The Complete Guide to J-1 Students Tax Return

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Every year, thousands of people travel to the United States on J-1 visas. Every J-1 participant is required to file a J-1 visa tax return; this is required by law! Many J-1 visa holders are perplexed by the complicated tax jargon that can be found in the United States. However, it is not as complex as it appears. Even a basic understanding of your filing requirements can be highly beneficial!
The Complete Guide to J-1 Students Tax Return
With this in mind, we’ve written this guide that will answer some of the most frequently asked questions from J-1 participants in the United States!
1. Is it necessary for J-1 visa holders to pay taxes in the United States?
J-1 visa holders in the United States are required to file a J-1 visa tax return on any income derived from sources in the United States while on their visas. The amount of tax you will owe will be determined by various factors, including your income, the rate of tax in your state, and whether or not your country of residence has a tax treaty with the United States. Non-residents must pay a 10 percent tax on any income tax they owe up to $9,950 if you earn more than this amount while on your J-1 visa; you must pay income tax on the amount between $9,951 and $40,525, which is 12 percent of your gross income.
As a non-resident in the US, you’ll be taxed on:
•  Wages and compensation
•  Salaries
•  Tips
•  Interest
•  Dividends
•  Some scholarships/fellowship grants
•  Prizes/awards
2. How do you determine your US tax residency status on a J-1 visa?
Most J-1 visa holders in the United States are classified as non-resident aliens for tax purposes. According to the Internal Revenue Service (IRS), this is determined by applying a test known as the substantial presence test. The substantial presence test is used to determine whether an individual who is neither a citizen nor a permanent resident of the United States should be taxed as a citizen of the United States or as a non-resident alien for a specific year.
The difference between the two is that US citizens are taxed on their worldwide income. In contrast, non-resident aliens are only required to report income derived from sources within the United States.
3. How to file a J-1 tax return?
If you earn income in the United States, you are required to file a tax return. When it comes to completing your tax return, you must file everything correctly. Fines and penalties can be imposed if a tax return is not filed or is filed in a non-compliant manner. It can also negatively impact your future visa and green card applications to the United States.
When preparing your US tax documents, you will need:
•  Passport
•  US entry and exit dates for current and all previous visits
•  All tax forms you’ve received (including Forms W-2, 1042-S, and/or 1099, etc.)
•  Visa/immigration status information-Form DS-2019
•  Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
Non-residents may find the 1040NR especially challenging to complete, so it’s vital just to take your time and carefully follow the instructions before proceeding. Please keep in mind that many of the boxes on the form will not apply to you. The majority of the data required is your personal information, earnings, the amount of tax you paid, and the amount you are entitled to a refund (if this applies to you).
4. Which forms do I have to accomplish?
If you have obtained income from the United States during the year, you will likely be required to file ‘Form 8843’ and ‘Form 1040NR’ to finish your J-1 visa tax return. You will be asked to enter your name, current address, social security number (SSN), or IRS individual taxpayer identification number (ITIN), as well as other general personal information, to complete the application process. At the end of the tax year, you can file Form 1040NR, along with a copy of your W2, to report your income in the United States.
When filing your tax return, you will also need to include a Form W2 “Wage and Tax Statement” or a Form 1042-S “Foreign Person’s US Source Income Subject to Withholding” if you earned income from sources in the United States. This is an IRS tax form that your employer uses to report the wages paid to employees and the taxes withheld from those wages. It is divided into sections for each state and the federal government. There are sections for employer information and income particulars. Your employer is required to complete a Form W2 or Form 1042-S, and they will send it to you by the end of January, in most cases.
However, if you did not receive a US source income, then you will still need to file a Form 8843 “Statement for Exempt Individuals with a Medical Condition.”
5. Are there any tax breaks available to those who are on a J-1 visa?
Several taxes, such as Social Security and Medicare, will be exempt from you because you are a non-resident (FICA tax). Furthermore, the country in which you reside will impact how much tax you will have to pay, as you may be entitled to tax treaty benefits. It is important to note that, as a non-resident J-1 participant, you will not be eligible to claim the American Opportunity Tax Credit (AOTC).
TFX assists students with their J-1 visa tax returns. Taxes are an essential aspect of life that many people forget to take care of. Still, it is also one area where you can typically save money.