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J1 Visa Tax Treaty 'Clock' Question

J1 Visa Tax Treaty 'Clock' Question

Old May 13th 2016, 12:03 am
  #1  
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Default J1 Visa Tax Treaty 'Clock' Question

Dear All,

It's my first time here. Thanks very much in advance for your help!

My question relates very specifically to applicability of the UK/US tax treaty to J1 visa holders.

My situation: I've been working in the US on a J1 visa since 1st July 2014. I will be leaving on 30th June 2016. I know that I can amend my US tax returns to reclaim the federal tax I've paid here if I leave within 2 years of arriving, and I would like to do this.

My possible problem: My contract here began on July 1st 2014, but I entered the USA on June 6th 2014. I arrived a few weeks earlier for tourism, and they logged it as a J1 entry. I subsequently left the US to visit Mexico, and re-entered on June 30th to start my job.

The UK/US tax treaty (2001 Technical Explanation, 20A paragraph 1, pg 71) specifically says:
[a J1 visa holder] ... will be exempted from tax by the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for the purpose of teaching or engaging in research.
My Question: Does my 2 year 'clock' on the tax treaty start on June 30th, or June 6th? The former is definitely "the date he first visits that State for the purpose of teaching or engaging in research", but I have an earlier J1 entry in my passport. Will this cause a problem? Does anyone have experience of this?

I've been searching around online most of the morning, but can't work out the answer to this question, or even who to ask about it!

Thanks very much in advance for your help!

Oscar.
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Old May 15th 2016, 9:09 pm
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Default Re: J1 Visa Tax Treaty 'Clock' Question

I cannot answer your question with any authority but I believe your interpretation is wrong. Your J-1 is a visa for research. Your J-1 allows you to enter the US 30 days before you start to work (but the date of entry is what counts for the 2 year period). You were admitted under the J-1 and not the WVP. Hence, despite leaving for a few days, you entered the US on June 6 for the purpose of engaging in research.

The IRS answers questions by email and I found their responses to be quite in depth. While they sometimes answer in days, it usually takes weeks and you're running out of time. See http://www.irs.gov/uac/Help-With-Tax-Questions-2

If it's too late to leave before June 6, I suspect you could submit amended tax returns asking for a refund and then you'll find out whether they accept or question it. I guess there is some room of interpretation in the tax treaty but I'm not sure how to prove intention apart from the visa you used to enter. You could try to argue that you should have been admitted under the WVP on June 6 and that admitting you under the J-1 was a mistake and doesn't show your true intention.

Last edited by tbm; May 15th 2016 at 9:12 pm.
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Old May 16th 2016, 11:31 pm
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Default Re: J1 Visa Tax Treaty 'Clock' Question

Thanks for your thoughts tbm.

I think I'll just have to submit amended Tax returns, and see how it goes! The strongest piece of evidence I have in my favour is my postdoc contract, which started on June 1st 2014. Hopefully that will suffice!

Oscar.
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Old May 16th 2016, 11:46 pm
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Default Re: J1 Visa Tax Treaty 'Clock' Question

Originally Posted by oscarbranson View Post
The strongest piece of evidence I have in my favour is my postdoc contract, which started on June 1st 2014. Hopefully that will suffice!
Again, I've to emphasize that I'm no expert. But if you have to argue your case, I would not make this your main argument. The IRS made it clear that the 2 year period starts from the date of entry and not the date you start to work. I think your case will be much more solid if you can show that you booked your travel to Mexico in advance and that this was your true intention... and being admitted under the J1 rather than the WVP was just a mistake. At least that's how I'd present it.
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Old May 16th 2016, 11:57 pm
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Default Re: J1 Visa Tax Treaty 'Clock' Question

I just called the IRS international line (267-941-1000) and spoke to someone useful in their international tax law department. This is what they said:

On the tax form, you need to enter all the times you've entered and left the USA on your current visa. This will show the initial entry date as June 6th. However, as in my case this entry was not "for the purpose of teaching or engaging in research" I should include a letter explaining that my initial visit was for tourism, and that I was admitted on a J1 visa in error (should have been VWP). I should tell them the dates of my contract, and that I had already booked onward travel.

If my return is challenged, I should show them my work contract and onward travel flight bookings to prove this was the case.

Basically, the "for the purpose of teaching or engaging in research" phrase saves me! The guy on the phone said it was irregular, but should be fine.

Hope this can help someone in the future!
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Old May 17th 2016, 12:35 am
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Default Re: J1 Visa Tax Treaty 'Clock' Question

Thanks for the update. I'm glad you received such a competent reply. (I hope you noted the employee id of the person you spoke to)

Enjoy Australia!
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