[lxl003]

I am an postdoctoral scientist working in OSU. I came to USA on Oct 11, 2007. When should I have to pay for the Federal tax? Based on the USA-china tax treaty-article 19, the exemption peroid should be three years: Oct 2007-Oct 2010? Thanks.

[taxesforaliens]

Yes, the treaty is valid for three years counting from the day you entered the US.
You would be a non-resident alien for 2 calendar years.
Even though your income under the treaty would be tax exempt, you still need to file a return to claim the treaty exemption.
For the period as a non-resident alien you would file a return only, if your income is from an US source. But you would need to file form 8843 nonetheless for that period.

[AtlantaTaxExpert]

He may NOT have to file a tax return, if OSU acknowledges his exempt status and reports his income on Form 1042-S as totally exempt.

Now, OSU may issue a W-2 for the state tax return, because I do not think Ohio, Oklahoma or Oregon honors the treaty exemption (OSU could mean Ohio State University, Oklahoma State University or Oregon State University). If they do, they would leave Box #1 and #2 blank, and, again, no federal return would be required.

As for the exemption period, it is "three years in the aggregate", which means it is NOT three years from date of arrival. Below is an extract from the technical explanation:

This article provides that a resident of a Contracting State who goes to the other Contracting State for the primary purpose of teaching, lecturing, or conducting research at an accredited educational institution or scientific research institution in that other State will be exempt from tax in that other State on the remuneration for such activities for a period of up to three years in the aggregate. Thus, for example, a resident of China who visits the United States to conduct research at the National Institute of Health (NIH) for two years, 1986 and 1987, returns to China for a year, and then comes back for another year of research at NIH in 1989 would be exempt from tax on his NIH remuneration for each of the three years. However, if he stayed at NIH in 1990 or returned at a later time the exemption would no longer be available. The exemption provided in this article is not available if the research is not undertaken in the public interest, but for the private gain of a specific person or persons.

A careful reading would show that ANY portion of the first of three years and ANY portion of the last of three years counts as a full year for the exemption period. Hence, if the visa holder arrives on 31 December of the first year and left on 1 January of the third year, he/she would have used up his/her entire three year exemption, even though he/she was only in country for one year and two days.

Would NOT be fair, but that is how the treaty reads!

Hence, for our OSU post-doctoral scientist, the exemption is good for 2007, 2008 and 2009. Starting on 1 January 2010, he/she becomes a resident alien and files a normal tax return.

Further, under U.S. tax law, he/she becomes liable for FICA (Social Security and Medicare) taxes starting on 1 January 2009.

[lxl003]

Thanks for the answers. Antother question:

I was in The medical center of Ohio State University from oct 2007 to April 2008, and received form 1042-s. Then I transferred to The nationwide children's hospital (also the department of Pediatric, the Ohio State University) from April 2008, and got a Form w2 for the rest of 2008 and a form w2 of the year 2009. IRS checked my tax of 2008, 2009. They think the income on the 2008 form 1042-s is exempt, but the amount from W-2 for 2008 and 2009 are not. They asked me why there is no other form 1042-s for 2008 and 2009. But I did not receive other 1042-s. What is the problem? Why they think the amount from W-2 for 2008 and 2009 are not exempt. They are still in the three years. How can I do next?

[AtlantaTaxExpert]

The fact that you got a W-2 instead of Form 1042-S did NOT change your tax-exempt status.

What changes your tax-exempt status is a change in VISA status. Since I assume your are still on a J-1 visa, you should retain the tax-exempt status. The I-20 you got when you first got here should also reflect that fact.

What you need to do is explain these facts to the IRS, or, if that seems to be beyond your skill set, you need to hire a tax professional to do it for you. I can provide that service; if interested, email me at [email protected] or [email protected].