Hello,

I'm here becaues I'm in need for help about my tax return for 2004 since I find myself in a strange situation.

I'm an Italian living in Italy but I've been working during all of 2004 for a US company (telecommuting from Italy) that now issued me a W2 with all the wages that I earned during 2004. Tax was withheld from that income and I'm now having trouble in getting a refund since all my income is reported on the W2 even if it is non-US source income
(because my place of work was Italy).

Here is a little bit more of explanation:
I've been working in US until the end of 2003 on a H1 non-immigrant visa. At the end of 2003 I moved back to Italy for what was supposed to be a temporary assignment.
But then, in 2004, I re-entered US only for two short periods that amount to 29 days.
This should make me a non-resident in US and the income that I received should be considered non-US source income and shouldn’t be taxed (I think) in US.
My problem is that during all of 2004 my employer kept withholding taxes from my income (as stated on the W2) and getting those taxes back is getting tricky.

What would it be the best way to proceed at this point?

If I ask for a refund of the tax withheld on form 1040NR and that request is not accepted, what will happen next? Is there a chance that my company might have to get involved with this issue because the IRS will question them about their behavior during 2004? (I want to avoid this scenario because my company doesn’t want to get involved with Italy to fix my position).

Any advice?
Does anyone know of a good tax preparer that is an expert in non-resident cases?

Thanks a lot!
Gmila

Gmila:

Your first stop should be to the US Consulate to explain your situation and get a official position from the US givernment. Do not expect to get it resolved on just one visit. They may also be able to refer you to a tax preparer in Italy who can help you.

Since you were on a H-1 visa, the IRS will probably contend that you were in fact a U.S. resident until you can prove otherwise. Copies of your passport showing that you were in Italy may be proof enough. Download a copy of IRS Pub 519 from www.irs.gov for further information.

Offhand, I suspect you will have to file Form 1040NR for the income tax and Form 843 for the Social Security and Medicare taxes. Procedures for filing these forms will be found in IRS Pub 519.

Thank you for your answer ATE,

Getting to the consulate in Italy is unfortunately one of the most difficult things to do that I can think of. I spent a lot of time on the phone with the IRS but it's been frustrating because every person I talked with, told me a different version!

I didn't even think that they might assume that I was in US: I thought that the first thing that they would have done is checking the I94 forms documenting my length of stay in US.
But you might be right and, in that case, I guess that will mean that my return will most likely be audited.
And then I guess there is a chance that the IRS will question my company's behavior because they kept paying me as if I was in US while in reality I was not (that is because it was initially supposed to be temporary but then it became permanent).
And that is something that I want to avoid because I still have business with them and they might get annoyed to have to deal with the IRS (and I don't really want to annoy them... :-) ).
On top of that I guess the IRS could claim that since my intention was that of being in Italy only temporary, I should still be considered a US resident and pay taxes to US (this is also one of the versions that an IRS employee told me on the phone).

I'm sorry that I cluttered the board with this rambling: writing it down helped me make a bit of order into my thoughts.

Bottom line: troubles ahead...

Your analysis seems accurate. Remember that with the IRS, the burden of proof rests with you, not them.