Hi everyone.

I moved from Germany to the States to work as a Research Associate on a J-1 visa for 2 years. Since I heard about the tax treaty between Germany and the US, I applied for tax exemption in the local payroll office.

From now on, they don't withdraw any taxes from my salary, which is good.
But: my question is now what kind of tax statement I will have to make during my stay in the US and later when I return to Germany - because I heard that I might have to pay taxes for the years I spend in the States later back in Germany...

Obviously no one here at the University exaclty knows how that works and it would be great if you had some advise for me!

Best,

Ruth

The U.S. German tax treaty allows you 2 years of exemption from federal income taxes. Also you are exempt from FICA taxes. You may need to pay the state income tax. Read Your U.S. Tax Return: U.S. Tax Treaties for Professors, Teachers and Researchers

In the U.S. you will file non-resident tax return Form 1040NR-EZ where you will report your income and then show deduction as per tax treaty.

Whether your U.S. income is taxable in Germany or not, depends upon German Income Tax rules. During your stay in the U.S. you are non resident in Germany. If in Germany a non-resident citizen must report worldwide income or not, check with local tax consultant.

The link provided by MukatA appears to be a plagiarized version of IRS publication 901. See Publication 901 (4/2008), U.S. Tax Treaties. It would make more sense to read the IRS authoritative document than to read a web page that has no identification of who wrote it. I wouldn't want to accuse Mukata of plagiarisim, but he does seem to link to "taxipay" a lot.

Indiana John:

It is NOT plagiarism to cut-and-paste from the IRS pubs. The IRS explicitly allows and encourages such practices to "get the word out" about tax law.

Of course, MukatA links to Taxipay. That is HIS blog where he stores his articles. I do the same thing; it is much easier that retyping the same information over and over again.

Rkrebs:

I am NOT an authority on German income taxes, but most countries do NOT tax income earned outside of its borders. The United States is pretty unique in taxing its citizen's world-wide income.

Atlanta,

You may be correct that it is not plagiarism to copy and paste from an IRS publication. However, it IS (at a minimum) misleading to create a blog posting that is copied word-for-word from a government publication and not indicate that this is what was done. Without this citation, the reader of the blog posting might believe that MukatA had actually drafted what was written.

In any case, why not link directly to the publication?

I agree with Indiana John. Unless the website or blog provides additional information or examples, it makes a lot more sense to link to the relevant IRS document.

Furthermore, it seems to me that it is done expressly to signal that the blog-writer has a higher level of tax competence than might actually be the case.

I think it would be wise to caution anyone using a tax provider that they find from the web to check whether the person is a licensed professional. A tax preparer who is not licensed may (or may not) be just fine, however it is clearly a case of buyer beware.

Hi Ruth,

I'm in the same boat as you, and I did a lot of research on that lately. And from what I found out you DO have to pay taxes on your salary in Germany if you claim the tax treaty. And you actually have to file for German taxes while you are in the US, as far as I understand it. See frag-einen-Steuerprofi.de, where there are quite a few posts (in german) on this matter, with answers from German tax accountants. If you found any other, opposite, information from a reliable source (and not just opinions), then please let me know. Of course tax free would be great. But I don't think that's the case, as also stated here (again, in German): Steuern USA - DFG-Wiki

Once the two years are over, and you don't claim the treaty, Germany doesn't tax you on your income anymore. And I'm still not sure if you HAVE to claim the treaty in the first place, there seem to be different interpretations. If anyone knows for sure whether you have to claim the tax treaties, that would be good to know.

And to answer AtlantaTax Expert, Germany does tax your world income as long as you are a resident of Germany for tax purposes. Which you seem to stay as long as you are claiming the treaty. But I'm not 100% sure about that part...