Hi!

I would like someone to help me with a question regarding tax-treaties.

I have heard of a number of J1 researchers who claim tax exempt status under tax treaties of US with European countries such as Germany or France. Is it correct that J1 researchers are allowed to get such an exemption under these treaties? Do they have to still report this income in the European countries then and pay taxes on them in these countries? Or is this income exempt from the tax in both countries and is a special rule for researchers, professors and trainees? Reading IRS Pub 901 gives the impression that it is indeed correct to get the tax exemption in US, but it says nothing about the tax liability in the other countries. Could some one please help me in this regard?

By the way, in case this income tax is just to be paid in the European countries, is it possible to remove the exemption asked in a previous return. Is it correct that one has to fill the 1040X form in this case.

The instructions of the 1040X deal with line numbers from 1040, 1040A and 1040EZ and not with those from 1040NR. I also did not see a way to remove the tax treaty exemption, is it correct to just change the adjusted gross income? And since the state taxes will also have to be changed, before claiming the standard deductions on the 1040X, it seems I should just also fill the state form corresponding to 1040X simultaneously and compute the correct state taxes. Is it advisable then to fill up also a separate complete 1040NR and send it along?

Does all this sound correct? I am trying to write down the step-by-step procedure in the hope that I do not miss anything and it will be easier for others to follow in case they decide to remove the tax exemption from previous tax years...

Thanks in advance.

You are NOT obligated to claim the exemption and, if you want to remove it, filing Form 1040X is the way to do it. You would attach a Form 1040NR to the Form 1040X that shows the tax calculation for the taxes owed without the exemption.

Whether you owe taxes to your home country depends on the tax laws of your country. Since you have NOT identified that country, it is IMPOSSIBLE to comment one way or the other.

Many thanks to AtlantaTaxExpert for the answer. I wanted to know about the tax liability in Germany after claiming the US-Germany treaty exemption (and if possible also the tax liability in France after claiming the US-France treaty for my spouse).

About 1040X, is it correct that I first settle the tax with the IRS authorities and then with the state tax authorities?

It is my understanding that NEITHER France nor Germany will attempt to tax the U.S.-sourced income that is exempt under the J-1 visa.

Hi Atlantataxexpert,

I am pleased to know this. I had asked this question after following this thread:

https://www.askmehelpdesk.com/taxes/j1-tax-treaty-us-germany-what-if-they-have-paid-me-tax-exempt-but-stayed-2yr-333284-2.html

Especially the first comment on that page. You think this comment is not relevant for J1 visa?

Thanks once again.

Okay, then it that case, the German tax agency requires a tax return. Again, in MY experience, no one has filed the tax return with Germany or France. It does not mean that one is not required.

I am investigating again on my side with other friends, one of whom is a German and had filled his tax return in Germany. Even after declaring his US income there, they ended up not taxing him. So again, it seems no one is clear about what should be done.