Thousands of Irish students are being called upon to submit their US tax return by today’s deadline – April 15th. The tax filing specialists Sprintax say that they believe hundreds, but more likely, thousands of those who travelled to America on a J-1 visa last year will fail to file because they are simply unaware of their obligation to do so. However, the tax experts say that they could be putting future US visa applications in jeopardy by not fulfilling their US tax obligations.
Eileen Devereux of Sprintax explained the current situation,
“In January 2018, a new tax bill came into force – the ‘Tax Cuts & Jobs Act 2017’. This means that J-1 students from Ireland (& elsewhere) now have to pay 10% tax from the first dollar earned when working in the States.
This means that the refunds traditionally claimed by these students once they have returned home will now reduce significantly. However, we believe there is widespread confusion about the impact of this change in tax law. Firstly, many students will still be eligible for a refund of some form – it will be lower than the historical average, but it’s still worth claiming. Secondly, however, and this is more important in the long run, any student who has taken part in the J-1 working holiday visa programme is legally obliged to file a tax return for the 2018 tax year. Failure to comply with these tax obligations may affect future visa applications.
You never know what future opportunities may arise for you in the US. That’s why it is so important to have your tax in order if you like the idea of working in the US in future.”
Travelling to the US on the J-1 working holiday visa is a rite of passage for many young people in Ireland. 7,000 places were made available to Irish students in the 2018 programme – and even greater numbers have travelled on the programme in years gone by. It’s estimated that approximately 30,000 students have taken part over the last 4 years.
The filing experts say that there’s still a chance for anyone who travelled to the US before the new tax laws were introduced to claim their full refund.
Eileen Devereux explained,
“If you worked in the US prior to 2018 and haven’t yet filed a tax return, you can still claim a refund of any overpaid US tax for the last four years. So, anyone who took part in the programme in the years 2016 – 2018 and failed to claim a tax refund should still do so for two reasons – a) they can get an unexpected windfall and b) they can be US tax compliant”.
Sprintax advises that even if people missed the filing deadline, it’s always a case of better late than never with US Immigration.
Ms Devereux continued,
“Ideally, people will file their return in the time allowed, but whether you miss the deadline by days or even years – our advice would be to submit a return. You do not want this to come back and bite you in the future when you’re applying for a visa. You never know what opportunities in the US the future holds!”
Sprintax have outlined the 3 Things Every J-1er Needs to know about US Tax
You have to file a tax return!
Every J-1 visa holder in the US must file a tax return at the end of the tax year. It’s the law and also one of the conditions of the J-1 visa.
The changes have a big impact on Irish students
The ‘Tax Cuts and Jobs Act 2017’ has wide-ranging effects for all US taxpayers – but particularly for those venturing to the States to study, for an internship or to work and travel. As most of these changes were activated in January 2018, it’s vital that all non-residents understand their US tax obligations and entitlements.
The primary change for non-residents relates to what’s known as the ‘personal tax exemption‘. Prior to the bill’s introduction, every non-resident who was working in the US was entitled to a personal exemption of $4,050. In other words, if you were working in the US on a J-1 visa in 2017 you could earn up to $4,050 tax-free. The personal exemption was also the main means that non-residents could use to get their Federal tax refund.
However, as of 1 January 2018 (and up to 2025) the personal exemption was reduced from $4,050 to $0. The removal of the personal exemption means that overall taxable income has increased for all non-residents.
It’s important to note that these amendments do not affect the 2017 (and previous) tax return filing season. So, if you were working in the US on a J-1 visa in 2017, you can still avail of the personal exemption.
You could still be entitled to a tax refund
The removal of the personal exemption means that, for most non-residents, Federal tax refunds will be reduced. From the 2018 tax year onwards, the only reason a non-resident will be entitled to a Federal tax refund is if too much tax is deducted from their income.
However, even if you’re not entitled to a Federal tax refund, it’s pretty likely you’ll be entitled to a State tax refund. Sprintax average State tax refund is $175.
To receive your State tax refund, you’ll have to file your State tax return. Before you can file your State tax return, you’ll first have to file your Federal tax return!