As an international student you may be receiving payments that are subject to income tax withholding. For example:
- wages from your on-campus employment
- the part of financial aid that covers room and board expenses
- earnings from CPT / OPT employment
- payments made on your behalf by the College (for example: flights, WIG (internship grants), emergency medical services (dental, vision), and ASWC student government stipends, etc)
Financial aid that covers tuition and college fees is (fortunately!) exempt from income tax in the U.S.
Income tax withholding determination
So, how much money will be taken from your payments? This depends on the type/source of income, your nationality, applicable international tax treaties, the length of your stay in the U.S. and a few additional factors. It is a very complex process and you can expect between 0% to 30% of your income withheld towards federal income tax. In the worst case scenario you will earn $1,000 but receive only $700 to your bank account.
It is in your best interest that Whitman's payroll office understands your personal tax situation well. This is why we provide you with a Tax Determination System (TDS) account called Calculus and ask you to keep the profile updated before each new academic year
Completing your Calculus profile is relatively easy. Calculus works best only once you enter your Social Security number into the profile. Calculus will provide Whitman's payroll office with information to estimate your tax withholding at the most appropriate level, so that you do not over or underpay your income taxes by very large amounts.
Example: Currently (2022) financial aid covering full living expenses on campus is valued at $14,210. If you do not complete your TDS profile, the College will ask you to pay income tax at 30%, or $4,263 - a very large amount! However, if you complete your TDS profile to determine your residency status, you can reduce the tax to 14% ($1,989) or even to $0 if you are eligible for a generous tax treaty (many students are).
Federal Income Tax Filing (aka Tax Returns)
Every year, typically between early February and April 15, hundreds of millions of Americans file their tax returns to the Internal Revenue Service (IRS). Now you will too — welcome to America!
As you have just learned above, tax withholding is just a rough estimate. It is likely that too much money is being taken from your paycheck. It is less likely but certainly possible that not enough is being withheld.
The purpose of an annual tax filing is to document to the IRS that you either paid too much (and request a refund - good day!) or that you perhaps did not pay enough and must send additional payments to the IRS (bad, bad day...).
Preparing the required documentation is rather complex. This is why Whitman College provides access to online tax preparation services from Sprintax Tax Prep (Sprintax Returns) to assist you. Once students have received their tax forms from their U.S. employer(s) in January and February, our ISSS office will inform you about tax filing workshops. These workshops will introduce the Sprintax.com website and its services.
Who needs to file a tax return?
You!All non-resident alien students on F-1 visa must file. If you receive no income you still must file one simple form called 8433 to notify the IRS on your current tax residency status. Sprintax Tax Prep will help with this as well.
Two online tax related systems: Sprintax Tax Preparation and TDS Tax Determination System
Confused? Both of these packages are produced by Sprintax and they communicate with each other. Completing the TDS will make it much faster/easier for you to complete Sprintax Tax Prep. Once more, but briefly:
TDS (Calculus) – You will update this “profile” every year to provide Whitman College with information about your nationality, tax residence status and some additional information that will help the College to set up your tax withholding at the most optimum rate.
Tax Prep (Returns) – This will help you complete and file your annual tax return form to the IRS. This is a report on your income and taxes paid that you send to the federal government by April 15th. Based on this form the IRS may return some money to you if your taxes were overpaid.
Taxes While on OPT
Students on OPT must pay particular attention to their tax status. It is very likely that your OPT employer is unaware of how your residency affects the taxes you should be paying. It is likely that they have never hired a non-resident before. We have seen many OPT participants paying thousands of dollars in taxes they did not need to pay.
While on OPT you must take actions to verify that your employer understands your situation, this is particularly important if you are still in the “non-resident for tax purposes” status.
- Verify your tax residency. You can do it via your current Calculus account
- Notify the HR office of your employer if you are non-resident for tax purposes. Ask if they understand how this affects your tax withholding of income, FICA (retirement, health care) and FUTA (unemployment) taxes. If they do not, you have a couple of options:
- More complicated but free: Refer them to the IRS Publication 15, section on nonresident alien employees. Figure out how to complete your W4 form correctly with non-resident endorsement.
- Easy solution: Pay for Sprintax Forms. This product is similar to Calculus but must be purchased individually. This product will determine your status correctly and complete your pre-employment forms for you. Share these forms with your HR.
- When you get your first paycheck, very carefully check your withholdings. Typically there should be no FICA withholding for anybody with non-resident status for tax purposes. FICA may be listed as Social Security or Medicare on your pay slip, so check very carefully.
What to do if FICA taxes have been withheld by your employer erroneously?
First, try working with your employer to have these refunded by the IRS. The process takes months. If your employer is unwilling to file for this refund you can do it on your own. Best is to ask Sprintax customer service for help.