The personal tax structure in the USA consists of several types of taxes:
- Federal Tax
- State Tax
- Local Tax
- Social Security and Medicare Taxes
The major tax is the
Federal Tax. It is levied on all income earned by any individual working in the USA. The federal tax rate depends on the earned wage and can reach up to 25%. Participants in the J-1 work and travel programs are usually paying 10-15% Federal Income Tax.
The
State Tax is imposed in addition to the Federal tax. It is levied on all income earned by any individual working in the USA except in the following states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington and Wyoming. The rate of the state tax depends on the given state and can reach up to 15%. Some states also apply a different system of tax allowances. Therefore, it can happen that a different portion of the federal and state tax can be refunded.
Local Tax charged on personal income is used in some states. This tax usually does not exceed 3% of the income. In the majority of cases, this tax will not be levied on your income. The process of refunding local taxes is complicated and in some cases not possible at all. Dendax offers the Local Tax Refund only from the state of New York.
Social Security and Medicare Taxes can be deducted from your wage in some cases. Please have in mind that all people working with J1 visa are NOT subject to paying Social Security and Medicare Taxes, except those students, who work in USA more than 183 days. These taxes need to be deducted from all US residents, as well as from all H2B visa participants and individuals treated like residents.
If your employer deducts these taxes from your wage, ask your employer to correct this mistake. The process of refunding Medicare and Social Security tax is longer and generally more problematic. You need to have your DS-2019 form, the exact name, address and phone number of your employer and if possible also the W-2 form from your employer.