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.

Visa Type Change: Changing Status, Visa, U.S. Tax Obligation, by Jean Mammen, EA

Changing Status, Changing Visa, Changing U.S. Tax Obligation

 Part II of III

For a first-time visitor to the U.S., determining U.S. tax obligations can follow a straight path. And the same is true if you have never visited the U.S. See Part I.

If you changed your visa type during your first visit, or if this is your second visit, more possibilities exist, and more analysis is needed.

VISA TYPE CHANGE:  What are the tax and tax residency effects if you changed visa types?

If your new visa allows counting days immediately, you do so.

Example: You had an F1 visa and were still in the eXempt period. You did not count days in the U.S. as days of presence. Now you have an H1b visa. You begin to count days.

 Example: Your new visa is a kind where you can never count days, such as a G visa, or do not count days during an eXempt or eXclusion period. You do not count days while in this period.

Tax residency status change? Immediately before you got the new visa type, what was your tax residency status?  Non-resident alien? Or tax resident? Filing on form 1040NR? or on Form 1040?

Example: First visit, you were in your sixth year on an F1 visa and had begun counting days. Maybe you reached 183 days and met the SPT, or maybe you had almost enough countable days.  Then, with just a short break, you get an H1b visa. You resume counting days. On December 31st, you add together your countable days from the F visa period and the H1b visa days.  Did you meet the SPT?  If so, you are now a US tax resident. You file on Form 1040.

Example: First visit, you were in the third year of an H1b visa. You rarely left the US. You had met the SPT. After a brief break, you got a G visa and stopped having countable days of presence in the US. You had already met the SPT. You were a tax resident. You will file on form 1040 for this tax year. But the following year, you are on the G visa for all the time you are in the US. You do not have 31 countable days in the US for that tax year. Or maybe you got the G visa the following year but before you spent 31 countable days in the US.  Either way, for this year you are now a non-resident alien. If you do have US source income, perhaps from rental real estate or investment income, you are back to filing on form 1040NR.

Example: You were in the US on an H1b visa and then decided to get an advanced degree. After a brief break, you got a student visa. On this student visa, whether F1 or J1, you are usually eXempt or eXcluded from counting days for any part of five calendar years. You had met the SPT in an earlier year. You were a tax resident. You filed on form 1040. If you had at least 31 countable days in the US during this year, and were in the US for most days in the prior two years, you would remain a tax resident through December 31st of this year and file as a tax resident on form 1040 at least one more time.

You must do the math to be sure whether or not you are a tax resident. If you spent just 31 days in the U.S. in this tax year, and 365 days in the US in each of the two prior years, your three-year day count exceeds 183 by 30 days. This leaves a small margin for spending days outside the US and still meeting the SPT.  31 + 1/3(365) + 1/6(365) = 31 + 121 2/3 + 60 2/3 = 213 1/3. Then 213 – 183 = 30.

The following year is your second year on a student visa. You spent no countable days in the U.S. You are a non-resident alien. You file on form 1040NR if you have any US source income.

This Series

FIRST VISIT / NO VISIT: If you have U.S. source income, how do you choose between form 1040NR and form 1040?. What are the tax and tax residency effects?

See Part I

 

VISA TYPE CHANGE:  What are the tax and tax residency effects when you change visa types?

Part II, above

 

SECOND VISIT/MULTIPLE VISITS: If this is not your first visit to the U.S., how do you determine your tax status?

See Part III