Vermillion Cross-Border Tax

An International Campus in a Small City

The University of South Dakota brings people from around the world to Vermillion: students on F-1 visas, visiting scholars on J-1 visas, faculty who came from abroad and Canadian athletes recruited by Coyote teams. Each has US and home-country tax questions. BOMCAS is based in Edmonton and works across the Canada–US border regularly, and we help Vermillion's international residents with US and Canadian filings remotely.

Treaty and residency basics are on our South Dakota cross-border page, and this page applies them to USD's international students, scholars and faculty.

Residency for Tax Purposes

Students on F and J visas are generally exempt from counting days for the substantial presence test for five calendar years, and teachers and researchers on J visas for two of the last six years. During that time they file as nonresidents on Form 1040-NR. After the exempt period, they may become residents and file Form 1040, reporting worldwide income. Getting the year of change right matters for which form to use and which treaty benefits apply.

Treaty Benefits

Many tax treaties exempt some or all of scholarship or wage income for students, trainees and visiting teachers for a set number of years. Claiming the benefit on wages requires Form 8233 to the employer, and on the return requires the correct treaty article. We check each client's country and visa history.

Canadian Students and Athletes

Canadian students at USD usually remain Canadian residents if they keep ties at home, and they file Canadian returns reporting worldwide income, with credit for any US tax. Scholarships may be exempt in Canada, and tuition may qualify for Canadian credits with the right form from the university. Canadian athletes receiving scholarships should understand how each country treats the award.

Faculty From Abroad

Faculty who moved from another country usually become US residents and must report worldwide income, including foreign rental income, pensions and investment income. Foreign bank accounts totalling more than $10,000 require an FBAR, and larger holdings may require Form 8938. Foreign mutual funds can trigger complex PFIC reporting, and foreign pensions may need extra forms.

Leaving Canada

Canadians who move to Vermillion for work need a final Canadian departure return, which may involve a deemed disposition of certain property. Keeping an RRSP is usually possible, and the treaty allows income in it to grow without current US tax. A TFSA is not tax-free under US rules.

Spouses and Families

A visiting scholar's spouse on a J-2 visa may be able to work with authorisation, and their wages are taxable. Families with children may qualify for credits only if each child has a valid taxpayer number.

What We Handle

Form 1040-NR and Form 8843.
Dual-status returns in the year of change.
Treaty claims and Form 8233.
FBAR, Form 8938 and PFIC reporting.
Canadian departure and resident returns.

Graduates Staying in the US

International graduates who remain on optional practical training or move to an H-1B visa usually move from nonresident to resident status at some point. In the year they change, they may file a dual-status return or elect to be treated as a resident for the full year. The choice affects deductions, credits and whether a spouse can be included on a joint return. FICA exemption for students on OPT generally lasts only while they remain nonresidents.

Home-Country Filings

Students and scholars should check whether their home country still treats them as residents. Canada, for example, may continue to tax a student with significant residential ties at home, and some countries require departure declarations. We prepare the US side and coordinate with home-country rules where we can.

For students who will return home after graduation, keeping clear records of US income and tax paid each year makes claiming foreign tax credits in the home country straightforward.