[itzhak]

Hi all,

Situation:
0. Filing taxes for 2012.
1. Came from Israel to the U.S. as a J-1 Exchange Visitor (Research Scholar) on August 1, 2010. Still in the U.S. in the same status.
2. There is a U.S.-Israel tax treaty that is for two years from the date of arrival. Claimed tax exemption for period August 1, 2010 - July 29, 2012. Was completely exempt for 2010 and 2011.

Questions:
1. What is my tax residency status for 2012?
2. How do I claim tax treaty benefits on my tax return?

Got really confused what to file and how. It seems that the question was discussed already on the forum but details change so can't be sure how it is all applicable. Hope someone can clarify.

[AtlantaTaxExpert]

Are you married? If so, you may be able to file jointly while still being exempt for the first half of the year.

If you are single, file as a non-resident alien, filing Forms 1040NR and 8843 one last time.

[itzhak]

Thanks for your answers! I added some details and hope you could comment on them.

Are you married?

Yes, I am married. My wife is in J-2 status. She was working in 2012 so I assume she is a resident alien for U.S. tax purposes.

If so, you may be able to file jointly while still being exempt for the first half of the year.

As a quick side question - may I file my tax return as a resident alien using "married filing separately" option. I understand that filing jointly has some benefits (exemptions and deductions) but because the situation looks confusing (to me!) I thought of preparing my taxes as a resident alien "married filing separately" to split the returns. Are there any drawbacks to this except losing some benefits of joint filing?

If you are single, file as a non-resident alien, filing Forms 1040NR and 8843 one last time.

I've heard of this path but I could not find anywhere the source in IRS publications (Pub. 519)! Can you please give a tip where to find this?

If I am married, may I still file a non-resident alien with forms 1040NR and 8843? (May the form 1040NR-EZ be used instead of 1040NR?)

[taxesforaliens]

You are a resident alien for 2012.

Non-resident alien status goes by calendar years.
If you exempted days of presence for the Substantial presence test in 2 out of the last 6 calendar years, you cannot exempt any more days.
So if you came in 2010 and excluded days in 2010 and 2011, you do not exclude any days in 2012 and would be a residnet alien once you meet the SPT counting all the days of presence in 2012.

The tax treaty on the other hand goes by years counting the exact number of days. Since the tax treaty with Israel has an exception to the savings clause, you can still claim it even though you are already a resident alien.

Since you are a resident alien (and not a non-resident or dual status), you can file jointly with your wife without any complications and still claim the treaty exemption.

[itzhak]

Thanks for all the clarifications!

"Resident alien + married filing jointly" seems to be the most appropriate tax situation for me.

Technically, what forms do I file? I believe I have to attach my W-2 and W-2 of my wife, my 1042-S (to show exempt income) and 1040.

Regarding 1040, Pub. 519 (9) says:

How to report income on your tax return. In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22.

Do I need to file any additional document to explain my tax treaty exemption?

Just in case it matters, I have applied for a U.S. Permanent Resident status in 2012 (it is still pending). Do you happen to know, if this has any effect on exemptions claimed under the tax treaty?

Thanks!

[AtlantaTaxExpert]

In the case, TaxForAliens is NOT quite right.

You CAN file jointly with your wife, but you must BOTH sign a statement that you CHOOSE to be treated as resident aliens for all of 2012. Further, you must WAIT until you meet the Substantial Presence Test, which will not occur until about 10 May 2013.

His points about you being able to claim the exempt status even though you are filing as a resident IS valid.

[itzhak]

Do you mean that, in principle, I am a dual-status alien for 2012 but I can opt to be treated as a resident alien for the entire 2012?

     2010*       2011*       2012         2013
|------->----|------------|-----!------|------------|
                            [1]   [2]

> - entered the U.S.
* - "exempt individual" as a J-1 research scholar
! - meet the Substantial Presence Test
[1] - non-resident alien for U.S. tax purposes
[2] - resident alien for U.S. tax purposes

Further, you must WAIT until you meet the Substantial Presence Test, which will not occur until about 10 May 2013.

Why do you say that I meet the SPT on 10-May-2013?

Thanks!

[AtlantaTaxExpert]

Because you cannot count ANY of the time you were exempt for SPT purposes, and only one-third of the 2012 days after the exempt period ends.