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    giulia's Avatar
    giulia Posts: 3, Reputation: 1
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    #1

    Feb 8, 2007, 11:46 AM
    Tax exemption J1
    Hello,
    I am an italian citizen and I was here as a PHD researcher on a J1 visa from jan 2004 to nov 2006 (I am on an H1B now). I know that I was entitled to a 2 years exemption form taxes. When in January 2006 I noticed that the institution I used to work for didn't detract taxes from my paycheck I asked them to do so, but I was told that I was still exempt (event if the 2 years where over) as long as I was on a J1. But I didn't get any further explanation. In August I changed job, but not visa status, and had to start paying taxes, so what will happen when I file my next tax return?
    Thank you very much
    Giulia
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Feb 8, 2007, 06:55 PM
    Giula:

    Probably nothing. The IRS is NOT omnipotent and all-knowing, so they will not figure out that something was done incorrectly unless they have reason to go looking for it.

    However, if you decide to apply for a green card, the IRS will have a reson to review your returns and your visa status at that time, and THEN they will figure it out.

    My reading of the law is that you retroactively forfeited your tax-exmpt status when you stayed past two years. If you do not take action to fix it, and then apply for a green card, your failure to fix the tax problem could be grounds to deny your immigration application.

    Thought you should know!
    taxsearcher's Avatar
    taxsearcher Posts: 222, Reputation: 8
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    #3

    Feb 8, 2007, 07:15 PM
    The US -Italy treaty is written in such a way that you don't retroactively owe tax. You should owe tax on income earned after the two year period.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #4

    Feb 8, 2007, 09:50 PM
    Great assist, TaxSearcher!
    giulia's Avatar
    giulia Posts: 3, Reputation: 1
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    #5

    Feb 9, 2007, 09:11 AM
    Thank you very much for the feedback!
    Does it mean I should retroactively pay the taxes from January to August 2006?
    I tought the lady of my former job (whom I'm having a hard time to contact) was referring to some other specific treaty when she told me I was exempt for longer than 2 years. Does anybody know of anything like that?
    Thanks again!
    giulia
    taxsearcher's Avatar
    taxsearcher Posts: 222, Reputation: 8
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    #6

    Feb 9, 2007, 11:54 AM
    Some treaties permit a longer period. If you are talking about Art 20 of the US-Italy treaty, my understanding is that it permits only 2 years.

    You will owe tax on any income earned after the end of the 2 year period. Since you have not yet filed your 2006 taxes, you will just end up owing tax on your 2006 return.
    giulia's Avatar
    giulia Posts: 3, Reputation: 1
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    #7

    Feb 9, 2007, 12:31 PM
    That's what I tought, too
    Thank you giulia
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