J-1 Visa Tax Guide for Australian Expats in the US in 2024

As a J-1 holder, you’re required to file an annual US tax return. 

But if you file your US tax return incorrectly, you could get fined or end up paying more tax. 

Uptrend Advisory prepares and files US tax returns for Australian expats.

Our extensive knowledge of the US and Australian taxation systems gives you peace of mind and makes US tax compliance effortless and efficient for you. 

  • If you haven’t filed your US taxes in three or more years, do you know how to reduce—or avoid—fines?

  • Do you know how to avoid paying double taxes? other

  • Do you know if you’re a resident or non-resident for tax purposes—and why it matters?

Get (back) on track with your US tax returns.

 

J-1 Visa Resident vs. Non-Resident Status

As a J-1 visa holder, you’re a non-resident for immigration purposes. However, you’re subject to substantial presence test and if you meet these rules the Internal Revenue Service (IRS) considers you a US resident for tax purposes. However J-1 visa holders may also get an exemption period of 2-5 years depending on the type of role you occupy.

Specifically, under certain circumstances, you may qualify as an exempt individual. In this case, your days of physical presence in the United States don't count for purposes of the Substantial Presence Test.

However there’s a limit on the number of years you can be considered an exempt individual. Generally, there’s a 5-year lifetime limit if you entered the US as a student. Or if you entered the US as a teacher or trainee, it’s a 2-year limit which can be extended to 4 years under certain conditions.

Finally, if you were both a non-resident and resident for tax purposes within the same tax year, you’re a dual-status alien.

It's essential to determine your tax residency status because it affects what you need to report to the IRS and which US taxes you’re subject to as a J-1 visa holder.

Impact of COVID Travel Restrictions

If you resided outside the US for an extended period due to Covid travel restrictions, it may affect your residency status for tax purposes.

Unsure of your residency status for tax purposes? Drop us a line and we’ll review your situation.

US Tax Basics for J-1 Visas

  • As a J-1 visa holder, you are subject to the same federal, state, and local income taxes as a US citizen.

    However depending on your residency status for tax purposes, you may be exempt from certain taxes including FICA taxes:

    If you’re a non-resident for tax purposes, you’re exempt from paying Social Security and Medicare taxes.

    If you’re a tax resident, you’re still required to pay Social Security and Medicare taxes.

    If you’re a dual-status tax, the rules around which US taxes you’re liable for will vary across the year.

    The exemptions you declare on your W-4 Form reduce the taxes withheld from your employer income. Don't claim more allowances than you’re entitled to though because you may end up with a tax bill after your US tax return is processed.

  • To claim a child tax credit or the credit for other dependents for dependent children, you need:

    Social Security Number (SSN) for US-born children, or

    Individual Taxpayer Identification Number (ITIN) for overseas-born children

  • If you’re a resident for tax purposes, you must report your worldwide income on your US tax return. Plus you must also file a Foreign Bank and Financial Accounts Report (FBAR) to report any foreign financial accounts you hold. Finally, you might be required to file other foreign forms depending on your circumstances, so if you’re not sure drop us a line and we can review your specific situation.

    The US-Australia Tax Treaty means you don’t pay tax twice in the US and Australia. But be aware that some US states, including New York and California, don't abide by the US-Australia Tax Treaty. This means you might get taxed on Australian sourced income, depending on which US state you live in.

    Non-resident aliens for tax purposes are exempt from reporting foreign income and are only subject to tax on US-sourced income.

  • If you’re a resident for tax purposes, you need to file an FBAR if the total balance of all your foreign financial accounts reached US$10,000 at any time during the tax year.

    This includes bank accounts, stock portfolios, shares, and other assets. And you must list all accounts on your FBAR, including zero balance accounts and accounts that individually didn't reach the US$10,000 threshold.

  • IRS guidelines on reporting Australian superannuation aren’t clear. It's a grey area and even tax professionals have conflicting views. But the IRS can impose fines for misreporting your US tax return so it’s important to get it right.

U.S. Tax Filing on an J-1 Visa

  • The due date for filing your US tax return is April 15th for the financial year ending the previous calendar year. You can request an extension with the IRS and your due date is extended October 15th. However if you owe US taxes you must still pay them by April 15th.

  • If you have a spouse, depending on what type of visa they hold, they may be required to file a US tax return also. If your spouse has a tax filing obligation, you need to determine whether to file a joint return or file separately. But to file a joint return you must both be classified under the same residency status for tax purposes.

  • You can file your US tax return yourself using:

    IRS forms, or

    Electronically using IRS or US tax preparation software.

    You can use a tax service to prepare and electronically file your US tax return. Uptrend Advisory is an Australian expat tax service based in the US, founded by an Australian expat, Jason Stoch, CPA, CA.

Changes to your J-1 Visa and Tax

  • If you go back to Australia permanently because your J-1 visa has expired, you must still file a US income tax return for the financial year in which your J-1 expired. Use the substantial presence test to check your US residency status for tax purposes.

    If you plan to cash out your 401(k) or IRA in the US, taxes and fees may apply.

  • If you switch from a J-1 visa to another visa type, e.g., a Green Card, it's important to know how your US tax obligations are affected.

Australian Tax Topics for Expats on J-1 Visas in the US

  • Generally, you still need to file an Australian tax return if you earn income, but exceptions apply. Learn more here.

  • If you own Australian investment property you must declare rental income to the ATO by filing an Australian tax return.

    If you're planning on selling your Australian investment property, consult an Australian tax specialist. That’s because the ATO has rules around paying capital gains tax on investment properties that specifically relate to Australian expat tax obligations. Learn more here.

  • If you have a HECS/HELP debt, you need to declare any worldwide income to the ATO, regardless of your tax residency status. Learn more here.

What happens if you get U.S. Tax wrong on an J-1 visa?

You could get fined by the IRS if you’re in this situation:

  • I'm late filing my US tax return.

  • I haven't filed any US tax returns because I didn't know I needed to.

  • The IRS sent me an inquiry.

  • I had help with my US tax return but it contained errors/wasn’t filed properly.

Uptrend Advisory has helped hundreds of Australian expats navigate through issues like these for more than 10 years. 

If you're late filing your US tax return you can apply to the IRS for an extension. 

If you haven’t filed your taxes in three or more years, you may be eligible for the IRS Streamlined Procedures, an amnesty program that can reduce or eliminate your penalties.

If you’re in a difficult tax situation, you don’t need to go it alone. Get in touch and we’ll advise you on the proper way to successfully resolve your issue.

If you’re a host sponsoring a J-1 visitor, connecting them with our experienced expat tax services at the start of their exchange program with you, means they can avoid US tax compliance issues before they occur. Drop us a line to learn more.

UpTrend Advisory Makes US Tax Easy For Your J-1 Visa

As Aussie expats ourselves, we know how overwhelming the US tax system can be. For your convenience and peace of mind, we offer US tax preparation and filing services for J-1 visa holders.

With our extensive knowledge of the dual US and Australian tax systems, you can trust us to prepare and file your US tax returns compliantly, accurately, and on time.

Our services include:

  • Preparation and filing of US tax returns

  • Preparation and filing of Foreign Bank and Financial Accounts Report (FBAR)

  • IRS Amnesty Program (Streamlined Filing Procedures)

  • Tax advice for Australian expats

We’re easy to reach and stay in regular contact with you, especially during tax time. This leaves you to focus on the important reasons you came here in the first place—gaining valuable US experience as a work or study-based exchange visitor.

Or if you’re the J-1 visa sponsor, by connecting your exchange visitor to our experienced tax services, you’re offering them the ease and convenience of meeting their US tax obligations. This means they can focus their unique skills and experience to help your cultural or educational program thrive.