For Tax Purposes, Are Exchange Visitors Nonresident Aliens or Resident Aliens?

Filed in J-1 Regulation Explainers by on February 1, 2017 0 Comments

Photo by Ken Teegardin.

The Internal Revenue Services (IRS) Internal Revenue Code provides two separate tax structures—one for U.S. citizens and permanent residents, and one for nonresidents. To prepare for tax season, exchange visitors must know which category they file under.

Exchange visitors are considered nonresident aliens because the maximum duration of a J-1 Exchange Visitor Program is one and a half years, and they are only taxed on their U.S.-based income sources. If an exchange visitor receives compensation from a host organization, the exchange visitor will have to apply for a social security number and pay income taxes to the federal, state, and local government.

Even if exchange visitors do not pay income taxes, they are required to file a tax refund. The Internal Revenue Service has forms for exchange visitors who received remuneration and for those who did not receive payment from the American host organization. For the ones who did not earn an income, Form 8843 is appropriate for filing; for those who did, they must file both Form 8843 and Form 1040NR-EZ with the IRS.

IRS and Social Security agencies are great sources to provide credible information to exchange visitors. These agencies websites deal with different issues that can assist exchange visitors with questions regarding filing tax return. Please follow the links for information concerning:

Exchange Visitors are exempt from paying FUTA (Federal Unemployment Tax Act) and FICA (Federal Insurance Contributions Act) taxes.

FUTA and FICA are employment, Social Security and Medicare taxes. Regarding FUTA, the purpose of the exchange visitors in United States is training or an internship as opposed to employment, therefore there is no need for unemployment or Social Security and Medicare taxes to be withheld from their paycheck. An exchange visitor can never be considered “unemployed.” Once the exchange visitor’s training or internship is complete, they must return to their home country within the 30-day post-completion grace period. The same is true with FICA taxes. Exchange visitors will not be a United States retirees and will not benefit from Social Security or Medicare insurance, so they are not required to pay into the system. For additional resources regarding taxes and exchange visitors, please visit the Exchange website.