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  #1 (permalink)  
Old 04-08-2008, 05:46 AM
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Join Date: Apr 2008
Posts: 3
Default Reporting 1042-s info on 1040

I have gone from being a non-resident alien to a resident alien student (F1) who has received a 1042-S with tax withheld on a scholarship.

I was planning on filing the 1040 form reporting this scholarship and also employment income (with a W-2). I was also planning on claiming an exception to the saving clause as per the US-India tax treaty for the amount of the scholarship. This subjects that income to a reduced rate of 14% (which has been withheld). Is that correct?

Also, how do I report this information on the 1040? The info on the IRS website re this is ambiguous (Publication 519 (2007), U.S. Tax Guide for Aliens ) and really only explains what to do for income exempt as per the exception, not income subject to reduced rate as per the exception.

Finally, if I use this exception can I still claim the standard deduction and personal exemption (to subtract from my W-2 wages)

Any help would be much appreciated.
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  #2 (permalink)  
Old 04-08-2008, 11:54 AM
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Join Date: Jan 2008
Posts: 2,031
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First apply the Scholarship and Fellowship rule for everyone -- residents and nonresidents:
If you are a degree candidate and if the financial aid (includes scholarship and fellowship) is for tuition fee, other fees, books, supplies and equipment, then it is not taxable. For a degree candidate aid for boarding and travel are taxable. If you are not a degree candidate, then all the financial aid is taxable.

Add only the taxable amount in line 7 of Form 1040. Also on the dotted line of line 7 write SCH and the amount.

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Last edited by Visa Taxes Expert; 04-08-2008 at 12:04 PM.
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  #3 (permalink)  
Old 04-08-2008, 12:34 PM
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Thanks for that. I realise its taxable but as per the treaty it (the scholarship but not wages under the exception to the saving clause) is taxable at a lower rate. I was wondering how this could be separated from the wages which are taxable at the US persons' rate
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Old 04-08-2008, 04:41 PM
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Join Date: Apr 2006
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Sir:

The 14% rate cited is for WITHHOLDING purposes.

The tax rate depends on your overall income picture.
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