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Calculation of Federal taxes - How it works?

In this blog, we would like to give you an idea of how to calculate a 1040 NR-EZ federal tax return in the United States.

The 1040 NR-EZ tax form is for US non-residents and applies to almost all students who have traveled to the US through the Work and Travel program.

So how do we calculate the tax liability, respectively? Tax overpayment or underpayment? For this purpose, we need the following information:

Gross Income - A summary of all earnings during your US stay. Information can be found either on the last paycheck or on the W-2 form that employers send to their employees during January. It is after the end of the calendar year in which you worked in the US.

The amount of federal taxes paid - Every Employers should pay a federal tax of 10% on your gross wage during the summer. This amount can also be found on the payslip or the W-2 form (Federal Tax Withheld). However, there is often a situation where the employer pays less than 10% or even no taxes. If this happens to you, you have the right to ask the employer for redress. Since the tax burden for income up to $ 9.575 is 10%, if your employer is paying for you less, you will have to pay arrears on your tax return and have to pay taxes when submitting your tax return.

The amount of state taxes paid - this amount represents the state taxes that the employer paid for you in the state in which you worked. This amount is also shown on the payslip and W-2 form (under the name State Tax Withheld). Not every state is required to pay state taxes, so you may not see this amount on your paycheck. More information about taxation in individual states can be found on our blog HERE.

The amount of local taxes paid - this amount represents the local taxes that the employer paid for you to the local authority of the city or county in which you worked. Local taxes are paid infrequently and represent the minimum amount of tax burden.

After the tax reform in 2017, the amount of state and local taxes paid in the only deductible item that you can use to reduce the tax base for calculating federal taxes.

So what is the formula for calculating federal taxes? Here is an example.





Gross income



State and local tax witheld



Taxable income



Tax 10% (if the tax base is less than 9,575 USD)



Federal tax witheld



Tax underpayment/overpayment

800 – 750 = 50 USD overpayment

Tax overpayment / underpayment is always calculated as the amount of federal taxes paid minus the amount of tax liability. If the amount of the tax liability is greater than the amount of taxes paid, there is a tax underpayment.

We hope that this article has helped you better understand the calculation of the 1040 NR-EZ tax return.

Your Tax Wizard