I am a British Doctor going to USA for a fellowship on J1 visa with my family (Alien Physician). Am I tax exempt!

Sorry it took so long to answer; I missed your posting.

Under the U.S.-U.K. Tax Treaty, there is NO provision for tax exemption for visiting researchers/teachers/professors/academics, so you will be treated as a trainee under U.S. tax law, and you will file as a non-resident alien for 2011 and 2012. You will need to file Form 1040NR or 1040-EZ PLUS Form 8843.

That being the case, your income is FULLY taxable under U.S. income tax law. You are EXEMPT from FICA (Social Security and Medicare) taxes for TWO calendar years, probably 2011 and 2012.

Starting on 1 January 2013, you become liable for FICA taxes, and will probably be treated as a resident alien for tax purposes for the 2013 U.S. income tax return.

Thanks very much

Glad to help!