Taxact 5000 treaty

Taxact 5000 treaty DEFAULT

How to apply Chinese student $5000 exemption treaty to the federal tax return? I didn't see any information included while filling out the forms.

Here are the instructions:

1.  Report your full income. Then enter the treaty exempt amount as negative amount ( -5000) under                                            Federal Taxes / Less Common Income / Miscellaneous Income 1099A, 1099C / Other Reportable Income

2.  You will have to file form 8833 from IRS to claim an exception.

3.  You cannot e-file.  You can still use the TurboTax program to prepare your tax forms, but you need to print them out            and submit by mail along with the form 8833. 



Filing a Resident Tax Return

There are three methods of filing a US tax return as a resident alien:

  1. Meeting the Substantial Presence Test or Green Card Test.
  2. Being an F-1 or J-1 student from Hungary, Barbados and Jamaica eligible for tax treaty benefits and choosing to be treated as a resident for tax purposes. Note: Visiting scholars and researchers are not eligible.
  3. Being married to a US citizen or resident alien for tax purposes and filing a joint return.

If you are married to a U.S. Citizen or resident alien for tax purposes, you may choose to be treated as a resident alien for tax purposes and file a joint resident tax return with your spouse.

The advantages of this include:

  • You can use the filing status "married filing jointly," which usually results in lower taxation
  • You can claim tax credits normally not available to nonresident tax filers
  • You can claim the standard deduction

The disadvantages are:

  • You may be subject to Social Security and Medicare withholding on your wages
  • You may not be able to claim tax treaty benefits (depends on country specific tax treaty)
  • You will be taxed on your worldwide income

Get Help With Filing Resident Taxes

International Student & Scholar Services is only equipped to assist nonresident alien tax filers. If, however, you would like help with filing, there are several options:

  1. Using software available from the IRS Free File website. 
  2. Purchasing a professional tax software program available online and in stores or consulting a paid tax professional.
  3. Utilizing the Austin nonprofit Foundation Communities' free tax preparation services.
  4. Finding a free tax preparation center by using the VITA Site Locator from the IRS.

Claiming Tax Treaty Benefits as a Resident Alien

The tax treaty between the U.S. & China allows for the tax treaty to be claimed on resident returns. The U.S./ China tax treaty does not have a time limitation and an F-1 or J-1 student from China who qualifies for the treaty can use the treaty benefit as long as they are a student in good standing, including the period of time the student is engaged in practical/academic training after graduation.

This means that even after a student from China becomes a resident for tax purposes under the substantial presence test, they may still claim the U.S./China tax treaty benefit.

The tax treaty allows:

  • $5000 exemption for wages per year: Article 20(c)
  • Unlimited exemption for scholarship per year: Article 20(b)

To claim the tax treaty on a resident return:

  • File as a resident alien for tax purposes using Form 1040.
  • Complete all applicable income lines and include any amounts that are tax treaty exempt.
  • On Line 21 (Other Income), enter in a negative number for the total amount of the tax treaty exemption being claimed. In effect, the amount of Line 22 (total income) will reflect your income minus the exempted amount from the tax treaty.
  • In the box on Line 21, write "U.S. {country} tax treaty, Article {article number}"
  • Attach Page 5 of the Form 1040NR to the back of the Form 1040. On Page 5, write your name, SSN, and "Resident Alien with Tax Treaty Exemption" written at the top and only complete Question L.
  • If you received Form 1042-S, attach Copy C to the front bottom section of Form 1040.

Mailing Instructions

If there is no tax due, mail the completed tax return to:

Department of the Treasury

Internal Revenue Service
Austin, TX 73301-0215

Otherwise, if a tax payment is due, mail the tax return to:

Internal Revenue Service

P.O. Box 1303
Charlotte, NC 28201-1303

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Form 8833

How to claim tax treaty benefits with the Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)



Worried about double taxation as a U.S. expat? Tax Form 8833 is here to save the day. Paying taxes twice on the same income is a concern most U.S. citizens have if they earn income abroad. Luckily, the U.S. has entered into tax treaties with many countries to help alleviate that concern. Tax Form 8833 is how you’d claim and report certain U.S. income tax treaty benefits, which can include anything from lower tax rates to full tax exemptions on certain types of income and pensions.

Read on to learn more about this form and how to claim these benefits in your yearly tax filing. Ready to file Form 8833? No matter where in the world you are, we’ve got a tax solution for you. Get started with our made-for-expats online expat tax services today!

What is the purpose tax Form 8833?

American who files irs form 8833 filming a vlog overseas

Each country has its own tax system, laws, and income categories, which can create a headache for U.S. citizens trying to file U.S. expat taxes. Tax treaties between countries serve to clarify or erase any confusion over benefits. Most U.S. tax treaties have specific provisions for Americans who live and work within that country’s borders.

Take the U.K., for example. The U.S./U.K. Tax Treaty has special provisions for U.S. citizens living in the U.K., including double-taxation prevention for capital gains and income taxes, a provision for pensions, and a provision that the two countries can share tax information about their residents. There is a similar treaty in place between the U.S. and Canada, and many other countries.

Form 8833, the Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) is the form you’d file if you wanted to claim certain tax treaty benefits specific to your country of residence. It provides an explanation to the IRS as to why certain income is receiving beneficial treatment because of the treaty.

There are consequences to not filing this form when you’re supposed to—you can be fined up to $1,000 for each year you failed to report your treaty position.

How do I claim tax treaty benefits using IRS Form 8833?

How do you fill out Form 8833? Before you file this form, make sure you need to—the majority of treaty benefits in fact do not require the filing of form 8833. For example, you don’t have to file if the treaty reduces or modifies the taxation of employment income, pensions, annuities, social security, and other public pensions, as well as income derived by artists, athletes, students, trainees, or teachers. Form 8833 is used in other situations, such as declaring tax treaty-based residency which allows a U.S. tax resident to file a U.S. nonresident tax return.

If you do need to file it, you also need to include a statement summarizing your situation. This summary trips up many expats as you must be extremely detailed in this summary and include the following information on the form:

  1. Your country of tax residence
  2. When you first entered that country
  3. Your current residency status
  4. The purpose of your visit (for example; contractor, spouse, student)
  5. The article of the treaty you are using
  6. The type and amount of income that is exempt from taxes, based on the tax treaty

Here’s a Form 8833 example statement:

I am a citizen of the United States and a resident of the United Kingdom. I temporarily performed services for my UK employer for 10 days in the United States and was taxed on this portion of income by the United Kingdom.

Under IRS Code 862, income received for services performed in the U.S. is considered U.S. source income and thus taxable to U.S. citizens. However, Article 24 of the United States-United Kingdom treaty allows such income to be resourced as U.K. source income which deems the U.K. income tax paid on the income as eligible for the foreign tax credit as necessary to alleviate double taxation.

You’ll likely have to consult with an advisor on if you need to file Form 8833. That’s why it’s in your best interest to let a professional handle the details for you. If you work with H&R Block’s Expat Tax Services you can simplify your process by letting our experts take care of the finer details.

Need help filing Tax Form 8833? Trust the experts at H&R Block

Confused about whether you need to file Form 8833 or not? Let our experts help you out. No matter where in the world you are, we’ve got a tax solution for you. Get started with our made-for-expats online expat tax services today!

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