[Massanu]

Hello !

I will try to be as clear as possible:

- I came from France March 16, 2013 to work as a Researcher for an American University under the H1-B Visa.
- We claimed the tax treaty so I have been exempted of tax from March 16,2013 to December 31, 2013.

It seems that we have to check if I can claim the tax treaty for 2014.
I asked several people at the university administration and I get a lot of really different answers. Because I am not a resident for tax purposes because of the substantial presence test.


So I did a lot of research by myself and find out that :
- France has a Tax Treaty with the USA
- There is an exceptions to the saving clauses for teacher and Researcher

If I understand correctly, this exceptions to the saving clause allow me to claim the treaty for a maximum of 2 years, even if I become a Resident for tax purposes and if I pass the substantial presence test

I don't know if I am right or totally wrong, I am kind of lost with all this paperwork.

Here is the different documentation I ve read, maybe it can be helpful:

Saving clause definition:
http://www.irs.gov/Businesses/Tax-Treaties-Can-Affect-Your-Income-Tax

Article 20 in this document shows that its an exception to the saving clause:
http://www.irs.gov/pub/irs-trty/francetech.pdf

Publication 901 for tax treaties
http://www.irs.gov/pub/irs-pdf/p901.pdf

[Massanu]

I add this document too:
Resident Alien Claiming a Treaty Exemption for a Scholarship or Fellowship

And do you think claiming this will create some issues if I try to get a Permanent residency in a few years ?

Thanks you again

[AtlantaTaxExpert]

Based on the wording of the U.S.-France Tax Treaty, I see nothing to prevent you from applying for the researcher status and getting the tax exemption EXCEPT...

The H-1B visa is a THREE-year visa, and the wording of the treaty says the exempt period will not exceed two years. Further, the H-1B visa is a WORK visa; most researchers come under a J-1 visa.

I have been preparing returns claiming the tax exemption for a number of Hungarian professors who are claiming tax exemption under a similar provision in the U.S.-Hungary Tax Treaty. They too are H-1B visa holders, but the wording of the Hungary treaty also allows them to claim the tax exemption in my considered opinion.

Whatever happens, it should have NO EFFECT on your application for permanent residency in future years.

[Massanu]

Thank You,

1 - Yes, so I will be exempted the first 2 years of my H1-B Visa, I am OK to pay taxes after that

2 - So when you prepared the returns for these Hungarian Professors, did it works ?

3 - In my case, I prefer to have a 0$ of withholding for both State and Federal taxes when I fill my taxes, is this make any difference ? So in my case I will get 0$ of tax return.

Thanks you very much, I really appreciate your help

[AtlantaTaxExpert]

1) Yes, that is my considered opinion.

2) It has so far. I started for the 2012 tax return, and I have already two of them for 2013.

3) If NO money is withheld from your return AND you can convince your employer to put ZERO in Box #1 of the Form W-2, you do not even have to file an income tax return.

Note that the treaty exemption usually is not honored by the state, so a state tax return IS required. Depends on the state!

[Massanu]

It seems like Oregon is honoring the Tax Treaty exemption

So I will probably choose to withhold 0 for state and 0 for Federal, I prefer managing the money myself rather than waiting for the return

Thank you very much I really appreciate your help !

[AtlantaTaxExpert]

Glad to help!