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I am non-resident alien on scholarship grant from my Country

who paid all my expenses...
I am non-resident alien on scholarship grant from my Country who paid all my expenses including my salary, fees to my working place an everything. all the money get paid to my work place and then they pay me my salary. I was wondering if i am currently in J1 visa and I have to go back to my country after my training why should i pay the tax ???

I also noticed they my tax withholding is too high and change with each pay stamp. Can you please advice me about this and is there like a consultant i can meet in person to explore this with
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Answered in 20 minutes by:
9/1/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,212
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Robin D. :

Hello and thank you for using Just Answer,
I understand you confusion on the reason for the tax. The US tax laws cover this though and because you are physically in the US and the US entity is paying your salary (even though they are getting the money from another source) they are required to withhold.
The withholding is base don the amount of your pay so if the amount changes with each pay period the withholding would also be a little different each time.
Even though you are here on a J1 VISA and do not intend to stay, you are taxed on the income you earn while here in the US. Now the US does have tax treaties with countries and sometimes those treaties allow for no tax to be paid by the nonresident alien in the US.
You stated "we have no tax in my country" just by using that statement it is doubtful that there is a tax treaty and if there were then possibly no provision for your not being taxed in the US while you are here and earning the wages unfortunately.

Robin D. :

I would certainly advise that you seek to speak with a tax professional face to face about your situation.

Robin D. :

We do not offer that here at Just Answer but I am sure you would first want to start with your "employer".

Robin D. :

If it is a university many already have publications for students that explain all the tax issues in depth and in an easy to understand format.

Customer:

no my salary is the same but the tax changes over the last 4 payments

Robin D. :

The employer has a very specific formula they must use for the withholding because you are a nonresident alien (this is because of your VISA.

Robin D. :

I would suggest you ask your employer then to show you haw they are calculating your withholsding.

Robin D. :

If the amount is exactly the same each time your formula would not change.

Customer:

i see , do I have an idea about the responsible department for such a thing

Robin D. :

Yes, you would want to speak with Human Resources

Robin D. :

They would then be able to send you to the individual that handles their payroll

Customer:

really , i already contacted them

Robin D. :

Is it a university?

Customer:

what do you think about this

Customer:

  • All amounts paid to NONRESIDENT ALIENS in the form of scholarships, fellowships, grants, and financial aid, which are not excludible from gross income as a "qualified scholarship" under Internal Revenue Code section 117 must be reported to IRS on Forms 1042 and 1042-S, regardless of the amount paid, unless the grant is from sources outside the United States, in which case the grant is neither reportable nor subject to withholding. The "source" of a scholarship or fellowship grant is generally the residence of the payer. However, a scholarship or fellowship paid by a resident of the United States to a nonresident alien who conducts his study, training, or research outside of the United States is considered to be a foreign source grant and is not reportable to the IRS and is not subject to withholding of Federal income tax.

  • In general, the taxable portion of a scholarship or fellowship paid to a NONRESIDENT ALIEN is subject to Federal income tax withholding at the rate of 30%, unless the payments are exempt from tax under the Internal Revenue Code or a tax treaty. However, payees who are temporarily present in the United States in F-1, J-1, M-1, Q-1, or Q-2 nonimmigrant status are subject to a reduced 14% withholding rate on the taxable portion of the grant because such individuals are considered to be engaged in a U.S. trade or business under Internal Revenue Code section 871(c).

Robin D. :

Yes, that is correct but as you see the percentage used would not mean your amount would change if you are paid the same each period.

Robin D. :

That info just re-enforces that it is taxable.

Customer:

All amounts paid to NONRESIDENT ALIENS in the form of scholarships, fellowships, grants, and financial aid, which are not excludible from gross income as a "qualified scholarship" under Internal Revenue Code section 117 must be reported to IRS on Forms 1042 and 1042-S, regardless of the amount paid, unless the grant is from sources outside the United States, in which case the grant is neither reportable nor subject to withholding.

Customer:

neither reportable nor subject to withholding.

Robin D. :

Your grant is not paid to you, you are receiving a payment from the US payer.

Robin D. :

If the source form your home country were paying you directly then it would not be taxable to you in the US.

Customer:

i understand now

Robin D. :

I know it seems unfair

Customer:

those tax for retirement plans right

Robin D. :

The FICA you mean?

Customer:

what is FICA

Robin D. :

FICA is the Social Security and Medicare taxes that are withheld. I thought that was what you were meaning when you said
those tax for retirement plans right

Robin D. :

What did you mean by "those tax for retirement plans right"

Customer:

everything

Customer:

too many tax subtitle in my payroll

Robin D. :

I see

Customer:

Federal W/O

Robin D. :

There should be Federal, that is straight Income tax

Customer:

Federal OAS

Robin D. :

State is for the state income

Customer:

ok

Robin D. :

OAS is Social Security

Robin D. :

Old age yes

Robin D. :

Medicare is health

Customer:

what about Baltimore city

Robin D. :

Oh yes, some cities also tax income not all but some

Customer:

Maryland is the state tax but Baltimore city

Robin D. :

Baltimore does

Customer:

OOOH my God , this is too much money

Customer:

ok now that means i have to pay the tax , right

Robin D. :

I know

Robin D. :

Yes, unfrotunately

Robin D. :

unfortunately

Customer:

is there an agency that do everything for me when i have to get my tax back

Customer:

before may

Customer:

next year

Robin D. :

You can file anytime from Jan to April of 2014 for the 2013 tax year

Robin D. :

Any of the tax offices in your area should be able to complete that for you

Robin D. :

or you could use an online tax preparation service

Customer:

ok , me and my husband are living in different state

Customer:

do we have to claim the tax back together or separately

Customer:

we are both receiving funds from our government

Robin D. :

You would need to each file your own returns but as you are technically a nonresident you would not be allowed to file joint usually. If they are a resident then you both need to have a professional look to see if filing together as a joint would be more beneficial

Robin D. :

Sometimes if one is a resident then it benefits to file joint but it would require a thorough calculation of both your situations

Robin D. :

I would suggest you get a professional that is trained in nonresident alien taxation, just make sure you ask before you pay or have them complete

Customer:

i see , in summery it means if i am non-resident they have the right to take my money but i don't have the right to get it back

Robin D. :

No

Robin D. :

It means that you pay tax because you are working in the US and are physically here but you may be able to get some back

Customer:

some back ?? by the end of the year almost more than 12,000 is already gone from my own money

Customer:

any way , That was very helpful; better even from my university Human resources

Robin D. :

Some, you would not be entitled to receive all back and the amounts withheld for anything but the Federal and State income taxes are not refunded for anyone (resident, citizen, or nonresident)

Robin D. :

I am glad that you have a better understanding.

Customer:

no problem, Thank you again

Customer:

have a great weekend

Robin D. :

You are most welcome

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,212
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
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Robin D.
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,212
16,212 Satisfied Customers
Experience: 15years with H & R Block. Divisional leader, Instructor

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