[sgrig]

Hi, there have been a few questions about tax treaties before, however I can't find anywhere what documentation I would need to provide to the IRS except the form 8233. So my main question is how do I prove that I have foreign residency? Or does the IRS check with the other country's tax authorities?

My circumstances are the following. I'm a British citizen, but over the last two years I lived in Germany. My parents also live in Germany now, so this is probably my country of residence now. I had a tax-free postdoc position, so I didn't have to file German tax returns and am generally outside the German tax system. In September I'll be coming to the US on a J-1 visa starting a 3-year assistant professorship.

As I understand, US-German tax treaty makes J-1 scholars exempt from income tax in the host country. So given my situation, I wonder if I would be eligible to use this treaty?

Thanks in advance for any answers and/or opinions.

[MukatA]

It seems that you will be covered by UK and US tax treaty. This is from IRS Publication 901. Tax Treaties.
A professor or teacher who is a resident of the United Kingdom on the date of arrival in the United States and who is in the United States for not longer than 2 years primarily to teach or engage in research at a university, college, or other recognized educational institution is exempt from U.S. income tax on income for the teaching or research. If the individual's 2-year period is exceeded, the exemption is lost for the entire visit, including the 2-year period.
The exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

You will be nonresident for first two years and will file nonresident tax return Form 1040NR or 1040NR-EZ and Form 8843.

[sgrig]

Oh right. It didn't occur to me that I could be eligible for the UK-US tax treaty. Is this on the basis of my citizenship? Just to clarify, I don't have anywhere to live in the UK, and since I never was in paid employment there, I never had to pay taxes nor to file tax returns there.

[AtlantaTaxExpert]

In my opinion, the U.S.-German tax treaty applies, which is better for you, because you lived in Germany just prior to your scheduled arrival to the U.S.

Now, as to whether you are eligible for the TOTAL tax exemption under the treaty, it appears that you DO qualify if you are visiting professor at a qualified educational institution.

[sgrig]

Ok, thanks for the answers. Of course the US-German tax treaty is better as it does not have the retroactive clause.

I have another somewhat related question. Say if I do qualify for exemption under the US-German tax treaty, but then, in a purely hypothetical example, I get a tenure-track job immediately after my 3 year position ends, and then stay in the US long enough (on a H-1b visa, presumably) to get permanent residence. Would I then retroactively lose benefits of the tax treaty (as it applies only to temporary visits)?

[AtlantaTaxExpert]

Negative; all retroactive tax provisions have been removed from the latest version of the U.S.-German Tax Treaty.

[sgrig]

Thanks for the clarification!

[AtlantaTaxExpert]

Glad to help!