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Question for the Money Doctors

Question submitted on Apr 30, 2012.

Question

my friend is a student on F1 visa in USA. During her studies, she did consultancy in India while staying in USA. She earned less than $5000 in a year. Does she need to pay taxes on the income she earned?

Thanks.

Answer

Not knowing enough detail from the question such as where your friend is from and did she earn the income in India, there are a few considerations.  Your friend is a non-resident alien (NRA) so normally a NRA files form 1040-NR (or 1040NR-EZ) and they are not entitled to the standard deduction.  Thus, their tax bills are higher than a citizen or resident alien.  However, depending on where your friend is from, a few countries have tax treaties with the US that may exempt F-1 students from US taxes.  See Form 8233 instructions (http://www.irs.gov/pub/irs-pdf/i8233.pdf).  Form 8843 typically needs to be filed annually as well, regardless of whether she has a requirement to file a tax return.

Also, it sounds like your friend may have earned the income in India.  Since she is a nonresident for tax purposes, she would not pay tax on the income earned outside of the US. 


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