Income from remotely working outside US

[nikhilkothari]

I am on F1 Visa and working for US employer. I went out of USA for 2 months. 1 month in February and 1 month in October and worked remotely from India for those 2 months. My US employer withheld both State and Federal Tax for that duration and I was paid salary in my US Bank account.

I am using sprinttax to file taxes and it asks me if I worked remotely anytime during the year and enter the salary amount for the time period. It is refunding both Federal and State taxes for the salary I earned while I worked outside USA. 

Is claiming back the taxes I paid while working remotely for two months correct?

[pk]

@nikhilkothari  , first we need to make sure that you are still on the exempt status - so when did you enter the USA with F-1?  Was this your first entry in to USA or were you here on other occasions ?

First IRS generally sources  income to the location ( US State or country ) where the work was actually done  ( a tax treaty in case of a different country may supersede this ).

Second as a Non-Resident Alien a person is taxed by the USA ONLY on US sourced income not world income. Thus  , and if you are considered a Non-Resident Alien , the  earnings while working from India ( even for US entity ), is beyond US taxation regime.  However in such a case  ( absent any other facts & circumstances ) India may have claim  to tax this income as locally sourced income under its tax laws.

Does this help ?

pk

[Opus 17]

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@nikhilkothari wrote:

Is claiming back the taxes I paid while working remotely for two months correct?

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Probably.

In general, a non-resident alien is only taxed on income earned while actually living or working in the US, regardless of the location of the employer's headquarters.  

Your US employer (presumably a college of some kind, if you are an F-1 scholar) likely continued to withhold taxes because, for anyone who is a US resident or green card holder, they owe US tax on all their world-wide income no matter where they are actually living or working.  So their payroll system is set up to continue to withhold, which makes it up to you to declare on your 1040-NR whether your income is US sourced or not.

Keep documents proving your travel and work abroad for at least 6 years in case of audit.  If audited, you will need to prove you were actually living and working outside the US while that portion of your income was paid. 

[nikhilkothari]

@pk @Opus 17 My first entry to USA was under F1 visa in August 2017. So, I have not spent more than 5 years in US. So I believe would still be non-resident alien.

Actually, I have already filed the return for 2020. So I would now need to file an amended return with:

1. 1040X 
2. 1040NR
3. My i94 to prove I was out of USA for that time period (just in case) ?

Also I looked up the process and it seems somewhat like this:

1. Go to www.irs.gov

2. Print BOTH a Form 1040-X and a Form 1040NR or 1040NR-EZ for the tax year that you wish to file an amended tax return. Be sure to also get the instructions for the preparation of that year’s Forms 1040NR or 1040NR-EZ as the tax rates and exemption amounts may be different for each tax year;

3. Complete a NEW Form 1040NR or Form 1040NR-EZ with the correct information (what you should have put on your original incorrect tax return) and write “AMENDED” on the top of each page of the new tax return;

4. On Form 1040-X simply complete the following:

1. Enter your name, current address, and social security number (SSN) or IRS individual taxpayer identification number (ITIN) on the front of Form 1040X;
2. Do not enter any other information on page 1. Also, do not complete Parts I or II on page 2 of Form 1040X;
3. Do not enter any other information on page 1. Also, do not complete Parts I or II on page 2 of Form 1040X.
4. Enter in Part III the reason why you are filing Form 1040X.

5. Submit the Form 1040-X, with the new amended Form 1040NR or Form 1040NR-EZ, along with a copy of the original incorrect tax return (marked "Original as Filed". Note that ALL Nonresident Alien tax returns, included amended tax returns, must be sent to the following address:

• Department of the Treasury, Internal Revenue Service, Austin, TX 73301-021
  
  Do I have a correct understanding of the entire procedure or did I miss out on something important?

[pk]

@nikhilkothari , in general agreeing with your post, I would suggest you also read up  ( I am assuming that you are citizen of India ) article 21 of US-India Tax treaty  ( it is available  at www.irs.gov and search for tax treaties ) ------->  https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

to make sure that you are asserting & taking advantage of the treaty benefits.

Is there more I can do for you ?