[thunder11]

Hi,
I hope someone can give me some help to understand my tax obligation in the US, as I can't figure it out from reading the tax treaties and Publication 901 and 519.

I'm a German citizen, who has lived in Canada the last 5 years to get a PhD. In early 2010 I am moving to the US in January 2010, to start a 2 year PostDoc in Colorado on February 1st. I will be working there under a J1 visa.

Questions:
1) Is the 2 year exemption from federal tax under the treaty with Germany for researchers on a J1 visa valid for two calendar years, or two years of working (exact dates, so for me until January 31st 2012)?
2) If it is only valid for two calendar years, will I have to pay back all the tax for 2010 and 2011 because I work one month in the US in 2012, even if I do not work there for more than 2 years and will leave the US in February 2012?
3) Also, am I still considered a German resident who can claim this tax treaty in the first place, even though I haven't lived there for 5 years? I still have a bank account there, my family is there, my plates and glasses are there, my bike is there, I had a German Fellowship for my PhD, I go and visit at least once a year, and I plan to ultimately return there after this PostDoc. And I never filed for Canadian residency, even though I could have, because I am planning to return to Germany.
4) Anyone know whether I'll also be exempt from Colorado state taxes due to this treaty, and whether this tax has also to be paid back?
5) And how is it for Social Insurance payments, which I hear I'm also exempt off as a J1 visitor, do you also have to pay them back if you work in more than two calendar years? Or do they just start withholding them in the third year but no repayment for the first two years?

This is complicated. I hope someone has some insights into any one of these questions, so I know what to expect.Because if I have to pay all this money back for just one month, I might be better off just quitting a month early.

Thanks a lot!

[AtlantaTaxExpert]

1) It is two years from date of arrival.

2) I believe the retroactive tax provision has been removed from the latest version of the U.S.-German Tax Treaty.

3) Not sure here. An argument could be made that you need to return to Germany to "re-establish" residency before coming to the U.S. and claiming exemption under the U.S.-German tax treaty.

4) Colorado DOES honor international tax treaties, so if you determine that you are exempt from U.S. income taxes for two years, that exemption also applies to Colorado state income taxes.

5) The FICA tax exemption is good for two CALENDAR years, which, for you, would be 2010 and 2011. You would become liable for FICA taxes on 1 January 2012.

[thunder11]

Thanks a lot "AtlantaTaxExpert", that already helps to clarify things a bit.

For point 3), any idea how I would determine whether I can claim the Germany-US tax treaty? I won't go back for more than a week or so, so not n\long enough to establish residency I assume.
And if I can't, can I claim the one between Canada-US? I would not think so, because I will cut all ties with Canada (except a checking account) once I leave here. So then I would just have to pay US taxes? Or no taxes for two years, because I'm on a J1 in the US and not a (tax) resident of any other country? I'm still a bit confused here about these Tax-Treaties...

And is the "FICA tax exemption" also tied to the Tax treaty, or can I get that in any case, because of the J1 visa status?

Again, thanks a lot, and I hope you can give me some insight into these remaining questions.

[AtlantaTaxExpert]

The re-establishment time requirement is normally at least ONE YEAR.

The 2-year FICA exemption is a matter of U.S. law and is NOT controlled by tax treaty.