Madison's International Connections
For a small city, Madison is closely tied to the rest of the world. DSU's students come from 48 states and 67 countries outside the United States, and many study online from abroad. The Manitou plant belongs to a French group and ships a large share of its output overseas. Technology workers here may work for Canadian or other foreign companies, or come from abroad on work visas. BOMCAS is based in Edmonton and works with Canadian and US tax daily, and we help Madison clients with cross-border returns remotely.
Treaty and residency basics are on our South Dakota cross-border tax page, and this page applies them to DSU students, foreign workers and international businesses in Madison.
International Students
Students on F-1 visas studying in Madison are generally nonresidents for their first five calendar years. They file Form 8843 every year and Form 1040-NR if they have US income. Tax treaties may exempt part of a scholarship or wages. Online students living abroad who receive scholarships from DSU may face US withholding on the taxable portion unless a treaty applies.
Graduates on OPT and Work Visas
International graduates working in cybersecurity or software on optional practical training or an H-1B usually become US residents once they meet the substantial presence test. In the year of change, a dual-status return or a full-year resident election may apply. Social Security and Medicare exemptions for F-1 students end when they become residents.
Remote Work for Canadian Companies
A Madison resident working remotely for a Canadian company is generally taxed in the US on that income. If the employer withholds Canadian tax by mistake, a Canadian return may recover it. Working as a contractor through a US entity can simplify the arrangement.
Canadians Living in Madison
Canadians who moved to Madison file a final Canadian departure return and become US residents. RRSPs can generally remain in Canada with treaty protection, while TFSAs and RESPs do not keep their tax-free status in the US.
Foreign-Owned Companies and Suppliers
Madison suppliers doing business with foreign-owned manufacturers may sign contracts or receive payments from foreign affiliates. Local companies that are 25 percent or more foreign-owned file Form 5472, and payments to foreign suppliers for services or royalties may need withholding unless a treaty form is provided.
Foreign Accounts
US residents with foreign bank and investment accounts totalling more than $10,000 at any time must file an FBAR, and larger holdings may need Form 8938.
What We Handle
- Forms 8843 and 1040-NR for students.
- Dual-status and resident returns for graduates.
- Canadian departure and non-resident returns.
- Form 5472, withholding and treaty forms.
- FBAR and Form 8938.
Scholars and Visiting Researchers
Visiting researchers and teachers on J-1 visas can generally exclude their days from the residency test for two calendar years, unless they were exempt in any part of two of the six preceding years, and some treaties exempt teaching or research income. They file Form 8843 and, if they have US income, Form 1040-NR.
Students From Canada
Canadian students at DSU usually remain Canadian residents if they keep ties at home and report worldwide income in Canada. Scholarships may be exempt in Canada, and tuition may qualify for Canadian credits with the right form from the university.
Moving Abroad After Graduation
US citizens who take jobs overseas continue filing US returns and may qualify for the foreign earned income exclusion or foreign tax credits.
Foreign students and workers who leave the US should file a final return for the year of departure and keep records of US tax paid for their home-country return.
Foreign Gifts
Students and families receiving money from relatives abroad should know that gifts from foreign individuals totalling more than $100,000 in a year must be reported on Form 3520, though the gift itself is generally not taxable.
We can also help students check whether their scholarship is taxable before the first payment arrives.
Madison Cross-Border Tax Questions
Do DSU international students need to file?
Yes, Form 8843 at least, and Form 1040-NR if they have US income.
When does an F-1 student become a US resident for tax?
Generally after five calendar years, or sooner if they change visa status and meet the presence test.
I work remotely for a Canadian company. Where do I pay tax?
Generally in the US, because the work is done here.
Is a TFSA tax-free in the US?
No.
Talk to BOMCAS About Cross-Border Tax in Madison
Students and workers file a personal return, and foreign-owned firms a business return. Local books, payroll and sales tax continue as usual. Plan before a change of status, and use late filing for missed forms. For other parts of the state, see our South Dakota pages on business taxes, personal returns, sales and use tax, bookkeeping, payroll, tax planning and back taxes through the South Dakota overview.
Tell BOMCAS about your Madison business or household and we will reply with next steps and what we need for a quote. Use the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. Every Madison service is on the Madison overview. This page is general information, not advice for your situation.