PI Advice

PI Advice

TAXES

The following information regarding tax issues is meant to provide general guidelines only. Tax laws are constantly changing and are subject to interpretation. Placement International is not responsible for knowing what tax forms each trainee needs to file.


Trainees need to contact the Internal Revenue Service (IRS) and research their filing status, any exemptions, and other relevant information. Please refer to the IRS's website at www.irs.gov.

If you find all these too complicated, you always have the option of getting someone to get all this work done for you. We recommend taxback.com. They will deal with all the complicated forms, file your tax declaration and send you the money straight into your account wherever you are in the world.

Tax treaties

Many international trainees are from countries, which have negotiated treaties with the United States affecting whether the trainee pays U.S. Federal Taxes. The employer must verify the exemption exists before adjusting any withholding amounts. Tax treaties constantly change. IRS Publication 901: US Tax Treaties can be used to verify a claim.

All IRS forms and publications can be ordered by calling: 1-800- TAX FORM (1-800-829-3676).IRS forms and publications are also available from the IRS World Wide Web site: http://www.irs.ustreas.gov/prod /cover.html /cover.html

All nonresident alien J-1 VISA participants pay:

  • State taxes
  • Federal taxes
  • Local taxes

All nonresident alien J-1 VISA participants do not have to pay:

  • Social Security Tax (FICA)
  • Medicare
  • Federal Unemployment Tax (FUTA)

Federal Income Tax will be deducted from the trainee's salary. However, at the end of the calendar year the trainee will be entitled to receive a refund of most of the tax deducted.

To claim a refund, the trainee must give a stamped self-addressed envelope to the employer before leaving the United States. At the end of the year, the employer should send the trainee a W2 form; which shows the total wages and the amount of tax withheld.

As taxes are paid based on the wages earned during a calendar year, W-2 forms are only available during or after the January following the trainee stay in the United States. After the candidate receives the W-2 form, the trainee should obtain a non-resident tax form and information packet from the US embassy or consulate.

Once the trainee has completed the form, the candidate has to attach the appropriate copy of the W-2 and mail to the address indicated on the form. The tax return must be postmarked by April 15. If the trainee does not receive the W-2 form by February 1, the candidate should contact the employer.

State and Local Income Taxes

Deductions from the salary for state and local taxes will vary. Some states do not have an income tax, while others may have a tax of 80% or less. Local taxes vary as well, although they will be considerably less. To claim a refund of state and local taxes the trainee must write directly to the Department of Taxation and Finance in the state where the candidate worked to request the tax forms. State and local tax returns are filed on the same form. The candidate will not be able to obtain these forms at a US embassy or consulate abroad. As with the federal forms, the trainee has to complete the state and local tax return form, attach the appropriate copy of the W-2 form, and mail to the address indicated on the form by April 15.

Tax Compliance and the Nonresident:

According to an article that appeared in a 1996 NASFA: Association of International Educators publication, "Although filing, has become easier, foreign student non-compliance with U.S. tax laws remains a fact of life". Research has shown that more than half of foreign students who should have filed a tax return for the year 1988 did not do so, with the percentage of non-filers from various national groups varying widely. The same research shows that over payment of taxes in a surprisingly common result of the failure to file. Federal law requires [employers] withholding tax on wages paid to students. "Had the non-filing students in Antenucci's and La Berge's study filed and claimed all allowable deductions and treaty benefits, most would have been entitled to refunds". (NAFSA. news, December 1996)

W4 form

On the first day of work the host company should ask the trainee to fill out the W4 form: Employees Withholding Allowance Certificate. The employer uses this form to determine how much tax to withhold from the paycheck. The social security number and card of the trainee are required to fill out this form, even though the trainee is exempt from Social Security tax.

If the W4 is not filled out properly, the trainee may be taxed too much, or too little. If the trainee is taxed too little, the candidate will owe money to the US government, and if the trainee does not pay it, the future VISA of the participant could be jeopardy.

W2 form

At the end of the year the host site should send the trainee a W2 form, which shows the total wages and the amount of tax withheld before February 15th. Even though the trainee has returned home, the trainee is legally required to file a US tax return. Tax returns have to be filled by April 15th for the previous tax year. The trainee will need two items to complete the tax return if the candidate is a non-resident alien:

Tax Day in the United States:

April 15th is known as "Tax Day" in the United States. It is the deadline for filing your tax statement for the previous year. Any money earned during the previous year must be accounted for when filing your tax statement on or before April 15th. IRS Publication 519, "U.S. Tax Guide for Aliens", contains additional information, which may assist you in understanding the process of filing taxes in the United States. You may also visit the IRS web site, which contains a great deal of helpful information and forms at http://www.irs.ustreas.gov.

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