Form 1042S on Income Tax Treaty for Resident Alien (F1-visa)

[spinsideways]

I'm a PhD student from China on F1 visa. I became a Resident Alien in 2016 as I've been in the US for five years. 

In the past four years, I claimed the U.S.-China income tax treaty for my scholarship income from my university, which exempt my first $5000 income from federal tax.

According to IRS website, I'm still eligible to claim the income tax treaty as a Resident Alien (see below). 

I receive my Form 1042S on this income tax treaty from my university. How can I enter my Form 1042S in TurboTax as a Resident Alien?

Info from IRS website for my eligibility.

https://www.irs.gov/individuals/international-taxpayers/resident-alien-claiming-a-treaty-exemption-f...

Example: Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under the Internal Revenue Code, a student may become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, the treaty allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States.

[ChristinaS · Accepted solution]

You need to enter any taxable scholarship (before apply the treaty provisions) under the Education Expenses section. This will carry the scholarship to line 7 of your return. Because the income is on a 1042-S, it must "hit" the appropriate line of the return first.

To enter your treaty exemption (negative number):

1. Click on the “Federal Taxes” tab ("Personal" tab in Self-Employed)
2. Next click on “Wages and Income”
3. Scroll down the very bottom section “Less Common Income”
4. Choose Miscellaneous Income
5. Choose "Other Reportable Income" and enter this information here under other taxable income
6. You should use a description related to the tax treaty article exempting the income (ie: China-US tax treaty, exemption under article 20) and the exempt amount as a negative number.

How to report income on your tax return.   In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22.

You do not need to complete Form 8833 for the scholarship reported on 1042-S.

[yoyowyf]

Thank you TurboTaxChristinaS for your detailed answer! Is this also applicable to state tax?

[hisham_dev]

Thank you for your answer. I would like to ask about some statements mentioned in your answer:  

What is "the amount for which treaty benefits are claimed", is it the amount withheld by the employer for the first paycheck before she applies the treaty, or it its the total salary paid by the employer?


Also, statement "subtract this amount from your income to arrive at total income on Form 1040, line 22.". The tax treaty given to my country is unlimited, so which part should I subtract?

Any help please?

[Ara_2021]

Your talking about "You should use a description related to the tax treaty article exempting the income (ie: China-US tax treaty, exemption under article 20) and the exempt amount as a negative number."

Just want to clarify what do you mean by negative number? Do we need to put the income mentioned in 1042s as negative number , whereas the federal tax withhold is 0. 

[luckyremy]

Hi, this answer is super helpful. I'm under the same situation and would like to ask a clarification question. Since the treaty is mentioned by the 1042s, do you mean that I do not need to submit Form 8833 anymore? I didn't realize that there is a Form 8833 before, and I wonder if I have to amend the tax return just because I did not file this form (when everything else is correct).

Thank you