Wages and taxes
For paid internships, interns are generally paid on the same schedule as your other employees – typically weekly or every other week – either by check or direct deposit into their bank account. An intern must be paid as a regular employee and cannot be paid as an independent contractor on a 1099.
As foreign visitors receiving paid training on a J-1 Visa, interns are not allowed to work second jobs and they are required to pay some, but not all, of the taxes that U.S. citizens pay.
Interns must pay:
- Federal income tax
- State income tax
- Local or city income tax
Interns do not have to pay:
- Social Security and Medicare tax (FICA)
- Federal unemployment tax (FUTA)
Avoid common mistakes
If FICA/FUTA has been withheld, you will need to change withholding taxes for future paychecks and issue a refund. A refund of incorrectly paid FICA/FUTA can be claimed when filing a federal tax return (see instructions for IRS Forms 941 and/or 944 for more information).
Host organizations must send a W-2 statement to participants at the end of the tax year. If the program spans two tax years, it might be necessary to send a second W-2 many months after the intern has returned home. Be sure to confirm the intern’s home and email addresses before the program ends. You can also contact CIEE for assistance if you need to verify an address.
If an online system is used to distribute W-2s, confirm that the participant has login information.
Unless your intern already has a Social Security number from a previous visit to the United States, he or she will need to apply for a Social Security number. While this can take several weeks, it is legal to work while waiting for the number to be issued.