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I am a student and UK citizen. This summer I will be interning in the US for 3 months on a J-1 visa. The internship is paid and my salary will be paid into a US checking account. I understand that there will be state and federal taxes whilst I am there.

  • Which taxes will I be able to claim back?
  • Are there any taxes which should not be taken from my pay in the first place?
  • If I bring the earnings back to the UK, how does the double taxation treaty apply in this situation?
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    The treaty applies to you, and your school should provide you information on what to do. I'm pretty sure you're not the first one to intern in the US.
    – littleadv
    Apr 17, 2015 at 2:55

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I can't give an authoritative answer to this, but I was in the same position in 2000 and 2001 and this was my experience as far as I can remember:

I visited a HMRC drop-in centre and asked if I needed to do anything to pay tax in the UK on the foreign income. They said I didn't because it would be taxed in the US. I wasn't entirely convinced by this but I couldn't find any clear information to the contrary so decided that even if the advice was wrong at least I'd tried to check and it was unlikely HMRC would pursue me for it.

Obviously what I was told by one person 15 years ago is no use to you directly, but it might be worth doing the same and contacting HMRC for advice.

The main US tax saving to be aware of is that you'll probably have taxes deducted at source in each pay period as if you are working for the whole year. That means you'll only be given the benefit of 3 months worth of the tax allowance and lower rate tax bands.

You can reclaim the difference after the end of the tax year by filing a tax return - for you it'll be Form 1040NR-EZ. I think filing a return may be a legal requirement anyway, so you should do this even if you don't expect a significant refund to make sure you don't end up in the IRS's bad books.

The first year this happened I paid a tax preparer (H&R block) to do my tax return for me because I was worried about getting it wrong. It was a complete waste of money. They had no idea about any possible subtleties associated with my non-resident status and just typed the numbers I gave them into a computer. I had another internship the next year and I did it myself without any problems.

It's possible you'll be exempt from social security taxes, but I'm not quite sure if this applies to all J-1 holders or only certain ones. In my case I just decided to assume that my employer had got it right and didn't check in detail - it was a large company that employed lots of J-1s. I can't remember whether I was charged it or not.

See http://www.irs.gov/Individuals/International-Taxpayers/Alien-Liability-for-Social-Security-and-Medicare-Taxes-of-Foreign-Teachers,-Foreign-Researchers,-and-Other-Foreign-Professionals:

Nonresident aliens, in general, are also liable for Social Security/Medicare Taxes on wages paid to them for services performed by them in the United States, with certain exceptions based on their nonimmigrant status.

The following classes of nonimmigrants and nonresident aliens are exempt from U.S. Social Security and Medicare taxes: J-visas, and Q-visas. Nonresident Alien scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other non-student aliens temporarily present in the United States in J-1, or Q-1/Q-2 nonimmigrant status are exempt on wages paid to them for services performed within the United States as long as such services are allowed by United States Citizenship and Immigration Services (USCIS) for these nonimmigrant statuses, and such services are performed to carry out the purposes for which such visas were issued to them.

Exempt Employment includes:

Employment as a professor, teacher or researcher.

Employment as a physician, au pair, summer camp worker, or any other non-student category of exchange visitor.

All of this is only about federal tax. I was in Washington State which doesn't have a state income tax so I didn't have to do anything about that.

The final thing is that if you leave your money in the US and it earns interest there, you do need to declare that to HMRC. I've still got a few hundred dollars now and every year I religiously declare the 20c or so of interest on my UK tax return, which they round down and don't charge me any tax on it. If you don't have to fill in a tax return anyway then in theory you should write to HMRC to tell them, but in practice if the amount is negligible then it would probably be fine not to bother.

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