I'm from China, and I'm NOT a student now. I'm now working as an INTERN at a NON-academic company under my SECOND US J-1 visa, starting from December 12, 2007, with a annual salary US$60,000.

(Under my FIRST US J-1 visa, I worked as a TRAINEE in the same non-academic company from July 13, 2006 to September 28, 2006 [11 weeks], during which I was still a student.)

My total income in 2006 was US$4400 for that 11 weeks, and I got all the tax back.

Now I have 3 questions:
1. Am I now exempt from Federal Tax?
2. Am I now exempt from State Tax (Colorado)?
3. Am I now exempt from FICA Tax (Social Security & Medicare tax)?

Thanks.

(I was told that all J-1 visa holder might be exempt from all kinds of income tax, which is so good to me, because I could get several thousand US dollars back if it is true!)

You are considered a trainee under your current J-1 visa.

1) You are NOT exempt from federal income taxes as a trainee.

2) You are NOT exempt from Colorado state tax.

3) You ARE exempt from FICA taxes, but just for 2007. The exemption ended on 31 December 2007.

Quote:

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Originally Posted by AtlantaTaxExpert

You are considered a trainee under your current J-1 visa.

1) You are NOT exempt from federal income taxes as a trainee.

2) You are NOT exempt from Colorado state tax.

3) You ARE exempt from FICA taxes, but just for 2007. The exemption ended on 31 December 2007.

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I'm now working as an INTERN (NOT trainee) under J-1 visa. Is this the same as what you said about working as a TRAINEE?

In the U.S. an intern IS a trainee by definition.

In order to be exempt from federal income taxes, you must be a researcher, academic or teacher, and the work involved must be for a college, university or charitable organization. By your own admission, you are working for a NON-academic company, so you do not qualify for this category.

1. As a trainee or intern you are exempt from residency and FICA taxes for two years that is 2006 and 2007. You must file non-resident tax return and will get deduction as per tax treaty (of $5,000). Read Read Your U.S. Tax Return: U.S. Tax Treaties for Students and Apprentices

2. During 2008, you are not exempt from residency. You will file resident tax return and do not have any treaty deduction. You must pay FICA taxes, federal income tax and state income tax.

I'm kind of confused.

Several months ago, I asked TaxBack.com:
****************** My Questions ********************
Still I have some questions (see my personal information attached below):

Q1. (This matters with my FICA tax) Since I will become a tax resident for the year of 2008 (Third calendar year working in the USA under J-1 visa), it is also said, for the first 182 days of my THIRD calendar year (2008) working here in the US, I'm still a non-resident alien taxpayer, while after 182 days, from the 183rd day of 2008, I will become a tax resident. Is this true?

Q2. Does the US-China Tax Treaty still apply to me for the tax year 2008, even if my employer is a non-academic company and I'm NOT a student ("As a Chinese resident you will be covered by the US-China tax treaty regarding compensation during training")?

Q3. I'm confused with sentence in your reply "It means they are exempt from FICA taxes on gross remuneration and should not count days of presence in the USA", "should not count days of presence in the USA", what does that mean? What is this used for?

My Personal Information
• I'm single;
• I was working as an intern/trainee in a non-academic company from July 13, 2006 ~ September 28, 2006 under my FIRST J-1 visa in the USA, when I was STILL a student studying for a Master's Degree;
• I graduated from Shanghai University with a Master's Degree in June, 2007. Since then, I have NOT been a student;
• I came to US again on December 12, 2007 and have been working as an intern/trainee since December 12, 2007 under my SECOND J-1 visa in the USA, and I was NOT and I am NOT a student anymore;
• I'm now still working as an intern/trainee under the SECOND J-1 visa program, which will be ending on December 12, 2008.
****************** My Questions ********************

############## TaxBack.com Answers ###############
Thank you for your e-mail. I would like to inform you that our US tax specialist reviewed your e-mail and the questions you had. The information he provided is as follows:

All the information you are asking for is requesting is covered by IRS Publication 519 "tax guide" for aliens.
You can download it from the IRS web site.

However in general for tax year 2008 you can claim the US-China tax treaty as it is not limited by the presence in the USA. The only limitation is the visa validity, you will be covered for as long as your J-1 visa expires.

The residency in the USA is not as simple as stated. It depends on the so called "Substantial Presence Test", and for the purposes of the test (page 5 of IRS Publication 519), you should not count days of presence for the first two years he is in the USA

For the third and any other subsequent year you are not exempt from FICA no matter of the presence
############## TaxBack.com Answers ###############

Your posting does not change what I originally posted.

1) You are NOT exempt from federal income taxes as a trainee.

2) You are NOT exempt from Colorado state tax.

3) You ARE exempt from FICA taxes, but just for 2007. The exemption ended on 31 December 2007