How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10165
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Tax Question Here...
Lane is online now
A new question is answered every 9 seconds

I am on J-1 visa as exchange physician. my salary comes from

Customer Question

Hi. I am on J-1 visa as exchange physician. my salary comes from my government who pays the university then the university issue me the check. I have 2 kids and a working wife who is on j-1 but paid here by a different employer.
I read in IRS that US tax withholding only applies on us income only.
So, if possible I do not want any taxes withheld? Can I claim exemptions from withholding my taxes and how do I complete the w-4 form?
Submitted: 5 months ago.
Category: Tax
Expert:  Lane replied 5 months ago.

Hi,

...

I can help here.

...

The general rule is as follows:

...

First, as a J-1 visa exchange person, your income is treated as US source income because you preform the service on US soil.

...

Second, you could pay tax as either a NON-resident alien (1040-NR form to file taxes) or as a resident alien (1040 form same as green card holders and US citizens) depending upon your countable days in the US

...

Nonimmigrants are resident aliens if they are physically present in the United States at least 31 countable days in the calendar year in question, and their U.S. presence over a three-calendar-year period satisfies the 183-day residency formula (called the “substantial presence test”), unless an exception applies. The formula adds all of the countable U.S. days in the current year, plus 1/3 of the countable U.S. days in the prior year, plus 1/6 of the countable U.S. days in the second preceding year

...

If you "pass," so to speak (are considered resident) you are taxed just as any US person (which is a good thing, because on the 1040-NR form there is no standard deduction allowed, meaning that an additional 12,600 of income (in 2016) becomes taxable.

...

HOWEVER, any one of several special Code provisions or treaty provisions may apply to exempt compensation paid to a J Exchange Visitor from U.S. taxes.

...

A special U.S. tax rule applies to exempt from U.S. tax, remuneration that is paid to J-1 nonresident aliens by a foreign employer.

...

However, once you are present for 4 out of severn yearfs, you will begin to be taxed as a resident alien (as in the general rule above).

...

A special 4-out-of 7calendar year rule applies to determine the residency status of J Nonstudents paid exclusively by a foreign employer. A “foreign employer” is defined by the Code as a nonresident alien individual, a foreign partnership or foreign corporation, or a branch or place of business maintained in a foreign country by a domestic corporation, domestic partnership or U.S. citizen or resident alien. However, a foreign government or foreign government agency is not included in this definition.

...

U.S.-source income payments made to or on behalf of nonresident alien recipients must be reported to recipients and the IRS on a Form 1042-S information return.

...

Finally, however, U.S.-source income payments made to nonresident aliens are subject to 30 percent withholding unless an exception applies. There is an exception for wages paid to nonresident employees but special wage-withholding rules

...

The federal income tax withholding rules for compensation paid to nonresident employees include special provisions because of the limitations on deductions and exemptions imposed upon nonresident aliens discussed above. Special Form W-4 rules apply to nonresident employees.

...

They:

• Can only use single status

• Cannot claim “exempt” on Form W-4

• Can only claim one personal exemption unless an exception applies

• Must indicate “NRA” on line 6 of the W-4

Customer: replied 5 months ago.
I need more clarifications please
Can you please explain to me the followings:
1) ////If you "pass," so to speak (are considered resident) you are taxed just as any US person (which is a good thing, because on the 1040-NR form there is no standard deduction allowed, meaning that an additional 12,600 of income (in 2016) becomes taxable.///How is that a good thing? and What do you mean 12,600 of income (in 2016) becomes taxable? Does it mean I will get more withholdings?On line 5 - I have a daughter who is a US citizen.. and another child who is a on J-2 and my wife works
So, Do I file jointly or separately?
How many allowances can I put on line 5?Thank you
Expert:  Lane replied 5 months ago.

Let me address these one at a time:

...

You said:

...

"I need more clarifications please

Can you please explain to me the followings:1) ////If you "pass," so to speak (are considered resident) you are taxed just as any US person (which is a good thing, because on the 1040-NR form there is no standard deduction allowed, meaning that an additional 12,600 of income (in 2016) becomes taxable.///How is that a good thing? and What do you mean 12,600 of income (in 2016) becomes taxable? Does it mean I will get more withholdings?"

...

WHen you file as a resident alien on fomr 1040 (you get the same standard deduction on the tax return that US citizens get (which for a joint return is $12,600 ... the first, 12,600 of income is exempt from taxation)

...

When you file as a non-resident alien (1040-NR) there IS no standard deduction, only the personal exemption of 4050 (in 2016) - which also exists on the 1040 for residents - is subtracted from taxable income.

...

You said:

...

"On line 5 - I have a daughter who is a US citizen.. and another child who is a on J-2 and my wife worksSo, Do I file jointly or separately?How many allowances can I put on line 5?"

...

I would file jointly - lower tax bracket on the same level of income and higher standard deduction - and use 3 allowances ... this will closely align you with the actual tax liability (withhod less to acccomodate th fact that you will get a 4050 exemption for both you and your wife ANd an addditional 4050 dependency exemption for your daughter.

Expert:  Lane replied 5 months ago.

I hope this has helped. … Please let me know if you have any questions at all.

...

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit")

JustAnswer will not credit me for the work unless you do.

...

Thank you!

Lane

I have a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Customer: replied 5 months ago.
Thank you
That helps
My last question will be on completing the w4 2016
So, A (1), B (0), C (0),
What shall I put for D? (3?)
E (0), F (1) , G (0),
H (5)Does that seem right?
Expert:  Lane replied 5 months ago.

That's right A, is 1 (for yourself)

...

B and C are zero

...

D is 1 (for your daughter) - this is where we differ

...

F is 1 also IF you are paying child care expenses or 2000 or more ... this will lower the withholding to accomodate for the child care credit you will get on the return

...

E doesn't apply to you and G also does not apply (with only one child) so those are both zero

...

So you are at three ... You can add one more for a total of 4 DEPENGING on how your wife completes HER w-4

...

If she also takes three, I would recommend you sticking with three

Customer: replied 5 months ago.
Thank you
I have no more questions
Expert:  Lane replied 5 months ago.

Note that on D, they ask for dependents (other than you or the spouse)

Expert:  Lane replied 5 months ago.

You're very welcome ... Your positive rating … (by using those the stars or faces on your screen, and then clicking “submit”) …is thanks enough!

That's the only way I'll be credited for the work here

...

Thank you,

Lane

Related Tax Questions