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achung · Jul 2, 2009, 01:44 PM

Hi, I am a student from Germany and somehow this treaty publication is written very generally and I am not sure whether this applies to me or not. It would be great if anyone can help me to figure this one out. About my background, I first came to the US in 2007 on a J-1 with the plan to leave after 6 months. Ended up staying to do my Ph.D. studies at a different institute and started my work on a J-1 visa for one year and was on payroll. After that I got switched to a F-1 visa which I am currently on and my payroll got switched to a stipend. However, after 3 months the university emails me and asks me whether I would like to submit the W 8 BEN Form since germany has a treaty with the US. She couldn't explain though whether that would be beneficial for me. My questions now are, does this treaty apply to me and if it does, does it matter how much $ I make? What would happen if I submit this form and end up staying in the states? Thank you very much in advance for your answers!

MukatA · Jul 3, 2009, 04:08 AM

Here is from IRS Publication 901 for Students for Germany:
"A student or business apprentice (including Volontaere and Praktikanten) who is or was immediately before visiting the United States a resident of Germany and who is present in the United States for full-time education or training is exempt from U.S. income tax on amounts from sources outside the United States for maintenance, education, or training.

An individual who is or was immediately before visiting the United States a resident of Germany is exempt from U.S. tax on amounts received as a grant, allowance, or award from a nonprofit religious, charitable, scientific, literary, or educational organization.

Individuals described in the previous two paragraphs are also exempt from U.S. tax on compensation for dependent personal services of up to $9,000 per year if:

They are present in the United States for not more than 4 years, and

The services are performed for the purpose of supplementing funds available otherwise for maintenance, education, or training.

If the individual's visit exceeds 4 years, the exemption is lost for the entire visit unless the competent authorities of Germany and the United States agree otherwise."

So for two years on J1 (2007 and 2008) and two years on F1 (2009 and 2010), you are exempt from residency and SS tax and Medicare tax. You must file nonresident tax return. W8-BEN is for claiming that you are nonresident.

achung · Jul 27, 2009, 01:12 PM

Thank you very much for your answer MuKatA. However, I still have some other questions... while I was in the states (2007-2008) I did not claim for US tax exemption and paid federal and state taxes. So do I still have 4 years of tax exemption left? And if not, can I claim the already paid taxes back? Also, are the $ 9000 for the total amount of compensation or only on the taxes? Meaning if my monthly compensation would be $ 2400 and the taxes that would be withheld are $ 370, does that mean I am tax exempt for ~5 months or until the paid taxes reach $ 9000? Thanks in advance for your answers.

MukatA · Jul 27, 2009, 11:58 PM

Did you file your 2007 and 2008 tax returns? If not, you must file nonresident tax returns Form 1040NR or 1040NR-EZ and Form 8843.

If you filed 2007 and 2008 tax returns, which form did you file?

achung · Jul 28, 2009, 06:10 AM

I filed 1040-NR for 2007 and 1040-NR-EZ for 2008. I did not file Form 8843.

MukatA · Jul 28, 2009, 09:26 PM

You are exempt individual (exempt from residency). You do not pay SS tax and Medicare tax.
For 2009, you can file nonresident return and Form 8843 and claim treaty deduction.
For 2007 and 2008, you can file amended tax returns Form 1040X with Form 8843.

May be you should get professional help from AtlantaTaxExpert at [email protected]