Income Tax information for overseas postdocs working in the US

The NPA has recently updated its advisory section dedicated to overseas candidates applying for, or embarking upon, a postdoc position in the USA. As part of the update, they have added a new article on US income tax. However, it's a bit too general and lacking in sufficient detail to be informative. Check it out all the same, but also have a read through the advice below, which I have shamelessly self-plagiarized from Across the Bilayer.

Taking advantage of Tax Treaties - Some countries have tax treaties with the US that will affect whether or not you have to pay US Federal Income Tax for the duration of your postdoc in America. The Internal Revenue Service has a full list available here.

For example, Britain and the US have a tax treaty that allows visiting British scientists to work in the US for a period of no more than 2 yrs without paying Federal Income Tax on wages earned. Note, however, that the visitor is still required to pay city and state taxes. The caveat here is that should the visitor remain in the US for one day longer than the specified 2 yrs (working or otherwise) they will be required to pay the back taxes for the entire duration they were receiving a salary. In this particular case, the conventional wisdom dictates that newly arrived British postdocs instruct their institution's payroll office to withhold Federal Income Tax (by filling out a W4 form) . If the postdoc leaves before the 2 yr limit expires, they can simply file an amended tax return (see below) and the IRS will post a cheque reimbursing the full amount. Either that, or the organised postdoc could open a savings account and make monthly deposits comparable to Federal Withholding, so that if they do decide to stay beyond 2 yrs they can easily pay the back taxes.

Some countries, such as China, have an even better deal with the US government. Visiting Chinese scientists are allowed the initial 2 yr tax exempt period regardless of whether the worker continues to work in the US.

Which Tax Return? – When it comes to filing the annual tax return (usually around April 15th), the form you should use will depend on your answer to the IRS's Substantial Presence Test. Briefly, if you have been present in the US for less than two tax years, you will generally be considered a Non-Resident Alien for tax purposes, and should file either form 1040NR or 1040NREZ. 1040NREZ is simply a basic version of 1040NR for people who don't have to worry about dependents, property taxes and other complicating factors. If you have worked in the US for longer than two years you will generally be considered a Resident Alien for tax purposes, in which case you file a conventional 1040 form (the same form filed by your US citizen colleagues).

Most of the time, your institute will send you the correct forms, but you can also download the forms from www.irs.gov.

City and State Taxes - Most relevant tax treaties will be between the postdoc's native country and the US Federal government. As a result, state and city taxes do not come under the treaty, and so the postdoc is rarely exempt from paying these. That said, some states do have their own separate treaties with foreign nations (Tax Treaty Overview). Make sure you are aware of the correct filing deadline for city and state taxes (usually near or on the deadline for Federal returns), and know where to download the relevant forms. University international centers can sometimes neglect to inform new arrivals of the finer points of the local tax infrastructure, and if this is the first experience you've had paying taxes (quite possible for a first time postdoc), there's ample room for getting it wrong. If in doubt, check with your colleagues.

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