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SLC.edu / Offices and Services / International Students / Glossary of U.S. Tax Terms

Glossary of U.S. Tax Terms

Calendar Year: International students are considered to have been in the USA for a “calendar year” if, during that year, they were present in this country for one or more days, between January 1 and December 31. For example, if you were in the USA from December 25-31, 2005, you were actually here for only seven days, but for US tax purposes you were in the USA for one calendar year.

Compensation: This is any payment made to an individual currently in the US, in exchange for services performed. Payment might include cash, reduced tuition, reduced rent, or other method of payment. You might be able to earn compensation as an employee, an intern, a contractor, or as a worker in some other capacity.

Deduction or Exemption: This is a specific amount of money you may deduct from your total taxable income when calculating how much tax you must pay for a given year.

FICA Tax: Sometimes known as the “Social Security tax,” FICA is a combination of a retirement pension and unemployment benefits tax imposed on employers and employees. The current rate for this tax is 15.3%: the employer pays 7.65%; the employee pays 7.65%.

Foreign-Source Income: Income derived from sources outside the USA. For non-resident aliens, this type of income is not taxable. Only US-source income is taxable. See Publication 519, Table 2-1 on page 11, to determine whether income is foreign- or US-source.

Form 1040ES: This is a form you may use during the course of the tax year to estimate taxes owed and make payments to the IRS accordingly. Students rarely use it. Most often, businesses and independent contractors are the only entities that use it.

Form 1040NR: Non-resident aliens are required to use this form, if they are eligible to claim dependents, tax treaty, or other exemptions or deductions, or if their US-source income during 2005 was over $50,000.

 Form 1040NR-EZ: Non-resident aliens may use this form, if they have no dependents, are claiming no additional exemptions, maintained bank accounts only to transfer money from their home country to cover expenses (not as investments), and earned under $50,000 in 2004. It is easier to use than a form 1040NR.

Form 8843: This is for exempt individuals. Most international students are exempt individuals, meaning that they are exempt from having to count all the days they were present in the USA, for purposes of the substantial presence test. Exempt individuals are NOT exempt from having to file tax returns and pay taxes accordingly. See Publication 519 for details.

Form I-94: Form I-94 is your Arrival/Departure card (stapled into your passport). The date which is written on this card is the date on which permission to stay in the USA expires. Many students in F-1 status have “D/S” written on their I-94. This means “duration of status.” Students with “D/S” written on their cards may stay indefinitely in the USA, as long as they remain within U.S. Citizenship and Immigration services (USCIS) guidelines for full-time students making reasonable academic progress.

DS-2019: Form DS-2019 (formerly Form IAP-66) is a form that is given to all J-1 visa holders by the agency that sponsored their visit to the USA. It describes the details and purpose of their visit. The category of your J-1 visa is set forth in section 4 of Form DS-2019.

Grants: Grants, as defined by the IRS, include “fellowships,” “scholarships,” or other sums of money, as long as you are a candidate for a degree, and the grant does not represent compensation for required service (such as teaching or research).

U.S. Citizenship and Immigration Services (USCIS): The governmental entity authorized to direct and enforce US immigration laws.

Internal Revenue Service (IRS): The US governmental authority charged with enforcing tax laws.

Itemized Deductions: If you file the 1040NR, you may list specific expenses within the guidelines of Publication 519, and deduct the amount of these expenses from your taxable income.

Medicare Deductions: Medicare Deductions are imposed on wages and salaries and are credited to a health insurance program for the elderly. As non-resident aliens are not expected to benefit from Medicare, they do not have to pay into it.

Original Date of Entry: This is the first date you arrived in the USA – before beginning your education or training. It is not the date that you last entered the USA, after returning from vacation or another trip outside the USA.

Non-resident Alien: The US tax residency status of a non-US citizen who is temporarily present in the USA. Unlike US citizens and resident aliens, who are required to pay taxes on their worldwide income, nonresident aliens are required to pay taxes only on their income from US Sources. In addition, if a tax treaty exists between the non-resident’s home country and the USA, all or a portion of US-source income may be exempt from taxes as well. (See Publication 901: US Tax Treaties.)

Permanent Resident Alien: Also known as “green card holder,” this is an individual who has been accorded the privilege of residing in the USA as a permanent resident. These individuals are taxed in the same manner as US citizens - on income worldwide.

Resident Alien: The tax residency status of an individual who has been in the USA for a sufficient period of time to meet the substantial presence test. Resident aliens are taxed in the same manner as US citizens – on income worldwide.

Social Security Deductions: Also known as the FICA tax, Social Security Deductions imposed on wages and salaries and credited to a combination of a retirement pension and unemployment benefits. The current rate for this tax is 15.3%: the employer pays 7.65%; the employee pays 7.65%. As they are not expected to benefit from Social Security, non-resident aliens do not have to pay into the Social Security fund.

Substantial Presence Test: This test, used to determine US residency status for tax purposes, generally involves calculating number of days that an individual has been in the USA over a period of three years.

Tax Return: An official statement filed with the IRS to report all income during a particular calendar year. All international students in the USA during the 2006 calendar year must file tax returns.

Tax Year: This is the period of time from January 1 through December 31 of any given year.

US-Source Income: Income from sources within the USA. For non-resident aliens, this type of income is taxable (as opposed to “foreign-source income,” which is not). See Publication 519, Table 2-1 on page 11, to determine whether income is foreign- or US- source.

US Residency Status for Tax Purposes: Non-US citizens’ liability to pay US taxes depends on their US residency status. All non-US citizens are classified as either “resident aliens” or “non-resident aliens.” This status is unrelated to INS or visa status.

Visa Status: This is marked on the visa stamp or sticker in your passport. When speaking about USCIS regulations (as opposed to IRS regulations), this is “your status” – i.e., F-1 or J-1.

Withholding: If you are an employee, your employer probably withheld a percentage of each paycheck and paid your estimated tax liability to the IRS, state, and city. In this way, you are not left with a very large bill to pay, by April 15th of the year in question. In fact, if estimated liability was too high, you may be owed a refund.