Hi
I stayed in US from Sep2002 to Dec2007. I was 'mostly' on J1 visa during the stay as towards the end of 2006, I got my status converted to H1B. I had a J1 from Sep 2002 to March 2004 and got the other one stamped in April2004 when I visited INDIA (though continued with the same employer). For the part 0f 2002 and tax year 2003 I took the exemption (INDIA-US treaty: paid 00 tax; filed) and then 2004 onwards I started paying the tax. I remember in between asking the payroll to deduct the previous years if you need to as I heard that it need to be paid for the past as well (i.e. whole stay in US) but I never filed it through any means and have no idea about it.
But here is the case now: I am in INDIA now and got a call from income tax office (in INDIA) asking to clarify if I HAVE OFFERED THESE AMOUNTS FOR TAXATION IN THEIR RETURN OF income FOR RELEVANT YEARS.
i.e. the amount 7000 USD and 30000 USD which I earned during 2002 and 2003.
And I don't know if this is from IRS or Indian government to just clarify if I have paid/filed the tax for the period of 2002- and 2003. The only proof I have is the 00 tax paid for those 1.3 years (with INDO-US treaty).
I am afraid if I will be fined for this which I don't want to.

Even though you are being queried by the Indian tax authorities, they are acting as agents for the U.S. Treasury's Internal Revenue Service. This is part of the reciprocity agreement contained in the U.S.-India Tax Treaty that obligates each government's tax administrators to enforce valid tax levies from the other government on its citizens for tax obligations that were incurred during periods of residency in the other country.

The tax exemption offered to J-1 visa holders who are researchers, teachers or scholars was valid for twenty-four consecutive months from the date of arrival. However, if you exceed the two-year period, you become retroactively liable for income taxes on income earned during that two-year period.

Given the income level, your tax liability for the $7,000 earned in 2002 is probably NOT that high (maybe $400 exclusive of interest and penalties). However, the tax liability for the $30K for 2003 probably exceeds $5,000. Further, you will owe interest on the back taxes, and the interest CANNOT be waived.

I recommend that you contact the IRS via telephone at 1-800-829-1040 and ask if you can amend returns for 2002 and 2003 to pay the taxes owed.

When you amend, you need to specifically ask that the IRS waived all penalties associated with failure-to-pay and/or late payment. It is these penalties that will cause the largest amount of money being due. They MAY waive the penalties, they may not, but it never hurts to ask.

Regardless, you need to resolve this issue. The fact that the Indian givernment has made this call to you makes it clear that they HAVE found you and that they are prepared to assess the taxes through the Indian government.

Hello Expert,
Thanks for the response, this makes the picture little more clear to me. I surely need to get this cleared..
However, I would like to know then what is the meaning of Para4b of article 1 for INDO-US treaty.

Is there an international contact to IRS apart from 1800.. which can respond quickly.. online chat OR even email (a working one)