Ask Experts Questions for FREE Help !
Ask
    mchoppin's Avatar
    mchoppin Posts: 9, Reputation: 1
    New Member
     
    #1

    Jan 25, 2009, 03:51 PM
    Visa switch from J1 to F1. Undo claiming of tax treaty
    Hi all,

    I have recently switched from a J1 visa to a F1 visa. I would like to determine if and how I can claim a tax treaty. My case is the following:

    I am a graduate student from germany. I entered grad school in NYC in January 2009 with a F1 visa. I had been to the US before as a research intern with two separate J1 visa between 2006 and 2008 (see below).

    During my "J1-visits", I claimed the US-German tax treaty.
    I was able to claim it for the calendar years 2006 and 2007. In 2008, I began paying taxes.

    I was told by the University HR that I cannot claim the 5 year Tax treaty under my current F1 status if I already claimed a treaty under J1 status before. Apparently, a "back-to-back" rule applies here. I could not find any information about that.
    I was told also, that the only way to get around this was to retract my claiming of the treaty for 2006/07 retroactively and pay taxes for those years.

    This seems to be the way to go becaues I did not earn anything in 06 and for 07 my income was barely above personal exemption.

    Does anyone have advice on this? How can I undo my claiming of the treaty?

    Past and current stays in the US

    June 2006-October 2006
    visa: J1
    Income: $0
    • no taxes, but day-count for 2 year treaty already active


    june 2007 - june 2008

    visa: another J1
    Income 2007: $4433 (compensation for researching)
    • no taxes, treaty claimed

    Income 2008: $5572 (compensation for researching)
    • Federal Tax: $465
    • NY state Tax: $84
    • City (NY): $66
    • (treaty could only be claimed for 2 calendar years apparently)


    January 2009-2013
    visa: F1
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
     
    #2

    Jan 25, 2009, 10:58 PM

    On J1 you are exempt for residency for two years. You MUST file non-resident tax return. In the third year (that is 2008) you will file resident tax return.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #3

    Jan 26, 2009, 11:35 AM
    Under the provisions of the tax treaty, your J-1 tax exemption was valid for two years (2006 and 2007). You then paid taxes as a non-resident alien for 2008, claiming NO treaty exemption.

    Now, regardless of whether you retract the tax exemption or not, you will be exempt from the Substantial Presence Test for ONLY 2009 and 2010, because the J-1 visa time counts against the five-year F-1 time. That is my reading of the rules, which only slightly differs from the HR department representative.

    BOTTOM LINE: Make no changes to your previous years' returns. File as a non-resident alien student and claim the $5,000 treaty exemption authorized under Article 20(4) of the U.S.-Germany Tax Treaty for 2009 and 2010.
    mchoppin's Avatar
    mchoppin Posts: 9, Reputation: 1
    New Member
     
    #4

    Apr 6, 2009, 07:46 AM
    Quote Originally Posted by AtlantaTaxExpert View Post
    Under the provisions of the tax treaty, your J-1 tax exemption was valid for two years (2006 and 2007). You then paid taxes as a non-resident alien for 2008, claiming NO treaty exemption.

    Now, regardless of whether you retract the tax exemption or not, you will be exempt from the Substantial Presence Test for ONLY 2009 and 2010, because the J-1 visa time counts against the five-year F-1 time. That is my reading of the rules, which only slightly differs from the HR department representative.

    BOTTOM LINE: Make no changes to your previous years' returns. File as a non-resident alien student and claim the $5,000 treaty exemption authorized under Article 20(4) of the U.S.-Germany Tax Treaty for 2009 and 2010.
    The situation is actually a bit different regarding my current status: Since 2009, I am being paid a stipend and therefore article 20(3) applies. Under this article, there is no maximum presence and no maximum payment.

    But the University representative tells me that I cannot claim any treaty because of a Back-To-Back clause.
    In my reading, this clause only exists for article 20(1) which I used earlier while I was still a J-1. The University tells me that this rule also applies when I switch FROM 20(1) TO 20(3). They say I needed to re-establish residency but I see no basis for this.
    Am I missing something?

    Any hints are greatly appreciated
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
     
    #5

    Apr 6, 2009, 09:09 AM

    Check Form 8843, part III for students. There is a question
    "Were you present in the United States as a teacher, trainee, or student for any part of more than 5 calendar years?"
    In your case the answer is No, so you are exempt individual and can get treaty deduction.
    mchoppin's Avatar
    mchoppin Posts: 9, Reputation: 1
    New Member
     
    #6

    Apr 6, 2009, 09:25 AM
    Quote Originally Posted by MukatA View Post
    Check Form 8843, part III for students. There is a question
    "Were you present in the United States as a teacher, trainee, or student for any part of more than 5 calendar years?"
    In your case the answer is No, so you are exempt individual and can get treaty deduction.
    Thank you very much for the hint but I think the problem my be something else: The University doubts that I can be considered a resident of germany for treaty purposes given my visa/treaty history. They say it takes 365 days to re-establish residency. Any ideas where to get an official reference on that?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #7

    Jun 4, 2009, 11:29 AM
    I have not been able to find a reference per se, but most of the technical explanations of tax treatries all cite a standard one-year residency period being required to re-establish residency back in your home country.
    mchoppin's Avatar
    mchoppin Posts: 9, Reputation: 1
    New Member
     
    #8

    Jun 4, 2009, 02:50 PM
    Quote Originally Posted by AtlantaTaxExpert View Post
    I have not been able to find a reference per se, but most of the technical explanations of tax treatries all cite a standard one-year residency period being required to re-establish residency back in your home country.
    Thanks for checking! Can you name a specific technical explanation? I did not find such a statement in the technical explanation of the German tax treaty.

    I wonder though: the term 're-establish' implies in my understanding that I have to have lost residency in the first place. I did not loose german tax residency in 2008 because I maintained closer connection to Germany and stayed in the US for less than 180 days. 2008 was my third year in the US, therefore I did not claim the treaty anymore but I was still considered a german tax resident. For 2008 I filed 1040NR-EZ as a non resident which was accepted and I got some taxes back. So given that I apparently did not loose german tax residency, do I still have to re-establish german tax residency?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #9

    Jun 15, 2009, 12:04 PM
    You CAN argue this point (maintaining closer connection and this NOT have to re-establish residency) with the IRS by submitting Form 8833 with your tax return. If they accept the argument, then you should okay.

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Claiming Tax Exempt treaty in Amendment form [ 4 Answers ]

I came to US in July 2007 and I claimed my tax treaty to be tax-exempt which is true for 2 years. I then realized that I might be staying in US for more than 2 years so I changed my status to Tax payer and also filed my 2007 returns with a Check to IRS for the due taxes considering me as a...

US/UK tax exemption Treaty 20a J1 visa [ 2 Answers ]

I have for the last several years visited USA as a visiting professor for aprox 1 month per year. Until now, I have been exempts from all US taxes and pay tax in the UK on my American earnings. This year I have been told that because this is the 3rd year I have visited on a J1 visa that I am no...

H1B visa holder claiming a Dependent who is on H4 visa? [ 2 Answers ]

I am on H1B visa and my wife is on H4 visa. Can I claim her as a Dependent while filing for the tax return. Do I have to apply for ITIN? Please explain the procedure. Thanks

G1 visa - Italy USA tax treaty art. 19 [ 1 Answers ]

I'm an Italian citizen working for the Italian Government at the UN . Prior the G1 visa, I was on a B1/B2,J1, E2, G2 changed into G1 visa, all of them issued in Italy. I always paid taxes in USA; I wish to understand if I'm still considered resident for taxes purposes in the USA. I'm...

Dual Status Tax payer claiming a treaty [ 3 Answers ]

Hi, I have been in NY since August 2004 under H1B visa and claiming tax exemption for 2 years under a Foreign Tax Treaty for 2 years. This Sept 2006, I have been a RESIDENT for tax purposes, hence I am considered a dual-status tax payer for 2006. Hy husband and four children aged 14-17 joined me...


View more questions Search