TAXES ON YOUR WAGES

As a J-1 visa holder, any wages you earn in the U.S. will be subject to "income tax" withholding (the taxation of one's income through employer withholding). Wages are monies paid by an employer to an employee for his/her services. If you receive income that is not considered wages, please refer to the section "Taxes on Scholarships and Fellowship Grants" listed below.

This is the largest chunk -- typically 15% of your wages. It is withheld by all employers, for U.S. citizens, resident aliens and nonresident aliens. It is sent to the U.S. Treasury and is used to build and maintain roads, airports, national parks, schools, etc.

When you start working, your employer will give you Form W-4, "Federal Withholding Allowance Certificate." On this form, you are not entitled to any exemptions from withholding, you will need to request withholding at the rate for a single employee (even if you are married), you may claim only one allowance (If you are a resident of Canada, Mexico, or American Samoa, you are entitled to the same personal allowances as U.S. citizens. If you are a resident of Japan or Korea, you may claim one allowance for yourself, for your spouse and dependent children who are present with you in the U.S.), and you must have an additional $7.60 withheld each week (thus, if the pay period is bi-weekly, fill in $15.30).

In some cases, a tax treaty which exists between the U.S. and your country will exempt certain types and/or amounts of income from taxation. Internal Revenue Service (IRS) Publication 901 (call 1-800-829-3676 to order) offers a quick summary of established treaties, but does not provide complete information. Complete texts can be obtained via the Internet from various private on-line sources, or by writing to the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

For example, the U.S.-German Tax Treaty Article 20 exempts wages received by a student or business apprentice as long as they do not exceed $5,000 per calendar year, provided that such income supplements other funds which are available for maintenance, education or training. To qualify for such a withholding exemption on compensation, based on a tax treaty, you must file IRS Form 8233, "Exemption from Withholding on Compensation for Independent Personal Services of a Nonresident Alien Individual" (call 1-800-829-3676 to order). Give this completed form to the company or institution issuing your compensation. They must complete Part II of the form and mail it and any attachments within five days to the IRS office listed in the instructions. The IRS has 10 days (soon to be extended to 20 days) to review and respond; any payments made before this review period is up MUST have all applicable federal, state and local taxes withheld.

These rates and regulations vary; most states and some cities tax wages, to pay for municipal infrastructures, but there are still a few which do not. You can call your state tax department (look in the telephone directory, under the state government section, for the number), or you can ask your employer for details. If, as is usually the case, state and/or local tax needs to be withheld from your wages, your employer will ask you to complete a state form which is similar to the federal Form W-4. There will be instructions on the form which you can follow.

The good news is that J-1 visa holders are NOT subject to Social Security, Medicare or FUTA (Federal Unemployment Tax Act) taxes, per Prop. Treas. Reg. 31.3121(b)(19).

Social Security (6.2% of wages) is a federal system of old-age, survivors and disability insurance. Medicare (1.45% of wages) is the federal hospital insurance system. For U.S. citizens, a total of 7.65% is withheld from wages for Social Security and Medicare, and employers must also pay another 7.65%. FUTA provides unemployment compensation to workers who have lost their jobs; employers usually have to pay this, but not for J-1 visa holders.

TAXES ON SCHOLARSHIPS AND FELLOWSHIP GRANTS

If you are the recipient of a scholarship or fellowship grant given by a U.S. corporation, institution or resident, you may be subject to 14% withholding on all applicable amounts, unless there is a tax treaty which exempts scholarships/awards. (The U.S.-German treaty exempts scholarships/awards, as does the U.S.-China treaty.)

Scholarship/fellowship payments made by an "international organization" listed under the International Organizations Immunities Act are considered "foreign source income" and therefore are not subject to U.S. taxation. The United Nations Industrial Development Organization (UNIDO) is included on this list; CDS acts as an intermediary agency for UNIDO Fellows in the U.S. Thus, UNIDO fellows are exempt from taxation in the U.S. on payments which CDS makes on their behalf. However, all fellows who receive a J-1 visa are still required to file income tax returns (see next section).

FILING YOUR TAX RETURN

All participants on a J-1 visa must file a tax return, even if one did not earn money.

In order to file your tax return, there are several forms which you need to obtain and complete. There are also several tax statements which your employer and other organizations provide for you.

Forms You Have to Obtain and Complete

1. Form 1040NR or Form 1040NR-EZ

As a J-1 visa holder, you are considered a "non-resident" for tax purposes, regardless of how long you were in the country during that tax year. This means that you must complete either Form 1040NR, "U.S. Nonresident Alien Income Tax Return," or Form 1040NR-EZ, "U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents," for each calendar year that you are in the U.S. and send it to the IRS by April 15th of the following year.

(If the only income you received in a calendar year was scholarship/fellowship income, i.e. you received no wages, or if you received no U.S.-source income at all, the due date for your Form 1040NR or Form 1040NR-EZ is June 15th.)

Form 1040NR-EZ is much shorter and easier to complete. You may use it if you:

	have no dependents;
	cannot be claimed as a dependent on another person's U.S. tax return
	received only wages, compensation and/or a scholarship or fellowship grant
	received less than $50,000 of total income, AND
	had no "away from home" business/travel expense or other general deductions.

2. Form 8843

In addition to filing Forms 1040NR or Form 1040NR-EZ, you must also complete Form 8843, "Statement for Exempt Individuals and Individuals with a Medical Condition," in order to document your exempt individual status. Forms can be obtained from the IRS, as listed above. You should complete parts I and II, sign and date on the back, and attach to your Form 1040NR or 1040NR-EZ.

If you earned no income, Form 8843 is the only Federal tax form that you will need to file.

3. State and Local Returns

You will also need to get the appropriate state and local tax return forms and instructions from the tax or revenue office in your state. Be sure to specify forms for non-residents.

4. Publication 519 (optional, but very helpful!)

IRS publication 519, "U.S. Tax Guide for Aliens," provides basic information which is helpful to read before filing your tax returns, particularly if you have a more complicated situation.

You can get forms and instructions by calling the IRS at 1-800-829-3676, or by downloading them from the IRS website at www.irs.ustreas.gov. If you are no longer in the U.S., you can also try the nearest U.S. Embassy or Consulate in your home country for federal forms.

Forms You Will Receive

If you had U.S. income which was subject to taxation, your employer or grantor is required to give you a Form W-2 by January 31st, which will list all the income you received from them in the previous calendar year, as well as federal, state and local taxes withheld. DO NOT LOSE THESE!

If you had U.S. income which was not subject to taxation, you will get a Form 1042-S by February 28th, listing all wages and/or scholarship/fellowship amounts.

If you earned any interest on a U.S. bank account(s), you may receive Form 1099-INT from your bank(s) by January 31st, listing the amount.

If you received any tax refunds from prior years, you may receive Form 1099-G by January 31st, listing the amount.

How To Complete Your Tax Forms

If you would like to have professional advice, or just do not want to complete the forms yourself, you can go to a tax preparer or accountant and pay them (approx. $60 - $300) to do it. They can also file it electronically for quicker refunds.

You can also use IRS-approved tax software to calculate and file your own tax returns from your own personal computer and modem. Software is available at retail stores and from on-line filing companies. The software allows you to file electronically, for a fee, through the software company or on-line filing company. However, please note that not all software takes into account the special conditions for J-1 visa holders, so check it carefully before you buy it.

If you decide to do it yourself, it is a good idea to make a photocopy or use a duplicate copy if one is provided, and complete your first draft in pencil. Once you're sure the information is complete and accurate, re-write it onto a clean form, in pen.

NOTE: Be sure that once you receive the necessary forms that you begin working on your return right away. You will be much less stressed if you don't wait until April 15th. Also, if you file late, you may be required to pay a fine.

Forms 1040NR and 1040NR-EZ

Use your U.S. address if you are currently in the U.S. and your foreign address if you are no longer in the U.S. Claim only one personal exemption for yourself (If you are a resident of Canada, Mexico or American Samoa, you may also claim one personal exemption for your spouse, if he/she had no income in the U.S., and one dependent exemption for each child. If you are a resident of Japan or Korea, you may do the same, as long as they lived with you in the U.S. at some time during the taxable year.).

Report your taxable wages (from box 1 of Form W-2) on line 8 of 1040NR or line 3 of 1040NR-EZ. Report any non-taxable wage income (from Form 1042-S) on line 22 of 1040NR or line 6 of 1040NR-EZ.

If you received scholarship/fellowship income which was exempt from U.S. taxes due to the terms of a tax treaty, report this amount (from Form 1042-S) on line 22 and complete Question L on page 5 of 1040NR, or line 6 and Question J on page 2 of 1040NR-EZ.

For the rest, just follow the instructions. Remember to sign and date the bottom of the form and attach appropriate copies of your W-2 and/or 1042-S. Make a photocopy of the completed form(s) before sending them to the IRS.

Send all completed federal forms to:

Reminder!

To fill out your tax return forms you need to have a social security number. Those who are not eligible to get a social security number will have to apply for an individual taxpayer identification number (ITIN) for aliens. To apply for an ITIN, file Form W-7 with the IRS office. You will find a sample W-7 form in the "Important Documents" packet provided to you at your orientation.

Deadline for Filing Your Tax Return

Don't forget that the deadline for filing your tax return is April 15th.