TransUSA Exchange Tax Back
If you’ve interned or trained in the U.S. on a J-1 visa, you could receive a tax refund (what we call TransUSA Exchange Tax Back). In order to receive the refund, you’ll need to file a U.S. tax return. J-1 State tax refunds vary but the estimated return is between $175-$800, making it well worth your time to apply!
As a J-1 student, you will be considered a non-resident for tax back purposes. All this means is that you’ll only pay taxes on income from U.S. sources. We’ve prepared a brief overview of the taxes you will – and won’t – pay in the U.S. during your internship or training program.
Taxes you WON’T pay:
FICA: Federal Insurance Contributions Act (FICA) tax is imposed on employers and employees to fund Social Security and Medicare. As a non-resident, you won’t be charged for this tax.
FUTA: Federal Unemployment Tax (FUTA) imposes a tax on employers that goes towards funding state workforce agencies and programs.
Taxes you WILL or MAY be required to pay:
Federal Tax: Used by the government to fund advancements in technology and education. It also allows the government to provide goods and services to the American people.
State Tax: The state you choose to work in will most likely have a state tax. Each state has the authority to create its own tax model, but most follow the federal government’s structure. A minority of states have a flat tax rate, and others have none at all. A flat tax rate applies a fixed percentage across all income levels.
The states with a flat tax rate are:
- North Carolina
States without a state tax:
- South Dakota
Sales Tax: Sales Tax is a tax imposed on goods and services in the U.S. Each state has its own sales tax (and some don’t!).
Local Tax: 15 states allow counties and cities to impose a local tax. It is typically non-refundable (except in New York). The states which allow this are:
- New Jersey
- New York
- West Virginia
How to submit your taxes as a non-resident
As a nonresident alien, your U.S. income is divided into two categories, according to the IRS:
- Effectively Connected Income with a trade or business (taxed at a graduated rate)
- Fixed, Determinable, Annual, or Periodical (FDAP) income (taxed at a fixed 30% rate, unless qualified for a lower treaty rate)
You will also need a W-2 form to complete your tax return. Your W-2 shows all earned income paid to you during the current calendar year. For a full rundown of the W-2 form, refer to the IRS page here.
In addition to your W-2 and 1040NR or NR-EZ form, you will need:
- Your passport
- U.S. entry and exit dates for your current and previous visits
- All of the aforementioned forms
- Visa/immigration status information – Form DS-2019
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
You will need a SSN or ITIN if you want to work in the U.S. A SSN or ITIN also identifies you for TransUSA Exchange tax back purposes. You will need to put this number on your tax returns, and other tax-related documents.
Certain countries have a tax treaty with the U.S., which means you’ll be taxed at a reduced rate or exempt from taxes altogether. Reductions and exemptions vary, so research your countries treaty agreement.
Countries that have a treaty with the U.S. can be found here.