Dear Tax Experts:

I came to US with J-1 visa from China for a training program sponsored by AIPT in April. I am working as a visiting scholar in a company and my status is single and have no dependants. I filled out W-4 to state I am a non-resident alien when I began my training.

The payroll of the company withheld Federal and state taxes, and also SUI/SDI tax every months. I did some research and found out that according the US-China treaty, I am exempt from these taxes. I told payroll manager last month but they had no idea or no experience of these conditions.

So, my question is, am I exempt from these taxes? If yes, how can I or the payroll do next?

Thank you so much

MukatA

Are you a trainee or a researcher? This makes a big difference.

Everyone on J1 is exempt from residency and Social Security and Medicare Taxes for two year. You will get exemption as per tax treaty. Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

For researcher: Your U.S. Tax Return: U.S. Tax Treaties for Professors, Teachers and Researchers

lovemiracle

Hi, MukatA,

How can I define a trainee or a researcher? From my DS-2019 form or according my work title?

Thank you so much

AtlantaTaxExpert

LoveMiracle:

Based on your original posting, you are a trainee, because even if you are doing research, research done for a for-profit company does NOT qualify for total tax exemption.

The BAD News is that you MUST pay federal and state income taxes, as well as SDI/SUI. Note that even if you were exempt from the federal income taxes, the state income taxes would STILL be due because most states do NOT recognize the various tax treaties between the U.S. and other countries.

The GOOD News is that you are exempt from FICA (Social Security and Medicare) taxs for the first two calendar years you entered the U.S. Unfortunately, ANY part of the first calendar year counts as a full year, so this exemption is good for 2008 and 2009.

BOTTOM LINE: It looks like your payroll department is withholding the taxes correctly.