Tax-treaty

[keli5734]

Hello, 

I am resident filer but my box1 and 2 on my W2 form are empty. I received 1042-S form with exemption code 3a 04 and 4a 16. there are some numbers in. 

What should I do here?

[DaveF1006]

Yes, there is a specific way to report this but you will need to print and mail this return. The reason is that you will need to file a form 8833, which is a claim to the treaty provision.  Form 8833 is not a form that TurboTax supports but does need to be included in your return in order to claim the treaty-based position.  Here are your complete steps for reporting this in TurboTax.

1. Go to Federal Taxes > Wages & Income. 
2. Scroll to the very bottom to Less Common Income and select Miscellaneous Income, 1099-A, 1099-C.
3. Select Other reportable income.
4. Description: "1042-S Treaty Exempt Income"
5. Enter the amount of income
6. Now select the add button, here you will enter an offset to the number
7. For a description, enter "Tax Treaty Relief - [Your Country Name]"
8. Now enter the same amount but with a minus sign in front of it. 

Complete Form 8833 (Manual Step)

TurboTax cannot generate Form 8833 for Resident Aliens. You must do this manually to explain to the IRS why you aren't paying tax on that 1042-S money.

1. Download Form 8833 from IRS.gov. 
2. Fill out the top (Name, Address, SSN).
3. Line 1: Enter your home country (e.g., China, India, etc.).
4. Line 2: Enter the Treaty Article number (e.g., "Article 20" or "Article 21").
5. Line 5: Write a brief sentence: "Taxpayer is a resident alien for tax purposes but remains eligible for treaty benefits under Article [X] of the US-[Country] treaty regarding scholarship/fellowship income."

Step 4: Final Assembly & Mailing

Since you have (Form 8833), you absolutely cannot e-file. Your tax return must be mailed. Include:

1. Form 1040 (Your main tax return from TurboTax). 
2. Schedule 1, 2, and 3 (Generated by TurboTax).
3. Form 8833 (The manual form you filled out).
4. Attach your 1042-S (The physical slip) to the front of the 1040, just like a W-2.

[keli5734]

@DaveF1006 

Thank you for your reply. This is very helpful.

What number should I enter in Box 1, 0 or the same as Box 5?

[DaveF1006]

To clarify, Box 1 of what? For the amount of income you are trying to report and exclude, it should be listed in Box 6 on the 1042 S. That is what you will report as income in the steps I have prescribed.

[keli5734]

@DaveF1006 

For Box 1 of the W-2 form, the system won’t let me proceed if I leave it empty (Box 1 is empty on my W2 form as I have tax-treaty).

[DaveF1006]

No. Do not report this as W2 income.  Delete the W2 entry completely. Follow these steps instead.

1. Go to Federal Taxes > Wages & Income. 
2. Scroll to the very bottom to Less Common Income and select Miscellaneous Income, 1099-A, 1099-C.
3. Select Other reportable income.
4. Description: "1042-S Treaty Exempt Income"
5. Enter the amount of income
6. Now select the add button, here you will enter an offset to the number
7. For a description, enter "Tax Treaty Relief - [Your Country Name]"
8. Now enter the same amount but with a minus sign in front of it. 

How to delete the W2.

1. Select Federal in the left menu, then click Wages & Income.
2. Scroll to the Wages and Salaries section and click Review/Edit.
3. On the "Your W-2 Summary" screen, click the trash can icon or Delete next to the W-2 you want to remove

@keli5734 

[keli5734]

Thank you so much @DaveF1006. This is very helpful! 

For state tax, should I just file as usual, like uploading my W-2?

[DaveF1006]

No, don't upload your W2. The information you reported already in the manner I prescribed will populate into your state return automatically and doesn't require a separate entry.

If you upload your W2, you will face the same issue as before.

[keli5734]

@DaveF1006  Then I also need to mail state tax (not e-file). is this correct? 

[DaveF1006]

Yes, that is correct.

[keli5734]

Thanks! For state taxes, should I mail:

1. the form generated by TurboTax,
2. Form 8833, and
3. my 1042-S?

Is this correct? @DaveF1006 

[DaveF1006]

Yes, this is correct, along with a copy of your W2.