How to File Taxes with Incorrectly Issued 1042S Forms as a Resident Alien

Thanks for this! When I add it as "Other Income," won't that cause it to be taxed again even though they already withheld taxes? My 1042S shows about $14,000 in scholarship money with around $1,800 in federal tax withholding. Also, should I include a statement with my return explaining the situation, or will just entering the numbers be enough?

Yes, reporting it as income means it will be included in your taxable income, but that's correct - scholarship money used for living expenses (not tuition) is taxable income. By entering the withholding amount separately, you're ensuring you get credit for the taxes already taken out of that money. This prevents double taxation. No need to include a separate statement explaining the situation. The IRS mainly cares that all income is reported and all withholding is properly credited. Just make sure you keep your 1042S with your tax records in case of questions later.

How does it handle the withholding issue? My university withheld at 30% when they shouldn't have withheld anything, and I'm trying to get that money back without hiring an expensive tax person.

Does it work with all tax software or only specific ones? I'm using TurboTax but having similar issues with my 1042S and being misclassified.

It specifically helps identify all withholding amounts and shows you exactly where to enter them in your tax software to make sure you get credit for every dollar withheld. It highlights Box 7 from your 1042S and tells you precisely where that goes in your filing. In your case with the 30% withholding, it would make sure you claim all of that back. It works with any tax software since it gives you specific guidance on what to enter where - I've used it with FreeTaxUSA, TurboTax, and even when filling out paper forms. It's software-agnostic and just tells you exactly what numbers need to go where based on your specific situation.

How does this actually work? Does it just keep calling for you or something? I've been trying to reach the IRS for two weeks with no luck.

I'm skeptical. The IRS never answers their phones and when they do, they usually just tell you to read the instructions. Did they actually give you specific advice for your situation?

It uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally answers, you get a call connecting you directly to them. It saved me hours of hold time and frustration. The IRS agent was actually really helpful once I got through. They specifically addressed my misclassification issue and confirmed exactly how to report the 1042S income and withholding on my 1040 as a resident alien. They even provided their ID number so I could reference the conversation if there were questions about my return later.

I didn't even think about that! Just checked my 1098-T and it shows $22,500 for qualified expenses but my actual tuition was $27,300. Should I contact the university to get this corrected too?

Yes, definitely contact your university's bursar or student financial services office about correcting the 1098-T. That $4,800 difference could potentially impact education credits you're eligible for. If they won't correct it, you can still claim the actual amount you paid for qualified expenses on your tax return, but be prepared to provide documentation if questioned. Keep all your tuition receipts and payment records showing the full $27,300 you paid.

I had to paper file when this happened to me. The e-file systems get confused when you have 1042S withholding but are filing as a resident alien on Form 1040. I mailed my return with a copy of my 1042S attached and got my refund after about 10 weeks.

I actually managed to e-file successfully after running into the same rejection issue! The trick was to make sure I didn't check any boxes indicating nonresident status in my tax software. In FreeTaxUSA, there's a section about foreign income/status - I had to explicitly select "No" to all the nonresident alien questions even though I had a 1042S form. Also, when entering the 1042S withholding, I labeled it as "Federal income tax withheld from Forms 1099, 1042S, etc." rather than trying to categorize it as nonresident withholding. The system accepted it on the second try and I got my refund in about 3 weeks via direct deposit.

This is really helpful! I'm in a similar situation where my university issued me a 1042S even though I should be filing as a resident. One question - when you say "most or all of the taxes they incorrectly withheld," what rate were they likely withholding at? My 1042S shows they withheld about 30% which seems way too high for what I should actually owe on fellowship income. Also, did you have any issues with the IRS questioning why you had a 1042S but were filing as a resident? I'm worried about triggering an audit or having to explain the university's mistake.

Yes, 30% is the standard withholding rate for nonresident aliens, so that's definitely way too high for your situation as a resident! As a resident alien, you'd typically pay regular income tax rates on fellowship income (probably somewhere in the 10-22% range depending on your total income), so you should get a significant refund. I didn't have any issues with the IRS questioning the mixed forms. From what I understand, universities make this mistake fairly often with international students, so the IRS sees it regularly. I filed my return normally and got my refund without any additional correspondence. Just make sure you're clearly filing as a resident (Form 1040, not 1040NR) and that should signal to them that you know your correct status. The key is being consistent - file as a resident, report all your income including the fellowship money, and claim credit for all the withholding. The IRS computers are pretty good at matching things up automatically.