F1 working remotely for an US university

[Shan0727]

Hello,

I have been holding an F1 visa since 2019 and also working as a Research Assistant at Indiana University Bloomington. Due to my PhD research, I left the U.S. in April 2022 and have been working remotely for my advisor since then. Do I need to pay federal, Indiana state, and Monroe County taxes under these circumstances? Many thanks!

[Opus 17]

Probably not.

You only pay state and city or county income tax if you are living or working in the state or county.  In this case, "living" means your physical location and also the location of your domicile, or permanent residence.  Domicile depends on facts and intent. There is no single factor that determines your domicile, it is a combination of facts and circumstances.  For example, if you bought a house in Indiana in 2019, you still own the house, and you plan to return to Indiana in the future, then you are probably domiciled there, even though you have been away for several years.  You don't say, but I suspect is it more likely that you are not domiciled in Indiana since 2022.  But only you know that for sure.  This is a reasonably good article on domicile.

https://ceritypartners.com/insights/domicile-vs-tax-residency-what-is-domicile-and-how-do-you-change...

If you are not a US citizen, green card holder or resident alien, you only pay tax on US-source income.  Your research salary is not considered US-source for this purpose, because you are actually doing the work out of the country, even though the employer is inside the US.

https://www.irs.gov/individuals/international-taxpayers/source-of-income-personal-service-income

However, if you work inside the US (such as, you travel to the US one week every 6 months to meet, talk, plan new work, etc.) then 2/52nd of your salary is US and Indiana income, and you would be required to file a 1040-NR non-resident tax return for that part of your income.

In the rare case where you are a non-resident alien, and your income is not US-sourced, and not subject to US federal tax, but you are still domiciled in Indiana because you plan to return, I don't know how that would be taxed, and I would need to ask another expert. 

[Shan0727]

Hi Opus 17,

Thank you for your reply! I do not own any property in Indiana, so it seems like I don't have to pay any taxes there.

However, federal, state, and county tax withholdings have always been applied to my paycheck even after I left. I did not receive full refunds through Sprintax for my 2022 and 2023 tax returns, which may be due to our department’s HR forgetting to update my tax location code after I left the US.
1) Does this mean I need to file amended returns for both federal and state taxes for 2022 and 2023?
2) If I wasn't in the US for all of 2023 and plan to file a 1040X, should my adjusted gross income be $0 regardless of the wages listed on my W-2?

Much appreciated!

[Opus 17]

You should file updated federal and state withholding forms claiming total exemption as a non-resident.

The only way to get withholding back is to file an original or amended return that reports zero relevant income (a 1040-X and a state return).  You show no taxable income and no tax owed, so that should calculate a full refund.  

You should have already gotten full refunds from your 1040-Xs that you already filed, so I wonder what went wrong on those returns.  

[pk]

@Shan0727 , having gone through your post and generally agreeing with my colleague @Opus 17  ( for his excellent reply ), my understanding of your situation is as follows :

(a) You came to the USA as a student on F-1 on 2019. Thus assuming that this was your first entry in to the USA,  your five year  "exemption " ( from  counting days present ion the USA) would have completed  on 12/31 /2023.

(b) You left USA and probably therefore  cancelled your F-1  status   ( not continuing to be a student  and physically present  in the USA ) sometime in 2022 ( what date please ).  You left while still an NRA.

(c) For tax year 2023  (you not being present in the  USA,) you continue to be  NRA.  Also , even though you have a bank account in the USA ( true ? ) wherein you receive payment from  Indiana University at Bloomington,  your  connection to the USA is limited ( and probably more connected to your home country -- which, please ) and therefore you are NRA.

(d) Being NRA, and performing work remotely in your home country, you generally would be immune  from US taxation ( Federal, State and locality , as suggested by  @Opus 17   ).

Please answer my questions above and I will circle back once I hear from you --yes ?

Is there more I can do for you ?

[Shan0727]

@Opus 17 I just noticed this issue recently and haven't filed any 1040X, sorry if I didn't make it clear.

@pk Regarding your description:

a) True.
b) I left the U.S. on April 7, 2022, to do my PhD research in other countries, so I am still a PhD student at IUB but just not physically present in the U.S.
c) I do have U.S. bank accounts. I stayed in my home country (Taiwan) for a year and then relocated to Switzerland to date. Yes, I am still NRA.

[Opus 17]

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@Shan0727 wrote:

@Opus 17 I just noticed this issue recently and haven't filed any 1040X, sorry if I didn't make it clear.

---

Sorry, I meant your 1040-NR.  If you filed a 1040-NR for 2022 and 2023, you should have reported you had zero eligible wages, owed no tax, and requesting a full refund.  Likewise you should have filed Indiana non-resident returns reporting zero taxable wages, zero tax owed, and requesting a full refund of withholding.  

I have not tried to use Sprintax so I don't know how it is set up, but even if you had a W-2 from the university because you were coded wrong, there should have been a manual way to indicate the W-2 was in error and your actual taxable wages were zero.

Lastly, if you had social security and medicare withheld, that was likewise also in error (probably, @pk ??).  You should be able to request a refund of those taxes using form 843.  This is separate from any normal or amended tax return you would file, and is not supported by Turbotax, you would need to file that one manually. 

(And also, if your PI was being charged the normal fringe benefit rate on your salary, they might also be entitled to an adjustment on their accounts, since if you are not getting retirement benefits or paying social security and Medicare tax, the cost of those fringe benefits should not be charged to your PI.  Let your PI know about this mixup.)

[Shan0727]

@Opus 17 Sprintax used the wage listed on my W-2 as eligible income, even though I provided all my U.S. visits and indicated that I wasn’t in the U.S. (like all of 2023). At the time I filed the return, I did not I realize either that I did not have to pay those taxes if I wasn’t physically in the U.S.

FICA showed up once on my paycheck this June, which is when I noticed that my tax location code was incorrect and caused me to be misidentified as a resident alien. After correcting the tax location code, I no longer see FICA, but federal, state, and county taxes are still being withheld. I’ll see if I can claim an exemption and will discuss with my advisor to make sure everything is on the right track. Also I will file a form 843 too, thanks for the info!

[Opus 17]

To claim exempt from federal withholding, see the form and the instructions on page 2. Note that you must file a new W-4 claiming exemption each year before Feb 15.  (So file one ASAP, then one next January, and so on.)

https://www.irs.gov/pub/irs-pdf/fw4.pdf

I don't think you should file an Indiana form WH-4, since that seems to be only for people (including non-resident aliens) who have Indiana income that requires withholding.  You are not a resident of Indiana (since 2022) so you should just be able to tell your employer that you are not a resident of Indiana and should not have any tax withheld.  

That should turn off all your withholding.

For 2024 you will file a 1040-NR (with 1040-X) and an amended Indiana IT-40PNR, but you will need to indicate that you had zero taxable income, so that you request a refund of all withholding.  You may need to make manual adjustments in Sprintax, or see a professional, or file by hand.  For 2023, it sounds like you need to file an amended 1040-NR and amended IT-40PNR. 

For 2022, since you were in the country part of the year and out part of the year, your tax situation is a bit more complicated, although you should still only pay US tax on the income you earned while you were actually living or working in the US.  I think @pk  will be of more help with correcting your 2022 tax returns. 

[Shan0727]

@Opus 17 I really appreciate your detailed response! I will start addressing these asap.