A student who performs services in exchange for pay receives “compensation” for his or her work and is generally considered to be an employee of the university. This employee compensation may take the form of wages or salary (depending on permanency, level of employee benefits, job duties, etc.). Wage and salary payments, in the university context, can be broken down further into such categories as student employment, work-study, teaching assistantships, and others. All such payments are processed through Payroll.
Payments received in connection with the past, present or future performance of services by a non-resident alien student are taxable income and are subject to federal and state income tax withholding by the university unless a tax treaty applies.
If no tax treaty exists or the treaty does not exempt the total amount of wages, the wages received by nonresident alien students are subject to the same graduated/progressive Federal and state income tax withholding tables to which U.S. citizens and residents are subject, with a few important exceptions. Federal and state income taxes are withheld throughout the year based on the Form W-4, Employee’s Withholding Allowance Certificate (PDF) and the applicable state form completed by the student (typically presented to you upon being hired by Human Resources). Nonresident alien students must follow a different set of instructions when completing the Form W-4 (discussed below). Even if an income tax treaty allows an exemption from withholding, a Form W-4 should still be completed because (1) the treaty exemption is never claimed on the Form W-4 and (2) treaty provisions may have dollar limitations.
Non-resident alien students who receive payments that are not completely exempt from income tax withholding under a tax treaty will receive a Form W-2, Wage and Tax Statement, from Payroll Services at Southeastern. Form W-2 is also provided to the IRS.
Students from countries that have a tax treaty with the U.S. that includes a wage article may claim exemption or a reduction of income tax withholding if the payment meets the requirements of the treaty and the student completes the required forms with the ISO using the Calculus system. The taxes covered under a treaty exemption include Federal and Louisiana tax.
In order for the university to consider granting a tax withholding exception under a treaty provision, the student is required to complete Form 8233, Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual (PDF). Additionally, students must complete a country-specific statement that details the terms of the treaty. Both forms, along with a list of applicable tax treaties, are available at irs.gov. You will be notified in your Sprintax Calculus profile though if you qualify for the tax treaty and the system does generate these forms for you.
The university has the right to reject a Form 8233 if it has reason to believe that such exemption is not warranted or if the form is completed inaccurately.
Since Forms 8233 and the country-specific statement must be submitted by the university to the IRS for their review and approval, it is imperative that these and all other tax documents be completed at the time of hire to avoid the withholding of tax or the delay of paychecks. Students must, however, have Social Security Numbers before any exemption from withholding can be granted. Note that Form 8233 and the country-specific statement must be completed each year.
The university reports treaty exempt wage payments on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. Form 1042-S is also provided to the IRS.
Non-resident alien students are responsible for reporting their exempt and taxable payments and remitting any tax due with their personal income tax return at the end of the year on Forms 1040NR or 1040NR-EZ and the corresponding state forms. Sprintax Returns is a valuable resource for filing your tax return each year.
Note that the instructions below are for illustrative purposes only. If you are employed at Southeastern, please use the W-4 provided by the Human Resources in Workday upon your hire.
DO NOT use the instructions on the front or back of the actual Form W-4. Those instructions, although not made entirely clear from the form itself, apply only to U.S. citizens and residents. The following instructions come from a combination of sources including U.S. statutes, regulations and income tax treaties.
* Students in F1 status are considered non-resident aliens as long as they are enrolled in a program of study. As an F1 student, and a non-resident alien, you must fill out the W4 exactly as instructed below.
A scholarship payment received by a candidate for a degree is generally not taxable income to the student if it is used for “qualified expenses.” Qualified expenses are defined by the Internal Revenue Service (IRS) and include tuition and required fees, and/or for books, supplies, and equipment required of all students in the course. These payments do not need to be reported to the IRS by the student or the university.
A scholarship/fellowship used for expenses other than qualified expenses is taxable income. Taxable scholarships/fellowships are generally referred to as stipends and are payments for which no services are rendered or required. Examples of stipends are payments that can be used for living and incidental expenses such as room and board, travel, non-required books and personal computers, etc.
Stipends are subject to withholding when paid to nonresident aliens (NRAs). The withholding tax rate is 30%. However, the withholding tax rate may be reduced to 14% if the stipend is paid to an NRA student or scholar with an F-1, J-1, M-1, or Q-1 visa. Currently, state taxes are not required to be withheld by the university even though the payments may be taxable in the state. This, however, is subject to changes in state legislation. A taxable scholarship/fellowship is not subject to FICA withholding since the payment is not for services.
Students or scholars from countries that have a tax treaty with the U.S. that includes a scholarship/fellowship article may claim exemption or a reduction of tax withholding if they meet the requirements of the treaty. The student or scholar must, however, complete the required forms with the university’s ISO.
The university reports stipend payments and the amount of federal tax withheld, if any, on Form 1042-S to the NRA student or scholar and to the IRS. NRA students and scholars are responsible for reporting these payments and remitting any tax due with their personal income tax return at the end of the year on Form 1040-NR and the corresponding state forms.
Social Security and Medicare taxes, commonly referred to as “FICA”, are imposed on payments for services such as wages. FICA requires that Social Security and Medicare “contributory” taxes be paid – one half by the employee and one half by the university – as a way of funding our governmental old age, survivors, disability and hospital insurance (OASDI) systems.
Nonresident alien students and scholars in F-1, J-1, M-1, or Q-1 status, who in accordance with U.S. immigration law, are complying with all of the terms of that status, are exempt from FICA, even at times when other students or scholars may not be exempt. Once a nonresident alien student becomes a resident alien, however, such student may then fall under the student exemption described below. Remember the ISO must receive all forms for residency determination before an exemption from FICA taxes based on immigration status will be allowed. Nonresident alien students and scholars on visa types other than F-1, J-1, M-1, or Q-1 are subject to the same rules as are U.S. citizens/residents.
International students and scholars who are required to pay FICA taxes may not always be paying into the U.S. system for naught. Some countries have agreements with the U.S. that will enable you, even if returning to your home country after graduation, to receive U.S. retirement benefits based on the “contributions” that you made while working in the U.S. To see if your country currently has such a social security agreement (called Totalization Agreements), visit or call a Social Security Administration (SSA) office.
An exception in the wage and employment laws permits the salaries of Southeastern students working for Southeastern and enrolled and regularly attending classes at the university to be exempted from such taxes. Current regulations further require that the student’s primary activity be that of a student rather than that of an employee who is also taking classes. IRS administrative rulings have helped to set national standards that are currently followed by most universities.
In accordance with these accepted standards, in order to be eligible for exception from FICA tax, the university requires that:
A review of your status is performed at the beginning of each semester.
Nonresident Alien Students Only
F-1 and J-1 students are considered nonresident alien (NRA) for tax purposes during the first 5 calendar years they are present in the U.S. NRA students are not subject to Social Security/Medicare tax withholding while working on campus or while working for off-campus employers under Optional Practical Training (OPT) or Curricular Practical Training (CPT).
Section 3121(b)(19) of the U.S. Internal Revenue Code (IRC) specifies criteria by which an international student may be exempt from Social Security/Medicare taxes:
Occasionally off-campus employers of international students on OPT/CPT are unfamiliar with this IRC section and withhold Social Security/Medicare tax in error. International students should follow this guide and work with their off-campus employer to have their portion of Social Security/Medicare tax refunded.
Step 1: Request Refund from Employer
You must contact the employer who withheld the Social Security/Medicare tax for assistance. Inform your employer of the Social Security/Medicare exemption for nonresident alien students working on OPT or CPT, and ask the employer to issue a refund of your Social Security/Medicare tax.
If this request is successful, you may stop here. If the employer is unwilling to provide a refund then proceed to Step 2.
Step 2: If the Employer Is Unwilling to Provide a Refund
Please note instructions are provided for illustrative purposes. Always consult the form instructions for the most up-to-date information.
This refund application is not a quick process and may take several months. Students should wait at least 60 days before attempting to contact the IRS to check the status of the refund request.