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IRS Forms W-2 and 1042-S and International Students

International students are non US resident aliens.  Typically they receive some type of income whether it be a stipend, scholarship or fellowship to come to the United States and student.  Consequently, they may receive IRS Form 1042-S and/or Form W-2 depending upon their income type.

SSA Form W-2:

The W-2 form is known as a Wage and Tax Statement and while the form itself is created by the Internal Revenue Service (IRS) the Social Security Administration (SSA) handles the paper and electronic filing. If you are employed in the United States, for any period of time, the employer must report your earnings to both you and the Internal Revenue Service (IRS).

By law, Copy B of the W-2s must be mailed to the recipient no later than January 31.  If you haven’t received a W-2 by mid February, then you would want to contact your employer because its possible they dont have your correct address on file.  The recipient, in this case, the foreign student, will be required to include a copy of each W-2 from with your federal and state income tax forms.

The IRS computer system will match the income paid with what they have received from the employer.

Different kinds of taxes are withheld by employers. The W-2 form has boxes for reporting withholding of Federal Income Tax (Box 2), Social Security (Box 4), Medicare Tax (box 6), State Income Tax (box 18) and local income tax (box 21). Some individuals who received form W-2 will find that all of these boxes have amounts in them, others will find only some or none of the boxes showing tax withheld.

Form 1042-S

Form 1042-S is used to report income paid to a non-resident regardless of whether the payment is taxable. The form has a number of purposes, but mainly used to report scholarship or fellowship income.

It can be used to report wages exempt under a tax treaty, wages earned as an independent contractor, royalties, and scholarship or fellowship grants.

By law, 1042-S forms must be issued by March 15. Many international students receive both form 1042-S and form W-2; some students will receive only form W-2.

The Universities are required to mention only Taxable portions of their scholarships in the Form 1042-S .

Example:

Say, a university paid $26,000 as scholarship split as

Tuition and Fees: $15,000

Educational Tools: $5,000

Room and Boarding: $6,000

1042-S contains only $6000, which are considered non educational expenses, and this amount will be taxed. Usually for students the taxes on non educational expenses is 14% and for other Non Resident Aliens its 30%

Hope you found the information helpful!

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Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

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  1. SN
    March 10th, 2014 at 14:06 | #1

    Hey Erich,

    Is the 1042-S (scholarship) income taxed by states too? I live in MA and since I make less than $8000, I don’t need to file a tax return. But if I include the income from 1042-S, I would need to. Any help on the matter would be appreciated.

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