If you received funding under the Fulbright student, LASPAU or Hubert H. Humphrey Fellowship programs you are REQUIRED to file your tax return through IIE's GRANTAX® service. If you earned non-IIE income, GRANTAX will include this on your tax return. This service is required under the terms of your grant agreement therefore you CANNOT file by yourself or through another tax service.
When You Are Required to File
If you RECEIVED MONEY from IIE during the tax year, you are REQUIRED to file even if:
- You were sponsored for ONLY one month
- No one at IIE contacted you to file with GRANTAX (you should send an email to GRANTAX for the filing instructions)
- Your IIE sponsorship ended during the year
- You returned to your home country
- You have a new sponsorship elsewhere
- Your new sponsorship gave you more money than IIE did
- Your school offers an easy tax service
Please do not file a tax return with only your non-IIE income and then register with Grantax to file a tax return with only your IIE income. The IRS requires that each person files ONLY one (1) tax return each year and the IRS will know if you filed more than one tax return and an amended tax return will then have to be filed.
If you decide NOT to file your IIE income at all, GRANTAX and your sponsor will not be responsible if the IRS decides to audit your tax return.
Tax Status for IIE Grantees - Nonresidents
Foreign students, teachers and trainees who came to the U.S on J, F, M or Q visas are "Exempt Individuals" and are not subject to the Substantial Presence Test (183-day residency rule). The students are considered nonresidents until they have been in the U.S. for five (5) tax years and the teachers and trainees until they have been in the US for two (2) tax years—it does not have to be consecutive years.
The U.S. income tax law for nonresident aliens is not widely understood by many U.S. employers and as result nonresident taxpayers may owe additional tax when they file their U.S. nonresident tax return. The major reason for this is that employers withhold tax from nonresidents' income in the same manner as U.S. citizens who are entitled to various tax benefits that are unfortunately not available to nonresident taxpayers.
Examples of the tax benefits that are not available to nonresidents are the Standard Deduction, Joint Filing with your spouse and claiming the dependent exemption for your children. Also your employers may not be aware that you are receiving other income such as your IIE scholarship in addition to income from them. So when your income is combined from all sources on your tax return your tax rate can go up (say from 10% to 15%) and you could end up owing taxes if your withholding was based on the 10% tax rate.
If you receive funding from IIE, your sponsor will pay the federal taxes on your scholarship income from IIE but will not pay any additional tax that is attributable to your non-IIE income such as wages and scholarship from your university, college, school or other organization.
If you have other income such as wages from employment or taxable scholarship income from non-IIE sources and you overpaid federal taxes, you may be entitled to a refund or subject to additional taxes if you underpaid federal taxes. Grantax will prepare an equalization summary by using the grant payments you received from IIE and applicable scholarship-related exclusion and deductions to determine if your IIE sponsor gets a refund or owes taxes. The difference between the tax liability on the tax return and the tax liability on the equalization summary is the tax liability on your non-IIE income. Therefore Grantax will either send you a bill for the tax owed or send you a refund check after receiving the tax refund from the IRS. A tax equalization summary will be sent to you with a copy of your Federal tax return for your records.
Your Tax Responsibility: How to Make Sure You Do Not Owe Additional Tax
When you start working, your employer will ask you to complete form W-4 to determine the amount of taxes to be withheld from your paycheck.
Please check ‘Single’ on line 3 as your filing status and ‘0’ on line 5 as your exemption even if you are married and have children.
Single filing status means that for U.S. tax purposes, you want to be considered single. Zero personal exemption means that you will not be claiming any dependents on your annual U.S. tax return.
Since it may be hard for you to pay off a significant amount of taxes that are all due at once, you can choose to increase your withholding tax with an employer by asking your employer to withhold about 5% of your gross income in additional tax withholding if you will earn more than $10,000 in addition to your IIE or university scholarship to ensure that you do not owe any taxes when your tax return is filed.
In addition, many employers do not know that nonresident students are not subject to FICA (social security and medicare) taxes on the income they earn during practical training that is related to the students’ course of study and incorrectly withholds 7.65% of their wages. So please look at your pay stub and make sure that FICA is not being withheld in error because it has become almost impossible to later claim the FICA refund from the IRS.
If your employer is not withholding taxes from your income and plans to issue a 1099-MISC form reporting the income you earned, you should email GRANTAX immediately at email@example.com. GRANTAX can estimate your tax liability and give you instructions to pay your estimated taxes quarterly to the respective tax authorities. Please note that IIE will not be responsible for the tax, late payment penalties and interest attributed to your non-IIE income.