Au Pair Income Tax Filing, by Jean Mammen, EA

An au pair in the U.S. on a J1 visa is participating in a cultural exchange program sponsored by an organization authorized by the State Department Bureau of Educational and Cultural Affairs. The au pair experiences life in an American family while providing child care for up to ten hours a day, not to exceed 45 hours a week.

The au pair must be enrolled in at least six semester hours of classes at a post-secondary institution. The au pair is not a full-time student. The DS 2019 issued by the sponsor is for a cultural exchange program participant (or trainee), not a student.

The au pair must receive a cash stipend.

The au pair will need to file a U.S. income tax return reporting the stipend, even if they do not receive a W-2 reporting the stipend amount. The tax and filing rules are the same for all J visa holders.
The usual au pair income tax reporting form will be a non-resident tax form. A non-resident form must be filed if a non-resident has any U.S. source income, whether or not any income tax will be due. ( IRC 1.6012-1(b)(1)(i)). Often the two-page Form 1040NR-EZ is suitable. The first page is the tax return. The last page, Schedule OI, or Other Information, asks about the foreign status of the filer.
The new tax law effective 2018 – 2025, the Tax Cuts and Jobs Act, eliminates the personal exemption and some deductions that a non-resident might have claimed. Thus, an au pair who files for 2018 on an amount of income similar to the 2017 income will have more taxable income, and likely pay higher taxes, even when the tax brackets and tax rates are more favorable in 2018.

The IRS has stated that Form 1040NR-EZ and Form 1040NR will not be updated for 2018. Thus, there may be lines on the income tax filing form that cannot be used, such as the personal exemption line.

Filing a State tax return. Check to see which filing form to use for the state, a non-resident form or a resident form. Some state rules say anyone who files a non-resident federal tax form also files a non-resident state form, if their income meets the filing requirement. Other states use their own residency rules to determine which form a foreigner should use. When you know which state form would be appropriate, check to see if taxable income by state rules meets the state filing requirement.

First Ever Visit to the U.S. by the J1 Visa Au Pair
A J visa holder who is a first-time visitor to the U.S. will file on a form for non-residents, Form 1040NR-EZ or Form 1040NR, for the first two calendar years. They will be a tax non-resident of the U.S. because they will not meet the Substantial Presence Test (SPT). They are eXempt from counting days spent in the U.S. as days of presence for SPT purposes for any period during those first two calendar years in the U.S. on a J visa. An au pair‘s placement might span two successive calendar years. It might run from June through May of the following year.

Preparing the forms: Gather the information and documents that will be needed
-Income information
-Passport
-Visa or visas
-Form DS-2019 issued by the sponsor agency
-Dates you were physically in the U.S. in the tax year and the two prior calendar years
-Print from the I-94 website all available information, especially the dates you entered and departed the U.S.

Form 8843 (Statement for Exempt Individuals…) is completed and attached to the Form 1040NR-EZ, or Form 1040NR, for each tax year where any days are eXempt from being counted for the SPT. Treas. Reg. 301.7701(b)-8(a)(2); 301.7701(b)-8(b)(2)

Form 8843: Complete it before starting on the income tax return itself. Its results show whether the correct income tax filing form is a non-resident or a resident tax form.

Find Form 8843 on the IRS website, https://www.irs.gov  , by searching Forms and Instructions. The instructions print out with the form.

Heading: on Form 8843: Since the au pair would attach Form 8843 to the non-resident income tax return, it is not necessary to enter the address in the U.S. on Form 8843 or to sign the form. Only the first page of Form 8843 will be required for a J1 visa au pair.

Questions 4a and 4b
4a – for the tax year and the two prior years enter the number of days ( Z ) you were actually physically present in the U.S.
4b – for the tax year, enter the number of days ( X ) that were eXempt from being counted for the Substantial Presence Test (SPT) because you were within the eXempt period on a J visa (or an F, M, or Q visa).

As stated above, the Z and X numbers are entered on Form 8843
The Y number will be entered on Schedule OI, Line H

X = eXempt days, not countable for SPT
Y = ‘present’ days that do count for SPT
Z = actual total days physically present in the U.S.

X + Y = Z, or, Z- X = Y

Form 8843 Part II Teachers and Trainees
Line 6 – An au pair cultural exchange participant would be treated like a Trainee. Enter the information for the person who signed your DS-2019.
Line 7 – complete
Line 8 – check ‘yes’ or ‘no’. The Line 8 information states that if you answer ‘yes’, you cannot exclude actual days in the U.S. for the tax year, unless you meet an exception. That exception could apply only to an individual on a student visa, not to a cultural exchange participant.

Third year, in U.S. on a J1 visa: A visa or program renewal year:
This situation will occur for a first-time visitor to the U.S. as a J1 au pair, only if they have renewed and are now in their third calendar year in the U.S.

A third calendar year au pair calculates whether or not they have met the substantial presence test (SPT) in the third year, to see if they should still file on a non-resident form, or if they have become a tax resident of the U.S.

Look at the Substantial Presence Test (SPT) before deciding whether to complete Form 1040NR-EZ or Form 1040 for the third year:

Substantial Presence in U.S. requires1 a Form 1040. The substantial presence test (SPT) is met when someone has 183 days of countable presence in the U.S., full or partial days, over up to three years, including arrival and departure days. 1Possible ‘student exception.’
If 31 day minimum in the U.S. in the tax year is met, count all tax year days present, plus
1/3 of days present in the U.S. in the immediate first prior tax year, plus
1/6 of days present in the U.S. in the second prior tax year. Add all fractions to the total.   IRC 7701(b)(3)(a)(i) and (ii)

If the J1 visa holder leaves the U.S. by the first few days of July of the third calendar year, likely they will not meet the SPT and will use the non-resident filing form.
But if the individual leaves the U.S. later in the year, their days present will be greater than 183, they will have met the SPT, and they will use the tax resident form (Form 1040).

Completing Form 1040NR-EZ, Page 1
Some online software does not include a Form 1040NR-EZ, Form 1040NR, or Form 8843. You might need to use a fill-in the forms feature and even have to calculate the tax due yourself. You might be unable to file electronically and have to print and mail in the forms.

Getting Ready
On the IRS website, https://www.irs.gov , search Forms and Publications, search for Instructions for Form 1040NR-EZ. Look through the instructions. Print out any pages you want to have at hand.

Choose a data entry method: online software, fill-in the forms, print forms and complete by hand, or, consult a tax professional.

Gather the information you will need on income, deductions, passport and visa, dates…

Complete the heading information, then
On Line 1, check either single or married.
Line 3, enter the total stipend received during the tax year
Line 10 – enter the appropriate number. Probably the same as the number on Line 3
Line 11 – Itemized Deductions: If you paid any state tax during the year, whether by withholding, making estimated payments to the state, or, in your second calendar year, paying the balance due on the first-year state or local income tax return, enter that amount here. No other type of itemized deduction may be entered here. (Use Form 1040NR instead if you want to claim other itemized deductions)
Line 12 – follow the instructions
Line 13 – enter -0- if this line is still available on the 1040NR-EZ tax form.
Line 14 – Taxable Income
Line 15 – Tax : Calculate this using the tax table in the instructions that applies to your personal status, single, or, married.
Lines 18 and 19, 20 and 21 – enter any tax payment already sent to the IRS
Determine if you are due a refund (Line 21) or you owe the IRS (Line 25)
If you owe more than $ 1,000, you may also owe a penalty, Line 26, which you include in the Line 25 amount.

Completing Schedule OI
Complete Lines A, B, C, D
Line E – Enter J if your visa is still valid for entry into the U.S. If your visa expiration date had passed and it could no longer be used to enter the U.S., enter “no immigration status”.
Line F The question says “ever”. If you changed visa type during the calendar year, the three-year SPT period, or the prior six-year period, check ‘yes’ and describe the change and date of change.

Line G – Enter in the boxes only dates within the calendar year.
If you need help, with the dates, visit the I-94 website, enter your passport number, and print out whatever pages are available to you. One of them will show the dates you entered and departed the U.S.

If you were in the U.S. on or before January 1, enter January 1. If you departed before December 31, stop after you enter your last departure date.

Line H – Enter the number of countable days of presence for meeting the SPT for each of the three years listed, the tax year and the first two prior years. If you were not in the U.S., enter -0-. If you only were in the U.S. on a J visa in either the first or second calendar year of eXemption from counting days in the U.S. as days of presence, enter -0-. If you also were in the U.S. on countable days, such as a 15-day tourist visit, enter the number (!5).

Remaining Lines – answer any yes/no question as required. Questions 2 and 3 likely are ‘no’.

Earlier visits to the U.S.
As a tourist only, not on an F, J, M, Q Visa
Apply the Substantial Presence Test (SPT)
On an F, J, M, Q visa, as either the principal or a dependent
See blog post on Second Visit to the U.S.  http://blog.1040nror1040.com/2015/07/03/second-visit-or-multiple-visits-to-the-u-s-changing-statusvisa-u-s-tax-obligations-by-jean-mammen-ea/

FICA and Tax Resident Filing
If the au pair will file as a tax resident because the SPT has been met, the employer must pay / withhold FICA – social security and Medicare tax – on the wages
The employer pays through
–Withholding, or,
–Schedule H attached to the employer’s own tax return

Leaving the U.S.
The au pair may need to obtain a sailing permit from an IRS TAC office to leave, if the employer has not withheld income taxes and provided a W-2. See blog post on Sailing Permit. http://blog.1040nror1040.com/2018/06/04/not-a-u-s-citizen-leaving-the-u-s-returning-before-filing-a-current-year-u-s-tax-return-not-planning-to-return-by-jean-mammen-ea/
The income tax form for a given year is filed the following year. The au pair probably will have left the U.S. before it is time to file the final U.S. income tax return. They should file whether or not they owe taxes. It can be important to demonstrate that they do not owe taxes.

Some child dependents don’t qualify filers for credits, by Jean Mammen, EA

Some child dependents don’t qualify filers for credits on Form 1040 or 1040NR. Some children who are not US citizens or residents may qualify as dependents on Form 1040, and even on Form 1040NR for residents of certain countries, without the taxpayer being able to claim certain credits for them.

Dependent exemptions may be claimed for children who meet the dependent taxpayer test either as qualifying child or qualifying relative. The children also either meet or qualify for an exception for other tests: Citizen or resident, joint return, relationship, age, not the qualifying child of someone with a better claim.

The most common barriers to claiming the child tax credit or the earned income credit for dependent children are that the child did not live in the U.S., or was not a U.S. citizen or resident.

Taxpayer Identification Number (TIN) may be another barrier. A child who does not qualify for a social security number may not have adequate documentation to obtain an ITIN.

The criteria for claiming the child tax credit and for claiming the earned income tax credit (EIC) are more restrictive than for claiming a personal exemption for a dependent child. The child and dependent care credit may be difficult for some taxpayers to qualify for.

Even taxpayers who are filing on form 1040NR and are residents of Canada or Mexico, may claim a child as a dependent for the personal exemption if the child is a resident of Canada, Mexico or the US and meets all the other criteria to be claimed as a dependent

A South Korea resident may be able to claim a pro-rated dependent exemption for a child who lives with the filer at some time during the year.

An India resident who is a student or business apprentice may also be able to claim child dependents if the children did not enter the US on dependent visas. They likely would have been born in the US.

Additional Criteria to claim a Child Dependent Exemption

The child generally lives with the taxpayer for at least half the year.

Exceptions apply:

If the parents are divorced, separated, never married, or live apart and they agree on which parent shall claim the dependent exemption, and they fulfill the conditions, the non-custodial parent may claim the child as a dependent.

Your child in Canada or Mexico may meet the ‘qualifying relative’ standard. If the person the child lives with is not a U.S. citizen and has no U.S. gross income, that person is not a U.S. taxpayer and so the child is not the qualifying child of another U.S. taxpayer.

Child Tax Credit – Child-related Criteria for Claiming Child Tax Credit for a Dependent Child

The child must be a U.S. citizen, national, or resident alien, including by meeting the Substantial Presence Test (SPT).

Thus the dependent child cannot be living in Canada or Mexico.

If the child is in the U.S. on a visa, not a citizen or green card holder, the child must be able to count days and the child must have 183 days of presence in the U.S. to meet the SPT test.

The child must be under age 17 on December 31.

Resident of the U.S. may mean tax resident by meeting the substantial presence test (SPT), rather than by being a resident alien (green card holder).  The substantial presence test is met when a child has 183 countable days of presence in the US in the most recent three-year period, and at least 31 of those days are in the tax year. Most foreigners in the U.S. may count days of presence. But,

A and G visa holder dependents may not count days of presence.

Dependents of students on F and J visas may not count days during their first five calendar years in the U.S.

Dependents of J visa exchange visitors may not count days during their first two calendar years in the U.S. within the most recent six year period.

EIC – Child-related and other Criteria for Claiming EIC

The child must have lived with you in the U.S. for more than half the year.

If married, the taxpayer must file Married Filing Jointly, or Head of Household status, not Married Filing Separately.

The taxpayer (and spouse, if married) must not be a non-resident alien during any part of the tax year.

Child and Dependent Care Credit Criteria

The child must live with the taxpayer(s) more than half the year.  Only expenses incurred while the child is below age 13 qualify.

This credit is unlikely to be workable if the taxpayer is married and filing on form 1040NR.  Head of Household is not a status available on form 1040NR. Canadians and Mexicans, South Koreans and Indian students may file ‘married’ on form 1040NR, but only one spouse may have taxable U.S. income on that form, and the credit requires that both spouses have earned income unless one is a full-time student or disabled.  Single taxpayers or Qualifying Widowers might qualify for the child and dependent care credit on form 1040NR.

For form 1040 filers, the child and dependent care credit cannot be claimed if one spouse, likely on an A or G visa,  is exempt from paying U.S. income tax on earned income.

Claiming a Dependent Exemption or Credits During Adoption of Children who are not US Citizens or Residents

An adopted child of a U.S. citizen or national who is a non-resident alien will meet an exception to the ‘citizen or resident’ test if the child is a member of the household for a full year, or, was lawfully placed in it for adoption.

Review of Dependency Rules.

Child as dependent: The simplest situation to claim a child as a dependent (qualifying child/qualifying relative) on form 1040 is when your child is:

Under 19 years old, and younger than the taxpayer

Under 24, a full time student, and younger than the taxpayer

Permanently and totally disabled, and of any age

Is a U.S. citizen or a resident of the U.S., Canada, or Mexico

Does not file a joint return with a spouse, except to obtain a refund of withholding

Does not provide more than half of the child’s own support

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