Hi,
My situation is little complicated. I work as a research scholar on J1 VISA. My wife has J2 and got EAD work permit and also worked as research scholar for during 2012 and till Jun 2013. We had a baby in 2012 here in the US. For 2012 my wife filed her tax returns through HR block as head of household. I have taken the tax treaty advantage and paid no tax and filed separately as single. However, now we are staying beyond two years and accordingly I need to pay back the tax and I am willing to do that. Now I am very confused as to how to go ahead. Should I file jointly for 2013 and pay back whatever I will have to for 2012 and 2013. If we can't file joint returns, can I claim wife and child as dependents at least for the period when she was not working? Do I also need to pay back the state returns (NY)? Is IRS going to put the fine and interest for 2012 and 2013 or only for 2012 since I am paying back for 2013 within the tax returns dead line? All in all what is the best way to go ahead. Any advice and suggestions are appreciated. Many thanks

I assume you are from India, since you are talking about the retroactive tax requirement for staying beyond two years. However, other countries have retroactive tax clauses in their tax treaties with the U.S. so please identify your home country.

First, your wife filed incorrectly. She was a non-resident alien in 2012 and was NOT eligible to file as Head of Household. You wife has to amend and file as a MARRIED non-resident alien, and UN-claim your child. She will pay taxes under the Married Filed Separately tax rates.

You will amend the 2012 return to file as a MARRIED intern or apprentice. That would allow YOU to claim your child.

For 2013, you MAY be able to file jointly; it depends on the exact date you arrived in the U.S. on your current J-1 visa.

If you want my professional help, email me at the email address in my profile.

Thank you for your quick reply. Yes, we are from India. I am surprised HR block did that mistake in her filing as head of house hold. We arrived in US on Feb 4 2012. So, based on SPT we both become residents for the tax purpose as we filed tax returs during April 2013 for 2012. If that is true, and If I am not wrong we both can amend our returns for 2012 and file as married and filing jointly and also claim our child. Or if we don't meet SPT, as you suggested she would amend and unclaim child. But I being a postdoctoral fellow/ research scholar can I file as married intern/ or apprentice and claim my child?
Do I need to pay back the NY state tax for the 2012 and 2013? One more thing am I to pay interest and fines for the 2012 and 2013?
Bye the way although we are indian citizens we were residents of Germany for 5 years before we came to the USA. I am not sure if we want to bring that up in any case. That might just complicate the whole thing?

H & R Block does an adequate job filing returns for U.S. citizens/residents, but they are out of their area of expertise when it comes to dealing with foreign nationals who file tax returns. I make significant money correcting H & R Block mistakes.

You do NOT qualify for the SPT for 2013, because the J visa status lasts for two years (in your case, 2012 and 2013).

That being the case, you CAN amend to file as an intern and claim your child as a dependent.

Yes, you also have to amend the NY state returns.

Interest WILL be charged, but you can ask for a waiver of penalties.

However, if you filed tax returns as German residents the year before you came to the U,S. then much of the above is moot, because the GERMAN tax treaty applies, and (I believe) the German treaty has NO retroactive tax provision, though your wife STILL must amend and UNCLAIMED the child.

Thank you very much for the clarification. Only recently I came to know that I could have taken the German-US tax treaty instead of the India-US tax treaty. But my account department just applied the India-US tax treaty probably based on my citizenship and did not ask me anything about the previous residency status. Anyway, is it too late to amend now? We were German residents but we did not file tax returns in Germany as I was on a stipend/fellowship which is tax free and filing tax returns is not mandatory in Germany. In that case is the German VISA an enough proof to prove my residency? Thank you.

It is not too late to amend. The German visa should be adequate proof.

Thank you for your time, especially at this time of the year. I appreciate it. Just a follow-up question: I read somewhere in one of the forums, that everyone who takes German-US tax exemption treaty will need to pay taxes in Germany unless the income earned is a tax free fellowships such as DAAD/DFG fellowships from Germany. All the cases of tax exemptions are reported to German counterparts by IRS. Is it true that I will need to pay the taxes in Germany if I take the treaty benefit in US. In that case paying taxes in US might be a better option as German taxes are probably higher. Any inputs on this please.

I cannot comment on whether you would need to pay German taxes, as I am not a German tax expert. However, I DO know that German taxes are generally HIGHER across the board than U.S. taxes.

Dear ATE thank you for the info... I am still little confused about claiming the German-US tax treaty as I did not pay taxes in Germany since I received a tax free fellowship/stipend. If I understood the German-US tax treaty correctly, I can claim the German-US tax treaty as I was resident of Germany before coming to US only if I have not received any tax exemption during my stay in Geramny. In other words I should have paid taxes in Germany during my German residency prior to arrival in the USA. Is that true?

Yes, that sounds logical, but I would have to study the German treaty to be sure, and, quite frankly, I do NOT have the time right now.

Thank you. I will look into it.

Wish I had time to do the research, but not until the end of April.

As I mentioned in my first post, I have not paid taxes for 2012 and 2013 as I took the tax treaty between India and US. Now I want to pay back the tax I owe. My question is am I supposed to pay interest on the unpaid taxes for both 2012 and 2013? Or only on the 2012 taxes I owe as I guess I still have time to pay the tax for 2013 until April 15 this year, which is the dead line for filing 2013 tax returns? Is there any source where I could calculate how much I owe? Many thanks in advance.

When you amend the returns to pay the back taxes, the IRS will bill you for the interest.