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I am currently in the US under a J1 and my home country has a tax treaty with the US. Therefore I am currently exempted from federal taxes and some other taxes.

I am getting married soon and want to apply for an Adjustment of Status. My question is, how does this affect my tax status for the current job (J1)? Will I have to pay taxes for whole salary I earned or is this still "tax-free"? Is this different if I would apply for AOS at Jan 1st? When does the Tax exemption end?

Edit: Tax treaty Germany USA Article 20(1):

  1. Remuneration that a professor or teacher who is a resident of a Contracting State and who is present in the other Contracting State for a period not exceeding two years for the purpose of carrying out advanced study or research or for teaching at an accredited university, college, school, or other educational institution, or a public research institution or other institution engaged in research for the public benefit, receives for such work shall be taxable only in the first-mentioned State. This Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons. The benefits provided in this paragraph shall not be granted to an individual who, during the immediately preceding period, enjoyed the benefits of paragraph 2, 3, or 4.
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  • The country is Germany and the tax treaty article is 20(1) afaik. I updated the question with a quote from that article and a link.
    – Freddy
    Sep 13, 2016 at 2:16
  • Who is paying your salary on J1? Foreign employer or the US company/government? Have you been in US in 2015, and if so, did you file a tax return?
    – George Y.
    Sep 14, 2016 at 16:22
  • I am paid by a US educational institution. I arrived 2015, received a stipend and filed a tax return which was 0.00 (except my stipend).
    – Freddy
    Sep 14, 2016 at 16:25
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    Did you talk to an accountant? I'm trying to understand why you are exempted from Fed taxes. AFAIK tax treaty with Germany would cover you if you were receiving income from Germany while in US. I don't see how it would exempt you from paying taxes on your US income while you're in US.
    – George Y.
    Sep 14, 2016 at 16:28
  • I will look up the exact wording and post it here. In about 1 hr.
    – Freddy
    Sep 14, 2016 at 16:33

2 Answers 2

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To answer my own question. I spoke with the tax professional at my workplace and the information is the following:

I don't pay any taxes retroactive. I begin paying taxes as soon as my status has officially changed (the start date of the green card).

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IRS 901 says the following about tax treaties:

Tax treaties reduce the U.S. taxes of residents of foreign countries. With certain exceptions, they do not reduce the U.S. taxes of U.S. citizens or residents.

and is supposed to cover the situations such as when you're in US, and receiving income from either abroad, or US governmental program (such as teaching in your case), you wouldn't be liable to US federal taxes

And the German teacher-specific exemption says the same:

A professor or teacher who is a resident of Germany and who is temporarily in the United States...

However after your adjustment of status is approved (since you mentioned marriage, it is assumed you're becoming US permanent resident), you're considered the resident of US, according to IRS:

The green card test - You are considered to have met the green card test if at any time during the calendar year you were a lawful permanent resident of the United States according to the immigration laws

This means that even if you got permanent resident status in Dec 2016, you're considered US tax resident for the whole 2016 (not just for Dec), so your whole 2016 income is taxable (because you been also present in the USA for >183 days at that moment). However your 2015 and earlier income is not taxable because of that.

An accountant review, of course, is highly recommended if the amount is worth it. Accountants working with immigrant communities are very familiar with this topic, and would be more helpful than, for example, HR block type.

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  • Again, as in the comment: The US resident for tax purposes has nothing to do with the exemption. You can be US resident for tax purposes and still be exempted from taxes.
    – Freddy
    Sep 16, 2016 at 21:42
  • Although becoming resident makes your German income taxable by USA, there are significant exclusions/credits if it is also taxed by Germany.
    – WGroleau
    Sep 17, 2016 at 17:13

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