> I am a J1 Scholar from Pakistan and getting my earnings,
>> funded by Government of Pakistan as research scholarship.
>> When I came here in USA, (in 2006), I filed the tax treaty
>> exempt (form 8233) since Pakistan and USA has the treaty.
>> After filing 8233 for the following two years (i.e., 2007
>> and 2008), it seems in my earning statement that my salary
>> wasnt dedcucted by the payroll for any tax. But when I got
>> my earning statement in April 2007, it showed me that my
>> salary was deducted for two kind of taxes, namely;
>> Fed-Studying/Trng Tax Trty and IL - Studying/Trng Tax Trty,
>> and after that until now every month my salary is being
>> deducted by the same taxes. When I asked to my payroll
>> office they replied me as following:
>>
>> "Fed-Studying/Trng Tax Trty and IL -Studying/Trng Tax Trty"
>> are indicators that I am receiving tax treaty benefits for a
>> portion of my income. Once the benefits have been used I am
>> then taxed appropriately for my tax residency status,
>> non-resident or resident alien".
>>
>> I have some questions:
>> 1) what is tax treaty benefit?
>> 2) If it's a BENEFIT, then why the amount is deducted and
>> reducing my salary?
>> 3) Should I get this deducted money back at the end of year
>> through IRS as I got my taxes back last year?
>> 4) How the way for filing this amount, to get back through
>> IRS? I mean which form..?
>> 5) Should I consider these two taxes same as the normal
>> taxes which normally one's get back at the end of
>> financial year??
> First reply seems to have disappeared in the ether.........
>
> If you are asking what is a tax treaty benefit, then I have
> to ask what did you enter in Part II of Form 8233 and what
> statement did you attach to the 8233? This is the section
> that identifies the tax treaty article and the amount exempt
> from withholding.
>
> Given your statement, I have to assume that you invoked
> Article XIII paragraph 1. This exempts $5,000 of personal
> compensation from tax and it exempts from tax all the funds
> you receive from abroad for maintenance, education and
> training. As such, any amount in excess of $5000 of
> compensation is subject to tax and tax withholding.
>
> J-1 visa holders are exempt from the substantial presence
> test and are considered to be nonresident aliens. As such,
> only your income effectively connected to a trade or
> business in the U.S. is subject to tax. E.g., your
> compensation for services is taxable.
>
> Lastly, you still have to file a federal 1040NR or 1040NR-EZ
> tax return to report your income and claim any tax treaty
> exemption. The tax treaty exemption gets reported on Form
> 8833 that you attach to the 1040NR.
>
> As you reside in Illinois and have Illinois source income,
> you are obligated to file an Illinois state income tax
> return. I am not familiar with Illinois law as it relates to
> federal income tax treaty exemptions. However, Illinois
> starts with federal AGI. As your federal AGI would not
> include the $5000 of exempt income, I am almost sure that IL
> would not tax that income.
Many Thanks for the reply, yes I do remember that in the form 8233 there was an exempts $5,000 of personal compensation from tax . I guess when I apply for the tax return then I should ask for this deduction too, right.? Thanks REAZ
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