It’s my annual “Taxes from A to Z” series! Next up:
If you are lawfully present in the United States, figuring out your tax situation can be tricky. But it’s also extremely important to get it right since taxes can directly impact your immigration situation. Failure to file properly can make it difficult to get a visa in the future or a green card while filing returns that could flag a violation of your visa (even if by accident) can be serious stuff.
The J-series visas are among the most popular short term visas.
The J-1 visa is a non-immigrant visa. Non-immigrant visas are temporary and generally restricted to a particular purpose. The J-1 visa, for example, is designed for non-citizens who wish to take part in work/study based exchange and visitor programs in the United States. It’s often considered a form of student visa, with J-1 exchange visitors often arriving to teach, study or receive on the job training. Other examples, however, of J-1 visas include those who work as nannies, au pairs and camp counselors.
Because of the temporary nature of a J-1 visa and the relative broad range of work/study opportunities, there is no one size fits all tax advice. How income is taxed depends on the specific category of the visa application; country of origin; and the duration of stay in the United States.
J-1 visa holders are largely considered nonresident aliens for tax purposes. J-1 visa holders are also generally exempt from paying Federal Insurance Contributions Act (FICA) taxes, or Social Security and Medicare taxes; the employer is likewise exempt from the employer side of FICA. That’s because it doesn’t make sense to pay into a system that the J-1 visa holder won’t benefit from later (remember, this is a temporary stay). However, federal income taxes may still apply, as do state and local income taxes. If the visa holder’s country of origin has a tax treaty with the U.S., certain tax treaty provisions may apply.
Typically, a J-1 visa holder is considered an exempt individual for purposes of figuring tax residency for up to two years. However, if a J-1 visa holder combines or transitions visa status with or from another visa status (say, an F-1 visa), or if the visa holder opts to be treated as a resident alien for tax purposes, then the J-1 exemption does not apply.
The J-2 visa is also a non-immigrant visa. It’s issued to spouses and dependents (unmarried children under the age of 21) of those holding a J-1 visa. Since a J-2 visa holder is in the country for the purpose of accompanying the J-1 visa holder, a J-2 visa holder may apply for permission to work to support his or her family (but not the J-1 visa holder). When the J-2 visa holder goes to work, wages from his or her job are subject to tax.
The J-1 exemption does not apply to a J-2 visa holder, meaning that generally, J-2 visa holders are subject to FICA taxes (Social security taxes & Medicare taxes), federal income taxes and, where applicable, state and local income taxes. As before, if the visa holder’s country of origin has a tax treaty with the U.S., certain tax treaty provisions may apply.
The intersection of immigration and taxation can be a complicated one. Make sure your immigration lawyer has the name of a good tax lawyer on speed dial – and vice versa. Always ask questions ahead of time and make sure that any applications for work permits and Social Security numbers properly match up with your tax returns.