I hope someone can help me out. In 2011 I did an unpaid internship in the US on a J-1 short term scholar. I went home, graduated, got myself a part-time job. In 2012 (186 days after my return) I came back as a PhD trainee on a J-1 research scholar visa. This time I'm getting paid by the hospital. After consulting the tax determination person, I was told the following: "you did not re-establish residency in your home country from your previous visit to the states, making you ineligible for treaty benefits (as mentioned in the tax treaty between the Netherlands and the US)".
This is what I found about re-establishing residency: Re-establish Residency Clause - "If following the period in which a person claimed student benefits, that person resumes residence and physical presence in his original home country of residence before returning to the United States as a teacher, he may claim the benefits as a teacher." Note: IRS considers re-establishing residency as at least a full year (365 consecutive days) before being eligible to use the tax treaty benefits again.
Now I was wondering if this is correct, I didn't claim any benefits last year, because I didn't get paid (I haven't filled in any tax forms for that year).
Here is the tax treaty between NL and US: http://www.irs.gov/pub/irs-trty/nether.pdf
page 42 would apply to me. Or page 47 (table 1) from Publication 901: http://www.irs.gov/pub/irs-pdf/p901.pdf
This is the bit applicable:
. An individual who immediately before visiting one of the States is a resident of the other State and is temporarily present in the first-mentioned State for a period not exceeding three years for the purpose of study, research or training solely as a recipient of a grant, allowance or award from a scientific, educational, religious or charitable organization or under a technical assistance program entered into by one of the States, a political subdivision or a local authority thereof shall be exempt from tax in the first-mentioned State on:
a) the amount of such grant, allowance or award; etc.
3. An individual may not claim the benefits of this Article or Article 21 (Professors and Teachers) if, during the immediately preceding period, the individual claimed the benefits of such other Article.
I assume the problem is that they claim I wasn't a "resident of the other state"? But is this correct? I'm pretty bumped that the treaty was applicable when I didn't need it (didn't get paid), but now I do get paid and therefore want to exercise this treaty, I can't!
Many thanks for any advice!