The United States tax system is a broad, dark, and deep subject. The most important thing is that every eligible taxpayer has a basic understanding of what is expected of them based on the category to which they belong. If you earn wages as a J-1 visa holder in the United States, you are required by law to pay a percentage of your income into Social Security and Medicare programs. However, your tax payment agreement depends on whether you are a resident or a non-resident foreigner.
J-1 Visa overview
The J-1 visa is for foreigners who want to participate in an approved exchange program for visitors to the United States. Successful J-1 applicants participate in various activities through specific exchange visitor sponsoring organizations for a certain period of time.
There are different categories of programs that cover a wide range of areas, including lectures, learning, teaching, teaching, demonstrating special skills, observation, and medical education or upbringing. As a J-1 visa holder, you can work in the United States during your program.
How do J-1 Visa taxes work?
The United States tax system classifies taxable non-citizens into two main groups – resident and non-resident aliens.
A resident alien as defined by the Internal Revenue Service (IRS) is a non-national who holds a green card or a person who meets the conditions substantial presence check, In some cases, a foreigner may be considered a resident foreigner if he or she makes the election in the first year, which may be due to the fact that he or she is a foreigner non-resident spouse is treated as a resident spouse. have a closer connection to a foreign country, or be classified under the tax agreement Politics.
Can a J-1 holder be a resident alien for tax purposes?
As a J-1 visa holder, you are unlikely to qualify with a green card. However, you can still meet one of the two other requirements to be classified as a resident foreigner for tax purposes, in particular the essential presence test.
If you meet the domestic foreigner requirements, you will be taxed according to the same rules that apply to a US citizen. Taxpayers residing in the United States must state their worldwide income in their tax returns. In some cases, they also have to report their foreign investments and bank reports.
Calculate the essential attendance test
The comprehensive attendance test is calculated based on the number of days you stay in the United States for a specific period. To pass the test, you must be physically present in the U.S. for at least the following:
- Thirty-one (31) days in the current year and
- 183 days in the three-year period, including the current year and the two years before:
- All days on which you were present in the current year and
- 1/3 (one third) one of the days you were present in the first year before the current year, and
- 1/6 (a sixth) of the days on which you were present in the second year before the current year
A non-resident is someone who is not a citizen and who does not pass the green card or the essential presence test. This is the category to which most J-1 Visa holders belong. If you have just arrived with a J-1 visa, you are automatically a non-resident foreigner.
If you are a J-1 student, you cannot pass the extensive attendance test until you have been in the United States for five years. And if you’re a J-1 visiting researcher or teacher, you must have been in the U.S. for at least two years before you can pass the comprehensive attendance test.
For this reason, it is generally not possible for many J-1 holders to pass the extensive test within the short time limit specified by their programs. This explains why most fall into the category of a non-resident alien.
J-1 Tax regulations for non-residents
While resident foreigners are required to report their worldwide income, non-resident foreigners only need to report their income from sources in the United States. This income can be specified as one of two options:
- Income that is actually related to doing business or trading in the United States, or
- Income not effectively linked.
The effectively related income includes personal service income and business income. These are the wages that are earned while working in the United States and are taxed according to the tiered structure that applies to resident aliens.
Income from investments that include interest, capital gains and dividends is not effectively linked. However, capital gains outside of property sales are exempt from taxation for non-residents of less than 183 days in the United States.
Tax documents from resident foreigners
Depending on your category and the income you submit, the required U.S. tax documents include:
- 104NR for income tax
- FBAR FinCEN 114 for foreign bank accounts
- 8938 for foreign financial assets
- 3520 and 3520-A for foreign gifts
- 8621 for interest from passive foreign investments
- 8621 for the possession of a foreign company
- Individual tax identification number (ITIN) for people who are not qualified for the social security number but have to file a US tax return.
Are there special tax exemptions for holders of a J-1 visa?
If you are already in the U.S. on a J-1 visa, you may be able to avoid certain tax payments if you fall into one of the following categories of exceptions:
Special social security tax
Social security and health insurance are usually mandatory for anyone who works in the U.S. and earns an income. The total tax is 15.3% of the employee’s gross wages. The employee pays half of the amount (7.65%), while the employer pays the remaining half. Social insurance accounts for 6.2% and Medicare for 1.45%. Social security tax is for pension benefits that are required by almost all workers, including those who may not be able to spend enough time in the United States to claim the benefits.
Exemption for non-resident J-1 holders
The good news is that there are many non-resident holders of J-1 visas exempt from social security tax as long as the services provided are approved by USCIS in accordance with their visa and exchange visitor program. J-1 researchers, trainees, teachers, au pairs, doctors, scientists, and camp workers who provide services to meet the specific purposes for which their visas were issued are exempt from tax. Such services include:
- Student job on campus up to 20 hours a week and 40 hours during the summer vacation
- Off-campus student job allowed by USCIS
- On-campus or off-campus internship student job
- Employment as a teacher, professor or researcher
- Employment as an au pair, summer camp worker or doctor
Many exchange visitors and employers are not aware of this exception. If you fall into this category and your employer is not known, you can inform them that you are not responsible for these J-1 visa taxes.
Alien Liberation Payments
This is another category of tax exemption for non-resident J-1 visa holders. If you are in the United States for a foreign employer under the terms of a TotalisierungsvereinbarungYou are exempt from paying social security and Medicare taxes. However, note that once you become a resident alien, this benefit will no longer be available.
If you are from one of the other countries that have tax treaties with the United States, you can benefit from a tax exemption. You do not have to be a national of the country – you are qualified as long as it is your immediate place of residence before you enter the United States.
An exemption means that you are taxed at a reduced tax rate or are completely exempt from paying certain taxes. The tax rate and / or tax exemptions depend on your country and the type of income received. Most of these exceptions only apply to non-resident foreigners, and some can be used even if they are resident foreigners.
Sometimes it can be difficult to know whether you qualify for one or not. For this reason, it is highly recommended to consult an immigration lawyer or a tax advisor. There are over 65 countries under this contract. You can Check this IRS website to be sure that you qualify.
Common mistakes you should avoid with J-1 Visa Taxes
In the United States, every worker with a certain income level needs to know the basic rules for filing a tax in their category. The following are common tax errors that you need to protect against:
Submission as non-resident instead of non-resident and vice versa
From the above explanation of two categories of foreigners in the US tax system, you can see that resident foreigners and non-resident foreigners have different rules. If you submit under an incorrect category, this will affect your tax return. If you notice such errors in your previous filings, you must contact the IRS or a tax professional for help.
The “pay-as-you-go” tax system applies in the USA. This means that your employer will withhold J-1 visa taxes from your paycheck and then transfer them to the IRS. It is your responsibility to ensure that your taxes are properly reported by your employer. If you are concerned that your employer is improperly or withholding your income taxes, you should report it to the IRS by contacting the IRS at 1-800-829-1040.
Filing on an incorrect form
Each income, property or employment tax has its own form. Make sure you know what applies to your case and fill out the form correctly.
Foreign bank accounts cannot be reported
This applies in particular to resident foreigners who are subject to worldwide income. If you do not disclose your international bank accounts, a large fine will be imposed if you are caught.
Penalties for US tax crimes
In the United States, as in any other country, deliberate failure to comply with tax law is a serious offense that results in severe punishment. As a foreign citizen, you will be affected in many different ways. Tax offenses can range from tax evasion or tax fraud.
Tax evasion: It is assumed that you have committed tax evasion if you intentionally avoid paying a real tax liability. This may mean that the J-1 visa taxes are not paid or are paid inadequately.
Tax fraud: Tax fraud is when you intentionally and deliberately lie on a tax return to reduce the amount of tax liability that you should pay. This can include providing false deductions, reporting no income, using the wrong social security number, or claiming personal expenses as business expenses.
A tax offense is classified as a moral offense. If a U.S. government tax offense causes a loss of income in excess of $ 10,000, it is considered a serious crime. Can be caught:
How our immigration lawyers can help
There are many immediate and future effects on the violation of the J-1 visa requirements. Therefore, you should not ignore the law or try to cut back on the system. Working with an immigration lawyer (J-1) not only helps you apply for a visa, but also helps you make the most of your exchange visitor status throughout the duration of your program.
Here at Immi-USA we have a team of highly qualified immigration lawyers who specialize in providing high quality legal representation. We’ll help you avoid possible pitfalls that affect your application process or that may occur during your J-1 program in the United States. To know exactly which tax bracket you belong to and how you can file your tax return appropriately and in good time, you can contact our immigration lawyers today and make an appointment by filling out this contact form.
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