Danish J1 visa research scholar in US - resident or non-resident tax filing

[user17751857036]

Hi all, 

I am a J1 visa research scholar (postdoctoral fellow) working in the US with a foreign employer (University in Denmark). I arrived November 2023 and currently preparing to file taxes for 2025.

My question is what residency status I should file as? According to Sprintax I am a resident alien, but after reading about exempt individual exception for trainee/teachers I was wondering if I can claim this exemption to exclude days in 2025 since I in the preceding years (2023 and 2024) was exempt and filed as non-resident under Danish-US treaty, and my salary/income is all from my foreign employer and I do not have any US-source income.  If this holds true, should I file form 1040-NR and form 8843 or I do not qualify for this tax exemption and need to file as resident alien?  

Hope someone can help clarify this for me. Thank you 🙂

[pk]

@user17751857036 , please see this page from the IRS --Tax residency status examples | Internal Revenue Service

In general for 2023 and 2024 you were NRA and therefore filed on form 1040-NR.   In your case , you started counting days from 01/01/2025 and since you were present all 365 days, you passed the  SPT  ( 183 days counting all days present in 2025 --365, 1/3 the days present in 2024 --0,  1/6 the days present in 2023 --0 ).

Section 872(b)(3) generally  excludes ( from US taxes )  foreign income  while  still an exempt individual and this exclusion expires once  the scholar / recipient is no longer an exempt person ( absent a  tax treaty assertion).   Thus under this clause, your stipend from  foreign sources would be taxable income on your form 1040 return -- for the  tax year 2025.

US-Denmark Tax treat article 20  says , in part -->  "The exemption from tax provided by this Article shall apply to an apprentice or business trainee only for a period of time not exceeding three years from the date he first arrives in the first-mentioned Contracting State for the purpose of his training" 

Thus assuming that the  three year  is the actual elapsed time, in your case the completion is on xx/Nov /2026 ( three years from xx/Nov/2023) and therefore, by that logic US cannot tax your foreign stipend till that date.

 My ref:  denmark2.pdf

     -------  dentech.pdf

I am assuming here that you are Danish citizen, in the USA  and engaged in public benefit research/training  etc. as required by the treaty and technical explanation thereof.

So as I understand the situation -- you file as a resident for tax purposes ( form 1040 and which is indeed supported by TurboTax) covering your world income and exclude  foreign stipend income from Denmark.

Is there more I can do for you ?

[user17751857036]

Thank you for your response, it is very helpful!

However, I am not sure what you mean by "file as resident for tax purposes covering your world income and exclude  foreign stipend income from Denmark."?

I get my salary/income from my home university, am I not supposed to report that in my world income and if I do, how can I exclude my Danish income?  Do you suggest I claim a treaty-based exclusion for it or?

[pk]

@user17751857036 ,

yes, this is a small problem --- required to report world income and at the same time exclude from US taxes.  

Two options :

(a) just not report , since it is excludable --- but that would mean that unless you have some other "world income" to report,  you  may not have to file at all.  No reportable income.

OR

(b) Report the income as wages --- Box 1 of W-2, nothing for all the other boxes .  Then under other income, enter a negative exact amount  with a note/legend  " excluded --article 20 of US-Denmark ".  Thus your Adjusted Gross income is zero.  You may have to add an interest income of US$1 so that the AGI  is non-zero -- so you can e-file the return.  All of this is kind of clutzy.   Part of the issue is that  TurboTax does not have a clean way to enter and exclude  under the "other" category and/or put legends.

My general sense is that in the interest of "reducing paperwork" and/or processing effort, IRS mostly prefers to not to deal with "non-reportable" income.  However, for your records it is better to have proof that you indeed did  recognize  and then excluded income from US taxes per  US-Country X tax treaty.

See this page from the IRS --> Foreign students, scholars, teachers, researchers and exchange visitors | Internal Revenue Service

Note that in this articulation , IRS is using "Non-Resident Alien" as is used by the immigration i.e. scholars/students etc. whom are in the USA temporarily and for a specific purpose ( studies, research etc.) 

[user17751857036]

I would like to report my filing for my own track record. However, I cannot fill out the form for W2 because my employer is my home university and not my US employer so I don't have an EIN or Federal ID.

But to be clear I can claim the exception for 2025 due to tax treaty article 20 US-Denmark and because I fulfil the 4 conditions for exempt indviduals Teachers and Trainee (https://www.irs.gov/individuals/international-taxpayers/exempt-individuals-teachers-and-trainees). 

I also need to file for state taxes which I am not sure how I will do if I report my foreign income as wages in form W2 in Turbo tax.