J-1 US-Israel tax treaty and tax return

[Stargazer2010]

I am an Israeli scholar (postdoc) on J-1 visa, working at a university. I came to the US in December 2006, but started working (and receiving salary) from Jan 1, 2007. For the first 2 years (2007-2008) I have claimed tax benefits under US-Israel tax treaty. Since I wasn't paying federal income tax for the first two years I didn't submit tax return paperwork, which I now understand was not a right thing to do. Anyway, during 2009 I payed all the taxes and now I am going to submit a tax return for the first time. My questions are:

1) Since I stayed in the US for the period longer than 2 years I have to pay income tax for 2007-2008 plus interest?

2) Is there any fine for not submitting the tax return forms for 2007-2008? Can I submit them retro-actively?

[Atlanta Tax Guru]

1) There is NO retroactive tax provision in the Israel-U.S. Tax Treaty, so you are good to file as a resident alien for 2009.

2) I suspect that no tax return is required for 2007 or 2008, since you had NO taxable income. However, you SHOULD have file Form 8843 for both years. File those forms now, along with Form 8833 to explain your tax-exempt status. That should be sufficient.

If you need professional help, email me at taxexpert@visataxes.com.

[JJy]

where to find US-Israel treaty article23, saving clause and exception to saving clause?

[Atlanta Tax Guru]

Here is the link to the treaty on the IRS website:

http://www.irs.gov/pub/irs-trty/israel.pdf