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Taxes & Withholdings for International Postdocs

Description

All postdoctoral trainee stipends are taxable for Pennsylvania personal income tax and subject to withholding. The stipends are also taxable for the Pennsylvania State Unemployment tax.

In addition, all postdoctoral trainee stipends are subject to City of Philadelphia wage taxes and withholding. The Philadelphia Income Tax Regulations do not provide any specific exclusion from gross income for stipends or similar payments to postdoctoral trainees or graduate students.

Although no reporting or withholding is required for National Research Service Award (NRSA) postdoctoral trainee appointments, the individual must report and pay federal income tax on any payments in excess of tuition, fees, books, and certain other expenses. For additional information regarding an individual’s responsibility for reporting such payments, please consult IRS Publication 970: Tax Benefits for Education. Further, there are special rules for nonresident aliens. For more information on tax treatment for nonresident aliens, please consult the IRS Publication 519: U.S. Tax Guide for Aliens.

Federal Income Tax and withholdings

For federal income tax purposes, nonimmigrants are classified as resident aliens and nonresident aliens and are taxed at different graduated rates. Tax residency for federal tax purposes is determined by either the Substantial Presence Test or the Green Card Test. For information on determining your federal tax residency status, see Internal Revenue Service Publication 519, Chapter 1.

Federal tax is withheld from nonqualified grant payments issued to nonresident alien Post Doctoral Scholars. Visa holders in F-1 and J-1 status are taxed at 14%, unless a tax treaty benefit can be applied to the payment. Both treaty exempt and non-exempt grant payments are reported to the payee and the Internal Revenue Service on Form 1042-S. For information on determining the taxable portion of grant payments, see “Scholarships and Fellowship Grants”, IRS Publication 519, US Tax Guide for Aliens, Ch 3, p.16.

Tax Withholding

Generally IRS regulations require that 14 percent of non-qualified scholarship and fellowship payments paid to F, J, Q, or M visa holders be withheld as federal income tax, unless you are a resident of a country with which the United States has an applicable income tax treaty.

Tax Treaty

Tax treaties make it possible to reduce or eliminate federal tax withholding on payments to nonimmigrants. Eligibility requirements include tax residence status, prior visits to the U.S., and type of payment. Information provided on the Penn Foreign National Information Form at the time of hire will be analyzed by the Payroll Department. If it is determined the employee is eligible for the treaty benefit, it will be applied to the employee’s pay in the manner specified in the treaty. To see if your country of tax residence has a tax treaty with the U.S., refer to the IRS tax treaty table in IRS Publication 901.

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