[fra.marangoni]

Hi all,

I am an Italian Research Scholar (J1), first immigrated in the USA in November 2008. I claimed full income tax exemption under art. 20 and was FICA tax exempt for 2 calendar years. I have 2 questions for you:
1) I am extending my stay beyond 2 years. Does the Italy-USA tax treaty have a retroactive clause that will force me to give back income taxes? Could you append the official document supporting your answer?
2) I am a little bit puzzled by FICA taxes... I am sure I'll not retire in the US (indeed I am planning to go back to Europe in 1-2 years), so I am paying for a service I'll never take advantage from. Is there any way to claim these taxes back (or at least to legally stop paying them)?

Thanks in advance for your help!!

Francesco

[MukatA]

This is from IRS publication 901: "A professor or teacher who is a resident of Italy immediately before the date of arrival in the United States and whose visit to the United States is expected to last no more than 2 years to teach or conduct research at a university, college, school, or other recognized educational institution, or at a medical facility primarily funded from government sources, is exempt from U.S. income tax for up to 2 years on pay from this teaching or research.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest."

There is no retroactive clause.
Every one on J1 is exempt from residency and FICA taxes for two year. After 2 years you must pay FICA taxes; no choice.
Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

[AtlantaTaxExpert]

Note that the FICA exemption applies for two CALENDAR years, which, for you, was 2008 and 2009. Hence, you became liable for FICA taxes on 1 January 2010. If your employer has NOT withheld FICA taxes to date, you have the legal obligation to notify him of his error.

The income tax exemption is for twenty-four consecutive months, which means from November 2008 to November 2010. The income tax exemption may or may NOT apply to the state income tax, depending on the state in question.

[wnhough]

QUOTE," . . . you became liable for FICA taxes on 1 January 2010." Then the tax exemption is void and the FICA Taxes including the interest due on the late tax payments become due retroactive to the date of arrival, 2008.

[AtlantaTaxExpert]

Wnhough:

No, that is NOT true (about the tax exemption being void).

The tax treaty between the U.S. and Italy does NOT address FICA (Social Security and Medicare) taxes.

The two-year exemption from FICA taxes is a matter of U.S. tax law, and, to my knowledge, there is NO retroactive tax provision under U.S. tax law.

[wnhough]

QUOTE," The tax treaty between the U.S. and Italy does NOT address FICA (Social Security and Medicare) taxes"--Oh, I see. Thanks a lot!