Would some Please clarify on H-4 receiving Scholarships

V

vidchin

Registered Users (C)
All,

Here is the situation. One of my friends wife is in school. She is on H-4 visa. The university is offering her a merit scholarship. I know that persons on H-4 visa are not allowed to work. In this particula case she does not have to work. The university even told her the scholarship amount is taxfree because its a merit award and no work/service is required for the payment.

Would it cause any problems from INS if she receives scholarship from the university? She just does not want to take any chances with INS.

I greatly appreciate your responses/opinions.

Thanks
 
No Title

She can receive Scholarship if she has a SSN. If not she can apply for Taxpayers Identification Number (TIN) and receive scholarship. I do not believe that will cause any problems with INS.
 
Just make sure........

Shouln\'t be a problem with INS. Just make sure that the university is not going to issue a W2 for the payment. Some universities opt for such a payment mechanism for certain types of awards. Typically scholarship payments for foreign nationals are reported to the IRS on 1042S and not on W2 since there\'s no work requirement. If it is a 1042S payment, she can remain a H4. If by chance (remote though) its a W2 payment she needs a F1 status.

Scholarships are not generally tax free. The amount that is tax free depends on the US - \'your country\' tax treaty. 1042S would tell you how much is tax exempt with IRS code for tax exemption reported on it.

I\'ve generally gotten scholarships/awards that were reported on 1042S. Once though I had a 9 month research award that was reported through a W2.
 
Thanks guys!! I greatly appreciate your responses.

She does have a ITIN. She does not want to change to F1 because of the hasseles involved and recent paranoia with student visas. Worst case she is going to reject the scholorship.

frodo,

Thanks for your experience. It really helps. Do you know where I can get details on 1042S? I am not sure if the university would be willing to issue a 1042S or not. We are going to check with them. Unversity guys told us they are definitely not going to issue a W-2, because she would not be working or performing any services(like GA/TA etc). They said they might issue 1099-misc for IRS purposes. But they said the amount is tax free(ref: IRS Pub 520) and we need not show it in our returns. So any more suggestions would be greatly appreciated.

Thank you
 
1042S

Check with the University Payroll folks (especially the non-resident tax consultant - big universites usually have one). They are the best people to give more info on 1042S, and how the payment will be made. They can also give more info on tax issues. In one of my awards, the paying unit thought it was tax free and were crediting the full amount to my bank account (bypassing payroll!). Later payroll clarified that I had to pay tax, and I ended up coughing up tax at the time of filing the returns). Paying units are sometimes blissfully unaware of 1042S (this was introduced by the IRS sometime in the mid 1990\'s).

1042S is automatically issued like the W2, for non-work related payment to foreign nationals.
 
Thank you so much for your time and the detailed info.

We will look into form 1042S. I appreciate your help.
 
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