I am on an F-1 visa and I am employeed during the year as a research assistant (receiving a W2) in NY. In the summer of 2012, I went on a 12-week internship in WA (also received a W2). This internship was explicitly supposed to be time-limited.

I've been getting conflicting information online about whether I can use Form 2106 to deduct meal, rent and other per-diem expenses during this internship.

Additionally, the amount in Field 1 of my W2 I received for my internship contained a number of reimbursements (housing subsidy, relocation expenses). Are those deductible in any way?

Thanks!

Sorry, but you cannot legally claim daily living expenses for the Washington internship because, as a student in NY, you have NOT established a tax home. That's the BAD NEWS.

The GOOD NEWS is that you do NOT have to report the internship income on your NY return because you are NOT a New York resident.

Quote:

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Originally Posted by AtlantaTaxExpert

Sorry, but you cannot legally claim daily living expenses for the Washington internship because, as a student in NY, you have NOT established a tax home. That's the BAD NEWS.

The GOOD NEWS is that you do NOT have to report the internship income on your NY return because you are NOT a New York resident.

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Thanks for the speedy reply ATE.

My understanding is that as long as you are employed at a location for the majority of the year, you do establish a tax home there. From this link on the IRS website:

Nonresident Alien Students And the Tax Home Concept

I am reading that "A nonresident alien student temporarily present in the United States in F, J, M, or Q status who, at the time of his arrival in the United States, intended to remain in the United States for a period longer than 1 year, and who is employed in the United States (or self-employed even if illegally under the immigration law) has established his tax home in the United States beginning on the date his employment or self-employment begins if such employment or self-employment is expected to last for a period longer than 1 year."

Considering I am employeed and receiving a W2 during the year (as a Research Assistant) and when I arrived in the US I had an expectation of being employeed (the financial support from my employment is part of my visa requirement) by my University for the duration of my studies. Based on the above, and what I'm reading from the IRS I would deduce that I have indeed established a tax home in the US (and in NY by extension).

Am I interpretting this incorrectly in some way?

Thanks again!

You are, because students in general (not just international students) are not considered to be fully employed if they are full-time students and have never worked before.

Look further down the link under Revenue Ruling 74-453. UT is pretty


Muster with the IRS given

The revenue ruling explicitly addresses internships and says travel and costs for such internships are NOT deductible.

Thanks for the reply again. Ruling 74-453 reads:

"a foreign university degree candidate in the United States during his summer vacation under an on-the-job training program intended to supplement his education but not required by the university in his native country with which the United States has no tax treaty, does not qualify as a scholarship or fellowship grant and is compensation for services includible in gross income under section 61 of the Code"

Notice that it mentions a "foreign university degree candidate" and it addresses internships for non-resident aliens who do not study at a US-based institution but are pursuing an internship as part of a degree at a foreign university. I am studying in an american university and I am employeed by the research foundation of that University for the majority of the year in NY so I do not see why that ruling applies to my case. It actually seems that the intent of this ruling is to ensure that folks on short-term internships who do not study in the US are actually liable for taxation.

I understand that "The activity of being a student does not constitute a trade or business under the Internal Revenue Code, and thus, in and of itself, cannot establish a tax home". However, referring to the quote in my previous post:

"A nonresident alien student temporarily present in the United States in F, J, M, or Q status who, at the time of his arrival in the United States, intended to remain in the United States for a period longer than 1 year, and who is employed in the United States (or self-employed even if illegally under the immigration law) has established his tax home in the United States beginning on the date his employment or self-employment begins if such employment or self-employment is expected to last for a period longer than 1 year."


This leads me to believe that my employment by the research foundation of my university (which is NOT considered a scholarship or fellowship) does establish my tax residence to be in NY since ruling 74-453 does not seem to apply to my situation.

I'd love to hear what you think about this above argument.

You are reading into it what you want, because you want to deduct the costs of the internship. If you feel confident about this, claim it.

Just do not be surprised when the IRS disallows the deductions and hits you with an accuracy-related fine of 25% of the taxes owed.

I have fought this battle several times with the IRS, and won ONLY ONCE (because the student also worked full-time under a H-1B visa and took a leave of absence to do the internship, leaving his family in California while he went to NY City).

How am I "reading into it what I want"? I quoted a very specific section of the ruling that you brought up as a counter to my original thesis. That section clearly states that if an NRA student intended to stay in the US for longer than 1 year and is employed in the US, he establishes a tax home on the beginning of his employment if that employment is expected to last longer than 1 year.

This contradicts the statement in your original reply which said that "students in general do not establish a tax home".

I appreciate the time you take posting on this forum (it is truly a service) but what I am looking for is an informed response and not "trust me I've been doing this for a while".

You CANNOT read a specific portion of the website in isolation and hope it applies to you.

In general, the IRS has held on numerous occasions (and it has been upheld in tax court) that students (be they U.S. or international student) CANNOT go on an internship in another state and deduct their costs of that internship, because, in general, students have not yet established a tax home.

If you do not believe me, then call the International Tax Hotline at 267-941-1000 and ask.

Better yet, go to the link below and submit your question to the IRS and you will get an answer in about four days.

Help with Tax Questions - International Taxpayers

I'd love it if you can cite the IRC or relevant rulings because the one that I am aware of regarded a student who was UNEMPLOYEED during the year and then went on an internship. The court ruled that his unemployment status was not enough to establish a tax home, even though he was a student.

Also I did call the International Tax Hotline and they refer you the main IRS hotline. Those guys (in the "advanced individual inquiries department") did take down my question and said they'd get back to me in 2 weeks over email.

To get such IRC citations requires detailed, time-consuming research, and I simply do not have the time.