It’s that time of year when everyone is looking to file their USA Working Holiday tax returns for the prior year! Fun! At the end of the US Financial year, you will be required to file a tax return – which is due around the beginning of April. The good news? You may be eligible to claim a refund for a portion of the taxes you have paid. Failure to file a return and/or pay taxes may prohibit you from returning to the U.S. in the future.
HOW TAXES WORK
As a foreign visitor receiving pay on a J-1 visa, you are required to pay some (but not all) of the same taxes U.S. citizens pay. Roughly 10% to 15% of your salary will be withheld for federal income tax. Some states and cities also charge income tax, which would could be an additional 5% to 8%. While your employer should withhold the correct taxes, it is wise to review your pay checks to make sure there are no errors and the tax withholding is correct.
What you must pay:
- Federal income tax
- State income tax (if applicable)
- Local or city income tax (if applicable)
What you do not have to pay:
- Social Security and Medicare tax (FICA)
- Federal unemployment tax (FUTA)
NOTE: If you have paid Social Security or Medicare, it does become very difficult to get this back. Unfortunately, there is no guarantee you will be able to claim any of this back so make sure you always give any new employer the Dear Employer letter in your visa pack so that they set you up in payroll correctly.
Here is some general advice and reminders as to where to start and how to go about your US tax returns:
- The tax year runs from the 1 January through to the 31 December. If you worked at all during this previous year, you should consider filing a tax return.
- You are not required to file a federal tax return under US law if you earned less than $4,000. However, we recommend that you all do one for each financial year (the calendar year) that you are living and working in the USA.
- If you have paid all your taxes correctly and earned more than the USD$4,000 exemption, you are not guaranteed a refund.
- You will need your W-2 forms from all employers you had during the tax year. These hold all of the information you will need in order to fill out your tax return. Contact your employer if you do not receive it by January 31.
- Filing your return, yourself is easy! The form you need to fill out for your FEDERAL tax return is the Form 1040NR-EZ, and can be found here (with a full instruction booklet also): https://www.irs.gov/forms-instructions
- When filling out the Form 1040NR-EZ, be sure to:
- Claim the USD$4.050 exemption under line 13; and
- Claim any state/city taxes paid under line 11.
- State/local income tax forms: These forms are different for each state. You can find more information at irs.gov.
- You can have a third party assist in filing your tax return, such as https://www.taxback.com/en/usa/j1-tax-refund/. These companies are specifically set up to help J-1 visa holders. However, remember that third parties will take a percentage of any refund you are eligible for. Follow this link here for information https://www.iep.co.nz/working-holiday-tax-back/. There are many companies that provide tax filing services. Carefully check any provider’s credentials to make sure he or she will file your returns properly.
- You should not use software such as comor HRblock.com as they are for designed for US residents and citizens to use. As a general rule they will NOT understand how things work for J-1 Exchange Visitors like you. You are deemed a NON-RESIDENT for tax purposes.
VERY IMPORTANT: You will also need to google the Tax department of your STATE and download the equivalent NR (non-resident) version and file that as well.
You should send mail your forms to:
Department of the Treasury Internal Revenue Service
Austin, TX, 73301-0215
If you have any questions regarding your tax return, please do let us or your visa sponsor, IENA, know. We do however like to remind you that we are not tax experts, and are only able to provide general tax return advice, rather than specific case-by-case assistance. Visit irs.gov for more details.