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Beginner's Guide to Income Taxes for International Postdocs Print Email

Please note: We are not income tax attorneys or certified public accountants. Please contact the Internal Revenue Service and/or income tax professionals with your questions, for the most recent information on taxation, or for assistance in preparing income tax forms. This information is meant only to provide basic information on taxation.

The United States taxation system is byzantine, and international postdocs working for U.S. employers should be prepared to invest some time to understand the regulations of this system.  Because of the breadth of this system, this article will not cover all aspects but only discuss the major issues. To begin the process of filing income taxes, it's a good start to read through the resources listed on the Internal Revenue Service (IRS) web page for foreign students and scholars.

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The IRS makes a distinction between residents and non-residents that can often differ from that made by immigration officials.  International visitors are considered residents for income tax purposes after a certain amount of time based on several criteria like their visa status and the time they have been physically present in the country. It's also possible to have dual status for a year when someone would be considered, for example, non-resident for part of a year and resident for the rest of the year, in which case the individual is allowed to decide to file taxes either as resident or non-resident.

The amount of income tax withheld from every paycheck depends on the information reported on Form W-4 when an individual begins employment. Some employers let you decide not to have any withholding and pay taxes on your own, but it takes discipline and good financial knowledge to save the necessary amount of money. Married couples, in case they are considered residents, can file tax reports jointly or separately. The amount of withholding may differ quite a lot and it's worth it to make a decision based on calculating income tax in each case using a tax table.

Although some research institutes may use software systems like Glacier or Cintax to collect financial information in order to expedite the filing of tax reports online, most institutes will provide tax guides, which explain basic terms and organize useful web links to help with submission of tax reports. The interactive online guide and the frequently asked questions on the website of the International Office of The University of Texas at Austin are extensive sources of information for visitors with different kinds of visas from any country. Because giving financial advice is a risky business, many institutes organize seminars where tax lawyers are invited to advise international employees and also to offer their services.

The U.S. has concluded tax treaty agreements affecting nonresident taxpayers from about 50 countries. Treaties generally exempt the income of foreign teachers and researchers for a period of two years, but eligibility may be restricted. View eligibility restrictions.  Recipients of scholarships, or other non-taxable incomes, still have to file a tax report even if they don't pay income taxes.

Most of the states have local income taxes, except these seven: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, while two others, New Hampshire and Tennessee, tax only dividend and interest income. Non-resident aliens don't have to pay local taxes and Social Security or Medicare taxes, but residents do, despite the fact that they can't use these services and that money can never be recovered.

Paying and reporting your income tax correctly is important not only for the obvious reason of obeying the law, but it will also support your claim if you should apply for an immigrant visa.

 

This page was written by Eva Morschl, PhD, The University of Texas Medical School at Houston.

 

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