Tax Back

Top down view of a white desk with TransUSA Exchange taxback materials laid out

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:

  • Colorado
  • Illinois
  • Indiana
  • Massachusetts
  • Michigan
  • North Carolina
  • Pennsylvania
  • Utah

States without a state tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

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:

  • Alabama
  • Colorado
  • Delaware
  • Indiana
  • Kentucky
  • Maryland
  • Michigan
  • Missouri
  • New Jersey
  • New York
  • Ohio
  • Oregon
  • Pennsylvania
  • 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)

Both incomes are filed using Form 1040NR, or 1040NR-EZ for certain nonresidents with no dependents. You can find both of these forms on their respective IRS pages: 1040NR | 1040NR-EZ.

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.

Tax Treaties

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.