Social Security or FICA Taxes
Social Security or FICA taxes are based on the Federal Insurance Contribution Act. There are two types of exemption from FICA: (1) F-1 and J-1 students are exempt the first five years in the United States (this exemption can be used only once in a lifetime) and (2) students employed by Penn State are exempt from paying FICA taxes as long as they are enrolled half time each pay period (see the Payroll Office for eligibility requirements).
When you are required to pay Social Security taxes, keep your social security card and all W-2 forms that show withheld amounts for social security. When you retire, the amount withheld in the U.S. might be credited to your retirement account in your country. (Student spouses, J-2 visa holders who have work permission, are required to pay social security taxes.)
Many states and cities charge a sales tax on purchased items. Pennsylvania charges a state sales tax of 6 percent on most items you busy, except food, clothing, and medication. Some services, such as restaurant service, are also taxed. This tax is charged at the time of purchase of the service and is not refundable (it is not a VAT tax).
Income Taxes General
There is a federal income tax, some states have a state income tax, and some towns and cities have a local income tax. U.S. income taxes are based on the calendar year and tax reporting is done the following year by April 15. You are required to complete tax forms if you have earned income during the year. While you are a student living in Pennsylvania, you are required to complete U.S. federal tax forms (non-resident or resident for federal tax purposes), Pennsylvania state forms (same for all), and local forms (State College -- international students are non-residents). If you lived in another state during the year and earned income while living there, you will need to file a tax return for that state if that state has income tax. If you had no income, you must complete the 8843 (see below).
The United States government taxes wages as well as interest on deposits or investments easrned in the United States (although non-residents for tax purposes do not pay taxes on interest). Scholarships, grants, and fellowships from U.S. sources are also subject to U.S. federal tax. The United States agency responsible for federal txes is called the Internal Revenue Service (IRS).
International students should understand that they are either "non-residents for federal tax purposes" or "residents for federal tax purposes." International students in F-1 or J-1 status are non-residents for tax purposes the first five years in the U.S. When they become "residents for tax purposes," they are taxed on their worldwide income.
As indicated above, all international students are required to report to the IRS how much money they earned or received during the previous yeasr from a U.S. source. The report omay be filed anytime between January 1 and April 15. If taxes are owed to the U.S. government, they must be paid at this time. The United States has tax treaties with some governments which reduce the amount of taxes due. If the student had no income from a U.S. source, then only for 8843 is sent with the student's signature and date (if the student is classified as a non-resident for federal tax purposes).
Employers are required to withhold a portion fo each employee's salary to make periodic payments of each worker's estimated tax. At the end of each year, all employers report to the IRS and to the employee the actual wages earned and the federal tax payment (as well as other taxes paid) that has already been made. The employer report to employees is called the W-2. Penn State's Payroll Office will send W-2s to all those who have earned wages from the University by the end of January for the previous year. A 1042-S form will be sent by mid-March for any qualified tuition reduction and for any amount exempt from federal tax due to a tax treaty. Both of these forms must be included in the student's tax return form 1040NR.
If tax treaty benefits are claimed, the following additional papers must be sent to the Payroll Office: form 8233, which is used to claim tax treaty benefits on personal services such as wages; W-8BEN is used to claim tax treaty benefits on scholarships; the correct Revenue Procedure 87-8, and a photocopy of the I-20 or DS-2019. NOTE: Application for the withholding exemption based on a tax treaty must be made on form 8233 and Revenue Procedure form 87-8 or 87-9 for the individual's home country. These forms must be submitted to the Payroll Office at the begnining of the employment period and resubmitted each year. The Payroll Office can answer questions regarding the tax treaties.
If additional federal taxes are due, the employee must pay these taxes before April 15. If too much money was paid to the government during the year, a tax refund will be sent to the employee after the tax return is reviewed by the IRS.
Filling Income Tax Returns
If you had no income in the calendar year for which tax returns are being filed and you are a non-resident for federal tax purposes, you must file Federal Form 8843. If you had no income and will file only the 8843, the deadline is June 15. In other words, if the tax year is 2013, the deadline to file the 8843 is June 15, 2014. DISSA provides tax help through tax software for non-residents for tax purposes.
If you are an international student in F-1 or J-1 status, you must first determine if you are a resident or non-resident for federal tax purposes.
- Were you in F-1 or J-1 student status on December 31 of the tax year in question?
- Is the first time you entered the U.S. in F, J, M, or Q status including any time as a dependent on or after January 1, 2008?
- Which years (January – December) since 1986 have you been in the U.S. in F, J, M, or Q status (either student, trainee, or non-student) for any day? Even if you were in the U.S. for one day, you must count that day as one year.
If you answer “yes” to the first two questions and there are 5 years or less, you may qualify as a non-resident alien for tax purposes.
If you answer “yes” to the first question but were in the U.S. for more than 5 years, you must calculate the “substantial presence test” to determine if you are a non-resident or resident for tax.
For example, if you were in the U.S. on December 31, 2012, in F-1 or J-1 student status and you arrived in the U.S. on or before December 31, 2007, you are probably a resident for tax purposes. In general, you are taxed the same as a U.S. citizen on worldwide income. You will not be given a Glacier Tax Prep password, but you should use the free tax software provided by the IRS.
Tax Help: Substantial Presence Test, Exemptions, and Tax Residency
The Directorate of International and Scholar Advising (DISSA) purchases tax software each year. We will give a password to anyone who is considered a non-resident for tax purposes (tax term, not an immigration term in this case). Those students who are no longer non-residents for tax purposes cannot use the non-resident tax software because it is specifically for individuals who are non-residents for tax purposes. If you are a resident for tax purposes, there is free tax software provided by the IRS for you.
- You need to determine your tax residency – either resident or non-resident for tax purposes.
- Complete the “substantial presence test” – see upper right-hand corner of this page.
- If you answered “yes” to boxes 1, 3, or 5, it is likely you are a non-resident for tax purposes. Print this SPT text sheet and bring to the 4th floor of Boucke and see Julie.
- If you answered “yes” to boxes 2, 4, or 6, it is likely you are a resident for tax purposes. See Residents for Tax Purposes above for information on free software
- If you were present in the U.S. in 2012 but had no income, please complete Form 8843.
There is additional tax help on campus for individuals who may have additional questions. Information is available during the tax season (February - April 15) from DISSA.
Federal Non-Resident for Tax Purposes Forms
Federal Residents for Tax Purposes Forms
- 2013 Pennsylvania Personal Income Tax Return Booklet (PA-40)
- 2013 Pennsylvania Income Tax Return (PA-40)
State College Borough Tax
Non-residents with proof of the I-20 or DS-2019, passport, and I-94 pay a reduced rate (see the tax rate on page 2 of the tax form).