J1 Taxes Explained

 

J-1 participants receive compensation from their host organization (employer). They will have to apply for a social security number and pay income tax.

The question frequently asked is, “But exactly which taxes do J-1 participants have to pay?”

J-1 visa holders are considered non-resident aliens and are required to pay federal, state and local income taxes. However, they are generally exempt from paying FUTA and FICA taxes. The logic is that they cannot be “unemployed” (if their program were terminated, their visas would be canceled and they would need to return to their home country immediately). Likewise, they are not able to enjoy social security benefits and are not required to pay into the system. Details on FUTA exemption can be found in 2010 IRS Publication 15, page 36 (section “students, scholars, trainees, teachers”). Details on FICA exemption can be found in IRS Publication 519 (Chapter 1 “Exempt Individual” and chapter 8 “Paying Tax through Withholding or Estimated Tax”, section “Social Security and Medicare Taxes”; “Students and Exchange Visitors”).

How does this effect you as the employer:  As the J-1 visa holder is exempt from paying FUTA and FICA taxes, the employer does not have to pay the matching contribution.

Looking to hire a J1 student to assist you with your seasonal staffing needs?  Visit our employer hiring page for more information by clicking here.

Have a question?  you can always reach the main office at 718-606-1892.

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