Hello,

My fiancée has a J1 exchange visitor (not student). We believe she does not have to pay tax for 2 years, and must complete forms 1040NREZ and 8843 for the tax treaty. Is that correct?

Our other question is, if she stays beyond 2 years, at what rate will she have to pay back taxes for those two years? Her income is below $40k. Is 14-15% the approximate amount of her income she needs to save? She is in Maryland.

Thanks

The J-1 visa covers a variety of visitors, which includes student, trainees, academics, teachers and researchers.

The academics, teachers and researchers are the ones who normally qualify for the 2-year tax-exempt status. However, that MUST be covered in the tax treaty between the United States and her home country, which you did NOT identify.

It appears to me that she is a business apprentice or trainee, in which case she IS liable for federal and state INCOME taxes, but will be exempt from Social Security and Medicare taxes for two calendar years.

If it turns out that she DOES qualify for the 2-year tax exemption, but stays beyond the two-year time, she will pay federal income taxes at about a 15% rate.

Note that Maryland does NOT recognize the 2-year tax exemption. She will have to pay Maryland taxes regardless of her federal tax status.

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Originally Posted by AtlantaTaxExpert

The J-1 visa covers a variety of visitors, which includes student, trainees, academics, teachers and researchers.

The academics, teachers and researchers are the ones who normally qualify for the 2-year tax-exempt status. However, that MUST be covered in the tax treaty between the United States and her home country, which you did NOT identify.

It appears to me that she is a business apprentice or trainee, in which case she IS liable for federal and state INCOME taxes, but will be exempt from Social Security and Medicare taxes for two calendar years.

If it turns out that she DOES qualify for the 2-year tax exemption, but stays beyond the two-year time period, she will pay federal income taxes at about a 15% rate.

Note that Maryland does NOT recognize the 2-year tax exemption. She will have to pay Maryland taxes regardless of her federal tax status.

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She's a researcher.

Her home country is the UK.

So she should save at 15% and pay Maryland taxes through her wages?

Thanks for your advice.

Yes, she MUST pay the Maryland taxes for her two year stay.

Now, the U.K.-U.S. Tax Treaty DOES have the 2-year exemption for researchers.

For WHOM is she doing research?

University of Maryland.

Thanks.

Okay, that qualifies for the 2-year tax exemption.

She should also make sure that that the University of Maryland AGREES with her about this so that they will NOT withhold federal income taxes and the FICA (Social Security and Medicare) taxes.

Quote:

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Originally Posted by AtlantaTaxExpert

Okay, that qualifies for the 2-year tax exemption.

She should also make sure that that the University of Maryland AGREES with her about this so that they will NOT withhold federal income taxes and the FICA (Social Security and Medicare) taxes.

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Thanks a lot for your help.

AtlantaTaxExpert has explained it all.
Read Your U.S. Tax Return: U.S. Tax Treaties for Professors, Teachers and Researchers