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Taxes, Taxes, Everyone Pays Taxes!!!

This is the truth; everyone pays taxes including International Students.  Since this is a fact of life that each of you will have to deal with I wanted to share a few bites of information and a pound of advice.

While you are here in the U.S. as a student participating in the Curriculum Practical Training (CPT) Program you need to know what your tax responsibilities are.

There are a number of taxes that are normally withheld from an employees pay in the United States. A few of the most common are;

  1. U.S. Federal Income Taxes; this is a progressive tax and the percentage withheld progressively increase as an employee makes more money. The tax ranges from 10% to 35%. These rates are subject to change each year as subscribed by Congress. Federal taxes are affected by different treaties that are in place between the U.S. and different countries. Some countries that currently enjoy benefits from such treaties are China, Korea, Thailand, and the Philippines. Be sure to mention this to your tax preparer.
  2. State Income Taxes; These fluctuate greatly from one state to another and range from 0% to 11%. This is in addition to your Federal Income Tax and most states base their calculations on those you provide on your Federal Income Tax return.
  3. Social Security Tax (FICA); the current tax rate for Social Security is 7.65% and will show up on your pay stub as FICA.  As an International Student working in the United States you are NOT required to pay this tax. However, often employers are not aware of this. Quite often once they are made aware they can discontinue the withholding of FICA from you check resulting in more money in your weekly check. Often though due to a number of circumstances (i.e. outsourcing of payroll or limitation of payroll software) they are unable to not withhold it from your check. Do not worry you will not lose this money. Instead, at the end of the year you will submit an application for refund to the Federal Government.
  4. Medicare Tax; The current Medicare tax rate is 1.45%. This tax is collect so that when a U.S. citizen reaches the age of 65 they will become eligible for Government Health Care. Again, as an International Student you are not required to pay this tax since you will not be eligible to receive benefits from the program. You will probably have to submit an application for refund at the end of each tax year that you work in the U.S., unless your employer is able to discontinue collection at their end.
  5. Local Taxes; certain states allow cities and counties to impose additional taxes on income earned in those cities or counties. This differs throughout the United States but in very uncommon and will apply to very few students but is something to keep on eye on.

These are the primary taxes that you will be responsible for paying via payroll deduction throughout the year as you work.

Each year during the month of January employers are required to provide the Federal Government, the IRS, and the employee with a IRS Form W-2. This form reports the total amount of wages paid and the amounts of Federal, State, FICA and Medicare taxes withheld from the employees pay.

This is the form that you will need to file you State and Federal tax return. All students earning income are required to file their State and Federal tax returns each year prior to the April 15th deadline.

You can complete and file you tax return yourself for free or you can hire a tax professional to complete them for you. I fully recommend that you seek out a reputable tax professional. Due to the complexity of the U.S. tax code the time necessary to research and prepare your return is significant and often results in not receiving the full amount entitled to. Using a tax professional that is familiar with the tax requirements of the International Student community will result in you receiving a full refund of all monies, including Social Security and Medicare taxes, that you are entitled to.

International student should be aware of those documents that they are required to submit to the Federal Government (IRS) each year.  Those forms will include the following:

  • IRS Form 8843

This form is normally required by ALL INTERNATIONAL STUDENT and must be submitted each year by the April 15th deadline.

  • IRS Form NR 1040 or NR 1040EZ

This is the form used to request a tax refund.

  • IRS Form 843 (Refund of erroneous FICA tax payments)

First you are required to request a refund from your employer. If your employer is unable to refund the full amount you will need to submit IRS Form 843. You will need to attach the following items to the Form 843;

?        Copy of your W-2 to substantiate you FICA  and Medicare taxes withheld

?        Copy of the page from your passport showing the visa stamp

?        INS Form I-94

?        If applicable INS Form I-538, Certification by Designated School Official, and

o   Statement from employer indicating the amount of reimbursement provided and the amount of the credit or refund your employer claimed. If you are not able to obtain this statement from your employer, you must provide this information on your own and explain why your are not attaching a statement from your employer.

o   IRS Form 8316, if unable to obtain statement from employer.

?        Mail Form 843 (with all attachments) to the IRS office where your employer’s returns were filed. If you do not know where your employer filed their returns mail to: Internal Revenue Service Center, 11601 Roosevelt Blvd, DPE 351, Philadelphia, Pa 19255.

?        There is a three-year statute of limitations for claiming tax refunds.

So, let me wrap this article up with a few up beat notes. While you are here in the United States the opportunities are truly unlimited. You will benefit not only from the education you receive but through the access you will have to U.S. corporate philosophies and cultural knowledge gain through your participation within the local communities.

While taxes are confusing and complex they are not overwhelming. You have a number of resources available to assist you with your filing requirement. Contact the Student Services Representative at your College or University or the HTIR representative for additional guidance or assistance. They will be more than happy to help you.


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