NAICU Washington Update

IRS Responds to Concerns of Foreign Students Denied Tax Refunds

June 09, 2016

During the past several months, many international students attending U.S. colleges and universities have reported being denied income tax refunds for their income earned and reported on tax Form 1042-S. As a result, the IRS conducted a review of its verification process and is taking steps to address the issues.

That review found a significant number of erroneous refund denials, stemming from a compliance and fraud detection program it administers. The IRS determined it had wrongly held up the refunds of these students.

The IRS is identifying all the taxpayers whose refunds are being held as a result of this process. As they are identified, it will release the hold and issue appropriate refunds. The IRS will also adjust their compliance system going forward.

While there should not have been a reason to red-flag these students for a fraud and compliance check, since there’s little if any history of false or improper reporting in this area, it’s welcome news that the IRS has recognized the problem and will address the issue.

According to the IRS, students affected do not need to pursue any additional action at this point. All the affected individual returns are being reviewed and corrected.

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