I am writing about a problem I am having with the Tax Return that I filed last April (fiscal year 2007).
I am an Italian citizen, arrived in the US on a J1-Research scholar visa on Sep 4, 2005, to perform research in astrophysics at an institute that is part of a national museum, while enrolled at an Italian university as a PhD candidate. My visit to the US has not been for other purposes but research. At the time of my arrival in the US, in 2005, I was a resident of Italy and I do not have any income besides my US fellowship.

This year, since I had passed the substantial presence test, I filed Form 1040 instead of 1040NR. Since I claimed partial exemption on my 2007 income under the USA-Italy Tax Treaty art. 20 (exemption on income earned until Sep 3, 2007), I also filed Form 8833 to undisclose my benefit position.
I must notice that my institute provided me with a 1042-S only in 2006 and 2007 (not 2008) and stopped withholding federal taxes from my monthly checks once I passed the substantial presence test. Also, my institute never applied the Tax Treaty exemption, which I just claimed when filling out my tax returns. As a consequence, I do not have any 1042-S, W-2 or similar form for this year tax return.

I have received my 2008 return back from the IRS (both Forms 1040 and 8833), because - they say - it lacks information. They have enclosed a pink sheet "Request for missing information or papers to complete return (international returns)", in which they circled "Form 1040NR" and two options:
- if you are an individual who is not a US citizen by birth or naturalization, but are a US permanent resident ("resident alien" or "green card" holder), please provide a copy of your US permanent resident visa;
- if you are not a US citizen or resident alien, you must file file Form 1040NR. Please, complete, sign and return the enclosed Form 1040NR after attaching all necessary forms, schedules and federal income tax withholding statements.
They also enclosed two blank copies of Form 1040NR to be filled out.

I do not understand what I should do. I cannot follow the first option, filing 1040, because I do not have a green card (I am not a US permanent resident) but - as far as I know - I cannot file 1040NR either (2nd option), because I have passed the substantial presence test, as I wrote - by the way -
in my Form 8833.
Furthermore, should the main issue be the lack of a form assessing the tax withheld (like 1042-S), I cannot attach any such form to my return, because I do not have any of those forms and no tax has been withheld (I made estimated payments).

It seems to me that the IRS is not considering the substantial presence test, according to which a foreigner can be a resident for tax purposes (therefore filing form 1040) without being a resident from an immigration-status point of view (without a green card).

What can you suggest me to do?

MukatA

Every one on J1 is exempt from residency for two years. Tax treaty between the U.S. and Italy allows you no income tax benefit for two years that is 2005 and 2006. In your case the two years are not from the date of arrival, as in case of some countries. Read Your U.S. Tax Return: U.S. Tax Treaties for Professors, Teachers and Researchers

For 2007, you will file resident tax return. You can not claim any tax treaty benefit. When you are nonresident and claim treaty benefit, you can't claim standard deduction. On your 1040 it appears that you claimed both the standard deduction and treaty benefit.

If you thought that you could claimed treaty benefit up to Sept 2007, then you can only file nonresident tax return. Cannot claim standard deduction.

AtlantaTaxExpert

Icer75:

Your income was EXEMPT from Social Security and Medicare taxes for 2005 and 2006. On 1 January 2007, your income became subject to these taxes.

In my opinion, your income was exempt from INCOME taxes for the 24 consecutive months, starting on 4 September 2005 and ending on 3 September 2007.

All of this you seem to understand as shown by your filing of the Form 1040 with Form 8833.

Follow the instructions on the pink sheet. You are claiming to be a resident alien because the two-year period under which you are exempt from the Substantial Presence Test (SPT) expired on 31 December 2006. Send them a copy of your J-1 visa which clearly shows your date of entry on Form I-94, with a statement that, since SPT exemption expired on 31 December 2006, you have met the criteria to file as a resident alien, with the exemption authorized under Article 20 of the U.S.-Italy Tax treaty superceding the imposition of income taxes on your salary from 1 January to 3 September 2007.