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Retroactive Taxation for German Citizen

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  • Retroactive Taxation for German Citizen

    Hello,

    I am a graduate student and German citizen in the US (employed as a
    research assistant) and I am here since August of 2001. For 2002 and
    2003 I claimed a tax exemption on my income of $6,000 and $5,000,
    respectively. While filing my taxes for 2004 now, I saw that this tax
    exemption (20(4)) has a retroactive clause, stating that if I should
    reside in the U.S. longer than 4 years, I will be liable for tax for all
    years claiming treaty exemptions.

    As far as I understand that means I would have to pay back all the taxes
    I saved with the exemption, plus penalties. I was not aware of this
    retroactive clause when I filed my taxes. And I will definitely still be
    in the US during 2005 and 2006, meaning that this retroactive clause
    will apply to me. Can anybody give me some advice on what I need to do?

    Thanks,
    -- Sascha
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