All employers in the U.S. are required to retain a portion of each salary payment and pay part to the U.S. government and part to the state government in anticipation of income tax obligations. The amount withheld depends on the information reported on Form W-4 when an individual begins employment and the amount expected to be paid during the year by the employer to that individual. If too much is withheld, a refund may be requested with the income tax return filed for that year.

2. Who are nonresident aliens for tax purposes?

F and J students are nonresidents for the first five calendar years they are physically present in the U.S. as students, teachers or researchers. They may NOT use any of the resident tax returns such as Form 1040, Form 1040A or Form 1040EZ. Thereafter they will be considered residents** for income tax purposes unless they satisfy the IRS that they do not intend to reside permanently in the U.S. and that they have substantially complied with the terms of their visa (by filing Form 8840 along with the appropriate information). See also Question #15 regarding dual status returns. Students from Barbados, Hungary and Jamaica may file as resident taxpayers but, in so doing, would sacrifice tax treaty benefits. See Question #9.

J-1 teaching and research scholars are nonresidents for the first two of the previous six calendar years they are physically present in the U.S. as students, teachers or researchers. They may NOT use any of the resident tax returns such as Form 1040, Form 1040A or Form 1040EZ. After that period of time they will be considered residents** for income tax purposes, unless they were physically present in the U.S. for less than 183 days during the 2007 tax year, they satisfy the IRS that they do not intend to reside permanently in the U.S. and that they have substantially complied with the terms of their visa (by filing Form 8840 along with the appropriate resident tax return). See also Question #15 regarding dual status returns.

H-1B, O-1 and TN academic and professional employees who were physically present in the U.S. for less than half of the year are nonresidents, unless they were already resident taxpayers immediately prior to attaining the H, O or TN visa classification. Those individuals who were physically present in the U.S. more than 183 days of the year may qualify as residents** for tax purposes and may chose to file Form 1040. Detailed rules regarding the "substantial presence" test are explained in Publication 519 and in the Instructions for Form 1040NR-EZ or Form 1040NR. H-1B scholars, O-1 and TN employees who were nonresident taxpayers for part of a year and resident taxpayers for part of a year, including the years of arrival and departure, should file as dual status taxpayers.

** Resident taxpayers filing Form 1040, Form 1040A or Form 1040EZ are entitled to the benefits of additional provisions of the federal income tax laws, including personal exemptions for spouse and minor dependent children, the standard deduction, the tuition credit, the earned income credit and the child care credit, but they must report income earned from sources both in and outside the U.S. They generally are not eligible for tax treaty benefits; however, in certain circumstances, a few tax treaties exempt income earned by resident taxpayers for specific periods of time.

3. Who must file income tax returns and what income tax forms must be filed by nonresidents?

Every F-1, J-1 and J-2 visa holder who is a nonresident and who has earned income from a source in the U.S. (except individuals who received only scholarships, fellowships or tuition remissions that did not exceed the value of tuition and fees and individuals who earned interest on deposits with banks, savings and loans institutions or credit unions) must file two documents with the IRS: (1) either Form 1040NR-EZ or Form 1040NR, the nonresident income tax returns and (2) Form 8843, the statement for F, J and M visa holders who are filing as nonresident taxpayers. These individuals also must file a state income tax return in each state in which they lived last year, except in states that do not have state income taxes.

Every F-1, F-2, J-1, and J-2 visa holder who is a nonresident, including individuals who earned no income in the U.S. and also including spouses and children of international students and scholars, must file Form 8843, the statement for F, J, and M visa holders who are filing as nonresidents. Individuals who earned no income from a source in the U.S. may file Form 8843 either with or without a Social Security Number or an ITIN.

Every H-1B, O-1 or TN visa holder who is a nonresident must file either Form 1040NR-EZ or Form 1040NR, but not Form 8843. These individuals also must file a state income tax return in each state in which they lived last year, except in states that do not have state income taxes.

4. Who may file Form 1040NR-EZ?

Form 1040NR-EZ is an easy-to-use nonresident income tax return. It is shorter and easier to use than Form 1040NR, the standard nonresident income tax return. You can use Form 1040NR-EZ if you meet all of the following conditions:

A. You do not claim any dependents.

B. You can not be claimed as a dependent on someone else's U.S. tax return.

C. Your only income from sources within the U.S. consists of wages, salaries, tips, refunds of state and local income taxes, and scholarship or fellowship grants. (If you had taxable interest or dividend income, you cannot use this form.) See Question #6.

D. Your taxable income is less than $100,000.

E. You do not claim any adjustments to income except the student loan deduction or the exclusion for scholarship and fellowship grants.

F. You do not claim any tax credits other than payment made to obtain a Certificate of Tax Compliance, sometimes called a sailing permit or departure permit (Form 1040-C or Form 2063)

G. If you were married, you do not claim an exemption for your spouse.

H. You do not claim any itemized deductions (other than for state and local income taxes).

Most single non resident taxpayers can use Form 1040NR-EZ.

Most married nonresident taxpayers, except those from Canada, India (students), South Korea or Mexico, and those with children born in the United States can use Form 1040NR-EZ.

There are certain advantages available to nonresident taxpayers from Canada, India (students only), South Korea, and Mexico who are married or who have other dependent family members. These may include the ability to claim personal exemptions for certain dependents, the use of the child care credit and, for Indian students, the use of the standard deduction. Therefore, married taxpayers from Canada, India (students only), Japan, Korea, and Mexico generally should use Form 1040NR. Married students from these countries, however, must file separate Forms 1040NR-EZ or Forms 1040NR if both spouses earn income from sources in the U.S. Married student taxpayers from India may find it advantageous for each to file Form 1040NR-EZ if both spouses earn income from sources in the U.S. Married student taxpayers from India may claim the standard deduction on Form 1040NR-EZ.

Nonresident taxpayers who can not use Form 1040NR-EZ must use Form 1040NR.

5. What items are needed to file a federal nonresident income tax return (Form 1040NR-EZ or Form 1040NR)?

A. Form 1040NR-EZ or Form 1040NR. (The Instructions for these forms may be helpful.)

B. Form 8843

C. Forms W-2 sent in January by employers to all persons employed during the previous year. (The employers also have reported the income to the IRS.) One copy of each Form W-2 must be submitted to the IRS with Form 1040NR-EZ or Form 1040NR and another copy must be submitted with the Nebraska state income tax return.

D. (Possibly) Form 1042-S (report of income subject to treaty benefits, scholarship and fellowships) and/or letters of award and receipts or cancelled checks documenting scholarships and fellowships. See Question #7

E. (Possibly) Form 1098-T (report of tuition paid).

F. A self-prepared schedule or list of "qualified educational expenses" with appropriate receipts for books and other required course materials. See Question #7.

G. (Possibly) Documentation of other income such as refunds of last year's state income taxes, sales of property, certain types of investment income.

H. (Possibly) Form 1099 reporting interest from a bank, savings and loan or credit union (if filing Form 1040NR).

I. (Possibly) Documentation of contributions to reorganized charitable organizations and other allowable deductions (if filing Form 1040NR)

6. What kind of income is taxable?

Nonresident taxpayers filing Form 1040NR-EZ or Form 1040NR pay tax at graduated rates (see Question #15) on income that is effectively connected with U.S. trade or business, including wages, salary and refunds of state taxes from the previous year.

Interest on deposits with banks, savings and loan institutions and credit unions in the U.S. and dividends from personal investments are not taxable unless it is in connection with a trade or business in the U.S. other than studying, teaching and conducting research. Tax-exempt interest is not reported on Form 1040NR-EZ but it must be reported on Form 1040NR.

Nonresident taxpayers pay tax at the rate of 30% on most other types of income from a source in the U.S.

** Resident taxpayers filing Form 1040, Form 1040A or Form 1040EZ pay tax at graduated rates on all income, whether it is from a source in the U.S. or elsewhere.

7. Are scholarships and fellowships considered taxable income?

Part or all of scholarships and fellowships from sources within the U.S., may be taxable. If the amount of a scholarship or fellowship grant awarded to a degree-seeking student does not exceed the cost of "qualified educational expenses" (tuition, fees, books, and required supplies), the student will receive Form 1098-T from the awarding institution or organization. In that instance, the student will not report any scholarship income on Form 1040NR-EZ. If the scholarship or fellowship grant exceeds his or her "qualified educational expenses", the student will receive Form 1042-S indicating the excess. In that instance, the student must report the excess on line 5 of Form 1040NR-EZ and also submit a copy of Form 1042-S with the tax return. A student who receives Form 1042-S with taxable scholarship or fellowship income (income code 15) may be able to exclude additional "qualified educational expenses" on line 9 of Form 1040NR-EZ. The student must document these expenses on a schedule or list. Scholarship or fellowship income that is exempt because of a tax treaty is reported on Form 1042-S. The student must report it on line 6 of Form 1040NR-EZ and also in item J on the back of Form 1040NR-EZ.

Scholarships from foreign governments and international organizations outside the U.S. generally are not taxable and are not reported on Form 1040NR-EZ or Form 1040NR. Awards from U.S. government agencies may be taxable. Contact your sponsor for additional information.

8. Are graduate assistantships taxable?

Yes, the cash stipend (salary portion) of an assistantship, whether a research assistantship or a teaching assistantship, is considered compensation for services rendered, and is fully taxable.

Only the portion of the assistantship which serves as tuition remission (tuition waiver) is considered a scholarship and, as such, is exempt from taxation.

9. How do tax treaties work?

The U.S. has concluded tax treaty agreements affecting nonresident taxpayers from about 50 countries. They take precedence over other federal tax regulations. Almost all treaties exempt earnings for a limited period of time. Only about half of the treaties exempt earnings by students from sources within the U.S. Only a few treaties exempt all of the income earned by nonresident students. Most limit the amount of earnings by students that are exempt each year. Treaties generally exempt the income of foreign teachers (and may exempt the income of foreign researchers) for a period of two years, provided they entered the U.S. for that purpose. Some treaties provide exemptions only when the individual is teaching or researching as a result of a specific exchange agreement between the countries or between institutions or on invitation from the U.S. government. A few treaties permit the exemption to continue for a specific period of time after a nonresident taxpayer becomes a resident taxpayer. Several treaties also stipulate that, if the individual remains in the U.S. more than a certain period of time, the exemption is lost retroactively and back taxes must be paid. Details are available in IRS Publications 519 and 901.

Graduate research and teaching assistants are considered students, rather than researchers or teachers, with regard to tax treaties.

Individuals who may benefit from tax treaties should arrange to have their UNL income exempted by completing the UNL Exemption from Withholding for Nonresident Aliens form at the Payroll Office, 404 Administration, or IANR Finance and Personnel Office, 313 Agriculture Hall. Whether some or all of your income is exempted by tax treaty, you must file income tax returns.

Income exempt from taxation because of a treaty is indicated on Form 1042-S and must be reported on line 6 of Form 1040NR-EZ and in item J on page 2 of Form 1040NR-EZ. It is not reported on Form W-2 and, consequently, not included in the income reported on line 3. A copy of Form 1042-S should be submitted with the income tax return. See also Question #10.

Resident taxpayers may not exempt income by virtue of a tax treaty unless the treaty contains an exception to the savings clause.

10. What are the most important parts of Form 1040NR-EZ?

Most (but not all) foreign students and scholars who earned income in the U.S. will use this form. To determine which form to use, refer to Question #4. Generally, complete the heading and the following: line 1 or 2; 3; possibly 4 (if a refund of 2006 state or city income taxes was received in 2007); 5 (if a scholarship or tuition waiver with a graduate assistantship exceeding "qualified educational expenses" was received); 6 (the amount of your income or scholarship, if any, that was exempted from taxation by a tax treaty); 7; 8 (if you were a student receiving a scholarship or fellowship indicated on Form 1042-S and had "qualified educational expenses" beyond those indicated on Form 1098-T); 9 (if you paid interest on a "qualified" student loan); 10; 11 (students from India may be able to take the standard deduction instead of the itemized deduction for state and local income taxes); 12; 13; 14; 15; 17; 18; 20 (if you paid tax in order to obtain a Certificate of Tax Compliance to leave the U.S. during 2007); 21; and either 22 and 23 or 24. If you complete lines 22 and 23, you are entitled to a tax refund, which will be sent to you several weeks after you file your Form 1040NR-EZ. You may receive the refund as a check or may chose to have it deposited directly into your bank account, which is both faster and safer. If you want the refund deposited directly, complete lines 24b, c and d. If you complete line 24, you owe tax and must send a check or money order to the IRS when you file Form 1040NR-EZ. All questions on page 2 of Form 1040NR-EZ also must be completed, including Item J if you are excluding any income exempted by a tax treaty between your country and the U.S. Remember to include Form W-2 from each employer in 2007 and, possibly, Form 1042-S and Form 1098-T.

Please note that you can "round off" to whole dollars the amounts you enter on your tax return. Delete amounts under 50 cents and increase amounts from 50 to 99 cents to the next higher dollar.

11. May I deduct the cost of tuition, fees and books?

Only if you received a scholarship or fellowship, and only to the extent it covered these expenses. See Question #7.

12. May I deduct expenses incurred in moving to or within the U.S.?

Nonresident taxpayers who move to and undertake full-time employment in the U.S. may deduct certain moving expenses on Form 3903 and on Form 1040NR. Students working on graduate assistantships and post-doctoral fellows may not deduct such expenses because the purpose of their move is education or training, not trade or business.

13. May I deduct any other expenses related to my temporary full-time employment in the U.S.?

Nonresident taxpayers who were employed in their home country and intend to return home to the same profession may deduct their own but not their family's non-reimbursed expenses (including living expenses of rent and food, professional dues and journal subscriptions, etc.) only if the U.S. education is required by their employer, or by law or regulation, to keep their salary or job or if it keeps or improves the employees' skills required in their work at home, and does not fulfill minimum requirements for their same job or qualify them for a new profession. These deductions are available only if the individual has living expenses at home that are duplicated in the U.S. and the temporary employment away from home is for less than one year. Please note: such miscellaneous deductions, including transportation, lodging, meals and professional expenses, are deductible on Form 1040NR only to the extent they exceed 2% of the taxpayer's adjusted gross income. Only 80% of unreimbursed meal expenses may be deducted, subject to the 2% limit. To claim these deductions, Form 2106 must be filed with Form 1040NR and Schedule A of Form 1040NR must be completed. Travel expenses (transportation, lodging, meals, and professional expenses) may not be deducted if moving expenses are deducted. Certain non-degree-seeking recipients of taxable U.S.-source grants my be able to deduct their educational costs (tuition, fees, and books), subject to the 2% limit, but only if the education is required by their current employer to keep their present job.

14. How much tax must I pay?

This is determined by a graduated scale, which means that individuals with higher incomes will be taxed at a higher percentage of their income. The scale, called a tax table, is printed in the instruction booklets for both the federal and the state forms and are based on the computations in those forms.

Generally, individuals who have earned no more than $3400 for the entire 2007 tax year will owe no tax; nevertheless, they are required to file a tax return (and Form 8843) and may be entitled to a complete refund of income taxes withheld.

15. What is a dual status return and how do I prepare it?

An individual who was a nonresident taxpayer for part of a year and a resident taxpayer in the same year generally files a dual status tax return. Two examples of dual status taxpayers are individuals who became permanent residents during the second half of the year and H-1B professionals who entered the U.S. in 2007 and were here more than half of the year. (An individual who becomes a permanent resident during the second half of the year may choose to file as a resident taxpayer for the entire year, gaining the benefit of the standard deduction and family exemptions and losing tax treaty benefits, or may choose to file a dual status return, gaining the benefit of tax treaty exemptions but sacrificing the standard deduction and family exemptions.) A dual status taxpayer prepares both Form 1040 and either Form 1040NR-EZ or Form 1040NR and files them together. A dual resident may be treated as a nonresident taxpayer for purposes of a tax treaty but is treated as a resident taxpayer for other U.S. taxes. See Question #20.

An individual who was a resident taxpayer on the last day of the year files Form 1040 as the primary tax return. On the resident tax return, Form 1040, "Dual Status Return" is marked at the top of the form. This form is used to report income and calculate tax on the portion of the year the individual was a resident taxpayer. On the nonresident return, Form 1040NR-EZ or Form 1040NR, "Dual Status Statement" is noted at the top, reporting the income and calculating the tax for the portion of the year the individual was a nonresident.

Individuals who were resident taxpayers in the U.S. but returned home permanently during the year are also dual status taxpayers. Since they were nonresident taxpayers on the last day of the year, they file Form 1040NR-EZ or Form 1040NR as their primary tax return and Form 1040 as their supplementary statement.

Married dual status taxpayers may file a joint return only if they decide to be treated as resident taxpayers for the entire year. This usually is to the advantage of international students or scholars, unless they earn significant income from non-U.S. sources. A qualified couple who makes this choice files only a joint resident return and attaches a statement with each spouse's name, address, Social Security number and a declaration that the couple desires to be taxed as residents for the entire year. Both must sign the statement and the return. Such individuals can never again elect to be taxed as nonresidents, regardless of changes in circumstances. Couples making the choice to file as resident taxpayers may not benefit from tax treaties and are responsible for U.S. tax on worldwide income.

Certain restrictions apply to dual status returns. A dual status taxpayer cannot claim a standard deduction, but can itemize allowable deductions. Personal exemptions can be claimed for spouse and dependents but the total amount may not exceed the taxable income earned during the period of residence. An H, O or TN visa holder who is married and meets the substantial presence test may elect to file a joint return, rather than file as a dual status taxpayer, and claim the standard deduction.

There are special rules for amending the tax return of a previous year if the taxpayer qualified as a resident taxpayer in the following year, based upon qualifying too late in the previous year to be treated as a resident taxpayer.

Refer to Publication 519 for more information.

16. When and where are federal and state tax returns filed?

Individuals who earned wage, salary, or tip income in the U.S. in 2007 must file Form 1040NR-EZ or Form 1040NR and Form 8843 by April 15, 2008 with the Internal Revenue Service Center, Austin, TX 73301-0125. Individuals whose only income earned in the U.S. is a scholarship, fellowship, or interest from a bank, savings and loan institution or credit union must file by June 15, 2008 with the same office.

Individuals in the F-1, F-2, J-1, or J-2 visa classification who did not earn income in the U.S. in 2007 must file Form 8843 by June 15, 2008 with the same office.

Dual status returns also must be filed by April 15, 2008 with the Internal Revenue Service Center, Austin, TX 73301-0125

Individuals who earned income from a Nebraska source in 2007 must file the Nebraska Individual Income Tax Return, Form 1040N(including Schedule III, the nonresident tax computation section), by April 15, 2008 with the Nebraska Department of Revenue, P.O. Box 94818, Lincoln, NE 68509-4818.

A nonresident federal tax return (Form 1040 NR-EZ or Form 1040 NR) may not be filed electronically.

17. Should I keep a copy of the tax returns I file?

Yes, you will need copies of all federal tax returns you have filed to obtain a Certificate of Tax Compliance before you leave the U.S. See Question #19. The IRS also selects a certain number of tax returns to audit (review in detail). Having your own copy will prepare you for this discussion. You also should keep a copy of the Nebraska Individual Income Tax Return.

18. Will the IRS send me anything to prove that my tax return was received?

No.

19. What is a Certificate of Tax Compliance and how is it obtained?

A Certificate of Tax Compliance, sometimes called a sailing or departure permit, (Form 1040-C or Form 2063) is a document issued by the IRS as evidence that all federal tax obligations have been met before an alien leaves the U.S. It must be obtained by all H-1B visa holders but only by those F and J visa holders who earned taxable income in the U.S. other than earnings from authorized on-campus or off-campus employment. International Affairs has additional information for H-1B visa holders.

20. What other taxes are assessed in the U.S.?

Social Security and Medicare (FICA): a federal payroll tax to support the elderly and certain people with medical needs. F-1 or J-1 visa holders who are legally employed and who file income tax returns as nonresident taxpayers do not pay this tax. J-2 and H-1B visa holders are assessed 7.65% of their pay and their employers must pay a matching amount directly to the government. The United States has entered into bilateral agreements with about 10 countries to eliminate the double taxation of people employed in another country who normally would be subject to social security taxation in both countries. These agreements provide for coverage by the social security system of the home country. Therefore, the taxes are paid to the appropriate agency in the individual's own country rather than as U.S. Social Security tax. Refer to Publication 519 for more details.

There are a variety of other taxes which are not related to income: for example, state and city sales taxes, personal property tax (on automobiles, boats, etc.) and real estate taxes.

IMPORTANT NOTE: Since each person's situation is unique, an individual might consider obtaining expert advice before completing and filing income tax returns. As indicated earlier, the IRS will provide expert advice for free by telephone. A professional tax consultant or preparer will charge a fee for such advice.