[KJY]

I worked as OPT during 2004 and I filed 1040NR in 2005. I reported the amount after taking $2,000(Tax treaty) off from whatever was on W-2.
Yesterday, I received 1042-S copy for recipient(Foreign Person's US Source Income Subject to Witholding) from IRS and it says,

"A refund check for your overpayment of U.S. income tax plus allowable interest due you is being processed. The tax we are required to withold from interest paid to a nonresident alien or foreign corporation was figurred at the rate of 30 percent, or at a lower rate if prescribed in a tax treaty."
Overpayment --------------------- $ 1,140.62
Interest at COMPAD % ------$ 36.67
Minus: Tax withheld
From interest at 12 % --------------$ 4.40
Net interest -----------------------$ 32.27
Tatal refund -----------------------$ 1.172.89

1) Could you help me with this, what this means, whether I owe them this much money, or I am getting refund for this amount..
2) And What should I do with this for 2006 tax report?

Thanks in advance.

[AtlantaTaxExpert]

KJY:

Based on the data you provided, you got a total refund of $1,172.89 for the Form 1040NR filed for tax year 2004.

The IRS paid you $36.67 in interest on the overpayment, then withheld $4.40 of that interest.

You must report this interest as income on your 2005 return, and add the $4.40 to your withholding amount when you prepare your Form 1040NR for tax year 2005 (I assume you are still on non-resident alien status). The tax on this interest is a flat 30% rate, and must be calculated on page 3 of Form 1040NR.

Contact me at [email protected] if you need further help or if you want to use my services.

[KJY]

Thanks.
I changed my status to H1-b in May, 2005 and I may file 1040 as resident alien. My follow-up questions are,

1) I already received refunds from both federal and state. Then, is this $1,172.89 additional?
2) Is this refund(1042-S) always this late? Wasn't I supposed receive it in 2005?
3) I don't have to include this in my income, do I?
4) If I file 1040, your last statement "The tax interest is a flat 30% rate, and must be calculated on page 3 of ~~" doesn't apply to me, does it?


Always thanks for answers.

[AtlantaTaxExpert]

KJY:

1) The only part that is taxable is $36.67.

2) You did received the refund. The 1042-S is just a document (like W-2) which clarifies what is taxable.

3) Again, only the $36.67 on Schedule B, Part 1 (Interest Income).

4) Yes, if you file Form 1040, then my statement does not apply to you. Just report the $36.67 in Interest on Schedule B and everyone will be happy!

[KJY]

Sorry for more questions.
But I didn't receive $36.67, they just sent 1099-G saying that amount was a credit before this 1042-S. Even so, do I have to include it in my income?
Thanks.

[AtlantaTaxExpert]

Yes, you do. The IRS expects to see that entry on your tax return.

You probably did get it as it was added onto your refund last year.