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Business and Policy Areas
Business and Policy Areas
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IRS to Process Refunds for International Students

May 23, 2016

On Friday, May 20, NACUBO learned that the Internal Revenue Service (IRS) is taking steps to release freezes placed on the accounts of international students who have been impacted by processing problems related to Forms 1042-S.

It is unclear how long this process will take, but the effort is currently underway. NACUBO has heard initial reports from institutions that some students have received notices that their 2014 accounts have been suitably adjusted.

The IRS is committed to processing the withholding credits and releasing refunds for affected individuals. The agency decided to take appropriate steps to address the situation after recognizing an unusual number of "false positive" outcomes in the 1042-S screening process. 

NACUBO became aware of the 2014 tax return problems earlier this year. Several thousand international students appear to have been denied tax refunds or assessed tax bills. IRS notices denied withholding credit amounts claimed, approved a reduced amount than that claimed, or informed the claimant that they owed the IRS money based on discrepancies on their 2014 tax return filed on either Form 1040NR or Form 1040NREZ.

Attempts by students, institutions, NACUBO, and others to seek clarification from the IRS shed little light on the cause of the tax woes, but they appeared to be related to Forms 1042-S.

Repeated requests to the IRS for information about the specific nature of errors went unanswered, which led NACUBO and others to believe the problems are complex. NACUBO sought resolution to the problem, working with individual colleges and universities, the IRS, and third-party processors. 

NACUBO is pleased that the IRS is finding workable solutions for students to resolve these issues quickly. It is our understanding that the IRS is taking steps to ensure that students—and institutions—don't face the same problems when 2015 returns are processed. 

Contact

Liz Clark
Director, Federal Affairs
202.861.2553
E-mail

Mary Bachinger
Director, Tax Policy
202.861.2581
E-mail