Money & Taxes
How much will everything cost in the U.S.?
You already have read your housing plan, which tells you the cost of rent, utilities and transportation. You will find that many things will be more expensive in the U.S. than at home. Costs vary widely depending on what state you are in, and whether your community is urban, rural, suburban or tourist. Inflation has also pushed up costs since the COVID-19 pandemic.
Here are some links that can help you determine how much you will spend on day-to-day expenses:
Expatisan - Compare the overall cost of living, between cities
www.expatistan.com/cost-of-living
Numbeo - Check out average prices for items in U.S. cities
www.numbeo.com/cost-of-living/
Rome2Rio - Calculate transportation options and prices
Opening a Bank Account
Follow the below steps to open a checking account where you can deposit checks:
Ask your employer if there is a bank they recommend, or visit https://banks.data.fdic.gov/bankfind-suite/bankfind to find a bank.
Go into the branch and ask how to open a checking account, particularly:
What documents must I bring to open the account?
Must I keep a minimum amount of money in the account?
What fees will I be charged?
What is the penalty if I withdraw more money than I have, either at an ATM, with a check or with a credit/debit card?
Your employer may do "direct deposit," where instead of handing you a paper check, they deposit the money straight into your bank account. This will mean that you can access your money faster, and don't have to worry about losing a check. You will receive a paper receipt every time money is deposited. This also makes it easy for your employer to deposit any money that you still are owed after you have finished working there.
If you must cash a paycheck before you have opened a bank account, you can do this at Walmart, or sometimes other grocery stores, for free. There are also places called "check cashing centers," but these charge a large fee and are not recommended.
Many checking accounts come with checks and with a credit/debit card. These cards allow you to spend more money than you may have in your account, but you will be charged a large penalty. So, keep track of how much money is in your account. If you lose your checkbook or credit/debit card, call the bank immediately to cancel it, so that someone else can't use it to steal your money.
Most checking accounts also come with online banking. You can use this to track your money and usually even to pay bills (you can have the bank send a check to someone on your behalf).
Click here to download Work Log
Keeping Good Records
Begin a Work Log where you write what days and what hours you work.
Keep your pay stubs (the paper that comes with your paycheck).
If you have any problems with getting enough hours at your job, ERDT will ask to see this log and your pay stubs. You may also need your pay stubs in the future.
Taxes
J-1 Work and Travel students do not need to pay Medicare, Social Security, or Federal Unemployment Tax (FUTA or FICA). If your employer asks for proof of this, direct them to our Employer Web Page or have them contact ERDT.
You must pay federal income tax, as well as state and local income taxes if they apply in your area. Your employer will take taxes out of your paycheck and send them directly to the U.S. Internal Revenue Service (IRS). If your employer doesn’t withhold taxes, you will have to pay a lot in taxes when you do your tax return, so be sure that taxes are being withheld.
Beware!
Make sure your employer is withholding Federal Taxes from your paycheck. If he/she does not, you will have to pay a lot of money to the U.S. Government when you do your taxes!
Typically, the amount the employer withholds is a bit more than you actually owe. In the beginning of the year after your Work & Travel program, you will receive a W2 form from your employer, which tells you how much you made, and how much you paid in taxes. You will use your W2 to file a tax refund with the U.S. government. Be sure that your employer knows how and where to send you your W2.
If you do not receive a W2 by the beginning of March, first contact your employer by phone and email. If this doesn't work, call the IRS at 267-941-1000. You will need to tell the IRS agent:
Your name
Your address
Your Social Security number
Your phone number
Your employer's name
Your employer's address
The dates you worked there
An estimate of how much you made, and how much federal tax was taken out (use your pay stubs to determine this)
The IRS agent will then contact your employer.
The U.S. tax refund system is very complicated, even for U.S. citizens. If you file your tax refund incorrectly, you may not get all the money you are owed, or you could even be charged a penalty. We highly recommend using Sprintax.com to file your taxes. Do not use TurboTax as it files incorrectly for J1 participants (you will get a bigger tax return, but it is illegal and you could owe penalties if you are caught). Other companies and people may offer to do your taxes, but many are untrustworthy.
Frequently Asked Questions
How can I get my final paycheck, housing deposit and/or tax refund after I have returned home?
Keep your U.S. bank account open when you leave the U.S., and ask your employer or housing provider if he/she will deposit the money in your U.S. bank account. The IRS can do a direct deposit of your tax refund into your account. You can transfer the money to your account at home, and close the account after everything is settled.