Taxes
From GRA
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Tax Information
The OIAA organizes a tax information workshop every year for residents and non-residents guest researchers working at NIST. If you would like to attend one of these workshops you should write your name on the list posted next to the OIAA Office. You have to bring a pencil, papers and a calculator.
Tax payments
All guest researchers receiving payments from NIST are subject to income taxes by the US Government (federal tax) and the State of Maryland (or other state of residence). You will need to fill forms specific to both the federal and state tax, but depending on your citizenship, you will not necessarily have to pay anything for the federal tax (see tax treaty agreement). If you come to NIST sometime in the year 2008, you will have to pay tax before April the 15th 2009. We advise you to read the following text to learn more about the procedures for filing tax returns.
To help guest researchers understand these obligations, NIST has contracted an expert in Income Tax Preparation Service to provide services on foreign taxation. If this is your first time, make sure to attend workshops organized by the OIAA. It has sign up sheets for appointments with the Tax Consultant on the bulletin board. The consultant comes to NIST, for the day, approximately every two weeks. A Tax Seminar for Foreign Guest Researchers are scheduled every year to help you fill out you tax forms. The OIAA will send you a mail about that, watch your NIST mail box around January or February.
Advance Information on taxation of allowances paid to NIST Guest Researchers
Overview
Payments made by the NIST to Guest Researchers for travel or living expenses are subject to taxation by the US Government and the Guest Researcher's state of residence (Maryland, Virginia, District of Columbia, or Colorado). The actual tax due will vary depending on the status of the taxpayer and any applicable bilateral tax treaty. Every Guest Researcher has the obligation to file the proper tax forms and pay the tax due by April 15th for the previous calendar year. All Guest Researchers present in the US at NIST are required to file a US income tax return for each calendar year of presence in the US. A tax form is required even if you have no US source income, or your income is exempt from tax according to a treaty agreement between the US and your country of residence. The State of Maryland does not honor federal tax treaty agreements. Therefore, every Guest Researcher residing in Maryland must pay state income taxes.
Resident or Nonresident for Tax Purposes
The manner in which you are taxed depends upon whether you are, for income tax purposes, considered a resident or nonresident alien. Your residency status can change from year to year. Resident aliens are taxed on their worldwide income in the same manner as US citizens. Nonresident aliens are generally taxed only on US source income. Your residency status will be determined by:
- The Green Card Test,
- The IRS Substantial Presence Test, or
- Tax Treaty definition of residency
According to the Substantial Presence Test, individuals present in the US with a "J" visa are considered to be nonresident aliens for income tax purposes for the first two calendar years they are present in the United States.
- Non-resident aliens file Form 1040NR U.S. Nonresident Alien Income Tax Return to report their federal income tax. (Resident aliens should use form 1040)
- State taxes are reported to your state of residence. It is likely that you will be considered a resident for state tax purposes. Maryland residents file Maryland Form 502. Colorado residents file Colorado Form 104.
Nonresident taxpayers are generally not allowed any tax benefits for dependent family members. The payments you receive for travel or living expenses may or may not qualify as tax deductible depending upon your individual situation. Nonresidents are taxed on U.S source investment income at a flat 30% rate unless reduced by a treaty. Some types of U.S. investment income, such as bank deposit interest and certain capital gains, are tax-exempt. Foreign source earned income and foreign investment income is tax-free. IRS Publication 519 U.S. Tax Guide for Aliens provides detailed explanations of the tax laws that apply to nonresident alien taxpayers.
Tax Treaty Benefits
To claim a treaty exemption from U.S. income tax you must qualify as a nonresident according to the substantial presence test or by treaty determination of residency. Even if your entire income is excludable, you must still file Form 1040NR. You must meet the following criteria to qualify for tax treaty benefits:
- Country of residence - You must be a resident of the country immediately before coming to the U.S.
- Duration of stay- Treaty agreements impose certain time limits.
- Type of payment - Compensation for services vs. "grant, allowance, or award".
- Types of activity - Different rules apply depending upon whether you are studying, training, performing research, or teaching.
The following countries have tax treaty agreements with the U.S. which include benefits for researchers receiving "allowances" from a U.S. government institution:
| Country | Treaty Article | Eligibility From Date of Arrival | Max. Amount Of Tax Exemption |
|---|---|---|---|
| Belgium | 21 (1) | 5 years | No Limit |
| China | 20( b) | Reasonable Necessary Period | No Limit |
| C.I.S. (former USSR) | VI (1) | 5 years | Living Expenses (Up to $10,000) |
| Cyprus | 21 (1) | 5 years | No Limit |
| Czech Republic | 21 (1) | 5 years | No Limit |
| Egypt | 23 (1) | 5 years | No Limit |
| Estonia | 20 (1) | 5 years | No Limit |
| France | 21 (1) | 5 years | No Limit |
| Germany | 20 (3) | No Limit | No Limit |
| Iceland | 22 (1) | 5 years | No Limit |
| Indonesia | 19 (1) | 5 years | No Limit |
| Israel | 24 (1) | 5 years | No Limit |
| Japan | 20 (1) | 5 years | No Limit |
| Kazakstan | 19 | 5 years | No Limit |
| Korea | 21 (1) | 5 years | No Limit |
| Latvia | 20 (1) | 5 years | No Limit |
| Lithuania | 20 (1) | 5 years | No Limit |
| Morocco | 18 | 5 years | No Limit |
| Netherlands | 22 (2) | 3 years | No Limit |
| Norway | 16 (1) | 5 years | No Limit |
| Philippines | 22 (1) | 5 years | No Limit |
| Poland | 18 (1) | 5 years | No Limit |
| Portugal | 23 (1) | 5 years | No Limit |
| Romania | 20 (1) | 5 years | No Limit |
| Russia | 18 | 5 years | No Limit |
| Slovak Republic | 21 (1) | 5 years | No Limit |
| Spain | 22 (1) | 5 years | No Limit |
| Thailand | 22 (1) | 5 years | No Limit |
| Trinidad & Tobago | 19 (1) | 5 years | No Limit |
| Tunisia | 20 | 5 years | No Limit |
| Venezuela | 21 (1) | 5 years | No Limit |
Treaty provisions among different countries vary considerably. Each treaty contains specific qualifications that must be met. If the US has a tax treaty with your country, you should consult the treaty to determine which provisions may apply to you. IRS Publication 901 summarizes treaty agreements. The State of Maryland does not recognize federal tax treaties Social Security You are required by the IRS to have a social security number for proper identification of your tax returns, estimated tax declarations, etc., and to assure that you are properly credited with any tax withheld, estimated tax payments, or final tax payment. This number should be used on all tax return forms, payment vouchers, remittance checks, and correspondence with the IRS concerning your taxes. Individuals in the United States on a "J-1" visa are exempt from U.S. social security tax as long as the services are performed to carry out the purpose for which they were admitted to the United States. Your spouse may get special permission to work. "J-2" visa holders with work permission are not excused from paying U.S. social security taxes.
Estimated Tax Payments
The National Institute of Standards and Technology does not "withhold" any federal or state income taxes. If you are subject to either federal and/or state income taxes, you will be required to estimate and pay taxes during the year as you receive your subsistence payments. Estimated taxes are payable quarterly (four times per year) and due on the following dates:
| April 15 | pay 1/4 of estimated taxes for current year |
| June 15 | pay 1/4 of estimated taxes for current year |
| September 15 | pay 1/4 of estimated taxes for current year |
| January 15 | final payment is due |
- Form 1040ES NR (for nonresidents) or Form 1040ES (for residents) will help you compute your federal estimated tax for 2001. These forms include payment coupons to mail with your payments.
- Form 502D will help you compute your state estimated tax for 2001. It includes one coupon for making the first payment. The State of Maryland will then mail you coupons for the remaining payments if you request them by checking the box.
You should take into consideration all anticipated income and deductions for the tax year when computing estimated tax. Making estimated payments does not fully satisfy your tax obligations. You must still fill out and file the income tax forms by April 15th. If you fail to make estimated payments, you could be subject to interest and/or penalties in addition to the tax you owe. You could also find yourself owing a large tax bill when you file your tax return. Whenever you mail money to the IRS or to your state of residence, write the following information on your check:
- Your social security number
- The tax year and the number of the form you are sending (for example: " 2001 Form 502D")
Where to Get More Information
All tax forms, instructions, and publications can be downloaded from the Internet:
