Payroll and Taxes
How to make sure you withhold the correct taxes from your J-1 participants’ paychecks
The federal tax code requires that J-1 participants be treated as follows:
J-1 participants must pay:
- Federal income taxes
- State income taxes
- Local income taxes
J-1 participants do not pay:
- Social Security taxes
- Medicare taxes
- Federal unemployment taxes
How to Complete a W-4 Form for your J-1 Participants
The IRS provides the following instructions:
- Do not use the Personal Allowances Worksheet at the top of the W-4—this is for U.S. residents only
- Check only “Single” marital status on line 3, regardless of actual marital status
- Claim only one withholding allowance (enter “1” on line 5)
- Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4.
- J-1 Visitors cannot claim “Exempt” withholding status on line 7
How to Calculate Federal Withholdings for your J-1 Participants
The following information may be useful to whoever is responsible for
processing your payroll. It was gathered from
www.irs.gov and applies to tax year 2013. Tax withholding instructions change every year, and employers should be sure to check that they have the latest information. The IRS provides annual instructions to employers in Publication 15, Circular E, which is available at www.irs.gov/businesses.
Employers must follow a special procedure for calculating the amount of federal income tax to withhold from the wages of their J-1 participants. Employers must add an amount to the employee’s wages before calculating how much tax to withhold. This extra amount is solely for calculating the withholding Federal income tax—it is not used when calculating Social Security/Medicare withholdings, does not increase the employee’s tax liability, and should not be included on their W-2 form.
The additional amount to withhold depends on the frequency of your payroll, as shown in the chart to the right:
The example flowchart is for employers who use the
“wage bracket” method for
calculating withholdings. If you
use the “percentage” method,
CIEE recommends you consult
the IRS or a tax professional to
ensure that you withhold the
What if I have been Withholding FICA/FUTA from my J-1 Participant's Paychecks?
You should change the employee’s witholdings for future paychecks, and issue them a refund of the total amount withheld in error. You can claim a refund of incorrectly paid FICA/FUTA taxes when filing your employer’s federal tax return. (See instructions for IRS forms 941 and/or 944 for more information.)
After your Participants Return Home
Tip: CIEE recommends Taxback.com for J-1 participants who are seeking assistance with their tax returns.
- You will need to send W-2 forms to your participants at the end of the tax year.
- We recommend confirming your participants’ addresses with them before they depart.
- Contact CIEE if you need a participant's address and are having trouble contacting them.