Which form to submit W-4 or Form 8233 as a NRA on F1-OPT?

@user17553787901 , first we  need a few bits of info ( to be able to focus the answer  to your situation).

(a) When fid you enter this country with F-1 ---- trying to understand whether you are still in or out of exemption period ?

(b) Which country are you from --- need to see the exact wording of the tax treaty ?  Many treaties  allow for an exclusion from US Tax of a fixed amount.  Thus form 8233 may not be applicable 

(c) If you are still in the exempt, you will have to file form 8843.   And of course  if you are NRA  at any point during the year ( depending on exact facts and circumstances ), you may have to file 1040-NR  ( Not supported by TurboTax --- use SprinTax or similar ) or dual status  ( 1040 + 1040-NR).

(d) During OPT, you are exempt from FICA

(e) Note even during  OPT you are not an employee but a trainee -- there are differences for tax purposes ( FICA/ vacation/overtime-pay etc.etc. )

(f) Do not understand whereon form W-4 you entered NRA -- 4c is for extra withholding.

 

I will circle back once I hear from you --yes ?

Hello @pk 

Thanks! Please see below my responses:

a) Still within 5 years exemption

b) Country - India. Treaty article - Article 21(2)

c) 1040-NR + 8843 is what I have used in last year filing. This is fine. The question is more on withholding tax documents needed by employer.

d) FICA exempt is known

e) 
f) Employer uses ADP. On providing Non-resident Alien, step 4c was auto populated as Non-Resident Alien

 

The main query is whether I need to submit Form 8233 to claim the $15,000 deduction under Article 21(2) or do I need to mark it as deduction under point 4(b) of W-4. Or both approaches are wrong and there is a different correct approach? 

@user17553787901 , you have lost me here ---as I see the US-India Tax Treaty and the technical explanation there of , there is no such "Exemption " from tax especially the US$15,000 you are quoting.  Please can you provide a source --   ( I know China has a  US$5000 per year exemption.  

My source is US-India Tax treaty -- see here ----  India - Tax treaty documents | Internal Revenue Service.

 

Specifically article 21 of the said treaty --

 

1. A student or business apprentice who is or was a resident of one of the Contracting States
immediately before visiting the other Contracting State and who is present in that other State principally
for the purpose of his education or training shall be exempt from tax in that other State, on payments
which arise outside that other State for the purposes of his maintenance, education or training.
2. In respect of grants, scholarships and remuneration from employment not covered by paragraph
1, a student or business apprentice described in paragraph 1 shall, in addition, be entitled during such
education or training to the same exemptions, reliefs or reductions in respect of taxes available to
residents of the State which he is visiting.
3. The benefits of this Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken.

 

What this does for students from India , are two things ---  1.  any stipends, awards. gifts from India are not taxed as long as these are for purposes of schooling/training  ( education and living )  and  2.  even during the NRA days the student is given the same rights / deductions etc. as a US domestic student -- thus you use standard deduction and not forced to use itemized deduction.

 

Does this make sense ?    I am very interested in finding out how you got that "exemption from tax" figure.  Really would like to chase it down.

 

Namaste ji

 

pk

@pk : Please refer following link, which is one of the sources. https://www.irs.gov/pub/irs-pdf/p4011.pdf

The standard deduction amount was $14,600 till 2025, its increased to $15,000 from 2025.

 

Excerpt from this publication is below:
Unique Treaty Provisions
United States-India Income Tax Treaty, Article 21(2)
An Indian student or apprentice may take a standard deduction equal to the amount allowable on Form
1040 and may be able to claim the personal exemptions for a nonworking spouse and U.S. born-children.
However, benefits will be limited to certain credits, as the allowable exemption deduction is currently -0- until
2025. Treaty benefits for a scholar from India are very different from those for a student. The scholar benefit for
income code 19 is lost retroactively if the visit exceeds 2 years.
Generally, the standard deduction for Single taxpayers and Married Filing Separately taxpayers in 2024 is
$14,600