The following information regarding tax issues is meant to provide general guidelines only. Tax laws is constantly changing and is subject to interpretation. For more specific and up-dated information, you should contact the IRS, a tax accountant, or a tax attorney.

Tax Information for Host Employers of Trainees

LEGAL AND PAYROLL ISSUES 

YMCA Multinational Leadership Training Program trainees are exchange visitors to the United States, participating in an Exchange Visitor Program designated by the U.S. Department of State. They have been admitted under Section 101 [a] [15] [J] of the Immigration and Nationality Act, as evidenced by the J-1 visa in their passport.

Trainees are authorized to participate in an internship which may not exceed eighteen months in length or the time period specified by their Form DS-2019, whichever is shorter. They are assigned to a specific host institution which has submitted a training plan detailing the internship. They may receive a financial stipend for the internship. They are not authorized to do any other type of work or to work at any other site. If for any reason they do not fulfill the requirements of their internship, or at the end of their visa period, they must leave the United States.

IDENTITY AND ELIGIBILITY TO WORK

Immigration law requires that employers verify that all employees - both U.S. citizens and aliens meet certain requirements. Within three days of hiring (that is, of starting work), you must fill out a I-9 Federal Government form on each employee hired. You must retain these forms for three years. For international staff on an Exchange Visitor Visa, you will ask to see the following forms which participants have in their possession:

to prove identity • exchangee's passport (pages listing vital statistics and J-1 visa stamp) to prove work • pink copy of DS-2019 form which allowed eligibility exchangee to apply for J-1 visa • white I-94 form stapled into passport - gives J-visa status and authorized length of stay.

In Section I of the form, check the third box and indicate the dates as listed in Section 3 of the form DS-2019 form. Indicate the number printed on the form I-94. You and the participant sign the form. You should make photocopies.

TAX STATUS

They are a number of factors determining the tax status of a YMCA international trainee. Indeed, the tax status may change during the trainee's stay in the United States. The following three factors need to be determined for each calendar year of the trainee's stay:

1. Is the trainee taxed as a nonresident or resident alien?

2. What is the withholding tax rate?

3. Is the trainee covered by an international tax treaty?

1. Non-resident or Resident Alien 

The IRS requires that the trainee provide information to the employer to determine this status.

Step 1: List the calendar years in which the trainee has previously been in the United States on a J-1 visa during the last six years.

Step 2: Add to the list the calendar years the trainee will be with your institution on the current J-1 visa.

Step 3: Delete the earliest two years.

Step 4: If the current year is no longer on the list, the trainee will be taxed as a non-resident alien. Go to step 9.

Step 5: Determine the total number of days the trainee will be in the United States during the current calendar year. _____

If the trainee will be in the U.S. for less than 31 days in the current calendar year, the status is non-resident alien for tax purposes. If so, go to step 9.

Step 6: If the previous calendar year is still on the list, determine the total number of days during that calendar year the trainee was in the United States. Divide this number by 3. ____

Step 7: If the list still shows two calendar years ago, determine the total number of days the trainee was in the United States during that year. Divide this number by 6. ____

Step 8: Add the resulting numbers in steps 5, 6, an 7. _____

(All days in current year, 1/3 days in last year, 1/6 days in two years ago.)

If the result is less than 183, the trainee is taxed for this calendar year as a non-resident alien.

If the result is 183 or more, the trainee is taxed for the current calendar year as a resident alien.

Step 9: If the trainee is still here on next January 1, repeat from step 

1.

2. What is the withholding rate?

Non-resident alien J-1 visa participants are exempt from FICA and FUTA taxes.

The wages, stipends, and pocket money of resident aliens is taxed at the same graduated rate as citizens. Resident alien J-1 visa holders should have FICA and FUTA taxes withheld, unless tax treaty conditions apply.

3. Tax Treaties

Many YMCA international trainees will be from countries which have negotiated treaties with the United States effecting whether the trainee pays U.S Federal taxes. Trainees who are claiming U.S. tax exemption for all or part of their U.S. income must give the employer a completed IRS Form 8233 each calendar year. The employer must verify the exemption exists before adjusting any withholding amounts. Tax treaties constantly change. IRS Publication 901: U.S. Tax Treaties can be used to verify a Form 8233 claim.

Currently tax treaties may effect trainees from the following countries: Armenia, Austria, Azerbaijan, Belarus, Belgium, Canada, China (Peoples Republic), Cyprus, Czech Republic, Denmark, Egypt, France, Georgia, Germany, Greece, Iceland, Indonesia, Japan, Korea (South), Kyrgyzstan, Luxembourg, Moldova, Morocco, Netherlands, Norway, Pakistan, Poland, Romania, Slovak Republic, Spain, Sweden, Switzerland, Tajikstan, Trinidad and Tobago, Tunisia, Turkmenistan, Ukraine, and Uzbekistan.

FILLING OUT THE FORM W-4

All trainees must fill out in IRS Form W-4 within three days of being added to the payroll. Non-resident aliens should fill out the form as follows: In box 3 the trainee should check off "Single" regardless of actual marital status. On line 5 the trainee should claim only one exemption (unless the trainee is from Canada, Mexico, American Samoa, Japan, Korea, or India in which case a tax treaty may allow additional personal exemptions). On line 6 the trainee should indicate that an additional $7.60/week is to be withheld. This $7.60/week is due to a non-resident alien being unable to claim the standard deduction on the tax return.

If the trainee will be in the United States for only part of the calendar year, the one personal exemption is pro-rated at $6.85/day for each day the trainee is in the United States.

Resident aliens fill out the Form W-4 the same way as U.S. citizens. If the trainee's status changes from non-resident alien to resident, or resident alien to non-resident during the internship, a new Form W-4 must be filled out.

REPORTING TRAINEE INCOME TO THE IRS

In most cases you will issue a Form W-2 to the trainee for all compensation you have paid regardless of non-resident or resident alien status. However, if the international trainee has given you a Form 8233 for the current calendar year which you have determined exempts this individual from all or part of U.S. Federal taxes, the exempt income is reported to the IRS on Forms 1042 and 1042S. It may be that the trainee has both exempt and non-exempt income requiring that you report the exempt income on Forms 1042 and 1042S and the non-exempt income on Forms W-2 and 1099. The filing deadline for Forms 1042 and 1042S is March 15 of the following calendar year from which the income was paid.

Rev. 6/00