J1 tax treaty US germany: what if they have paid me the tax exempt but I stayed >2yr

MukatA · Mar 24, 2009, 12:47 PM

For Germany the exemption from federal income tax is for two years. The exemption is lost for entire visit unless the competent authorities of Germany and the United States agree otherwise.

You should get answer from AtlantaTaxExpert.

AtlantaTaxExpert · Mar 25, 2009, 08:32 AM

Harvard:

You have two options.

1) You can file your ask for an exemption of the retroactive tax provision with the IRS. I would need to know more about the circumstance surrounding your extended stay before commenting on the merits of that request. A similar request would likely be submitted to the German tax authorities to get their concurrence.

2) You can pay the 2007 taxes by amending your 2007 return with a Form 1040X and a properly-prepared Form 1040NR or 1040NR-EZ.

iwanuschka · Apr 4, 2009, 01:57 PM

I visited a tax seminar at Harvard just a few weeks ago where I was told that the retroactive loss of the treaty benefits with Germany in case a J1 reserach scholar stays longer than two years was changed in 2007!

Please see attachment article 20.

My question is - how often can I calim the tax treaty? If I have claimed it in 2003 and established residency in Germany in between - can I claim it now again?

Thanks, Stefan

AtlantaTaxExpert · Jun 3, 2009, 11:15 AM

Iwanuschka identified a change to the Tax Treaty that I was not aware of at the time of my 25 Mar 09 posting, which is that the retroactive tax clause in the U.S.-German Tax Treaty has been deleted!

This means that Harvard can claim the income tax exemption for 2008 and not worry about paying thise taxes back for 2007 and 2008 if he stays beyond two years.

Lucky him! :-)

salvochi · Jun 15, 2009, 08:13 AM

Hallo
The "2 years" (cfr art 20(1)) mentioned by Mukata seem to be important only in certain cases. According to art. 20 (3), if Harvard got an award (e.g. Fellowship) or a post-doc grant (typical case for a postdoc who is neither a teacher nor a professor) there seems to be no time limit for claiming tax exemption... Did I get it completely wrong?!

Thanks in advance for your answer

AtlantaTaxExpert · Jun 15, 2009, 09:21 AM

When dealing with tax returns, there is ALWAYS a three-year statute of limitations in claiming exemptions, deductions, etc. On a tax return.

After the passing of that three-year period, any amendment or filing that results in a refund will be rejected by the IRS as a matter of law.

salvochi · Jun 15, 2009, 09:43 AM

Quote:

Originally Posted by AtlantaTaxExpert

When dealing with tax returns, there is ALWAYS a three-year statute of limitations in claiming exemptions, deductions, etc. On a tax return.

After the passing of that three-year period, any amendment or filing that results in a refund will be rejected by the IRS as a matter of law.

Thanks for the answer and sorry for the misunderstanding: the "2 years" refer to the total stay of the German resident in the US, and not to the deadline for filing the application.

According to MukatA, "the exemption from federal income tax is (i.e. Lasts maximum or covers the german resident) for two years". What I wanted to say is that, according to art. 20(3), this is not true in case of a post-doc fellowship/grant.

Cheers
Salvo

Peter-Berkeley · Nov 11, 2009, 08:15 PM

Oh, it exist, finally I found it, a forum with people who can actually help - I have asked already so many.....

I have read the thread and "Germany tax treaty 2 why _march19.pdf" but I am to stupid to transfer it to my situation. I am a Postdoc at school of public health at UC Berkeley since January 2008, thus I almost completed my 2 years stay limit - and I just extended my contract for 2010. I am (and will be) paid by money from a grant of my PI. During 2008/2009 I was under the German-US tax treaty, exempt from federal taxes.

As I understood this thread, in my situation I do not have to pay back the last two years federal taxes (2008/2009) - as stated in the pdf file, page 8: "....no retroactive loss of benefits if a teacher or researcher overstays the two-year benefit period." - or do I? Furthermore, in the thread it is mentioned that the two year limit does not always apply - guess, it does apply in my situation?

I am lost. Any advice, help is much appreciated. Thank you very much. Peter

AtlantaTaxExpert · Nov 12, 2009, 08:36 AM

As noted in earlier posts, the retroactive tax clause within the U.S.-German Tax Treaty no longer exists, so you were exempt for 2008 and 2009.

Starting on 1 January 2010, you become liable for FICA (Social Security and Medicare) taxes as a matter of U.S. Tax law. Be sure your PI know this so they start the required withholding on time.

Your two-year period ends on the anniversary date of your arrival. On the following day, you lose the INCOME tax exemption for both the federal and state returns.

You will file as a resident alien for 2010, paying FICA taxes starting on 1 Jan 2010 and normal federal and state income taxes starting the day AFTER your two-year anniversary of arrival.

J1 tax treaty US germany: what if they have paid me the tax exempt but I stayed >2yr

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