[Tango47]

Taxes professionals, I would like to ask your advice.

I am postdoctoral fellow (researcher) at National Institutes of Health, which is governmental organization. I am on J1 visa and a citizen of Ukraine. When I joined NIH, I was told by NIH person, who was doing my paper work, that I shouldn’t pay federal taxes as I am Ukrainian researcher on J1 and an exempt for federal taxation according to the tax treaty between United States and Ukraine. She entered in the system that I am exempt and automatically I did not pay any federal taxes. In 2007, I filed 1040EZ, and now IRS is sending me letters asking to pay federal taxes. I sent them letter explaining my situation—I am Ukrainian, on J1 and an exempt for federal taxation. They said something about correcting my taxes, but I have no idea how to correct them. Shall I file 1040X and correct filed 1040EZ to 1040NR-EZ?

I thank you for your time.

[MukatA]

Normally a alien on J1 visa files as nonresident for first five years of the study. For your 2006 return, you filed 1040EZ instead of 1040NR-EZ.
Now to amend your 1040EZ, you must file 1040X (amended tax return) along with your proper tax return 1040NR-EZ. Make sure to use 2006 forms.
Also to confirm you filing status and tax treaty, you should read
IRS Publication 901: Tax Treaties
Internal Revenue Service

[AtlantaTaxExpert]

Tango47:

It looks like the IRS has properly acknowledged your tax-exempt status, but would like you to amend your tax return to set the record straight. I would have to see the IRS correspondence and a copy of your filed tax return (probably for the 2006 tax year) to be sure.

You should NOT have filed a tax return AT ALL. You are tax exempt, so no tax return should have been necessary. If money was iomproperly withheld, you should have filed Form 843 to request a refund.

Your best course of action would be to file an amended return (Form 1040X) to claim ZERO taxable income with a detailed explanation as to why you are a tax-exempt individual.

If FICA (Social Security and Medicare) taxes were withheld, you still need to file Form 843.

I recommend that you get professional help to file this amendment and, if necessary, the Form 843.

If you wish my professional help, contact me at [email protected] to discuss my fee. Please hurry as tax season is rapidly approaching!

[MukatA]

You should NOT have filed a tax return AT ALL. You are tax exempt, so no tax return should have been necessary...

Here is info from Publication 901, page 2, center column
"Disclosure of a treaty-based position that reduces your tax.
If you take the position that any U.S. tax is overruled or otherwise reduced by a U.S. treaty (a treaty-based position), you generally must disclose that position on Form 8833 and attach it to your return. If you are not required to file a return because of your treaty-based position, you must file a return anyway to report your position… If you fail to file Form 8833, you may have to pay a $1,000 penalty..."

[AtlantaTaxExpert]

Noted, but normally, tax-exempt individuals do NOT file Form 8833 (even though they should) and nothing happens, because the IRS has no paper trail on them.

That what would have happened had Tango47 not filed.

Since he has filed, he should attach Form 8833 (or an equivalent statement) to the amended return.

[MukatA]

But the IRS can come after the person who failed to file tax return even after many years (of course if the person is still in the U.S.)

[AtlantaTaxExpert]

Yes, they can, but they have to know the person exists to begin with.

You must understand something: the IRS is NOT OMNIPOTENT. They are tasked to monitor tax compliance for OVER 300 million people plus millions of companies and corporations. They respond to issues that are identified to them, usually by some type of paper trail.

Once they DO know about your existence, they are VERY persistent about getting the taxes they feel are due.

In fact, in many cases, leaving the country will NOT relieve the foreign national from paying the tax if the IRS has a strong case showing they owe the tax. Each tax treaty has a reciprocity agreement included in the treaty, which means the person's home country taxing authority will enforce an IRS levy for unpaid taxes. All the IRS has to do is prove to that home country's taxing authority's satisfaction that the tax IS valid and WAS unpaid.