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Tax Considerations

Tax Treaties.  Your physical presence “clock” starts ticking the day you arrive in the United States.  This is important if you are a tax resident of a country with a tax treaty with the United States.  The Internal Revenue Service uses your date of arrival, rather than the start date of your employment to calculate your treaty eligibility.  If you are eligible, a tax treaty between your tax residence country and the United States may provide an exemption from paying U.S. federal taxes and payroll taxes for a limited amount of time.  You can review tax treaties on the IRS website to get a sense of whether you will be eligible for a treaty.  Note that tax treaty eligibility will vary based on your nonimmigrant classification. Tax treaties do not exempt individuals from state tax obligations.

Certain countries, such as the United Kingdom, Germany, and the Netherlands, among others, limit tax treaty eligibility to stays in the United States that are less than two years from the date of arrival.  Certain treaties obligate individuals who have benefited from the treaty who choose to stay for two or more years to repay the taxes.  You may choose to waive treaty benefits and pay federal taxes if you are from one of those countries and you know that you will be in the United States for two or more years.

U.S. Tax Process.  The U.S. federal government and state governments collect taxes on U.S. income, including wages and scholarships. Taxes are automatically and regularly deducted from your paycheck.  In January or February each year, Caltech provides every employee with an itemized statement of taxable income for the prior calendar year (i.e. W2, 1099, 1042S or 592B).  Individuals use that statement to prepare and file both Federal and State taxes. Typically, the deadline for filing tax returns is April 15.

Dependents.  If you pay taxes in the United States and have at least one child in daycare, preschool, private school, or camp, you should consider establishing a Dependent Care Spending Account. The DCSA allows you to set money aside from your paycheck to pay for eligible dependent care expenses using tax-free dollars.

Additional Resources.  See Taxes on the International Offices website for information about software for Federal tax preparation and seminars for California state tax preparation.