[cekaata]

Hello,

I entered the US in Sep 2009 with a J1 visa (category specialist) and I switched to H1B in August 2010. During both periods I was working (and still am) as a researcher at the University of Chicago.
For 2009, I did not claim the exemption that the tax treaty US-Italy provides for teaching and research activity (art 20) since I received a low income and was almost under the regular tax allowance anyway.
For 2010, I'm considering claiming tax exemption based on the treaty, that is for 2 years. Please note that based on the substantial presence test I'm still a nonresident alien for 2010 (since for most of the year I was under J1), but the treaty has an exemption to the saving clause so the exemption does apply even if I become a resident (as I will in 2011).
My questions are:
- do the 2 exemption years have to be the FIRST 2 years or could I claim them later? My understanding is that they are the first 2 years but I'd like a confirm
- in case they have to be the first 2 years, when do they start in my case? September 2009 or August 2010? The online tax preparation program that I'm using (CINTAX) is suggesting me that I can claim exemption starting from August 2010 but again I'm not sure.
- if the 2 years do start from August 2010 and I claim the exemption for fiscal 2010, am I using one of the 2 exempt years or just 5 months (Aug-Dec)?
- the treaty says that the exemption applies to "a professor or teacher who makes a temporary visit to a Contracting State for a period that is not expected to exceed two years for the purpose of teaching or conducting research". My current visa is for 3 years (as usual in H1B) so the period I'm staying here actually is expected to exceed 2 years. Can I still claim the exemption? And if I do and I stay the third year (when the exemption is over) am I risking that the IRS will want the taxes back?

Thank you for any help or suggestion you may have.
Best,
Cecilia

[AtlantaTaxExpert]

Cecilia:

1) It IS the first two years.

2) It starts from the date your arrived, and lasts for 24 consecutive months, or until the H-1B visa became effective. Hence, you can claim the exempt status from January-to-August 2010.

If you are SINGLE, you would file as a non-resident alien, filing Form 1040NR and Form 8843 and NOT claim any income during your exempt period. You would also need to submit Form 8833 to explain the treaty position that allows you to exempt the income from the first 8 months of 2010.

If you are MARRIED, you can file jointly with your spouse and CHOOSE to be treated as a resident alien, yet also claim the treaty exemption for the first eight months. You would claim ALL of the income on Line #7 of Form 1040, then claim the exemption on Line #21 as a negative number, again submitting Form 8833 to explain the treaty position.

If you have not filed yet, and you need professional help filing your return, email me at [email protected] or [email protected].