If you are on a J-1 visa, you will be exempt from the Substantial Presence Test for the first 2 (if non-student) or 5 (if student) calendar years that you are in the US. This means that you are considered a non-resident aliens for US tax purposes.
Please refer to this US Tax Guide for Aliens for additional information about visa exemptions and the various filing requirements.
If you are exempt, you are considered a nonresident alien are you are only required to file a US tax return for income from US sources. If you are required to file a tax return, you will file a Form 1040NR. TurboTax does not support Form 1040NR but you can go to the following website https://www.sprintax.com/ which is specifically designed to help international students file 1040NRs.
Additionally, here is a link to the IRS website for Form 1040NR:
https://www.irs.gov/uac/Form-1040NR,-U.S.-Nonresident-Alien-Income-Tax-Return
If you meet the SPT and are considered a resident alien, then you will file as a US resident and will need to include all income worldwide on your US income tax return (Form 1040)
You will be able to your TurboTax to enter your 1042-S and W-2 on your Form 1040.
You will enter the 1042-S income as:
- If wage income - other earned income
- If Scholarship - under the education section
- If other income - under other miscellaneous income
and you will enter the amount of the treaty exemption as a negative amount under other miscellaneous income. You may also need to attach Form 8833 to your tax return. (Attaching this form will require that you mail in your return. You will need to select - file by mail under the file tab.)
Since Form 8833 is not supported by TurboTax, here is the link to the IRS website regarding claiming a tax treaty benefit:
https://www.irs.gov/Individuals/International-Taxpayers/Claiming-Tax-Treaty-Benefits
To enter your 1042-S for wages under other miscellaneous income:
- Click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Wages and Income”
- Next click on "jump to full list" or “I’ll choose what I work on”
- Scroll down the screen until to come to the section “Less Common Income”
- Choose "show more", then Miscellaneous Income
- Choose "Other Income not already reported on a Form W-2 or Form 1099 "
- Select - "Yes" for "Other Wages Received"
- After 3 screens, select "Yes" for "Any other earned income".
- On screen titled " Enter source of other earned income" - select " Other"
- Input the "1042-S wages" and the amount on the next screen (screenshot #1)
To enter your 1042-S related to your scholarship:
- Click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Deductions and Credit”
- Next click on "jump to full list" or “I’ll choose what I work on”
- Scroll down the screen until to come to the section “Education”
- Choose "show more", then Expenses and Scholarships (Form 1098-T)
- You will need to choose the student this Scholarship relates to and select "edit"
- Under the Education Summary page, select "Scholarships and Grants" - edit
- Say "yes" - to question "Did (name) receive a scholarship or grant in 2015?"
- Enter amount as "Other Scholarships/Grants/Fellowships (screenshot #2)
To enter your 1042-S as other miscellaneous income:
- Click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Wages and Income”
- Next click on "jump to full list" or “I’ll choose what I work on”
- Scroll down the screen until to come to the section “Less Common Income”
- Choose "show more", then Miscellaneous Income
- Choose "Other Reportable Income" and enter this information here under other taxable income (screenshot #3)
To enter your treaty exemption under as other miscellaneous income:
- Click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Wages and Income”
- Next click on "jump to full list" or “I’ll choose what I work on”
- Scroll down the screen until to come to the section “Less Common Income”
- Choose "show more", then Miscellaneous Income
- Choose "Other Reportable Income" and enter this information here under other taxable income
- 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.