_EJ_

Hi,

Looking for anyone who has experience switching from a J1 to an H1B visa please.

I've found this thread to be somewhat relevant:
http://britishexpats.com/forum/usa-5...ty-20a-626424/

I was a J1 postdoc for one year, and used the two year UK-US tax treaty. I've recently switched to an H1B in a different state. I was planning to use the tax treaty for the J1 time, and not for the H1B time (i.e. no taxes on J1, taxes on H1B, file as dual status). To my mind, I've left the country before my two year tax treaty time is up, and then re-entered with a different visa/job. Is this correct, or should I start making plans to repay back a year of federal tax?

Thank you in advance for any advice or insight.

EJ

Steve_

Yeah, you can file dual-status in that situation.

It's nothing to do with the tax treaty, there is a specific provision in the internal revenue code that provides an exemption for alien teachers, exchange visitors and students in a non-immigrant status. (Although it's mentioned in Article 20 of the treaty as well, but only in relation to payments received from abroad).

So you can choose to remain a non-resident alien for tax purposes by filing form 8843 each year. You cease to benefit from that exemption on the last day of the second year, i.e. when you are no longer in J-1 status, so you file dual-status and resident for the rest of the year now that you're H-1B.

Bear in mind that if you are non-resident in the US, you're resident in the UK, so you need to file a P85 with HMRC for the date you changed status. And you'll need to file for a foreign tax credit in the UK for any income tax you paid in the US during that period.

_EJ_

Thanks very much for getting back to me. I was only on J1 for one year so unfortunately can't claim for the full two.

According to HMRC I was non-resident in the UK for tax purposes for the last tax year (less than 183 days). I'm not entirely sure when I put when I left the UK (either last September or this September). Does this mean I need to pay tax to the UK on the J1 income?

Steve_

You've got to be tax resident somewhere... if you're a non-resident alien in the US then you're resident in the UK for tax purposes. That's why that exemption exists primarily. Say you're a student, and your parents send you money to pay for your education, that income might be classed as income to you in certain situations if you were resident in the US for tax purposes. As a non-resident alien, it's dealt with under the tax laws of your home country. (In the case of the UK, it's exempt under Article 20, but you've got to be a non-resident alien).

_EJ_

Ahh, fair enough. Thanks. But in this case, I can do the UK-US tax treaty for that one year, even though there isn't a gap between my J1 and my new H1B (i.e. resident alien) visa? Reading a lot of conflicting information. In that, it says if you overstay, you have to repay it all back.

Steve_

Like I said, tax treaty doesn't really matter as there is a general exemption but anyway, yes you can claim to be a non-resident alien for up to 2 years or any portion thereof. Just make sure you file Form 8843 with your 1040NR. And then you can also file dual-status at the same time if you want. The only real difference in your situation to someone who just arrived on H-1B is the 8843 to cover the first part of the year.

tbm

I am not sure this is true. I believe you can be a non-resident alien in the US according to IRS rules and non-resident in the UK according to the Statutory Residence Test.

_EJ_

It seems like it.

The issue I am concerned about is not the social security exemption, but the two year tax waiver (Treaty 20A). If you overstay by even a day, you have to retroactively repay. I don't know whether changing status to a different visa can stop this.

tbm

I feel that you and _EJ_ are talking past each other. You're correct that J-1 scholars are non-resident aliens for the first 2 (calendar) years.

However, _EJ_ is asking about the federal tax exemption due to the tax treaty. You can only claim this exemption if you stay in the US for 24 months or less. From past forum discussions, it seems it's not entirely clear what you have to do so you can make use of the tax treaty while remaining in the US for longer on a different visa (i.e. how long you have to stay outside the US before returning on a different visa). caleyjag has written about his experience extensively and I hope he'll comment, see for example this thread: Payment of incomes taxes after 2 year J1 period - British Expats

_EJ_

Yes I think there's crossed wires here. I can't use the tax treaty (or exemption) on the new visa. I'm assuming the change in status and spending a few weeks back in the UK will trigger a new "visit". On the tax return form there is a box to fill in the J1 end date also. I could call the IRS but after extensive googling it seems like they might not know or care. At least I have saved up more than the back taxes would be.

_EJ_

Yes, I am talking about the federal tax exemption. There is no exemption associated with the H1B. I won't be out of the US for long - three weeks or so. But it is a different job and different visa. The treaty simply states "overstaying" but does not mention leaving and returning with a different visa. The one year home stay refers to returning on another J1.

If I fill in my tax form based on the exemption and it turns out to be incorrect, will I get into a lot of trouble?

tbm

Someone had a good experience calling the IRS international line, see http://britishexpats.com/forum/usa-5.../#post11949784

I'd try that and read through caleyjag's old posts.

If you call the IRS, please post an update here.

_EJ_

Thanks for that. I called them and was told the following:
If I overstay past two years on the J1, then the tax has to be repaid. If I leave and return on a different visa, then there is no problem. I haven't overstayed on the J1 hence I am not liable for tax. I did state that I was doing research on the J1 and would be a professor on the H1B. I can file as dual status for this year.

I'll try to remember to update this when I file the taxes for 2016 - hope this helps someone else.

caleyjag

Checking in.

PM me if yo have questions. I only have my experience, but it seems broadly similar to yours.

In my case the IRS's unofficial (over the phone) analysis was that because I came back after a few months in he UK to work in the private sector in a totally different role I did not violate the terms of 20A and was not hit with the back taxes and penalties.


On a related note, I have a good friend who elected to stay on in his J1 role past the two year deadline. He contacted the IRS and they let him negotiate down his owed taxes quite substantially.