I am about to get a J1 visa for work in the US.

I will be living and working in Manhattan for the full year.

What taxes will i need to pay?

Can i remain UK domicile if I still have a home in the UK and avoid any tax?

Or does the J1 give me any reductions?

AtlantaTaxExpert

Katharine:

What is the nature of the employment? Individuals on a J-1 visa may be taxed as a resident alien, non-resident alien, or be completely exempt from taxation.

Generally, if you continue to pay UK taxes, any federal income taxes that you pay should be credited back to you when you pay the UK taxes. Avoiding a "double tax" on income is the principal reason for tax treaties between countries. Further, if you continue to pay all UK taxes, that theoretically should exempt you from the U.S. Social Security and Medicare taxes.

Unfortunately, paying UK taxes will not exempt you from NY state or NY city taxes.

If you have a choice, I suspect you would want to pay the U.S.-based taxes rather than the UK taxes, because the U.S.-based tax rates are probably lower than the UK tax rates.

katharine

Thank you for your help,

I am going to be on a traineeship with a video games company in their marketing department for the full year. Does that make a difference to my status?

Thanks

Kath

AtlantaTaxExpert

Katharine:

Your position will be considered a trainee position as defined by IRS Pub 519 (which can be downloaded as a PDF document from www.irs.gov).

This makes you an "exempt individual" for the Substantial Presence Test provisions. If you are taxed at all (contact your employer's Human Resources department to check this out; you may be completely exempt from taxation), you will be taxed as a non-resident alien. This means you file Form 1040NR.

If you are exempt from all taxation (I am pretty sure you are exempt from the Social Security and Medicare taxes, but not so sure about the federal income taxes), you still have to file Form 8843 annually. Procedues for filing this form can be found in the IRS Pub 519 cited above. The on-line pub is for 2004, but provisions have not change in the past year so they apply equally to 2005 and, for now, 2006.

katharine

This is excellent.

Thank you for your quick response.

AtlantaTaxExpert

Glad to help!

Please let us know what your HR department says about your tax status!