Taxes

Any program participant who has a paid training position must pay US income tax. Failure to pay any taxes owed could cause problems for you in the future if you plan on returning to the US on a new visa. Therefore, please make sure that these taxes are being withheld from your paycheck and that you file a US income tax return.

In the US, the Federal government imposes an income tax on all wage earners. The Host Company generally withholds income tax from a participant's salary and pays it directly to the government. Approximately 10 to 15 percent of your salary will be withheld for federal income tax, a portion of which you may be able to claim back as a refund at the end of the year. Please read through the following information to learn how to properly file your US income tax return.

• Taxes You Must Pay
• Filling out the W-4 Form
• What to do with a W-2 Form
• How to File a Tax return
• Tax Returns for Unpaid Trainees

Taxes You Must Pay:
As Trainees in the US, you have to pay some of the taxes that a US citizen is required to pay -

Trainees do pay:

• Federal Income Tax
• State Income Tax
• Local Income Tax

Trainees do not pay:

• Social Security & Medicare Tax (FICA)
• Federal Unemployment Tax (FUTA)

Nearly all states and some cities may charge extra income tax according to relevant laws. While state income taxes constitute approximately five to eight percent of your gross pay, local taxes can vary. If applicable, state and local income taxes will be withheld from your paycheck. Please ask your Host Company about the local tax requirements. You may be able to claim a refund for a portion of these taxes at the end of the year.

In addition to these taxes, which are automatically deducted from your paycheck, you will likely be charged sales tax on most retail purchases you make. Sales tax is not the same as the Value Added Tax that many Europeans are familiar with. You will not be able to file a claim for reimbursement of the sales tax that you pay during your training program.

Filling out the W-4 Form
On your first day of training, you and your Host Company supervisor will complete your IRS Form W-4 (Employee's Withholding Allowance Certificate). Your Host Company supervisor will use the information on this form to determine how much tax should be withheld from your paycheck.

While you are training in the US, you are classified as a "non-resident alien". Therefore, the instructions shown on the W-4 form do not apply. When you and your Host Company supervisor fill out the W-4 form you should follow these directions:

1. Disregard the Personal Allowances Worksheet. This section is for US Citizens only.
2. On the bottom half of the Form W-4:
   a. Box 1: Enter your personal information including US address as instructed.
   b. Box 2: Enter your Social Security Number (SSN). If you have not been issued a SSN but have applied for one write "Applied For".
   c. Box 3: Check mark or fill in withholding as "single," regardless of actual marital status.
   d. Box 4: Leave blank.
   e. Box 5: Enter "1". There are no exceptions to this.
   f. Box 6: Write "NR" to indicate Nonresident Alien status.
   g. Box 7: Leave blank. Nonresidents cannot claim "Exempt".
   h. Box 8 - 10: Leave blank.
   i. Sign and date the form.

What to do with a W-2 Form
If you are participating in a paid training program, you MUST file a US income tax return. In order to do this, you must have a W-2 Form. At the end of the calendar year, Host Companies send all paid employees and Trainees a W-2 form. This form details total wages received and the amount of taxes withheld. The information outlined in the W-2 form is essential for accurately completing your US income tax return.

Please ensure that your Host Company has sent you a W-2 form outlining your annual wages. If you do not receive your W-2 Form by February 15, you must contact your Host Company for a replacement.

How to File Tax Return
As a wage-earner in the US, you are legally required to file a tax return, even though you may already have returned home at the time. Tax returns need to be filed by April 15 for the previous tax year (January 1 - December 31).

There are two methods for filing tax returns - you may use a tax filing service, such as http://www.taxback.com/ciee or complete the tax return yourself. CIEE has been working with TaxBack.com to improve the tax return process for its J-1 Exchange Visa participants. Thus, we recommend this service for any participants who are uncertain of their ability to file the forms correctly on their own. However, this is not a mandatory part of the program and all participants have the choice of using this or another similar service, or filing independently.

Should you choose to complete the tax returns yourself, you will need the following forms:

• W-2 Form - This is sent by your Host Company and details the total wages and the amount of each tax that was withheld.
• 1040NR-EZ Form - This form is specifically for non-resident aliens. It can be obtained, together with instructions for filling it out, on the Internal Revenue Service website, at http://www.irs.gov/formspubs/index.html.
• State Income Tax Form - These forms differ for each of the 50 states in the US, and you will need to complete the form for the state(s) in which you trained. A list of state tax sites is available at the website listed above ("State Tax Forms").
• Local Income Tax form - These taxes will only be withheld in certain cities. Check with your Host Company about local statutory requirements and, if relevant, where to locate the necessary forms.

The standard deadline for filing tax return forms is April 15. The earlier you file your tax returns, the sooner you will receive any applicable refund.

Tax Returns for Unpaid Trainees
Trainees that receive no US-source income or no income at all from their Host Company, as well as any J-2 dependents, must file Form 8843 to report their presence in the United States. To find and download the current form please go to http://www.irs.gov/pub/irs-pdf/ and search for ‘8843’ by using (Ctrl F) or scrolling down the page. Some tips are mentioned in the next paragraph but please be sure to completely read all of the directions.

The space for the taxpayer identification number on Form 8843 should be filled in if you have a Social Security number or an Individual tax identification number (ITIN). If you have neither a SSN nor ITIN, this can be left blank. Complete Parts I and II and send Form 8843 to the address indicated on the form before the June 15 deadline. Be sure to keep a copy for your records.

Note: If you have received interest income from a US bank account and have no other US source income, you may still use Form 8843. (US bank interest received by nonresidents is considered foreign source of income.)