Visa Lawyer Blog
We like to intimate about the special tax return filing requirements for foreign students. According to Notice 2005-77:
“Non-resident aliens whose U.S. wages do not exceed the personal exemption amount are not required to file a tax return”.
We encouraged to go for Tax filing in order to receive a refund. If you are a student and having a taxable scholarship, partially or fully exempted income, or any other taxable income, you are required to file a tax return. If you are a foreign student having an income from a foreign source, a tax free scholarship/fellowship, other non-taxable income, income generated through interest at a U.S. Bank, U.S. savings and loan institution, U.S. credit union, U.S. insurance company, or an investment that accrues portfolio interest, you are not required to file a tax return.
United States citizens and permanent residents are required to pay taxes under the Federal Insurance Contribution Act (FICA). Taxation funds both Social Security and Medicare programs. Under FICA, full and part-time students are exempt from paying such taxes as long as their employment is secondary to their studies. This is also applicable to qualified foreign students on an F-1 visa.
Non-resident students on an F-1 visa are exempt from paying U.S. Social Security and Medicare taxes as long as they are employed in services allowed by USCIS and appropriate for their status and that the services they are performing are within the scope of the purpose of the visa issued to them.
Included Exemptions:
Only certain types of employment are exempt:
– Student may work on campus for up to 20 hours a week.
– During summer vacation, students may work full time, up to 40 hours per week,
– Students who work at USCIS approved off campus locations in practical training (OPT, CPT, or STEM OPT).
During the first year of academic study, F-1 visa holders are limited to on-campus employment. After one year of study, F-1 visa holders may seek off campus employment in one of the classifications above. Typically, non-resident students can only claim one exemption, so long as he/she is not being claimed as a dependent on another U.S. tax return. Restrictions to Tax Exemptions:
F-1 students who enter the United States are required to currently be classified as non-resident aliens to receive exemption from Social Security and Medicare taxes. Once an F-1 student becomes a resident alien, he/she will no longer be exempt (certain exceptions to this in section 7701b).
F-1 students who change to a non-immigrant status (other than J-1, M-1, Q-1, or Q-2) will also be required to pay Social Security and Medicare taxes, typically starting the day that their status is changed. For instance, if an F-1 student changes to H-1B status, he/she will no longer be exempt from paying Social Security and Medicare taxes.
F-1 students who have been in the United States for more than five calendar years do not qualify for exemption because they are considered resident aliens (unless they meet the student FICA exception). F-1 students who have been in the United States for less than 5 calendar years are still considered non-resident aliens; they are exempt from paying Social Security and Medicare taxes. For taxation purposes, the calendar year in which an alien enters the United States is used to determine exemption eligibility. For instance, if an F-1 student enters the U.S. on December 31, 2009, 2009 counts as the first of his five year exemption, even though he entered the very last day of the calendar year.
Spouses and children of F-1 holders in the United States on an F-2 visa will be subject to Social Security and Medicare taxation because their primary purpose for entering the United States is not based on research, teaching, training, or to study. Under law, those in F-2 status are not allowed to work in the United States. Regardless, employment in the United States under violation of F-2 status will not be tax exempt. A qualified foreign student may be exempt from Social Security and Medicare taxes even if he/she is already a resident alien. Revenue Procedure 2005-2011 outlines student FICA exemption eligibility for employment occurring after April 1, 2005.