Paying U.S. Income Taxes as a J Visa Holder: The Two W’s (Part I)

Filed in J-1 Regulation Explainers by on January 23, 2015 0 Comments

Photo by 401(K) 2012.

The holiday season has ended and along with the cold January weather, another new season has arrived. Yes—it is tax season!

Filing U.S. Income Taxes is as confusing, frustrating, and time-consuming as any of our other political processes in the U.S. If you have not yet read it, take a look at our Tax Assistance for J-1 Participants page. The FAQs on that page addresses some of the required documents and procedures for J-1 Exchange Visitors who are filing U.S. income taxes.

In the first installment of this two part series, I discuss two important forms which directly relate to filing your income taxes: the W-4 and the W-2.

Form W-4

The W-4, an Employee’s (read as: J-1’s) Withholding Allowance Certificate, is a form that you will normally fill out when you are added to the payroll at your host organization. Withholding, as defined by the website Investopedia as,

“Income tax withheld from employees’ wages and paid directly to the government by the employer… The amount withheld is a credit against the income taxes the employee must pay during the year.” (Source: Investopedia)

The second part of the definition is important. Essentially, what the W-4 tells your employer  is how much money you would like to have deducted from your paycheck in order to pay your taxes at the end of the year. These deductions are lawful amounts of money that you are able to subtract from your gross income in order to not pay taxes on that income or to avoid paying a huge lump tax sum once a year. The more deductions you take, the smaller your paycheck, but the larger your potential tax refund at the end of the year. It is a relatively simple concept, but the rules about what you can deduct and what you cannot deduct, whether you should deduct more or less income, and how changes in your pay rate affect deductions are complex.

When filling out the W-4 form, there are many factors to consider—especially for J visa holders. In light of this complication, The IRS has published some instructions on filling out W-4 forms for non-resident aliens (J-1s and J-2s are included in this category).

Keep in mind that treaties between your country and the U.S. can also affect the taxes you pay. You can find more information about tax treaties in IRS Publication 519.

Form W-2

Your host company is required to file a W-2 Wage and Tax Statement for everyone who has been paid by the company for services they performed during a given tax year. The W-2 lists all of the income that a J-1 has received from the host organization during the year, as well as how much was income was withheld based on the information on the W-4. Host organizations have a legal responsibility to provide everyone who is on the company’s payroll with W-2 forms by the deadline of January 31 each year. If you do not receive your W-2 form by this date, you should contact your host company immediately.

Your W-2 form contains information such as the total income you were paid during the year and how much of that income has been withheld from your paycheck. If you do not understand the information on your W-2 form, the Human Resources person at your company should be able to explain it to you. The Internal Revenue Service (IRS), the government agency responsible for tax administration, can question you about data that was filed up to seven years ago, so you should always maintain copies of all your tax documents.

When filing taxes, it is important that you possess your W-2 form, because most of the information that is requested on your income tax return is located on the W-2. Normally, J-1 exchange visitors do not pay Social Security or Medicare taxes, so if your host organization has withheld those taxes from you, you may be eligible to have that income reimbursed. But, we will save discussions of tax returns and refunds for Parts 2 & 3 of the series on paying U.S. Income Taxes as a J Visa Holder.

Remember that taxes can be complicated. Your visa sponsor is not an expert on all of the different circumstances that may affect your taxation (such as tax treaties, for example) so be sure to consult a qualified tax professional if you have questions!