U.S. Tax System
The United States tax system can be complex and confusing, even for American citizens! Individual reporting requirements and tax obligations vary depending on many factors, including filing status, income & earnings, exemptions, etc. These can change over time and are often impacted by major life events. The University of Rochester has several resources for international students and scholars to help in navigating their US taxes.
The US tax system is governed by the Internal Revenue Service (IRS) and consists of two primary functions: 1) Regular reporting and tax withholdings on earnings and payments made throughout the calendar year, and 2) Filing an individual year-end statement of all income and exemptions, which are used to calculate actual taxes owed. Each spring, employers, banks, and other institutions issue individual summaries of all financial activities for the previous year to help in the year-end filing process. Once an individual's earnings for the year are summarized and totaled, the actual tax amount owed for the year can be calculated. Any money withheld from payments during the year is counted as taxes already paid and refunds are granted when total withholdings are greater than the tax obligation. However, if more taxes are owed than the amount withheld during the year, individuals are responsible for making the required payment to the IRS. State taxes are handled separately from the Federal filing and are subject to individual state laws.
All kinds of income are taxable, including earned wages, non-service scholarships or awards, and interest. They are often taxed differently, however, based on the type, amount, or recipient of the payment.
The University of Rochester relies on a tax compliance tool called GLACIER to make sure that foreign nationals are paid and taxed appropriately, according to their tax residency category. More information on these and other tax reporting requirements are available online.