While U.S. individual taxpayers can file and quickly receive their 2015 federal income tax refunds, there are many international students who are still receiving notices from the IRS stating that their 2014 requests for refunds have been denied. On March 7, 2016, the National Association of College and University Business Officers (NACUBO) reported that it is aware that thousands of international students received notices from the IRS regarding withholding credits. The notices indicated that students would not receive a refund of their withholding, or would only receive a partial refund, due to discrepancies between what the colleges reported on their Forms 1042-S and what the individual students reported on their non-resident tax return 1040NR.
Higher education institutions are required to withhold and remit tax payments on certain types of payments made to students, such as scholarships paid in excess of student tuition, fees and other qualified education expenses. The amount of payment and tax withheld for an individual student is reported to the IRS on the Form 1042, Foreign Person’s U.S. Source Income Subject to Withholding. Students from outside the U.S., who possess a U.S. Tax Identification Number, may file a 1040NR or 1040NR-EZ to request a full or partial refund of taxes withheld by their college or university.
No clarity was provided after NACUBO and other international experts spoke with IRS representatives. The IRS revealed that it is working to identify common issues with the 1040NR returns submitted by students as well as the possibility of issues with 1042-S forms occurring during transmittal. While this doesn’t leave much direction for confused students and universities, the IRS did provide some limited guidance.
Students who received notices about their 1040NR or 1040NREZ should respond to the IRS in the manner provided for in the notice. All correspondence should be sent via certified mail.