All wage income received in the USA is subject to three main types of tax:  (1) federal income tax; (2) Social Security tax; and (3) Medicare tax.  Social Security taxes and Medicare taxes are collectively called "FICA taxes."  Persons in F-1 and J-1 nonimmigrant status are exempt from FICA payments for a certain period of time, as discussed below.

 

General Student FICA Exemption

FICA taxes do not apply to payments received by students employed by a school, college, or university where the student is pursuing a course of study. An examination of the student's primary relationship with OSU will be made in order to determine if employment or education is predominant in the relationship.

 

International Student & Scholar FICA Exemption

International students, scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other aliens temporarily present in the United States in F-1,J-1,M-1, or Q-1/Q-2 nonimmigrant status are exempt from FICA taxes on wages as long as such services are allowed by USCIS and have not passed their substantial presence test to become a resident alien for tax purposes. Employment includes the following: On-campus student employment up to 20 hours a week (40 hrs during summer vacations) Off-campus student employment allowed by USCIS. Practical Training student employment on or off campus. Employment as professor, teacher or researcher. Employment as a physician, au pair, or summer camp worker.J-1 Scholars, Teachers, Researchers, Trainees and Physicians and other non-students in J-1 status are considered NRA (Non Resident Alien) for tax purposes and exempt from FICA taxes for the first two calendar years of their presence in the USA. After their second calendar year period, they will become a resident alien for tax purposes and subject to FICA withholding unless they depart the USA in less than 183 days into their 3rd calendar year.

 

Limitations on FICA Exemption for International Persons :

• • • The FICA exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status.
    • The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
    • The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status that is not exempt or to a special protected status.
    • The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 nonimmigrants who become resident aliens.
    • The FICA exemption only applies to international persons in F-1, J-1, M-1, Q-1, or Q-2 visas and who are still classified as nonresident aliens for tax purposes under US tax regulations.
    • International students in F-1, J-1, M-1, Q-1 or Q-2 nonimmigrant status are entitled to the FICA exemption for the first 5 calendar years of physical presence in the USA. After this period of time has passed, international students are classified as Resident Aliens for Tax Purposes and are subject to FICA tax withholding. However, if they remain students enrolled half time or more, they may still be eligible to receive the FICA exemption.
    • The five year exemption permitted to F-1, J-1, M-1, Q-1 or Q-2 students also applies to any period in which the international student is in "practical training" allowed by USCIS, as long as the foreign student is still classified as a nonresident alien for tax purposes.

International persons in H-1B, TN, O-1 or E-3 status are fully subject to FICA tax withholding. No FICA exemption is available to persons in these visa categories.

 

"Six Year Look-Back" Rule

Under the "six year look-back rule," persons in F, J, M or Q visa status must have at least two calendar years of NRA (Non Resident Alien) for tax purposes status during the prior six calendar year period from the current year.Internationals who remain in the USA for lengthy periods of time will find that they have moved from NRA (Non Resident Alien) for tax purposes to RA for tax purposes and then back to NRA (Non Resident Alien) for tax purposes. Moving back to NRA (Non Resident Alien) for tax purposes means classification as "Single or Married Filing Separately" for tax purposes regardless of the number of dependents or marital status.

 

Measuring a Calendar Year

When measuring an alien's date of entry for the purposes of determining the five calendar years or the two calendar years mentioned above, the actual date of entry is not important. It is the calendar year of entry which is counted toward the two or five calendar years respectively. For example, a foreign student who entered the United States on Dec. 31st of the given year. That given year counts as the first of their five years as an "exempt individual."

 

The Tax & Compliance Services Department will need to schedule a Glacier Tax Session with you. This could be a one-on-one session or a group session, depending on the time of year. You must attend a Glacier Tax Session if you plan to be employed at Oklahoma State University and to complete the work permit process. Your OSU work permit is not complete until you have attended a Glacier Tax Session with Tax and Compliance Services. Please wait to upload your work permit to UKG (or provide to your hiring department) until after the session to ensure that your payroll and tax information will be set up correctly.

 

Unless specifically instructed otherwise by Tax and Compliance Services, you will need to bring your own laptop (laptops are available for check out from the OSU Library) when attending a Glacier Tax Session. You will also need to bring a passport with visa, I-20 (or DS-2019 if you are on a J-1 visa), I-94, and a printed copy of the partially completed work permit provided by ISS. All immigration documents must be originals or printed copies.  Plan ahead and bring all documents and copies to the session.

 

Please review Chapter One of the IRS Publication 519 for the formula used to calculate your status as resident or non-resident for tax purposes, http://www.irs.gov/pub/irs-pdf/p519.pdf    For purposes of the SPT, students that are temporarily present in the U.S. under an F, J, M, or Q visa are exempt from counting days toward the substantial presence test for five (lifetime) calendar years. This does not mean you will be exempt from tax.  In the event that you arrive in the U.S. on December 31^st of a given year, you are considered present in that U.S. for the ENTIRE year for purposes of the substantial presence test.

 

A teacher or trainee temporarily present in the U.S. under a J or Q visa is exempt from counting days toward the substantial presence test for two years.  After this two year period, if the J or Q visa holder is exempt for any two of the prior six years, they are NOT exempt in the current year.  This exemption refers to counting days toward the substantial presence test, not tax exemption.

 

Days of Presence in the United States - You are treated as present in the United States on any day you are physically present in the country at any time during the day.  Please see Chapter One of IRS Publication 519 for a list of exceptions to this rule. 

The United States has income tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are exempt from US income tax or taxed at a reduced rate on certain types of income received from a US source.  The tax treaties vary; some allow for tax exemption and reduction on many different types of income while others do not.  If  a tax treaty does not address a specific type of income, then no tax exemption or reduction can be applied to that income and persons receiving that income will have to pay US federal income tax.   

 

Do States Honor Tax Treaties?

Some states honor the provisions of U.S. tax treaties but some states do not. 

 

Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens for Tax Purposes

Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption.   Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income.  However, if you entered the United States as a nonresident alien for tax purposes, but are now a resident alien for tax purposes, the treaty exemption may continue to apply if the tax treaty has an exception to its savings clause (see below) that allows you to continue to claim treaty benefits.  

 

Saving Clause & Exception to Saving Clause

Most tax treaties have a saving clause. A saving clause preserves or “saves” the right of each country to tax its own residents as if no tax treaty existed. Therefore, once an international person becomes a US resident or resident alien for tax purposes the tax treaty benefits can no longer be claimed.

However, many tax treaties have an exception to the saving clause, which may allow an international person to continue to claim certain treaty benefits even after becoming a US resident or resident alien for tax purposes.

 

Time Limit for Claiming Tax Treaty Benefits

Many treaties limit the number of years you can claim a treaty exemption. For international students, apprentices, and trainees, the limit is usually 4–5 years from the date of entry into the USA.  For teachers, professors, and researchers, the limit is usually 2–3 years from the date of entry into the USA.  Once you reach this limit, you can no longer claim the tax treaty exemption.   It is important to note that the tax treaty benefit clock begins as of the date you enter the USA.  Therefore, if you do not claim tax treaty benefits during the allowed time, you cannot claim them later.   For example, a J-1 researcher who enters the USA on January 1, 2010 who can claim tax treaty benefits for two years, must claim those benefits in 2010 and 2011.  If the J-1 researcher does not earn any income in the USA for the first two years, the opportunity to claim tax treaty benefits is lost unless an exception to the saving clause exists. Another example:  F-1 student enters the USA on August 1, 2006.  The student earns no income for first three years but receives a paid internship in last semester of senior year (i.e. 2010), has a year of Optional Practical Training and then continues on to graduate studies and works as a graduate teaching assistant from August 2011 - May 2013.  Since the student arrived in the USA in August 2006, tax treaty benefits could be claimed for no more than 5 years.  The student can claim the tax treaty benefits in 2010 only. For the additional pay as a graduate teaching assistant, the student must pay US income tax unless an exception to the saving clause exists.

For more information on tax treaties, please follow this link to the IRS Tax Treaty page.

All international persons are considered nonresident aliens for tax purposes for a fixed period of time. The fixed period of time is determined by the visa status and classification. International persons become resident aliens for tax purposes as such time as their visa status allows this designation change.

 

F-1 and J-1 students are considered nonresident aliens for tax purposes for the first five calendar years of presence in the USA.

 

J-1 scholars, teachers, trainees, researchers, professors and other non-students, are considered nonresident aliens for tax purposes for the first two calendar years of their presence in the USA.

 

During the time that an international person is considered to be a nonresident alien for tax purposes, they will be classified on their W4 as SINGLE even if they are married and have dependents.

 

Exceptions to this regulation are only permitted if a tax treaty exemption exists that allows for different W-4 marital status designation or the ability to claim additional allowances.