I am a postdoctoral researcher on a J1 visa in Houston, Texas. I am originally from the Netherlands. Under the tax treaty with the Netherlands, a J1 visa holder is exempt from paying federal income taxes in the US for the first 2 calendar years.

I arrived in the US in 2015 and filed and received a return of my federal income taxes for 2015. I am now preparing my tax return form for 2016 and unsure what to do. I am currently in my third calendar year, so overstaying the exempt 2 years (2015 and 2016).

If I claim a return of the federal income taxes, will I have to pay them back next year? If so, will I have to pay a penalty and/or interest? Would it be wiser then not to claim a return of the 2016 federal income taxes? And pay back the federal income taxes from 2015 now? If so, how do I pay them back?

Thank you very much in advance. I have asked a tax adviser and colleagues but so far have not been able to find anyone who can answer these questions.

This is a common problem among my clientele (who are mostly from India), as there is a retroactive tax provision in the U.S.-India Tax Treaty as there is in the tax treaty with the Netherlands.

If you know without a doubt that you are going to over-stay the two-year exempt period, then file as a non-resident alien and pay the appropriate income taxes for 2016.

For 2015, amend the return with Form 1040X and attach a corrected Form 1040NR-EZ with the word "AMENDED" printed on the top of the Form 1040NR-EZ, explaining on page #2 of the Form 1040X that you will be over-staying the two-year exempt period and wish to pay the taxes due.

On that second page, ask that the IRS waive all penalties and interest. It is likely they will NOT waive the interest, but it is equally likely they WILL waive any penalties.

If you need professional help with this, this IS what I do. Please email me at the email address in my profile.

Thank you so much for your quick reply, this is very helpful!

Can I claim any deductions on these taxes due for 2015 and 2016? (e.g. sales taxes?)
And for next year (the third calendar year), will I then file a 1040-EZ as a resident alien in stead of a 1040NR-EZ that I used these 2 years?
Thank you very much again.

Glad to help!