Information About U.S. Income Taxes
How does income tax in the U.S. work?
- In the United States, taxes are levied at the federal, state, and sometimes local levels to fund various public services and government operations.
- Individuals and businesses are required to report their income.
- The amount of tax owed is determined based on a progressive tax system; where higher incomes are subject to higher tax rates.
- Taxpayers file annual tax returns, reporting their income, deductions, and credits to calculate their tax liability.
- If they have overpaid during the tax year, they will receive that money back from the IRS as a tax refund!
- Tax evasion and non-compliance are subject to penalties, so it is VERY important to meet your tax obligations accurately and on time!
Tax Filing is Required for J-1s
How do US taxes apply for me as a J-1 SWT Participant
- As a J-1 visa holder, you are considered a non-resident for tax purposes.
- This means you will file a different tax form than U.S. citizens or residents and have a different tax rate than they do.
- Unlike American Citizens, you do not get to take what is called the ‘Standard Deduction’ which would allow you to receive most or all of your prepaid taxes back because of the income level of most typical J-1 students.
- Like an American citizen, you should receive a form W-2 from each of your employers no later than February 15 of the following year.**
- Once you have this form, you can file a tax return using a form 1040-NR (not form 1040).
- You may receive at least a portion of your taxes paid back as a refund, however this is not always the case!
Note: One of the most common questions asked is, “Why does the amount of my return not equal the amount of tax I paid?”
The answer is simple – you are only entitled to receive back the amount that you overpaid based on the United States IRS tax schedule for the calendar year you were here.
*For tax-related questions, check out the FAQ/Tax section.
**This is an enforceable legal obligation held by all of your employers. If you HAVE NOT received this form by February 15, please reach out to us here for help!
What to consider during the SWT program to have maximum refunds?
1. Filing a form W-4 with your employer
When you arrive in the U.S., your host employer will give you a W-4 Form. Based on the information you provide on the W-4, your taxes will be calculated and deducted from your paycheck. You must fill this form out and give it back to your employer to get paid.
What Is Form W-4 Used for?
Form W-4 is used by your employer to calculate the amount of money that will be withheld from each of your paychecks and paid directly to the tax authorities as an estimated tax payment. This will ensure that the IRS collects federal income tax from you in a timely manner. Not paying enough during the year can result in a tax bill and perhaps a penalty, while withholding too much can create a refund when you file your tax return.
What is the difference between a W-4 and a W-2?
There are several key differences between a W-4 and a W-2, specifically, who completes it and what it is used for. A W-4 form is completed by you and provided to your employer at the start of employment, so they know how much to withhold from your paychecks. On the other hand, a W-2 is given to you by your employer when it’s time to do your taxes. A W-2 form will show your wages and the taxes withheld for the year.
Who Has to Fill Out a W-4 Form?
Every employee is asked to fill out a W-4, usually on the first day of the job. Failure to do so could result in you paying too much or too little taxes.
W-4 Forms are designed for U.S. residents, not for visitors. So, there are a few special instructions you need to follow.
- Home address: Indicate your permanent U.S. mailing address.
- Box 2: Enter your Social Security number if you already have it. If you do not have your number yet, inform human resources at your host company that you applied for a number, and provide a copy of your receipt.
- Box 3: Mark or check “Single,” even if you are married.
- Box 4: Leave blank.
- Box 5: Write “1” to claim only yourself as a dependent.
*If you want to ensure that you will not owe any tax at the end of the year, write “0”. You will have more taxes taken out of your check however you will have no surprise bills when you file!!*
(If you are a resident of Canada, Mexico, Japan, or South Korea, or India, please visit the IRS website for further instructions.)
- Box 6: Write NRA for “Non-Resident Alien”
- Box 7: Leave blank.
- Sign and date your form.
- Box 8-10: Leave blank.
- Do not complete the Personal Allowances Worksheet; this does not apply to exchange visitors.
- NOTE: If your employer withheld less than 10% of your total wages, you will probably owe on your Federal return. This is why filling out your form W-4 correctly is so important!!
Click here and let us handle your W-4 form! We will ensure you get the best return possible!
WARNING!
If any service tells you that you will receive ALL of your tax money back, you should make sure that they are filing the correct forms.
If you plan to come back to the U.S., filing the wrong tax form (form 1040 for US Citizens) can cause you to be denied a future Visa and may lead to fines or other legal penalties!!
We take pride in ONLY filing accurate, legal, returns for all J-1 SWT participants and we will NEVER tell you something that is ‘too good to be true’ just to get your business!
All Summer Work & Travel USA students will have accident and sickness insurance coverage throughout their program in the U.S. This insurance, arranged by a facilitating agency, is provided through an insurance company. Participants are insured during their program dates (as indicated by your DS-2019 dates).
