Hi,

I'm a J1 research scholar from Switzerland at Harvard University with a one year contract, earning 50000$ per year. I ve been already in the US as an exchange student on J1 for 4months in 2005 (don t remember exactly what type of J1, but I didn't have to pay taxes then). After that I visited the US twice on a tourist visa for a few days. Am I eligible for a reduction in tax payments for this visit? How much taxes do I approx. have to pay from these 50k$? How can I reduce the taxes that I have to pay in the US?

Any help is appreciated greatly!

Maite

Maite:

Sorry, but there are NO treaty exemptions for researchers, teachers or scholars in the U.S.-Swiss Tax Treaty. Further, the exemption for students and trainees applies ONLY to income received from OUTSIDE of the U.S.

So the $50,000 is subject to federal and state income taxes.

The GOOD NEWS is that you are EXEMPT from FICA (Social Security and Medicare) taxes for up to two calendar years as a matter of U.S. tax law.

I'm a J1 postdoc student from Switzerland aat Uchicago since August 2008. I receive a grant from the Swiss government for my postdoc.
The Swiss government tells me that according to the article 20 of the treaty I should be exempted but the IRS (phone information) tells me no.

The article 20 says:

Payments which a student, apprentice, or business trainee, who is or was immediately before
visiting a Contracting State a resident of the other Contracting State, and who is present in the
First-mentioned State for the purpose of his full-time education or training, receives for the
Purpose of his maintenance, education or training shall not be taxed in that State provided that
Such payments arise from sources outside that State.

Who is right?

Thanks in advance for your answer

Julie:

At face value, I would say YOU are correct. However, you MAY want to review the technical explanation of the U.S.-Swiss Tax Treaty for Article 20 at the link below:

http://www.irs.gov/pub/irs-trty/swistech.pdf

The reason is that the IRS may have asked from WHERE did you get your grant: DIRECT from the Swiss government (either depsoited in your Swiss bank account, then wire-transferred to you in Chicago) or from the University of Chicago (the Swiss sends the money to the University, who then administers the money and pays you). In the second case, the IRS may NOT consider the money to be coming from the Swiss government, though in fact it IS coming from you.

How is the University of Chicago treating the income?

Thank you so much for your prompt answer. The money is wired on my swiss account directly. I tranfer money to my US account when I need.
I have a O$ income on the University of Chcago payroll

I still have a question. My scholarship does not appear on any official for (W2, 1042,. ) should I report the amount of the grant on the line 7 of the 1040 forms and then claim the tax treaty on line 21 and subtract the amount, or should I not report any amount?
And last but not least should I write a letter to explain the situation to the IRS?

If you are getting NO W-2 or Form 1042-S, then you have NO reporting requirement at all. Hence, you need file NO return at all.

By not issuing these forms, the University of Chicago is clearly taking the position that this income is tax exempt and thus NOT reportable.

Excuse me juste to make sure I understand you. You mean I should file no tax return at all (no 1042 form) or does it mean I should file the form with 0$ income.

Thank you again for your help

You need file NO tax return.

You DO need to submit Form 8843 in the two-page version that requires a signature.

You can download the Form from www.irs.gov.

The mailing address is in the sintructions.