Question

J1 Research Scholar- Retroactive Tax- Repayment Advice

Forum|Forum|5 years ago
September 28, 2020
4 replies
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Hi,

Need some tax advice.

Need advice. I am an Indian citizen, currently on a J1 research scholar visa (since 2018) in the USA, working at a University. For the year 2018 and 2019, I had a tax treaty applied to my paycheck, which made me exempt from paying federal income tax. The tax treaty had a retroactive clause (pay back all of that federal tax if you stay in the US over 2 years, i.e., pay back the tax for 2018 and 2019 in my case). Now since I am in the USA for over 2 years, and planning to stay longer, I need to pay back the tax I owe as soon as possible. Does anyone have any experience with this, and please share it in that case? I assume I need to submit form 1040X but I'm not sure what else. Also, do I need to pay interest/penalty?

Many Thanks.

Not A Product Question

P

pk12_2

Employee

@sabya3112 , the US-India tax treaty only allows a J-1 researcher to exclude certain US based income for up to two years and therefore be taxed as a US person. Note that since you are not an exempt person, you will be ( thereafter) taxed as a Resident for Tax purposes. The treaty does not have any retroactive clause ( in fact none of the treaties that I am aware of nor the model treaty docs ) and therefore there is no claw back of presumed taxes for the years that were excluded. Therefore I do not understand your concern -- please add more details as to why you think there is a claw back due .

Namaste ji

pk

P

pkm4

The technical explanation of the Indo-US tax treaty says this in the fourth para of the article 22:

If a professor or teacher remains in the host State for more than the specified two-year period, he may be subject to tax in that State, under its law, for the entire period of his presence.

Although the article 22 of the tax treaty does not have any retroactive clause but its technical explanation makes this confusion.

DaveF1006

To clarify, have you been in the US for more than two years but never claimed an exemption from US taxation?

@pkm4

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P

pkm4

@DaveF1006

I have been in the US for more than two years and claimed exemption from the taxation two times. Now, the question is related to this thread. Do I need to pay taxes retroactively for the previous years also?

N

Narayan

Hi @sabya3112 , @pk12_2, @pkm4, @Gourav039,

I was looking for an explanation for the same question. I arrived in the USA on a J1 visa in the year 2021. I availed the treaty benefits for tax years 2021 and 2022. Now, I am filing taxes for the year 2023 (third year), I tried to get a straight answer but it is not very clear if I need to return those benefits or not, and if yes, then how? Is there a specific timeline, would there be any penalty or interest?

I would greatly appreciate any sort of advice on this, based on your experience.

Thank you.

DaveF1006

J-1 Research scholars/Professors are considered “exempt” from the substantial presence test as they do not count days of presence in the United States for the first 2 calendar years of presence.

Based on the information given, you do not need to return those benefits.

@Narayan

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