Saving on US taxes

Saving on US taxes
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Saving on US taxes


Income Tax is something you can never escape, except in countries that have made themselves tax havens. As many Indians emigrate or go for their higher studies in the US, it is imperative that they acquaint themselves with the Income Tax architecture of the country. Being knowledgeable about the system ensures compliance, as violations of Tax laws might result in punishments like arrest or deportation. 

Most countries provide tax exemptions to foreign students and scholars but this is not the case with the US. In the US, foreign students have to pay taxes and the procedures might appear quite complex. There are essentially two federal income tax systems in the United States, one for tax residents of the U.S. including citizens, permanent residents, and certain non-immigrants, and the other for tax non-residents. The definition of “residence” for tax purposes and for immigration purposes are not the same and must not be confused.

The first step for foreign students and scholars in the tax process is to determine their tax residence. Special rules apply to persons in “F,” “J,” “M,” and “Q” immigration status in determining tax residence. The second step is to determine whether the source of any income is a “U. S. source” or a “foreign source.” Internal Revenue Service (IRS) Publication 519, “U.S. Tax Guide for Aliens,” provides definitions and explanations of these issues. 

Individual tax reports are generally due on April 15 of the following calendar year. If no U.S. wages are received, the due date is June 15. Tax returns for a particular year cannot be filed before December 31 of that year. All non-resident alien tax returns and statements are mailed to: Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, U.S.A. 

The US also has a facility with other countries known as a Tax Treaty. Individuals hailing from countries with which the US has the treaty, under arrangement from the Organization for Economic Co-Operation and Development {OECD} are provided with some special exemptions.  The universities will provide support of availing of treaty benefits. 

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