introduction to us taxesU.S. tax laws and regulations are very complex. For this reason, many international students and their dependents fail to comply with U.S. tax laws. However, it is essential that you know and comply with your tax obligations. Failure to do so may lead to significant tax penalties and fines, and may complicate or even jeopardize your immigration status or your eligibility for future immigration benefits.
Conversely, it is important to understand tax laws to ensure that you do not pay more taxes than you need to. Many students who pay taxes fail to take full advantage of the tax benefits for which they are eligible. It is therefore to your benefit to attain an understanding of the U.S. tax system.
The U.S. Income Tax System
The U.S. payroll or income tax system follows a reconciliation system. Employers are, in most cases, required to withhold taxes from an individual's pay or compensation. Then, the individual employee files an annual tax return to reconcile how much taxes were withheld against how much taxes the individual owes. If too much tax was withheld, the individual gets a refund; if not enough taxes were withheld, then the individual may have to pay additional tax.
Therefore, there are two circumstances at which students may have questions about taxation:
- Tax withholding at the time of compensation. Every time you are paid wages, salary, or other forms of compensation, your employer may be required to withhold taxes from your compensation. The taxes that are withheld are then submitted to the U.S. Internal Revenue Service and other applicable tax authorities. Whether taxes should be withheld, and if so what kinds of taxes and how much tax, will depend on your individual situation.
- Annual filing and tax reconciliation (income tax return). Every April, you must file an annual income tax return to reconcile (a) how much taxable income you made in the previous calendar year against (b) how much taxes were withheld by your employer or employers. If too much taxes were withheld, you will be eligible for a refund. If too little taxes were withheld, you will need to pay taxes. Note:international students and their dependents are required to make an annual filing with the U.S. federal government even if they had no taxable income during the previous calendar year.
Different Levels of Taxes
A student who has taxable income may be subject to different kinds of tax withholding. The following types of taxes may be withheld:
- Federal income tax
- State and local income tax
1. The amount of federal income tax that is withheld will vary according to your tax status and whether there is an applicable tax treaty between the U.S. and your country of residence.
2. The amount of state and local income tax that is withheld will depend on the state you are working in, the state you are living in, and the type of work you are doing. Note that in addition to the U.S. federal government, each state has its own tax laws and regulations. A student who has taxable income and is subject to federal income taxation may or may not need to pay state or local income taxes. For example, New York, New Jersey, and Connecticut each have state income taxes, but very different tax systems and tax requirements.
3. Whether or not you are required to pay Social Security or FICA taxes depends on your tax status and the type of work you are doing.
More detailed information about the above is available throughout this web site.
Because of the complexity of U.S. federal and state tax laws, the Office of International Services is unable to provide tax advice or assistance in individual cases. However, the information presented in this web site will cover most situations applicable to F-1 or J-1 students and their dependents.