Life in a college town is filled with intellectual and cultural richness that enhances the lives of the residents and the community at large. A college town is also filled with students, scholars, and professors from faraway places and others who may travel abroad to do research or teach. These individuals have special tax opportunities and responsibilities, and it is important for them to understand how to remain in tax compliance.
Foreign students, scholars, and professors generally enter the United States with visas that allow them to remain in the country without becoming a resident for tax purposes. This exemption is not permanent but does protect them for a period of time. During this period, the individual is considered a nonresident alien (NRA) and is only required to report income from U.S. sources.
Nonresident alien students and scholars are required to annually file Form 8843, Statement for Exempt Individuals, to claim their exempt status and to report U.S. source income such as taxable scholarships or fellowships, U.S. wages earned, and other U.S. source income. There is no minimum dollar amount of income that triggers an income tax filing requirement for a nonresident alien, but a nonresident alien whose only U.S. source income is wages is not required to file a U.S. federal income tax return unless his or her U.S. source wages exceed the personal exemption amount. Students or scholars who only have income from foreign sources are not required to file a U.S. tax return but will still need to file Form 8843 to report their exempt status.
Professors who are U.S. citizens or residents and spend time working abroad need to file their U.S. tax returns as usual but may be able to either exclude some of their foreign earned income or receive a tax credit for foreign taxes paid. They may also be able to deduct some of their travel and living expenses while out of the country.
Over the next few weeks, we will explore these topics in more detail and provide some examples of international tax issues related to students, scholars, and professors.