Jack from Ohio Posted May 13, 2013 Report Share Posted May 13, 2013 Does anyone have any experience with J-1 exemption? I find that J-1 are exempt from SS & Medicare withholdings for 2 years. New Client, $13K income. No taxes, SS or Medicare withholdings on her W-2. She absolutely insistst that she is not subject to any income tax Federal, State or local. I cannot verify her exemption from any income tax at all. Any help is appreciated. She is living with a very good long time client of ours, and this is the first J-1 we have encountered. Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 13, 2013 Report Share Posted May 13, 2013 I don't but I believe another active poster by the name of MsTabbykats has experience with foreign nationals tax returns including exchange students. Hope she is reading your post. Quote Link to comment Share on other sites More sharing options...
mircpa Posted May 13, 2013 Report Share Posted May 13, 2013 I believe you have to file 1040NR and IRS form 8843. J & F visa holders are not subject to SS & medicare taxes BUT they have to pay federal and respective state income taxes. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted May 13, 2013 Report Share Posted May 13, 2013 I've had that situation before, and while they are not subject to the payroll taxes, they ARE subject to income tax. In my case the payroll taxes had been withheld, and we had to go to the employers to get corrected W-2s and get the withheld taxes paid back to them. Was a real pain convincing a couple of the CPA's that did the W-2s, but I won them all eventually. Quote Link to comment Share on other sites More sharing options...
TaxMan60601 Posted May 13, 2013 Report Share Posted May 13, 2013 Except her visa type, you need also her DS-2019 form - for program type, box 4. Depends on circumstances - generally exempt from FICA but not from income taxes ... More info here: http://www.irs.gov/Individuals/International-Taxpayers/Exempt-Individual----Who-is-a-Student You also may need her nationality before prepare 1040NR return for her, in case she can avail on tax treaty - pub 901. Be careful about SPTest first. Quote Link to comment Share on other sites More sharing options...
gianni1212 Posted May 14, 2013 Report Share Posted May 14, 2013 lot of experience with these....needs to fill out 1040 nr. Fill out a schedule a and itemize deduction even if its less than standard because they cannot take standard deduction unless they are from india. If they are from india let me know, there is a special way to fill out the form to get the tax treaty benefits of the standard deductiosn. I highly recommend using nr-ez....will make your life much easier. Quote Link to comment Share on other sites More sharing options...
TaxMan60601 Posted May 14, 2013 Report Share Posted May 14, 2013 well, I am not sure ... Again, be careful with this one, Jack. There is no sense to compare itemized and standard for non-residents at all just because they can't avail on standard one and that's all! Unless they are from India. Still, they can avail on many other deductions, and ref and nonref credits but it depends on circumstances - residency first (that's why I wrote to check the SPTest first), nationality, program type, income type, etc. ... and what itemized deductions on ez form!? ... have no idea ... Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 14, 2013 Report Share Posted May 14, 2013 I wonder what the average tax prep fee is for a 1040NR? Seems like lots of research work with tax treaties and variation by nationalities etc. Plus if these folks are here for a short period of time you are really not developing any long term clients. The relationship seems to be more of a transactional nature!! In all my years I have yet to do a 1040NR?? Quote Link to comment Share on other sites More sharing options...
TaxMan60601 Posted May 14, 2013 Report Share Posted May 14, 2013 That's all correct - no long term clients, no planning, no relationship - just you, income, some expenses (possibly) and tax treaties, lol ... Of course, the variety of weird scenarios is more than imposing. First, there are trainees and business apprentices who are in the States for more that a year; teachers, artists and athletes, gamblers, students (the longest term). On another hand, there always are students who "forgot" to leave the country or got second student visa, OPT students, workers on tourist visa, models who spontaneously decided to stay and live in the US, green card lottery, investors, political asylum, intracompany transfers, and so many many other ways to make, you know, your American Dream come true! The "good" thing is that finally all of them ends in one and the same way - resident 1040 tax return ... Furthermore, there are enough online tax prep softwares for non-residents out there, who are ready to prepare their NR forms for a 10 or 20 bucks discount coupon, so in general it is not a good stake at all ... unless you have a list with lets say 10k foreign students who 'desperately' need their 1040NR tax returns Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 14, 2013 Report Share Posted May 14, 2013 Just curious, what happens if one of them leaves the country without filing form 1040NR if no income taxes were witheld like in the example from Jack. Does IRS try to go after them in their home country? How does that work or do they put their picture on the wanted tax cheat list and grab them if they ever visit USA again? Quote Link to comment Share on other sites More sharing options...
TaxMan60601 Posted May 15, 2013 Report Share Posted May 15, 2013 HA HA HA! You must be joking! ... No, seriously, the truth is that actually the Service are really trying to do some things but with variable success. Eventually, the black stamp on the visa is one of the solutions ... or sometimes they impose to levy on any foreign taxpayers assets incidentally left in US. The real issue is that compared to residents, problems with nonresident tax returns are much more less, in the same time ROI is low, so they can not afford to waste time and money to chase them ... You know, average fed tax refund for nonresident is several hundred dollars, and average fed tax refund for resident in 2012 is ~ $2300!? No sense to talk further Most of them, in fact almost all of them are doing their tax returns just for the refund. And because the Department of State requests it with their next visa applications. Not because they want to be tax compliant with the US tax law ... Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 15, 2013 Report Share Posted May 15, 2013 I can't see IRS sleuths jumping out of blackhawk helos in the middle of the night in a foreign country grabbing a tax cheat. Hey buddy you forgot to pay your tax before you left. Now you are going to Gitmo! You will be our guest! HA HA! Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted May 15, 2013 Author Report Share Posted May 15, 2013 Student was from China. She provided us copies of her visa with J-1 designation. China has a tax treaty so she is exempt from Income, SS & Medicare taxes. She is also exempt from State of Ohio as well because she has no Fed AGI. She can have two years of exemptions, then she is taxed like all other non-resident aliens. 1040NR-EZ is the trick. Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 15, 2013 Report Share Posted May 15, 2013 Nice treaty the Chinese signed with USA! No income or payroll taxes or state taxes! Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted May 15, 2013 Author Report Share Posted May 15, 2013 Nice treaty the Chinese signed with USA! No income or payroll taxes or state taxes! Her chosen profession as a teacher granted her the tax exemption. Not all get the same treatment. Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted May 15, 2013 Report Share Posted May 15, 2013 Sort of makes you wonder how different countries treat their teachers? China negotiated a tax treaty with USA to let their student teacher get all tax exemption and some of us here are trying to get rid of teachers or cut their pay! I bet the Chinese Govt. realizes that a good teacher is the key to the success of their school children to compete against the rest of the world. Quote Link to comment Share on other sites More sharing options...
TaxMan60601 Posted May 16, 2013 Report Share Posted May 16, 2013 Don't be so 'optimistic', Taxed! USA have signed tax treaties with 64 countries and there is an article for teachers in almost all of them, it is not only China. This is rather a matter of protocol, economic interests and negotiations but not only of negotiations .... Unfortunately, teachers are one of the lowest paid professions all over the world, and (strange but) because there had been some sanity left in politicians long ago in days when first treaties were negotiated (not today!), when they used to sign the protocols, they decided to grant some relief not only to teachers but also to lecturers, students, trainees, physicians, researchers(not all) artists and athletes... There are tax treaties for your foreign dividends or royalties, your pension or social security benefits, and even for gambling winnings, lol These are standard agreements which are constantly evolving. Two last points, Jack. Check within regs and instructions if State of Ohio allow tax treaties in the same way as Federal, otherwise you will need to report her OH income on the state return no matter she has no Fed AGI. "She can have two years of exemptions, then she is taxed like all other non-resident aliens." - if she prolonged the period, she may have to pay back retroactively all taxes due for the first two years. And as far as I see, exempt years are three not two ... but you better check this by yourself. Just my 2 cents. Quote Link to comment Share on other sites More sharing options...
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