Guidance on Filing Taxes with W-2 and 1042-S Forms for Resident Alien Status

[Mr_Clever]

Hello,

I am an international student from China on an F1 visa. Since 2023 is my sixth year in the U.S., I believe now I'm qualified to file taxes as a resident alien for the year 2023. As a Ph.D. student and a teaching assistant at a university, I've received a W-2 form indicating my wages. Additionally, I have a 1042-S form from the payroll center, related to wages claimed under a treaty benefit, with an income code of 20 (box 1), a gross income of $5,000 (box 2), chapter indicator 3 (box 3), Exemption code 04 (box 3a), Exemption code 16 (box 4a), and 0 for box 3b, 4b, 7a, 8, 9, 10, 11. 

I'm looking for guidance on how to accurately enter the information from 1042-S forms through TurboTax, as I was unable to locate the section for inputting the 1042-S information. 

Thank you!

[DavidD66]

TurboTax does not support Form 1042-S, so there aren't any specific entry screens in TurboTax for form 1042-S.  You should report the income and withholding in the appropriate category of income that is appropriate or as "Other Reportable Income" under Miscellaneous Income if you cannot find a matching category.   

[Mr_Clever]

Thank you for your prompt response and the guidance provided.

However, I'd like to clarify my situation further regarding the $5,000 income. Under the tax treaty between the U.S. government and the government of China, specifically under article 20(c) and the saving clause of article P2 (shown on the form W-9 that I signed), the first $5,000 earned at the university by a student from China is considered non-taxable. This is also reflected in my Form 1042-S, where the tax rate is indicated as "00.00", implying no tax was withheld since it's treaty-exempt.

After following your advice and entering the $5,000 as "Other Reportable Income" under Miscellaneous Income in TurboTax, it appears that this amount is being treated as taxable income, which contradicts the treaty's stipulation.

Could you please advise if there's an alternative way I should be reporting this income to accurately reflect its non-taxable status under the treaty? Or is there a specific section within TurboTax where I can claim this exemption to ensure it is not taxed? Or should I just ignore this and only report income shown on the W-2?

Thank you once again for your assistance.

[AmyC · Accepted solution]

Yes, you have to report the income as mentioned above but you also need to subtract the income using the same interaction. Your 1042-S would be wage income so report the $5,000 under other reportable income and then report it again as a negative income and a description identifying it as China treaty related.

Federal:

Here is an example of an Italian pension income and withdrawal as an example of input. Yours will be a little different since yours is wage income.

Unless you have something else, you should be exempt from filing the 8833 with the federal. 

The payee must file a U.S. tax return and Form 8833 if claiming the following treaty benefits:

1. A reduction or modification in the taxation of gain or loss from the disposition of a U.S. real property interest based on a treaty.
2. A change to the source of an item of income or a deduction based on a treaty.
3. A credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code.

The payee must also file Form 8833 if the payee receives payments or income items totaling more than $100,000 and determines the country of residence under a treaty and not under the rules for determining alien tax status.

State:

The treaty may not apply to your state. You will need to see if your state taxes the income or if they require you to file form 8833 for it to be exempt or if nothing additional is required. See How do I contact my state Department of Revenue?

[Mr_Clever]

Thank you very much for your detailed and helpful response. This approach makes sense, and I appreciate the example you provided.

[Al Emran]

Hi @AmyC  I have a quick question related to this. The gross income listed in my 1042 S is lower than the allowable treaty amount. So, I wonder if I can report the amount in 1042 S as income and then enter a negative adjustment with the allowable treaty amount.  These two numbers would be different. Will that be okay? 

[AmyC]

No, you can't claim a deduction larger than the income. You can claim up to the treaty amount based on the income received.

@Al Emran

[Al Emran]

Hi @AmyC I was on F1-OPT status while I was having 1042 S (treaty benefit) and in September I got a green card. My company forgot to put me in the treaty benefit before August and thus I only got a portion of the allowable treaty benefit for August. Now, can I claim the full treaty benefit while tax filing? Also, is it that true a green card holder can't claim treaty benefits for the same year receiving a green card?

[AmyC]

You might be able to claim the full treaty benefit. Check for your situation. This is from Frequently asked questions about international individual:

As a green card holder, you are a U.S. tax resident.  However, the definition of residency under U.S. tax laws does not ordinarily override tax treaty definitions of residency. If you are a dual-resident taxpayer (a resident of both the United States and another country under each country's tax laws), you can still claim the benefits under an income tax treaty.

The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). If you would be treated as a resident of the other country under the tie-breaker rule and you claim treaty benefits as a resident of that country, you are treated as a nonresident alien in figuring your U.S. income tax. For purposes other than figuring your tax, you will be treated as a U.S. resident.

If you are a dual-resident taxpayer and you claim treaty benefits as a resident of the other country, you must file a return by the due date (including extensions) using Form 1040-NR and compute your tax as a nonresident alien. You must also attach a fully completed Form 8833 if you determine your residency under a tax treaty and receive payments or income items totaling more than $100,000. You may also have to attach Form 8938 as discussed in the “Other Forms You May Have to File” section under chapter 7 of Publication 519, U.S. Tax Guide for Aliens. For more information on reporting treaty benefits, see "Reporting Treaty Benefits Claimed," in chapter 9 of Publication 519, U.S. Tax Guide for Aliens.

If you are a long-term resident and you claim treaty benefits as a resident of another country pursuant to a tax treaty, you may be subject to the expatriation tax. Please refer to the expatriation tax provisions in Publication 519, U.S. Tax Guide for Aliens, and in later questions.

Reference: Claiming Tax Treaty Benefits | Internal Revenue Service

[miladibrahim]

Can you please elaborate how to deduct the amount on the 1042S in the deductions? I do not seen to find an option for "negative income" or other relevant choices to make the deduction

Thank you!

[AmyC]

To subtract income:

1. Open your return to federal Income
2. Locate Miscellaneous Income, 1099-A, 1099-C, Start
3. Scroll to the bottom
4. Other reportable income, Start
5. Other taxable income?
6. Select YES
7. Description 1042S
8. Amount, enter your negative amount, must be less than or equal to the amount on the 1042S
9. continue

@miladibrahim