boatboy80

Hi Guys,

This is my first posting here, but I’ve been viewing the forums for quite some time to get advice on living in the US and have found it extremely helpful. I’ve recently moved back to the UK after spending two years in the Chicago area working as a postdoc on a J-1 visa, and am trying to prepare my tax returns for 2016. I already have my W-2 and 1042-s forms from my previous employer, so am all ready to go. In the previous two years I was classified as a non-resident alien, so was able to use a tax software (Glacier) that the university provided. However, due to how my time crossed over into different tax years, I’m now classified as a resident alien so have to file taxes a different way which I'm not familiar with. The crux of my question is, what forms do I need to prepare, what’s the best way to do this and are there any free advice centres I could contact (from the UK) before the deadline? My situation is also possibly complicated by the fact I was claiming the J-1 tax treaty exemption during this period (although maybe that doesn’t make any difference). I’d greatly appreciate any advice.

Thanks

tom169

Try out TurboTax's online software for free. Even if you don't pay for it, it should give you an idea..

Cook_County

Why were you using a treaty in 2015? Which Article; on what kinds of income? Which days during 2016 were not exempt days?

boatboy80

As a J-1 visa holder it is possible to claim a tax exemption (I forget which taxes exactly) for two years from the date of entry on your J-1 program, but you must exit the visa (and the country) within the two year period otherwise you retroactively lose the benefits of the exemption. I was using this from November 2014 through October 2016, as my position only lasted two years. So technically all days I was in the USA during this period (on my J-1) the exemption should have been valid. In terms of income, I'm not sure of the maximum income it covers, but as a postdoc my income was not particularly large.

Cook_County

That's interesting. Domestic US law provides non-US residence status if a Form 8843 is filed. The treaty further exempts teaching income. Try not to get domestic law and treaties muddled up or it is easy to get the answer wrong. Did you file an 8843 for 2015?

Cook_County

The filing deadline incidentally is 15 June 2017, as you live overseas.

boatboy80

Ah excellent, I was focussing on the April deadline. Looking through my files, I used a 1040NR-EZ and 8843 for 2015. I guess I go straight to the standard 1040 then as a resident alien?

Steve_

You moved back to the UK when? If you moved back in October then it's the same as for 2015, you just file a 1040NR and an 8843. From the sounds of it you could only have been working in the US for that period anyway as you were on J-1.

You're not a resident alien, obviously. If you were still in the US then I suppose you should file dual-status but it seems pointless if you left. The fact the two years covered three tax years isn't relevant, you were in the US for only two years physically. The 8843 has a section where you list the number of days so the IRS can add it up.

It's pretty easy really, you just copy the boxes from the W-2 and the 1042-S onto the 1040NR, voila. Like you said, you can probably use 1040NR-EZ.

You don't want to file as a resident, note you were filing as a non-resident so technically you were still resident in the country where you came from for tax purposes.

boatboy80

This sounds much more like what I was hoping I'd have to do, however it's slightly complicated by my university telling me that I met the resident alien status due to the substantial presence test. I officially left the country, and exited my visa, at the end of October (29th to be exact). After that I went backpacking, which actually brought me back through the US for a couple of weeks (this also adds to my presence, but I wasn't on a visa, employed, earning, etc). I'm a little confused to be honest, I'd prefer to submit as non-resident alien since I'm familiar with this process, however it looks like I'm a resident alien now based on the criteria... then there is also the dual-status I could file as, although I'm not sure of the added complications/benefits of this method?

Steve_

The substantial presence test is totally irrelevant, I really get annoyed when banks and so on start quoting it to me. (a) as you've pointed out you're exempt due to the special exemption on 8843 and (b) even if you weren't it's overridden by Article 4 of the tax treaty and you would just file 8833 instead.

You just file like you did last year, the college gave you erroneous information, read IRS publication 519. Although that goes banging on about the substantial presence test for pages and pages.

It's the biggest red herring in US tax law imo. Most countries have tax treaties that modify or override it and even it they don't there are exemptions that can be claimed on 8840 or 8843.

I suppose the IRS might be fussy if you claim the vacation days as well, so just file an amended return if they do and claim the tax treaty exemption on 8833 and point out your vital interests were outside the US.

boatboy80

Thanks for this information, it was really helpful. I read the IRS publication 519, and under chapter 1, tax treaties, it does indeed say even as a dual-status I should be treated a non-resident alien if subject to the treaties, so to submit the 1040NR, etc. I contacted my old university and they are still adamant I am to be treated as a resident alien, even though the 519 says otherwise. I guess I'll file as previously now, since that what the law states.

tbm

Unfortunately I have to disagree with Steve_'s position. If you meet the SPT, you are a resident for US tax purposes. Publication 519 says that J-1 teachers are exempt but this only applies for the first two years: "You will not be an exempt individual as a teacher or trainee in 2016 if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years." In other words, you can file 1040NR and 8843 for 2014 and 2015 but imho for 2016 you'll pass the SPT (you spent more than 181 days in the US) and will become resident.

The treaty exemption is valid for 24 months from date of entry (and I don't think it matters whether you're resident or non-resident, although I'm not sure how to claim the exemption when you have to file a regular 1040). However, you're only exempt from FICA as a J-1 when you're non-resident, which would mean that you have to pay FICA in 2016.

Steve_, on which basis do you think can boatboy80 claim to be non-resident despite meeting the SPT?

tbm

The treaty exemption only covers federal income tax. Some states (e.g. NY) take the income from the federal level and therefore you wouldn't have to pay state tax whereas other states (e.g. CA) don't accept the tax treaty exclusion and so you would have to pay state tax. The treaty exemption is valid for 24 months (which might span 3 tax years).

AFAIK there's no maximum income but given postdoc salaries I think this point is pretty moot anyway.

There's also an exemption from FICA (social security) for non-resident J-1 visa holders (i.e. the first two calendar years). https://www.irs.gov/individuals/inte...-professionals

boatboy80

Hmmm...now I'm even more confused. So I know from the tax treaty, and the university I was employed by, that I am covered by the treaty within my employment/visa period. It's just how to report them. I can see both sides of the argument for the non-resident/resident alien status, but there does not appear to be anything concrete in the publications, it all seems to be open to interpretation. Does anyone know of a tax expert that may specialise in this kind of area.... I got recommended the H & R block expat people, but am not completely convinced a consultation will provide the answers?

bewildering

H & R block told me my situation was too complicated for them. Off the record, they said to simply transfer to the 1040 and not worry about paying back the retroactive taxes. Their comment was to 'keep my head down'. They said the IRS wouldn't care about my complicated situation combined with meager postdoc income. Interesting advice.