state tax return form). Odds are pretty good that you will get a refund from NY state as well.

Hi

So, does that mean my New York state and NYC should tax my 11K - 5K (treaty) = 6K worth of income? Just like federal.

I would imagine that I should expect a refund from them only if that is the case!

thanks again...

Falcon1:

No, NY state will authorize you a different Standard Deduction, which is actually higher at $7,500.

Hi AtlantaTaxExpert,

One last question, I promise. THanks again for all the advice.

I noticed in the federal tax return form that one can claim the standard deduction which is 3100. I was wondering if foreign students like me on F-1 visa can do that. From the instructions of 1040-NR-EZ and the form itself it seems one can do that. I am a bit surprised that with this and the tax treaty one can greatly reduce the taxable income.

For the New York tax return there is a form for non-residents but I am not sure if that applies to me since I have been living in NY continuously for past 5 years.

Thanks again...

Falcon1:

The $3,100 exemption is not the standard deduction, but rather the personal exemption.

Yes, you can claim your personal exemption ($3,100) plus the standard deduction ($5,000 under the U.S.-Pakistani Treaty).

Now, the NY state tax return for Non-Residents is for people who work and earn income in NY state, but live somewhere else (like Connecticut and New Jersey). It does not apply to nonresident aliens. You should file the NY state return for residents.

Now, the NY state tax return for Non-Residents is for people who work and earn income in NY state, but live somewhere else (like Connecticut and New Jersey). It does not apply to nonresident aliens. You should file the NY state return for residents.

I am afraid you are wrong, ATE.
See http://www.tax.state.ny.us/pdf/2005/inc/it203i_2005.pdf, page 10.

If you are a U.S. nonresident alien for federal income tax purposes and are required to file federal Form 1040NR or 1040NR-EZ, you may be required to file a New York State nonresident return, Form IT-203.

That's a bad wording (because they tell you to check if you had enough income to trigger filling requirements), but you need to file non-resident return. Also, it is what all International Student Centers say...

Vaya

I beg to differ.

First, let's remember that I am talking about a NEW YORK state tax return.

Now, to the guts of the matter!

You are not reading your own citation carefully. See below:

If you are a U.S. nonresident alien for federal income tax purposes and are required to file federal Form 1040NR or 1040NR-EZ, you may be required to file a New York State nonresident return, Form IT-203.

The emphasis on MAY is critical. If you go back to page 6 of the instructions you cite with the link, it clearly cites examples of people who either do not live in NY and have NY-sourced income or who lived in NY for only part of the year.

It seemed obvious that Falcon1, though a non-resident alien for federal tax purposes, had indeed lived in NY state for all of 2004. Hence, he clearly is considered a resident of NY for NY state tax purposes. NY does not recognized his exempt status afforded to him under the F-1 visa.

BTW, the guidance I gave him was wrong, since he exceeded the five-year limit on exempt status afforded to F-1 visas. I did not know that at that time, since the original posting is over one year old!

See
* http://www.isso.cornell.edu/tax/NYSTax05.pps
* https://www.hvcc.edu/international/nystax.pdf
* http://www.twmlaw.com/resources/general10cont.htm
* and many more international student offices...

Vaya