[dralis]

Hello all,

I'm in USA since October 2005 on a J-1 visa as a research scholar. I'm a German citizen and working in a hospital as a researcher. I filed a U.S. income tax return for 2005, 2006 and 2007 with follow tax treaty article: p901, Income code 15 and treaty article 20 (3)...
For 2008 I received a fellowship paid by a German Research Association and since 1/1/2009 back on salary paid by grants.
What about the 2 years rule? Do I have to pay the taxes back next year? I'm confused cause everyone is telling something different about it!
Please help

Thanks a lot

[AtlantaTaxExpert]

The tax exemption for a researcher is good for ONLY two years, but you lose the exemption if you exceed the two-year period. That is what is said in the general text portion of IRS Pub 901.

However, if you received a Form 1042-S with an Income Code of 15, then you fall into a different category that allows you to claim the tax exemption indefinitely under Article 20(3) of the U.S.-Germany Tax Treaty, listed below:

3. Payment other than compensation for personal services that a person who is or was immediately before visiting a Contracting State a resident of the other Contracting State receives as a grant, allowance, or award from a non-profit religious, charitable, scientific, literary, or educational private organization or a comparable public institution shall not be taxed in the first-mentioned State.

It would also appear that the current under which you are working ALSO QUALIFIES for the total tax exemption cited under Article 20(3).

One key question: Is the hospital in which you do the research a non-profit or for-profit hospital?

[dralis]

Thank you for the answer. It's very helpful.
I'm working in a non-profit hospital.

[AtlantaTaxExpert]

If it's non-profit, then you should be good to go!

[dralis]

I've again a question since the tax is due again.
I never received the Form 1042-S with an Income Code of 15, just the W-2 every year.
Since 2005 I always got all my taxes back with the following tax treaty article: p901, Income code 15 and treaty article 20 (3) and never have problems. The hospital is a non profit one and I get paid by grants.
This year my visa status will change to H1-B (October).
Someone told me that I've to pay all the federal taxes back for the last 5 years because of the status change. I just know one person that have to pay all the taxes back out of 10.
What will happen to me? How IRS decided about it?
I'm afraid since we're talking about 20k.
Thanks!

[AtlantaTaxExpert]

At one point in time, there WAS a retroactive tax provision in the U.S.-German Tax Treaty that would have required you paid all of the back taxes due had you never claimed the treaty exemption.

However, that provision was REMOVED from the U.S.-German Tax Treaty in 2007, so you have nothing to worry about.

You are exempt for the first nine months of 2009, but must pay taxes for the last three months unsing Form 1040NR-EZ, plus Form 8833 to explain your treaty position.

If you have not yet filed, contact me at [email protected] for further consultation.

[dralis]

Hello my favorite tax expert!

I've multiple questions regarding filling taxes for 2010.
Since 2005 I was on J1 visa and got all my taxes back with the following tax treaty article: p901, Income code 15 and treaty article 20 (3). The hospital is a non profit one and I get paid by grants.
2010 my visa status changed to H1-B (October).
You wrote that I'm exempt for the first nine months of 2010, but must pay taxes for the last three months using Form 1040NR-EZ, plus Form 8833 to explain the treaty position.
I didn't file any exemption and paid taxes throughout the year 2010. But I'm not sure how to file the taxes back.
Additionally, I'm married and my husband is on J1 visa since November 2007 and we file our taxes separately. My husband works for the same non-profit hospital and he is using the same treaty article as above.
We also having a daughter (born August 2010, US citizen).
Which form do I have to fill out to claim my taxes back? Can I use the 1040NR-EZ form again since my income didn't exceed 100k? Do I need to fill out the form 8833 also?
Do I file as resident or non-resident,jointly or separately? Can I claim my daughter as dependent since my husband will not.

Thank you for you help in advance and looking forward to hear from you.

[AtlantaTaxExpert]

If you file jointly you can claim your daughter; otherwise, no.

File Form 1040NR-EZ and Form 8843 one last time.