Hello all,

I'm in USA since October 2005 on a J-1 visa as a research scholar. I'm a German citizen and working in a hospital as a researcher. I filed a U.S. income tax return for 2005, 2006 and 2007 with follow tax treaty article: p901, Income code 15 and treaty article 20 (3)...
For 2008 I received a fellowship paid by a German Research Association and since 1/1/2009 back on salary paid by grants.
What about the 2 years rule? Do I have to pay the taxes back next year? I'm confused cause everyone is telling something different about it!!
Please help

Thanks a lot

The tax exemption for a researcher is good for ONLY two years, but you lose the exemption if you exceed the two-year period. That is what is said in the general text portion of IRS Pub 901.

However, if you received a Form 1042-S with an Income Code of 15, then you fall into a different category that allows you to claim the tax exemption indefinitely under Article 20(3) of the U.S.-Germany Tax Treaty, listed below:

3. Payment other than compensation for personal services that a person who is or was immediately before visiting a Contracting State a resident of the other Contracting State receives as a grant, allowance, or award from a non-profit religious, charitable, scientific, literary, or educational private organization or a comparable public institution shall not be taxed in the first-mentioned State.

It would also appear that the current under which you are working ALSO QUALIFIES for the total tax exemption cited under Article 20(3).

One key question: Is the hospital in which you do the research a non-profit or for-profit hospital?

Thank you for the answer. It's very helpfull.
I'm working in a non-profit hospital.

If it's non-profit, then you should be good to go!