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Scholar Provisions

The term Scholar refers to professors, researchers, and short-term scholars working temporarily in U.S. colleges or universities on J-1 or H-1B visas.

Scholars may be subject to U.S. taxation based on the source and type of income and the number of years they have been present in the U.S. In general, teachers, researchers and trainees who are in the U.S. in J-1 status for less than two calendar years are considered nonresident for tax purposes. J-1 scholars who are in the U.S. for more than two calendar years may be considered residents for tax purposes.

Scholars who are in H-1B status are considered residents for tax purposes as soon as they meet the "Substantial Presence" test as described by IRS. (See the section in this manual entitled "Determining if you are a Resident or Nonresident for Tax Purposes", or consult IRS publication 519 for information on "substantial presence.")

It is important to understand that a key factor in determining an individual's income tax liability is his or her status as a resident or nonresident for tax purposes as described by the U.S. Internal Revenue Service. This status may or may not coincide with their resident or nonresident status for immigration purposes under U.S. Immigration and Naturalization Service regulations. Many individuals who are in non-immigrant status for immigration purposes are considered resident aliens for tax purposes.

In general, individuals who are allowed to file as residents for U.S. income tax receive a more favorable tax rate than those who are required to file as nonresident. However, tax treaties may permit taxation at reduced rates or exempt certain income altogether for nonresidents. We recommend you consult an accountant or a tax attorney for advice on how to file your income tax.

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Personal Service Income

Personal Service Income is any income earned from trade or business. In general, any individual who receives payment from an employer is considered to be performing personal service and, as such, is subject to income tax in the United States. When applying treaty benefits to personal service income, an individual must examine the specific language of the treaty to determine the exact limitations and provision. In most cases, the first "X" amount of dollars are exempt and anything above that amount is taxable. In a few cases, the exemption applies only if the income is below a certain amount. If the income exceeds this amount, none of the income is exempt from taxation.

It is important to note that some treaties provide for a retroactive loss of benefits if the individual stays beyond the period covered by the treaty stipulations. Those who anticipate staying in the U.S. longer than the treaty time limit may wish to refrain from obtaining treaty benefits, as they would be subject to the payment of back taxes once the time limitation as established under the treaty expires.

Individuals should also be aware that the U.S. Internal Revenue Service reports amounts claimed as tax treaty benefits to the officials in their home country. Therefore, an exemption from U.S. tax on certain portions of your income may make you liable for home-country tax on those amounts. Before claiming exemption by virtue of a treaty, the nonresident individual may wish to obtain and study a copy of the actual treaty or consult Internal Revenue Service authorities. (Please note: The OISS does not have copies of individual tax treaties. If you wish to review the tax treaty between your country and the U.S., please consult the Government Documents Section at Dimond Library, the U.S. Internal Revenue Service, your home country government, or a competent international tax attorney.)

Individuals from treaty countries who wish to claim partial or total exemption from withholding must file Form 8233 along with Form W-4. Form 8233 must be filed annually to claim treaty exemption for personal services. In some cases, Form 1001 must be filed to claim treaty exemption from service-free scholarship or fellowship income. Form 1001 is valid for up to three years. Form 8233 must also be attached to Form 1040NR (your Income Tax Form) which is filed between January 1 and April 15 of each calendar year.

IRS Publication 901, U.S. Tax Treaties, provides an excellent summary of the tax treaties in effect in a given year. It is published annually and should be consulted each year, as new treaties are constantly being negotiated and existing ones renegotiated. IRS Publication 519, U.S. Tax Guide for Aliens, provides detailed information on the filing of U.S. Income Taxes for nonresidents.

Please consult the file folders outside the Office of International Students and Scholars to see if your country has an applicable treaty with the U.S. or obtain a copy of IRS Publication 901.

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List of treaties which were in effect for the most recent tax year for which information is currently available: