Tax Assistance for J-1 Participants
If you receive payment from your US host company as part of your J-1 internship or training, you will pay tax on all your earnings – just like you would in your home country. There are four types of tax - Federal Tax, State Tax, Federal Insurance Contributions Act (FICA) Tax, and Local Tax. Federal Tax is usually about 10% for J-1 Visa holders, while State Tax varies from 1% to 13% depending on where you’re located. Forty-two US States have State Tax and ten of those also have Local Tax, city or county tax that is deducted from your earnings.
FICA (Social Security and Medicare) taxes are 7.65%, but as a J-1 Visa holder you may not have to pay this tax. Many J-1 participants are incorrectly charged FICA taxes. At the end of the tax year, you are entitled to a refund of any taxes you’ve overpaid – including FICA, Federal, State and Local Tax. Depending on your nationality, you may also be able to claim a tax refund under international tax treaties, which are agreements between the US and other countries that allow you to claim tax you paid while working abroad.
Most J-1 Visa holders are considered non-residents for tax purposes. You would only be considered as a resident for tax purposes if you had been in the US for a certain amount of days during the last three years.
As a non-resident receiving compensation in the US, should you earn more than $3700 in the US during 2011, US tax law requires you to file a tax return. If you don’t file a tax return it can affect future visa applications to the US.
To file your US non-resident income tax return you need to use a 1040NR-EZ form. The form is not available in the US e-filing tax system so please be careful of tax companies that promise to speed up your tax return by filing it online – J-1 non-resident taxpayers cannot use this system.
The other document you need to apply for your US tax refund is your W2 Form, This is the document you receive from your US host company at the end of the tax year. The W2 outlines earnings and tax paid for the entire year.
If you want to claim your US tax refund but find the US tax system complicated, it’s a good idea to use a tax professional who understands the system and can claim any money you’re owed. Make sure to use a tax professional who understands non-resident income tax laws. If you don't have a company in mind, please visit Taxback.com or another J-1 Tax specialist. Be certain to ask about their experience with J-1 taxes, and always read carefully before signing official documents.