| Treaty USA-Italy Non-resident Alien Tax Exemption
Hello,
I have a question related to the non-resident alien/resident alien problems. More in detail, I have a question about the exemption under international agreements between USA and my country Italy.
Briefely, I describe my situation.
I am an Italian citizien. On the 3rd of September 2002 I arrived in the USA under J-1 VISA (after March 2005 I started the H1B VISA). I was here as a teacher/researcher. For the ENTIRE 2002 I was supported by Italy. In the year 2003 I was supported by Italy as well until October 2003. In November 2003 I started working as a research associate at the University. Therefore, I had a US income source only for the months of November and December 2003. The University asked me to fill out forms W4 and 8233, including the Attachment to Form 8233 (Article 20-Teachers and Researchers). Eventhough I was exempt from paying taxes in 2003, I DID pay all taxes in 2003.
In 2004, I claimed that I was exempt and the University returned me some money (see point 2 below). I believed that this refund was related to the year 2003. Therefore, I did not file any tax return for the year 2003.
I filled out forms W9 and 8233 in the year 2004.
This year (2005), I did some "investigations" about what the University was doing on my taxes. Basically, I found out the following information:
1) I paid all taxes in 2003 (Social Security, Medicare and Federal) but I was 100% exempt under article 20 of the treaty USA-Italy.
2) The refund I was talking about above was related to the federal taxes for the first two months of 2004. Therefore, from a practical point of view, I did not pay any federal tax in the year 2004 until August 2004. I concluded that I was considered exempt.
3) The University DID NOT consider me exempt from Social Security and Medicare taxes in the same period (January-August 2004).
I spoke with my employer about all the issues. The University is going to refund me the Social Security and Medicare taxes for ONLY the year 2003. For the Federal taxes of the year 2003 I will ask the IRS for the full refund using the form 1040NR-EZ. The issue is about the year 2004. The University is NOT going to refund any Social Security or Medicare taxes for 2004. I had 2 years exemption and so I should not pay anything. However, in 2004 I became a resident alien and AFTER that date (which should be on August 2004) I was supposed to pay those taxes. Please tell me what I have to do. Before this discovery, I filled out the 1040EZ form for the year 2004. It was returned to me by IRS because I forgot to attach the form W2. After all these findings, I am going to attach form 1040X and form 1040NR-EZ for the year 2004 (in these forms I have to write the portions of income for which I was exempt and the portions for which I was not). Then I am going to file form 1040NR-EZ for the year 2003 in order to have the federal tax back and, finally, I am going to file form 843 in order to claim the social security and medicare taxes held by error in the period of Juanary-August 2004.
Is everything I said right?
I'm exempt from paying taxes (social security, medicare and federal) for 2 years (my Country is Italy). I arrived in the US on September 2002. Does my exemption end in August 2004 (2 years after my arrival date)? For the year 2004, am I exempt only from paying Federal taxes or the exemption is total (100% tax free)? If yes, I'm supposed to start paying taxes in September 2004. Right?
Please answer these questions as soon as possible.
One last question: in my case, I was considered non-resident alien until August 2004. Is it right?Thank you again,
Traianus
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