Frequently Asked Questions - Tax

I just noticed that my employer started deducting CT tax from my paycheck. Prior to that, I had been receiving full amount. I was wondering if I hadn’t filed some the proper forms. Could you please explain this to me? Thank you.

If you previously claimed exemption from Connecticut tax withholding, you are required to update your state tax withholding form CT-W4 each year, before February 16th, you should have received an email notice from the Payroll office. You can update your form in the Payroll office located at 155 Whitney Avenue, Room 100.

I recently completed Form W-4 in the Payroll office. I am a new post-doc in pharmacology department and the Payroll office returned Form W-4 to me along with a letter stating that I am classified as a nonresident alien for tax purposes. In fact I am currently a ‘green card holder’ and have the permanent resident status. Can you please check to see what needs to be done to correct that?

In order to correct your tax residency status in the Tax Office files, please send to us a copy of your green card, once the Tax Office receives this document we will update your record. You will also need to complete and submit a new Form W-4 to the Payroll office.

When I filed the last year’s tax return, I found there was Social Security and Medicare (FICA) tax withholding on Form W-2. However, since I am an international student holding F-1 visa, I am not subject to FICA taxes, it this correct?

For an individual to be exempt from FICA tax under IRS section 3121(b)(19), the individual must be: A nonresident alien; Present in the U.S. under an F, J, M, or Q immigration status; Performing services in accordance with the primary purpose of their immigration status (e.g., under the “-1” status and legally employed).

If you meet all of these criteria you can request a refund from your employer.

I receive semimonthly graduate student stipend. I am on J-1 student status and I am a nonresident alien. What is the tax rate of withholding 14% or 30%?

The taxable portion of your stipend will have a 14% tax withholding. The reduced tax rate of 14% requires that the grantee be (i) a nonresident alien temporarily present in the U.S. under an F, J, M or Q immigration status (either “-1” primary status or the “-2” dependent status) and (ii) the recipient of the stipend, scholarship or fellowship grant. Stipends, scholarships and fellowships are considered non-service payments.

I am a nonresident alien student under F-1 visa status, I was granted $2,000.00 from Leitner and $620.00 from the Program in Agrarian Studies. Both fellowship grants will be used for research/study outside the U.S. Are these fellowships taxable?

The IRS regulations state that scholarship and fellowship payments will be “sourced” based on the location of the payor; except when the U.S. based payor makes payments to a nonresident alien to study or conduct research outside the U.S.; these payments are treated as “foreign source income”, not subject to tax or reporting to the IRS.

I am a tax resident of China, I am a student on F-1 visa. I noticed there is federal tax withholding in my paycheck; however, there should not be any tax withholding since there is a tax treaty with China for the $5,000 of salary. How can I correct the federal tax withholding?

In order to be exempt from federal tax withholding first you must submit to the Tax office Form 8233 Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Once the Tax office receives your properly completed and signed Form 8233 you can be exempt from federal tax withholding effective ten (10) days after the Tax office sends this form to the IRS.

I sent Form 8233 to our foreign lecturer to fill out, sign, and return so that I could process his (second) payment without taxes taken out. The original wire and CR I sent over did not include this form because I was not aware that the U.S. had a tax treaty with Norway. At any rate, I need to rewire him more money because his first payment ended up being taxed $900 (30%). Can I submit Form 8233 after he already received and cashed his check?

Federal taxes are not deducted from the payment only if the check request documentation includes a properly completed Form 8233. Norway does have a tax agreement with the U.S. for independent personal services, Article 13. Since he already received the payment, at this point he can file a federal tax return for the year in question (Form 1040NR, if nonresident alien) and claim a tax refund pursuant to the treaty with Norway. He will receive Form 1042-S from the University stating the amount of the payment as well as the taxes withheld. The University cannot refund taxes properly withheld at the time of payment.

Can my wife on J-2 visa status claim the tax treaty benefit between U.S. and Germany?

No, the primary purpose of a J-2 status individual is to accompany the spouse or dependent (i.e., J-1). There are no tax treaties that allow exemption for these individuals; therefore, your wife is subject to withholding federal tax at the standard nonresident alien rates.

I know that my country, France, has a tax treaty agreement with the U.S. What do I need to do to be exempt from U.S. tax under the treaty?

The existence of an income tax treaty does not mean that you will automatically qualify for the tax exemption. You must meet the qualifications for the tax exemption as set forth in the tax treaty, you also need to file the appropriate forms in a timely fashion.

How do I obtain an Individual Taxpayer Identification Number (ITIN)?

A foreign individual who does not have a Social Security Number (SSN) and wants to claim tax treaty benefits must have an ITIN. They can apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification Number. It takes the IRS approximately 4-6 weeks to process the application. If a tax treaty benefit is claimed based on the ITIN application (i.e., before the ITIN is actually issued), it is the responsibility of the International Tax Department to follow up with the visitor and to obtain the ITIN before year-end reporting.

Note: If the foreign vendor does not want to claim treaty benefits or he comes from a non-treaty country, he does not need to apply for an ITIN.

To apply for an ITIN, submit the original Form W-7 along with notarized copies of the foreign vendor’s passport including the I-94 Record and visa stamp and a copy of Form 8233 to the IRS at the address listed on the Form W-7 instructions. On Form W-7 under “Reason you are submitting Form W-7”, check boxes a and h. In the dotted lines next to h write “Exception 2” along with the treaty country and the relevant article number.

If submitting a payment transaction with the anticipation of receiving an ITIN from the IRS for a vendor, include a copy of the Form W-7 with the payment request.

Contact the Tax Department if you have questions: phone (203) 432-5597 or (203) 432-5530 or email Daysi Cardona.

What is the difference between citizenship and tax residency?

Citizenship is the status of being a citizen of a country:  you have the right to live there, work, vote and pay taxes. 

You are considered a tax resident of a country where you are required to pay taxes, whether or not you are a citizen there.  This may vary depending on the specific requirements of the country.

How do I know what kind of visa the payment recipient has?

The payment recipient will be able to tell you their visa status since they had to apply for the visa prior to arriving in the U.S. Keep in mind that visitors from visa waiver countries do not have a visa: they can enter the U. S. with only their passport and either a visa waiver for business (WB) or a visa waiver for tourism (WT). They must check the correct visa status when they complete the International Information Form (IIF).

Payment recipients visiting from another institution will likewise already have a visa sponsored by that other institution. Please request their visa status and review the Payment Planning Tool for Individuals to verify that the payment is permissible.

Why do I need to submit this documentation with the payment request?

Documentation is required for two reasons: to verify that the payment recipient’s visa status allows them to receive payments and to determine the recipient’s tax obligations.

The immigration documents are required to confirm the foreign visitor can receive payments from the University. U.S. immigration regulations prohibit or limit payments to certain visa statuses.

According to Internal Revenue Service (IRS) regulations, a foreign person is subject to U.S. tax on their U.S. source income. Payment made to or on behalf of a foreign person who is considered a nonresident alien is subject to 30% federal tax withholding. The IIF and/or Form W-8BEN (W-8BEN-E for entities) are required in order to determine the foreign payment recipient’s U.S. tax residency (e.g. resident alien or nonresident alien) so that the University can meet tax withholding requirements.

Payments to foreign vendors for services performed abroad are not subject to tax withholding or reporting. The Form T-100, Statement for Independent Personal Services Performed for Yale University Outside the United States and/or Form W-8BEN (W-8BEN-E for entities) are required in order to establish location of activity and tax residency.

Is my residency status for tax purposes the same as my immigration status?

Your residency status for tax purposes is separate from your designation for immigration purposes.  You might qualify as a resident for tax purposes while remaining a non-immigrant alien for immigration purposes.  If you are present in the U.S. on a temporary visa, you might be a resident alien for tax purposes, a non-resident alien, a non-resident alien who is eligible to elect to be taxed as  a resident, or a dual-status alien.