Saturday, March 29, 2014

How to fill the tax form as a non-resident (in California) ?

Filling my tax form in France wasn't really fun...But here in the US it really becomes a Chinese puzzle !! Fortunately, Caltech offers us a tax software for the federal tax and a seminar for the state tax. I will try to compile these information together and share them with you !
The aim of this post is to explain how taxes work in the US and also to help for the filling of your own form. Except...I was too lazy to read everything, so I just looked what I needed. So, if you are not exactly in the same situation as me, you will probably need to read the notice by yourself. Even if you are exactly in the same situation, I'm not an accountant and I probably misunderstood a lot of things. So, if you want to be 100% sure about your tax form, I encourage you to take an accountant or to pay a software ! (By the way, if you see some mistakes, tell me, I will correct them for the others)

For those who continue the reading, here is my profile :

I'm married without children. We are living in California since February 2013 under J1 and J2 visas. Before, we both worked in France until January 2013. Since we are here, only my husband works and has a SSN. He doesn't have any scholarship and he's directly payed by Caltech.

How work taxes in the US and in California ?

The first thing you have to know is that taxes do not work like in France at all ! (I don't know for the others countries). Indeed, contrary to France, income taxes are here directly taken on your salary and the form is only needed to adjust it and eventually to get a Tax Refund (or sometimes to pay a little more).
As for the taxes, you have two different kinds : the Federal Taxes (for the US government) and the State Taxes (so California for me).

How to fill the tax forms in the US and in California ?

Most of the time, post-docs are tax-exempt in the US (for French people, you have 2 years without US federal taxes if you are J visa). But even if you don't pay taxes, you still have to send your form ! Moreover, the treaty doesn't concern the State. So, I still have to pay taxes in California (and in France of course).
Below, you will find what to do in the correct order (why do I need to precise in "correct order" ?  because it's important to follow each steps, otherwise, you can't correctly fill the forms).

Step 0 : Receive your forms from the University

Here is the easiest step, but the most needed !! Before filling forms, you need various papers. For us (and I guess for every post-doc), we receive the W2, 1042S and W4. If you still didn't get anything after the January 31st, call you employer.

Step 1 : Fill the US Income Tax Return (form 1040NR or 1040 NR-EZ)

  • For us, this step was pretty easy, since Caltech provided us a software to fill everything. Thus, we just had to answer questions, and the software gave us automatically the 1040NR-EZ and the 8843. For those who don't have this chance, fill the 1040NR (if you have dependants), or else the 1040NR-EZ. You will find more information in the Instructions IRS.
To be clearer, here is an example I filled (This is neither me, nor my income !) and some explanations.
If the picture is not clear, click on it
Box n°6 : Your american income (The same from the box n°16 in the W2)
Box n°11 : What has been withhold from your income for the State taxes (You will find it in the box n°17 in the W2)
Box n°13 : For this, I'm not sure, but I think this corresponds to the maximal deduction you can have from the government, so $3,900 (so this point is to check).
Box n°1b : If you are french, this is 20 (otherwise, you can find the number in the 1042S)
Box n°1d : For us, our salary. This amount may change for those who have a high income, because I think the treaty is limited to a certain amount. (This is to check)
  • Then, you have to fill the 8843 for every member of your family (You will find it here). For us, we just had to fill the parts I and II with your personal information (name, address, passport n°, etc.).
  • In the envelope 1, put in the correct order :
    • 1042S copy C
    • W2 copy B
    • 1040NR-EZ
    • 8843 for the J1
    • 8843 for the other members
  • In the envelope 2, send the 8843 for the spouse J2.
  • Keep a copy of these forms and keep them for a long time !!!
  • Send the 2 envelopes to the following address :
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

Step 2 : Fill the California State Form

For a non-resident (like us), there are 2 forms to fill in : the Schedule CA(540NR) and the form 540NR (Apparently, we have the choice between the Long Form and the Short Form but the accountant told us to take the Long Form).
  • Let's begin to fill the Schedule CA(540NR) using the form 1040NR-EZ.
I won't detail everything (you can find the instructions here), but here are the main information you need to know.

Column A is used to report the federal amounts from you 1040NR-EZ.
Column B is used to report the exempt federal amounts in California such as social benefits or lottery.
Column C is used for the amounts that are not taxed by the federal government but are by California, such as foreign incomes. (So if I understood right, all the 2013 foreign incomes count as if we wear a full year resident, but I would be delighted to learn this is not the case !!!)
Column D = column A - column B + column C
Column E only concerns Californian incomes.

For column A :

Box 7A (CA(540NR) = line 3 (1040NR-EZ)
Box 10A  = line 4 (1040NR-EZ)
Box 21f B  = line 5 (1040NR-EZ)
Box 21A  = Sum of 21Bs
Box 22 A  = Sum of the boxes 7A to 21A = line 7 (1040NR-EZ)
Boxes 22b A/B/C/D/E  = Boxes 22a A/B/C/D/E
Box 33 A and C : I didn't succeed to know if my french student loan was eligible for the deductions. If someone knows, please tell me !!
Boxes 36 A/B/C/D/E  = Sum from 23 to 31 and 32 to 35 A/B/C/D/E (Box 36 A  = line 8 (1040NR-EZ))
Boxes 37 A/B/C/D/E  = Boxes 36 A/B/C/D/E - Boxes 22b A/B/C/D/E (Box 37 A  = line 10 (1040NR-EZ))

For column B :

For us, nothing.

For column C :

Box 7C  = Exempt American income + foreign income
So, to be clearer, put the amount from line 6 in the 1040NR-EZ and sum everything you earned in your own country. For the foreign income, convert what you earned in $ using the average annual conversion rate.
Boxes 33 A and C : I didn't succeed to know if my french student loan was eligible for the deductions. If someone knows, please tell me !!

For the column D :

You just have to sum columns A and C and to subtract the column B !

For the column E :

Box 7E (CA(540NR) = line 6 (1040NR-EZ) (so only our Californian incomes and even if those are exempted by the federal government)
For the part III :

Line 38 (CA(540NR) = line 11  (1040NR-EZ)
Line 39 (CA(540NR) = Put here the taxes you are gonna to pay (included those in your foreign country) + the deductions of the line 11.
Line 40 (CA(540NR) = line 38 - line 39
Line 42 (CA(540NR) = line 40 + line 41
Line 43 (CA(540NR) = If you don't earn more than the indicated amounts, report here the line 42.
Line 44 (CA(540NR) = Report here the standard deduction, which is $3,906 for us.
Line 45 (CA(540NR) = Box 37E
Line 46 (CA(540NR) = line 44
Line 47 (CA(540NR) = Box 37E / Box 37D (with 4 decimals)
Line 48 (CA(540NR) = line 46 * line 47
Line 49 (CA(540NR) = line 45 - line 48
  • Fill then the 540NR Long Form using the both the Tax Table and the Schedule CA(540NR) you just filled.
For the top of the page, just put your name and your actual address. For the status, if you're married with a non-resident, check the box 3 "filling separately", because this is the only option for non-resident people.

Then :
Line 7 (540NR Long Form) = 1* $106 = $106
Line 11 (540NR Long Form) = Sum lines 7 to 10
Line 12 (540NR Long Form) = Box 16 in W2
Line 13 (540NR Long Form) = Line 10 (1040NR-EZ)
Ligne 14 (540NR Long Form) = Case 37B (CA(540NR))
Line 15 (540NR Long Form) = Line 13 - Line 14
Line 16 (540NR Long Form) = Box 37C (CA(540NR))
Line 17 (540NR Long Form) = Line 15 + Line 16
Line 18 (540NR Long Form) = Put the deduction $3,906 except if you want to give money for charities
Line 19 (540NR Long Form) = Line 17 - Line 18

Line 31 (540NR Long Form) = If you earn less than $100,000, check the "Tax Table" and put the number associated to your income and your fillin status into the line 19.
Line 32 (540NR Long Form) = Box 37E (CA(540NR)) = line 45 (CA(540NR))
Line 35 (540NR Long Form) = Line 49 (CA(540NR))
Line 36 (540NR Long Form) = Line 31 / Line 19
Line 37 (540NR Long Form) = Line 35 * Line 36
Line 38 (540NR Long Form) = Line 35 / Line 19
Line 39 (540NR Long Form) = Line 38 * Line 11
Line 40 (540NR Long Form) = Line 37 - Line 39
Line 42 (540NR Long Form) = Line 40 + Line 41
Line 63 (540NR Long Form) = Line 42 unless you filled the lines 50 to 62
Line 74 (540NR Long Form) = Line 42 unless you filled the lines 71 to 73
Line 81 (540NR Long Form) = Line 38 (CA(540NR)) or box 17 from W2
Line 85 (540NR Long Form) = Line 81 unless you filled the lines 82 to 84
Line 101 (540NR Long Form) = Line 74 - Line 85 if you over-payed (report this number on the line 103)
Line 101 (540NR Long Form) = Line 85 - Line 74 if else.
You fill then the information to pay or to receive your refund and you're all set !
    • Now you need to put all the papers in an envelope. And in the right order please !! :-)
      • W2
      • long Form 540NR
      • schedule CA540NR
      • copy of 1040NR-EZ
    • And send everything to the following address :
    If you have a refund :
    PO BOX 942840
    SACRAMENTO CA 94240-0001

    Or if you owe money :
    PO BOX 942867
    SACRAMENTO CA 94267-0001

    That's it, you can relax and open up a bottle of Champagne (and maybe wait for your tax refund !!!)

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