Should I input my scholarship as negative income?

mathilda

I am a Chinese citizen and the US-China tax treaty says I don't have to pay taxes if I receive scholarship. Should I just not put it anywhere on the form, or should I input it as positive income and then negative income somewhere on the "other income" section and state the tax treaty benefit?

I don't have a W-2 form.

mathilda

Oh also I am a resident alien 😃

JanaA

Hello mathilda! Your instinct about reporting the income and then offsetting it is correct. According to IRS guidance, as a resident alien claiming a tax treaty exemption, you should not simply leave the scholarship off your return. Instead, you would report the scholarship income on the appropriate income line of Form 1040, and then enter the same amount as a negative number on Schedule 1, Line 8z (Other Income). In the description field, you would write something like "Exempt income, U.S.-China tax treaty, Article 20(b)." This way the income is disclosed but the exemption offsets it to zero.

To do this you will select the Income tab and then Other Income from the drop-down menu. Here you will select Yes when asked if you have a taxable scholarship. Enter the scholarship in the field provided. On the same page you will enter the description and a negative amount in the Misc Income section at the bottom.

There is an important additional requirement, however. The IRS also requires you to attach Form 8833 (Treaty-Based Return Position Disclosure) when claiming this exemption as a resident alien. Because Form 8833 is not supported in our software, you would need to paper-file your return with that form attached. On the top of all pages of your printed return, you should write "Resident Alien With Tax Treaty Exemption."