[cder]

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

[AtlantaTaxExpert]

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.

[cder]

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!

[AtlantaTaxExpert]

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.