Tax examples

See our example of people applying the right tax traety

The story of every year:

It is February and you just received in the mail or on-line your W-2 form and/or the 1042-S. People around you start to talk about refilling tax, tax exemption, treaty etc, but none seems to have a clear idea. You would like to ask to your U.S. colleagues but even them, they appear confused, and they will tell you to use Turbotax or to go to the tax preparer suggested by a friend. You are working hard and you do not what to do.

Take a breath and follow us, we lived your same experience and we survive it!

You have to understand that in the U.S. tax system many things can be interpreted, and you can achieve the same objective in different ways.

But very importantly, you are  not a U.S. citizen, and there are great chances that you could benefit of a tax treaty that will discount your federal and state tax for up to 5 years. You could be refunded of  up to 9000 $ or more, just doing the right things.

There are several exemptions and different way to obtain your tax refunding. But if you are not a U.S. citizen and you are teaching or doing research in the public interest the situation is quite simple.

  1. First of all: When did you start to work in U.S.? Unless you spent significant periods of time (months) in U.S. before to start with your actual job, the rule is simple. The first two years you are a Non resident Alien for tax purpose, then you will probably became a Resident Alien for tax purpose. You will use different forms depending on your status (see necessary documents). In case of doubt you could use the substantial presence test. For this calculation consider that being an alien you can discount all the days spent in U.S. during the first 2 calendar years from the substantial presence test. If during the first two calendar years that you are in U.S. you married a U.S. citizen, a green card holder or a resident alien and you file jointly tax return you can be considered a resident alien.
  2. Then, you have to know that: 1) Turbotax is thought for American citizens and will not work well for you; 2) most of the tax preparers do not know how the claim exemption for aliens like you (even if you do not come from the space 🙂 ); 3) Your friends, colleagues or institution of research/teaching/training could ignore the treaties between your country and U.S. bringing you to lose a lot of moneys.
  3. Where you come from? For tax purpose does not matter which is your nationality, but where you were living and paying taxes before to arrive in U.S. This will be your Nationality for tax purpose.
  4. If you are from one of the following countries you could benefit of a treaty for tax exemption for up to 5 years: Armenia, Azerbaijan, Belarus, Bangladesh, Belgium, Bulgaria, China, Cyprus, Czech Republic, Egypt, Estonia, France, Georgia, Germany, Greece, Iceland, India, Indonesia, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malta, Moldova, Morocco, Netherlands, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, South Korea, Spain, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan and Venezuela.

If the previous points are clear, you can claim your tax exemption using the tax treaty between your Country and U.S. with just few forms. Find out how with us.

Do you want some real example

1. Example of Tax treaty for Professors, Teachers, and Researchers: Mario is Italian and he arrived in U.S. in February 2015 for his PhD.

He does not have any further income from his original country and he earned a total wage of 37816.18 $ in 2015 (amount indicated in the box 1 of W-2 form “Wages, Tips, other compensation”). Of this total income he paid 5426.11 $ of Federal income Tax (amount indicated in box 2 of W-2 form ”Federal income tax withheld”) and 1340.86 $ of State income Tax (see box 17 “State income tax” of W-2 form). Mario is declaring now (2016) his incomes. He will use the Tax treaty for Professors, Teachers, and Researchers that is established between Italy and U.S. Thanks to this treaty he will be exempt of declaring U.S. income for the calculation of Federal taxes. Thus, Mario will be refunded of the entire amount that he paid for federal tax, equivalent to 5426.11 $. State taxes are calculated based on your income. Since applying the Tax treaty for Professors, Teachers, and Researchers Mario is exempt of declaring is U.S. incomes, he will not have neither to pay State tax. Therefore, he will be refunded also of 1340 $. Thus he will earn 6386 $ more than what he was expecting, just doing the right thing. So he is very happy and with this money he will have more than enough to buy the ticket to come back in Italy this summer and also next Christmas! Mario knows that he can use the Tax treaty for Professors, Teachers, and Researchers established between Italy and U.S. for a maximum of two years. Therefore, he will be refunded of federal and Californian Tax also next year.

2. Example of Tax treaty for Professors, Teachers, and Researchers, but with a nationality for tax purpose different from his/her real nationality: Carmen is Spanish, but she was leaving in France before to accept a post-doctoral position in U.S. in 2014.

She does not have any further income from his original country and she earned a total wage of 45472.32 $ in 2015 (amount indicated in the box 1 of W-2 form “Wages, Tips, other compensation”). She was also refunded in 2015 of 1484 $ for the state tax paid he previous year (indicated in the form 1099-G). Of this total income she paid 5089.08 $ of Federal income tax (amount indicated in box 2 of W-2 form ”Federal income tax withheld”) and 1543 $ of State income Taxes (see box 17 “State income tax” of W-2 form). Carmen is declaring now (2016) her incomes. She will use the Tax treaty for Professors, Teachers, and Researchers established between France and U.S. Thanks to this Treaty she will be exempt of declaring any U.S. income for the calculation of Federal Tax. Thus, Carmen will be refunded of 5089.08 $ for the Federal Tax that she already paid. State taxes are calculated based on your incomes. Since applying the Tax treaty for Professors, Teachers, and Researchers Carmen is exempt of declaring her U.S. incomes, she will not have neither to pay state taxes. Therefore, she will be refunded also of 1484 $. Thus, she will receive a total of 6573.08$ and she will finally buy a car! Carmen knows that being French for tax purpose she can use the Treaty for Professors, Teachers, and Researchers for the first two years that she spent in U.S., as she has already done. However, she also knows that France and U.S. established other treaties (for trainees and for the recipient of a grant), for up to five years. Therefore, she is working hard to obtain a grant on her name, because she knows that in this case she will be exempt of declaring her incomes for Federal and State tax for the amount of $ covered by the grant.

3. Example of Tax treaty for Training, education, studying (up to 5 years). José is Spanish. He came in U.S. to study

He does not have any further income from his original country and he was able to earn a total wage of 15310.28 $ in 2015 for works related to his study program (amount indicated in the box 1 of W-2 form “Wages, Tips, other compensation”). José is declaring now (2016) his incomes and he will use the treaty for training, education, studying. In this way he will discount his income of 5000 $. Thanks to this Treaty he will reduce the federal and state tax to pay for this year. José knows that he can use this treaty for up to 5 years.

4. Example of tax treaty for the recipients of grants, fellowships, scholarships and awards: Bertrand is French. He started is PhD in U.S. in 2011.  

In 2015 he won a U.S. grant that allows him to remain in U.S., and to work as post-doc. His grant covered 37500 $ of his salary. He does not have any further income from his original country and he earned a total wage of 47072.40 $ in 2015 (amount indicated in the box 1 of W-2 form “Wages, Tips, other compensation”). He was also refunded of 1640 $ for state tax last year (indicated in the form 1099-G). Of this total income he paid 6861.90 $ of Federal income tax (amount indicated in box 2 of W-2 form ”Federal income tax withheld”) and 1758.75 $ of State Tax (see box 17 “State income tax” of W-2 form). Now (2016) he is declaring his U.S. income. He knows that France established a tax treaty for the recipients of grants, fellowships, scholarships and awards, which can be used for up to five years. Therefore, he will discount of his income the amount of $ provided by the grant. In this way he will be refunded of 6755.90 $ for the federal tax. The reduction of the income to declare determined by the tax treaty for the recipients of grants, fellowships, scholarships and awards, will affect also the calculation of the State tax. Therefore, Bertrand will be also refunded of 1758 $ for the State tax. Thus, this year Bertrand will receive 8513.90 $. He will be very happy and he will buy the motorbike of his dream!