J1 PCT Tax Refund

Joxer_S

Hi,

I've done a search but found nothing definitive. While in the US on the 1 year J1 in 2010, I was able to claim back almost all my tax. This is due to article 20 of the tax treaty with Ireland.

I will be heading back out on the career training visa (also a J1) and I was wondering if anyone had experience of filing a tax return while on this visa before?

I'm going for 18 months and the treaty states that only the first year is eligible not to be taxed, however I don't know if my previous visa counts towards this first year.

lil_lisa

This is always tricky to figure out. So, you are eligible to pay tax when you pass the Substantial Presence test, i.e. you have been in the US for a certain amount of time. There's a good article about it here from the IRS. If you scroll down, you will see:

Exceptions: Do not count days of presence in the U.S. during which:

you are an exempt individual;

Definition of Exempt Individual:

Student on F, J, M or Q visa;

• must wait 5 calendar years before counting 183 days;
• the 5 calendar years need not be consecutive; and once a cumulative total of 5 calendar years is reached during the student’s lifetime after 1984 he may never be an exempt individual as a student ever again during his lifetime;
• Quality of being an Exempt Individual applies also to spouse and child on F-2, J-2, M-2, or Q-3 visa;

If you do not pass this test, then you are a non-residential alien and will not have to pay social security tax, otherwise, you will have to pay just like everybody else.

Hope this helps!

Corrimbla

I was there on a 12 Month IWT Visa and used Taxback.com and they were good. Took 13% fee I think but I know they deal with all the different J1 visa including the PCT so maybe inquire with them. Oh by the way as far as I know its only summer J1's that get most of their taxes back. I got most of my state and a decent % of my federal back but still ended up paying a good few K in taxes. You wont have to pay Medicare or Social Security tho as you should have your own insurance and are not entitled to SS.

Joxer_S

Corrimbla wrote: »

I was there on a 12 Month IWT Visa and used Taxback.com and they were good. Took 13% fee I think but I know they deal with all the different J1 visa including the PCT so maybe inquire with them. Oh by the way as far as I know its only summer J1's that get most of their taxes back. I got most of my state and a decent % of my federal back but still ended up paying a good few K in taxes. You wont have to pay Medicare or Social Security tho as you should have your own insurance and are not entitled to SS.

I was the same, I filed myself using the 1040nr-ez form and got a full refund on both. Actually Massachusetts only gave me a partial refund, and when I appealed and sent in a copy of my visa they sent me out the rest. I don't have to worry about it until next year anyway, was just curious as to whether I can expect a nice little bonus at the beginning of the year or not!

Corrimbla

Hi guys,
I was doing my tax return for 2012 and mentioned the article 20 clause to Taxback.com when I was dealing with my account manager. They looked into it and advised "that article 20 of the tax treaty between the USA and Ireland states that the payments received by a trainee or student will be exempt from tax in the USA provided that such payments arise outside the USA. In other words the payments must come from non-US employer. If you worked for a US employer the payments are taxable as per the US legislation". I mentioned that I heard of people claiming for a full refund under this article and was advised this was a frivolous position to take on a tax return if the income received was not paid by a non-US company.
They strongly recommended anybody who filed falsely under this clause to file an amended tax return as when the US Tax Office makes an audit, they will find out if the income arose from a US company and will start sending owe money notices.
Just thought I'd pass this on to anybody who thought it was loophole!

Joxer_S

Interesting, in all my hours combing those forms and guides I never came across that. It sounds right, given that it is clearly stated that you are liable to pay tax when applying for the visa, and article 20 seemingly contradicts this. I'm going to go with taxback or h&r block this time around.

lil_lisa

This is true, you are eligible to pay tax if you work in the US for a US employer. However, if you are an exempt individual, there are SOME taxes you don't have to pay or can apply for a refund for. I have never heard of anyone receiving a full refund. At the end of the day, you're living in their country, using their commodities (roads, police, water, parks etc). You are charged for other things like unemployment, but if you are an exempt individual, you can never benefit from unemployment therefore you are eligible to receive that back. This is just one example.

Joxer_S

lil_lisa wrote: »

This is true, you are eligible to pay tax if you work in the US for a US employer. However, if you are an exempt individual, there are SOME taxes you don't have to pay or can apply for a refund for. I have never heard of anyone receiving a full refund. At the end of the day, you're living in their country, using their commodities (roads, police, water, parks etc). You are charged for other things like unemployment, but if you are an exempt individual, you can never benefit from unemployment therefore you are eligible to receive that back. This is just one example.

I'm familiar with the concept of taxation and to what it contributes. I filed my return in good faith with the best information and instructions I was able to ascertain myself at the time. I must check my records but I don't believe it was a full refund, but it was quite a lot relative to what I had paid.

spideog7

Typically you'll get a large refund if you don't work for the entire year as your tax credits from the months you don't work will carry over into the months you do work. I'm now here on a H1B and I'm salaried so I only get a few dollars back as I know exactly how much I will earn in the year and therefore how much I should be paying in tax. You have some control over this when you fill out your W4.

Joxer_S

Yes it was two "part year" returns on hourly wage the last time I was here, I'm salaried now so it should be pretty straightforward, thanks everyone