How do I report a treaty-exempt 1042-S as a resident alien?

Forum|Forum|1 month ago
April 15, 2026
1 reply
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Hello,

I am using TurboTax Desktop for my 2025 tax return and would appreciate some guidance.

I am an F-1 student, but I was already a resident alien for U.S. tax purposes in 2025.

I received a Form 1042-S for Summer 2025 stipend income, and my role letter describes it as non-wage income. My university payroll tax team later confirmed in writing that this stipend was exempt under tax treaty and therefore not taxable. They also told me that I received the 1042-S because the stipend was treated under a tax treaty regardless of my residency status.

Here are the details of the 1042-S:

Box 1 income code: 16
Box 3 chapter indicator: 3
Box 3a exemption code: 04
Box 3b tax rate: 00.00
Box 4a exemption code: 16
Federal tax withheld: 0

I also have regular W-2 wage income, and my understanding is that I may separately claim the China treaty 5,000 exemption for wage income under Article 20(c), which should not conflict with the treaty treatment of this 1042-S stipend income.

I also came across a prior TurboTax Community discussion with a background very similar to mine:
https://ttlc.intuit.com/community/tax-credits-deductions/discussion/f1-resident-alien-with-1042-s-with-0-tax-rate/00/1271294

From that discussion, my understanding is that one common approach is to enter a negative adjustment in Less Common Income / Miscellaneous Income for the treaty-exempt 1042-S amount, with a description such as “tax treaty exemption (Article 20(b)).”

What confuses me is this:

If I enter the negative treaty adjustment in Miscellaneous Income, where should I enter the positive 1042-S income amount so that it offsets correctly and is reported in the proper place?

More specifically:

Should the 1042-S code 16 income be entered first somewhere else as scholarship/fellowship income, and then adjusted out as treaty-exempt income?
Or should both the positive and negative amounts be entered in Other Miscellaneous Income?
I seem to be having trouble finding where to enter this in the Education / 1098-T section. Is that even the correct place for this type of 1042-S income?

Thanks so much.

CatinaT1

Level 15

Since you are a resident alien for the 2025 tax year, you are correct that you must file Form 1040 rather than 1040-NR. However, because of the specific "Saving Clause" exception in the U.S.–China Tax Treaty, you can continue to claim student treaty benefits (Article 20) even after you become a resident alien for tax purposes.

To report this correctly in TurboTax Desktop, you should follow the "offset method" to ensure the IRS sees both the income (to match your 1042-S) and the exemption.

Because your stipend (Code 16) is technically a scholarship/fellowship, it should be recorded on Line 1 of your Form 1040 Schedule 1

Go to Wages & Income.
Scroll to the bottom to Less Common Income.
Select Miscellaneous Income, 1099-A, 1099-C.
Select Scholarships and Fellowships.
Enter the Gross Amount from Box 2 of your 1042-S.

Now you will enter two separate negative adjustments in the "Other Reportable Income" section to offset your income. This will flow to Schedule 1, Line 8r.

Go to Wages & Income -> Less Common Income -> Miscellaneous Income.
Select Other reportable income.
Entry 1 (The Stipend): * Description: U.S.-China Tax Treaty, Art. 20(b) exemption
Amount: Enter the stipend amount as a negative number (e.g., -8000).
Entry 2 (The W-2 Wage Exemption):
Description: U.S.-China Tax Treaty, Art. 20(c) exemption
Amount: Enter -5000.

As a resident alien claiming a treaty benefit that overrides the Internal Revenue Code, you are required to attach Form 8833 (Treaty-Based Return Position Disclosure).

Switch to Forms Mode (click the "Forms" icon in the top right of TurboTax Desktop).
Click Open Form and search for 8833.
You will need to fill out one or two of these (you can often combine them on one form) explaining that:
You are a resident alien under the Substantial Presence Test.
You are claiming Article 20(b) for the scholarship and Article 20(c) for the $5,000 wages.
Cite the Protocol to the U.S.–China Treaty, Paragraph 2, which allows the Article 20 benefits to continue even after you become a resident.

Because you are attaching Form 8833 as a resident alien and claiming a treaty benefit, you will likely be unable to e-file.

Attach a copy of your 1042-S and your W-2 to the front of the 1040. Place your completed Form 8833 behind the 1040.

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