The H-2B program permits US employers or authorized agents to bring foreign nationals to the United States to fill temporary non-agricultural jobs. Considering the temporary or seasonal nature of H-2B jobs, are foreign workers required to pay taxes under H-2B status? Keep reading to find out.
Must H-2B Visa Holders Pay US Taxes During Their Stay?
The United States Citizenship and Immigration Services (USCIS) requires prospective H-2B employers to prove the need for foreign H-2B workers is actually temporary (regardless of whether the nature of the underlying job can be described as temporary).
Considering the temporary or seasonal nature of the H-2B visa, many applicants think there are no tax liabilities associated with their stay in the United States.
Similar to other nonimmigrant workers who enter the United States to occupy temporary or seasonal jobs, H-2B visa holders must pay US taxes. Under H-2B status, all temporary workers are subject to federal income taxes.
Depending on the state where an H-2B worker is living, he or she may be subject to state taxes. Currently, nine US states do not require H-2B workers to handle any tax filings:
- New Hampshire
- South Dakota
While H-2B workers living in New Hampshire and Tennessee are not required to file taxes on earned income, they are subject to taxes applied to investment income.
H-2B workers from certain countries can apply for a US tax exemption. Currently, the United States has signed tax treaties with more than 65 countries across the globe. An H-2B worker from an eligible country can work with an expert attorney to file for a partial or complete exemption.
Filing a US Tax Return Under H-2B Status – US Resident Forms vs. Non-US Residents Form
It is fundamental for H-2B workers to identify their residence status for tax purposes when filing IRS forms. Many nonresident workers in the United States fail to fill out the forms adequately, identifying their tax status as US residents.
Foreign professionals with permanent resident status must file Form 1040 (US Individual Income Tax Return).
Considering temporary or seasonal workers filling employment gaps in non-agricultural jobs have no permanent resident status, they must file Form 1040NR (US Nonresident Alien Income Tax Return).
If an H-2B accidentally files Form 1040, it may create several issues in a future adjustment of status or a USCIS petition for lawful permanent residence in the United States. In such cases, a feasible solution is to file an amended tax return.
Filing the wrong IRS forms and not fixing the issue results in fines and penalties. Generally, the IRS applies a late filing penalty of 5% of the owed amount for each month that is late (not exceeding 25% of the H-2B visa holder’s unpaid taxes).
From the day after the tax filing due date, the IRS starts to apply the penalty. Accordingly, failing to file the tax return more than 60 days after the due date may increase the penalty significantly (up to 100%, depending on the case’s severity).