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The following information regarding tax issues is meant to provide general guidance only. Tax law 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.
The following information was reviewed by Lowell Hancock, Issues Specialist, IRS Foreign Payments Division.
ICCP camp staff are exchange visitors to the United States, participating in an Exchange Visitor Program designated by the U.S. Information Agency on March 2,
1960. 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. The work authorization is valid for four months from the start date on the DS-2019 form.
They are placed by ICCP at a specific camp and are not authorized to do any other type of work. They must leave the United States before 30 day past the end of the DS-2019 period.
The tax law considers participants as non-resident alien employees of the camp where they have been placed.
I. IDENTITY AND ELIGIBILITY TO WORK
Immigration law requires employers to verify that all employees (both U.S. citizens and aliens) meet certain requirements.
Within three days of the new employee 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 -
exchange's passport (pages listing vital statistics and J-1 visa stamp)
to prove work
a. copy of DS-2019 form which allowed
eligibility exchange to apply for J-1 visa
b. white I-94 form stapled into passport - the immigration entry control card.
In Section I of the form, check the third box and indicate the dates as listed in Section 3 of the Form DS-2019. Indicate the number
printed on the Form I-94. You and the participant sign the form. You should make photocopies.
II. TAX STATUS
A. Taxpayer Identification Numbers
All nonresident aliens participating in the YMCA's exchange visitor's programs must apply in person for U.S. Social Security Numbers at the nearest Social
Security Office. Employers can be penalized under Section 6109 of the Internal Revenue Code for failing to include identification numbers on
reports to the IRS.
Please note that ICCP has arranged for all participants attending Arrival Orientations in New York, St. Louis, and Chicago to apply for Social Security Numbers at orientation.
The Social Security Card will be sent to camp as soon as it is processed. Participants will have a form from the Social Security
Administration indicating that they have applied for the number.
B. Social Security and Federal Unemployment Withholding
All nonresident alien J-1 visa summer camp participants are exempt from both FICA and FUTA taxes. The IRS does
not have a form for use in claiming these exemptions. Employers should attach a statement to both their Form 940 (FICA tax return) and Form 941
(FUTA tax return) stating that the participants are not subject to FICA or FUTA withholding due to their J-1 visa status.
C. Federal Income Tax Withholding
(The following information is valid only for international summer camp staff participating on ICCP's four month J-1 visa program.
Other tax rules apply for participants on longer YMCA exchange visitor programs.)
SUMMARY
There are two distinct withholding cases:
1.) Withholding is $0 if -
The international summer camp staff will clearly earn less than the one Federal withholding allowance and will not return or remain in the US
more than 30 days past the date on the DS-2019 form, the Federal withholding is $0.
2.) Standard tax tables plus $7.60/week apply if -
The international summer camp staff will earn more than the one Federal withholding allowance or
plans to return or remain in the US more than 30 days past the date on the DS-2019 form, tax is withheld according to the graduated tables plus $7.60 per week.
D. Filling out IRS Form W-4
Employers must require all ICCP participants to complete IRS Form W-4. International staff in the United States
on a J-1 visa must check "Single" in box 3 of the Form W-4 regardless of their actual marital status. Likewise, they may only claim one withholding allowance on line 5 (except participants from Canada, Mexico, American Samoa, Korea, or Japan who may claim additional personal
exemptions due to tax treaties).
EXPLANATION
In case you need to know:
IRS publication 515 instructs employers to withhold $7.60/week because the J-1 visa program participant may not claim the standard deduction on the U.S. income tax return.
Lowell G. Hancock, Issues Specialist of the IRS Foreign Payments Division has stated that the IRS should administratively allow an exception to this withholding in the cases where
the total compensation given the international summer camp staff is clearly less than the one withholding allowance to which they are entitled.
This is because the US government will incur no loss due to the lack of withholding (a fancy way of saying it will cost more to process the overseas tax refunds than the $7.60/week would
generate). This administrative exemption from Federal withholding is applicable only for international summer camp staff earning less than the
one withholding allowance, and who will not return or remain in the US more than 30 days past the date on their DS-2019 for any reason during the calendar year.
Camps electing to not withhold should keep careful records showing the ICCP participant will not receive compensation in the United States in excess of the amount of the
personal exemption they may claim. As with all records relating to taxes, this information should be kept for
(7) seven years.
If you are unsure whether the international staff will earn more than the personal exemption amount or you are unsure of how many days the international staff will actually be
in the country, withhold the $4/week.
For tax purposes, a participant's taxable income includes all pocket money, wages, and stipends. It does not include: value of meals and lodging provided by the employer during the time of employment, travel expenses for business purposes, or value of employer-provided health
and accident insurance.
III. U.S. TAX REPORTING
Required Furnishing of W-2 Form
As employers who are paying "remuneration for services performed by an employee," you are required to issue a form W-2 to each employee, including each
nonresident alien employee. Employers are subject to a penalty if they fail to do so.
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