How J-1 participants can stay compliant with the IRS after Trump’s 'Tax Cuts and Jobs Act'
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What President Trump's 'Tax Cuts and Jobs Act' means for J-1 visa holders
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Understanding J-1 tax obligations and entitlements
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Sprintax - the easy way to file a J-1 tax return!
Through the J-1 Exchange Visitor Program 300,000 foreign visitors enter the US to work and travel each year.
When President Donald Trump introduced the 'Tax Cuts and Jobs Act' in November 2017, the bill had huge implications on every one of these 300,000 J-1 participants.
Many of the changes included in the bill were actioned from 1 January 2018. And yet, many J-1 participants are still confused about what the changes mean for them.
It's vital that all J-1 visa holders understand their tax obligations. Failure to comply with US tax law can result in fines, penalties and even complications for future visa applications.
Fortunately, by following a few simple steps, J-1 participants can be 'tax compliant' and adhere to the conditions of their visa.
Here's what the 'Tax Cuts and Jobs Act' means for your J-1 participants and how they can stay compliant with the IRS
Here's a video we made for J-1 participants to explain the changes
Personal exemption
Most J-1 participants are considered 'non-resident aliens' for tax purposes in the US.
The primary change in the 'Tax Cuts and Jobs Act' that relates to non-residents surrounds what's known as the 'personal exemption'.
Prior to the bill's introduction, every non-resident working in the US could earn up to $4,050 without paying tax. However, as of 1 January 2018 (and up to 2025) the personal exemption was reduced from $4,050 to $0. This means that overall taxable income has increased for all J-1 participants.
It's important to note that these amendments do not affect the 2017 (and previous) tax return filing season. So, anyone working in the US on a J-1 visa in 2017 can still avail of the personal exemption.
More information on the 'Tax Cuts and Jobs Act' can be found here
Tax refunds
The removal of the personal exemption means that, for most J-1 residents, Federal tax refunds will be reduced. From the 2018 tax year onwards, the only reason a non-resident will be entitled to a Federal tax refund is if too much tax is deducted from their income.
However, the reduction of the personal exemption does not affect State tax refunds. In other words, a J-1 visa holder will still likely be entitled to a State tax refund even if they're not entitled to a Federal tax refund.
More on tax refunds below!
Claim your tax refund with Sprintax
US Federal Tax rates for J-1 participants
From the 2018 tax year onwards, all J-1 visa holders must pay 10% in income tax up to $9,525 and 12% on earnings between $9,525 and $38,700.
Case studies
1
Fred travels to Boston on a J-1 visa to work in a restaurant for the summer. During his time in the US he earns $4,000.
If Fred was working in Boston in 2017 he would not have to pay tax on his earnings as his income does not exceed the personal exception amount of $4,050.
However, if Fred works in Boston in 2018, he will not be able to avail of the personal exception and must pay $400 (10%) in income tax.
2
Fiona moves to Miami on a J-1 visa and secures work in an office for the summer. During her time in the US she earns $9,000 (the average income for around 50% of all summer work and travel participants).
Had Fiona earned this income in 2017, her tax bill would have been $495 ($9,000 - $4,050 = $4,950. 10% of $4,950 = $495).
However, if she earns this income in 2018 her total tax bill will be $900.
The full tax rate and bracket list is as follows:
| Bracket | Tax rate |
| $0 - $9,525 | 10% of taxable income |
| $9,526 - $38,700 | + 12% of the balance over $9,526 |
| $38,701 - $82,501 | + 22% of the balance over $38,701 |
| $82,501 - $157,500 | + 24% of the balance over $82,501 |
| $157,501 - $200,000 | + 32% of the balance over $157,501 |
Tax obligations for J-1 participants
Filing a tax return is the single most important tax obligation for J-1 participants.
In fact, all J-1 visa holders are required by law to file a tax return.
And filing Federal and State tax returns is also the only way J-1 participants can receive their tax refund.
File your US tax return the easy way with Sprintax!
Failure to file
If a J-1 participant does not file a tax return they may be subject to penalties and interest. The late filing penalty is 5% of the additional taxes owed amount for every month your return is late, (up to a maximum of 25%). If you file more than 60 days after the due date, the minimum penalty is $205 or 100% of your unpaid tax, whichever is less.
Failure to comply with your tax obligations may also affect future US visa applications.
Filing a tax return the easy way!
Your J-1 participants could choose to file their return directly with the IRS.
But, for many J-1 visa holders, filing a tax return is an extremely confusing and complicated task.
The fastest, easiest and best way to prepare a US tax return is to choose Sprintax.
Sprintax is the only online self-prep tax software for those on a J-1 programme in the US. By simply creating an account, your participants prepare a US tax return in minutes and to receive their maximum legal tax refund!
Our average State tax refund is $175
Our software also helps J-1 visa holders to determine your residency status. What's more, Sprintax is also the 'go-to' tax filing software for numerous major universities in the US including NYU, Columbia, Arizona State University, Illinois Institute of Technology and Cornell. We're also the non-resident partner of choice for Turbo Tax.
File with confidence. File with Sprintax.
- Compliant US tax return
- Save time and stress!
- Determine your residency status
- Avail of relevant international tax treaties
- Avail of personal allowances, credits & tax deductions
- 24/7 Vita Qualified Live Chat facility
- Maximize your State tax refund
Over 500k people have used Sprintax to prepare their tax return and get their tax refund!
What our customers say about us
"As an International student, a tax return is always a nightmare because of its complexity. Now I just finished my first application and it was very simple. So happy!"
Chenyu Wang
Oregon State University
"I like the Sprintax sotware very much - it's a really good service. I will recommend that my friends use your online system!"
Huan Gu
University of Mary (North Dakota)
"Sprintax.com was very helpful for me as a non-resident who is not used to answering this amount of information relating to income tax. Thanks a lot!"
Amina Bouslimani
University of California San Diego
How much will it cost?
The Sprintax tax prep fees are:
$35.95 – Federal
$25.95 – State
But don't forget, most J-1 visa holders are entitled to a State tax refund!
File your US tax return the easy way with Sprintax!
Need to know:
- President Trump's 'Tax Cuts and Jobs Act' has reduced the personal exemption from $4,050 to $0 for non-residents
- The majority of all J-1 visa holders are considered non-residents for tax purposes in the US
- Every non-resident in the US is legally obliged to file a tax return
- Failure to do so may result in fines, penalties and future refusal of entry to the US
- However, J-1 visa holders can still apply for their State tax refund by filing a tax return
- Sprintax makes filing US tax returns easy!
- When a J-1 participant prepares their tax return with Sprintax they'll receive their maximum legal refund
Filing your US tax return with Sprintax is super cheap and easy. Get started now!
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