1040NR Update: Student Issues Yet to be Resolved

Higher Education|International|Tax

By Ellen Martin

It came to light recently that thousands of international students were receiving notices about their 1040NR tax return for 2015. Instead of receiving their expected refunds, these students received notices either denying their request for a refund or assessing new taxes.

Form 1040NR, U.S. Nonresident Alien Income Tax Return, is often filed by international students to receive refunds of taxes withheld on scholarships. When students receive scholarship or fellowship compensation in excess of their tuition and other qualified costs, higher education institutions are required to withhold taxes.

Each year, colleges and universities report the amount withheld to both the associated student and the IRS via Form 1042-S. Just as U.S. residents use their Forms W-2 or 1099 to complete Form 1040, international students report the information provided by their Form 1042-S on their non-resident tax return. Recent notices from the IRS indicated that amounts in its record of 1042-S’ filed by colleges and universities did not match amounts that students reported on their 1040NRs.  If the student reports amounts provided on the Forms 1042-S from their college or university, there should not be any discrepancies.

The National Association of College and University Business Officers (NACUBO) has been following this issue since its emergence. NACUBO has reported that in its March conference call with the IRS, the IRS provided no resolution other than advising students to respond to notices as indicated. NACUBO reports that continued student and institutional correspondence has provided little, if any, guidance.

With no explanation surfacing, software error has been a repeated theory regarding the source of the discrepancies. Nina Olson from Taxpayer Advocate Services announced on April 15, 2016 that “most problems appeared to be caused by a software error” stemming from 1042-S preparation software. She goes on to say that for some cases, “it appears that the mismatches may themselves be the result of the IRS shifting data fields on the students’ tax returns.”

In their April 21 briefing paper, NACUBO expressed concern for international students receiving notices, since they believe that the IRS has limited resources to assist students in a timely fashion. NACUBO openly requested that the IRS identify the cause of these notices and provide a solution for students to easily resolve these issues with the IRS.

Contact us if you have questions regarding 1040NR returns and visit our Tax Services page to learn more about the services that we offer our clients. 


Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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