Mastering Your Taxes: A Guide for OPT Professionals

 My nephew, a South Korean citizen, graduated in the US and started working under OPT in 2025. To help him to file his first US tax return soon, I prepared some instructions for him, and I'm sharing this for other international students in similar situations.

First, you need to determine Your Tax Residency

The first step is knowing if you are a Non-Resident Alien (NRA) or Resident Alien (RA).

• The 5-Year Rule: Most F-1 students are considered "exempt individuals" from the Substantial Presence Test for their first 5 calendar years in the U.S. Remember this rule is 5-Year Lifetime Cumulative, meaning gap years (in case you left for Korea to fulfil mandatory military service and return in two years) don't count, but prior years stay on your record.

• Example: If you entered the U.S. in 2022, 2026 is your 5th year. You are still an NRA. If 2026 is your 6th calendar year, you may have transitioned to "Resident Alien" status. 

You do not count the number of days to determine a year for the first five years when applying the 5-year rule for F-1 (including OPT) students. The rule is based on calendar years, not the number of days present. Any part of a calendar year in which the student is in F-1 status (even just one day) counts as one full exempt year. For the first five calendar years in F-1 status, all days are exempt from the substantial presence test, regardless of how many days the student was actually present in each year.

For example, if a student arrives in the U.S. on December 31, 2020, the entire year 2020 counts as the first exempt year. The next four calendar years (2021, 2022, 2023, and 2024) are also exempt, even if the student is not present for the full year in any of those years. Starting in the sixth calendar year (2025 in this example), the student must begin counting days for the substantial presence test.

For NRAs:

1. The "Must-Have" Forms 

As an NRA on OPT, you will likely encounter these specific forms:

• Form 8843: Mandatory for everyone. Even if you earned $0, you must file this to explain your presence in the U.S. and maintain your "exempt individual" status.

• Form 1040-NR: This is the actual income tax return for non-residents. You file this if you earned U.S.-source income (like your OPT salary).

• Form W-2: Your employer will send this to you by late January. It summarizes your earnings and the taxes already withheld.

• Form 1042-S: You might receive this if you claimed a tax treaty benefit or received a taxable scholarship.

2. The Social Security and Medicare taxes (FICA) Exemption (Your "OPT Pay Raise")

One of the most significant benefits of being an NRA on an F-1 visa is the FICA tax exemption.

• The Rule: NRAs on F-1 visas are generally exempt from FICA as long as they are still NRAs and their work is related to their study (OPT).

• What to Check: Look at your pay stub. If you see deductions for "Social Security" or "Medicare," your employer may be withholding them in error.

• How to Fix It: Ask your HR department for a refund first. If they cannot provide one, you can file Form 843 and Form 8316 with the IRS to claim it back.

3. Leveraging Tax Treaties

The U.S. has tax treaties with many countries (e.g., India, China, South Korea, Canada) that can significantly reduce your tax bill.

Under the Korea-U.S. Tax Treaty Article 21 (1) a Korean resident who is in the U.S. primarily for study or training is exempt from federal income tax on $2,000 Wage

• Action Step: Check IRS Publication 901 to see if your home country has a treaty benefit.

4. Filing Your Return: Avoid Common Pitfalls

• Specialized Software: Look for tools like Sprintax or Glacier Tax Prep, which are specifically designed for international students and NRAs.

• State Taxes: Remember that you likely owe state taxes too. Most states do not follow federal tax treaties, so you may owe state tax even if you are exempt from federal tax.

For Resident-Aliens (RA):

Regardless of whether you are an RA through a Green Card or SPT (Substantial Presence Test : You spent enough days in the U.S. (183-day weighted formula) ), you share these obligations:

• Worldwide Income: You must report all income from every country, not just the U.S.

• Tax Forms: You file Form 1040 (the same form U.S. citizens use). You need to pay FICA taxes as well.*

• Disclosures: You must file FBAR (FinCEN Form 114) and FATCA (Form 8938) if you have foreign bank accounts or assets above certain thresholds.

• Deductions: You are eligible for the Standard Deduction and various tax credits (like the Child Tax Credit).

*Unlike some other countries (such as South Korea, which may offer a "Lump Sum Refund" of their national pension when foreigners leave), the U.S. does not refund properly paid Social Security taxes just because you are leaving the country.

Is the money lost? Not necessarily. If you move back to a country that has a Totalization Agreement with the U.S. (like South Korea, Canada, the UK, or Japan), the credits you earned in the U.S. can be "totalized" with your home country’s pension system to help you qualify for a retirement benefit later in life.

For both NRAs and RAs:

Important Deadlines for 2026

• April 15, 2026: The deadline to file Form 1040-NR or 1040 and pay any taxes owed.

• June 15, 2026: The deadline if you only need to file Form 8843 (no U.S. income).