i understand many people are in the same boat and i am also in the Same boat as all. let me present my case and have it clear understanding for all

First i was on OPT status from 1st January 2004 to 13th Oct 2004.
i changed my status from F1 -> H1B on 14th Oct 2004.
Hence my status from 14th Oct 2004 to 31st December 2004 was H1B.

I have couple of questions which i hope will clear doubts for many people in the same status as mine????

Federal Forms to be filed ( I guess it is 1040NREZ or 1040NR).

Social security and medicare taxes Forms numbers.

Can i claims a refund of social security taxes and medicare taxes fr the whole year from january to december??? or shud i claim refund taxes only January till 13Th October 2004.

Also i have a 300$ income in 1099INT form. Am i elgibile not to report this income since i was on OPT for more than 9 months???

What kind of standard deduction etc should i take in 1040NREZ???

Do i need to fill two fedearl forms for the dual status etc.

I am from india by the way.

i will greatly appreciate if you can throw some light on it.

Thanks in Advance,

AtlantaTaxExpert

kichubhai99:

You are not dual status because you did not meet the Substantial Presence Test.

You should file Form 1040NR and, if your itemized deductions do not exceed $4,850, you can claim a standard deduction of $4,850. Be sure to cite the "U.S.-India Tax Treaty" on Line #36 when you claim the standard deduction. You cannot take the standards deduction on Form 1040NR-EZ.

You must try to get the Social Security and Medicare taxes back from your employer first. If he refuses, ask him to put it in writing so you can attach that letter to your refund request. The form is Form 843. You can claim a refund only until 13 Oct 04. When you went to H-1B visa status, you became liable for the Social Security and Medicare taxes.

You can pro-rate the $300 in interest and be taxed only on the interest earned while under H-1B status. Show your calculations to the IRS.

You also have the option of filing as a resident alien under the First Year choice. If you do so, however, you forfeit any refund on the Social Security and Medicare taxes.

kichubhai99

"You should file Form 1040NR and, if your itemized deductions do not exceed $4,850, you can claim a standard deduction of $4,850. Be sure to cite the "U.S.-India Tax Treaty" on Line #36 when you claim the standard deduction. You cannot take the standards deduction on Form 1040NR-EZ."

Thanks for the Reply Atlanta-Tax-expert, i greatly appreciate it.

The reply did confuse me a little but it was a great directicon. I thought both the frms 1040NR and 1040NREZ are the same and really dont make differences at all. Say i made $26000 for the last year on my OPT and H1B with whihch one can i get more refunds. i donot have any dependents and have no claims to make on deduction such as IRA,House loan etc.....

"You also have the option of filing as a resident alien under the First Year choice. If you do so, however, you forfeit any refund on the Social Security and Medicare taxes."
This ansuwer of yours is also a little confusing for me to understand about the First Year choice.. . Could you please give some reference or elaborate it little,i would definetly not want to loose the Social Security and Medicare taxes....

Thanks in advance

Kichubhai99............

AtlantaTaxExpert

Kichubhai99:

The requirements for First Year Choice can be found on page 9, IRS Pub 519. They are a bit confusing, but you meet all the criteria except the Substantial Presence Test for 2005. To meet that requirement, you must wait until May 15, 2005 before filing. This is a correction of what I previously told you. This is not a problem if you will get a refund. All you need to do is file an extension, then file on May 15th. If you must pay instead of getting a refund, you should send a check with the extension.

You can file Form 1040NR-EZ. It just takes away the opportunity to claim other deductions. That's your choice.

As for forfeiting the refund of Social Security and Medicare taxes, that is a logical consequence of filing as a resident alien. Resident aliens are taxed just like U.S. citizens. They can claim all the various credits and deductions available to a U.S. citizen, but they also have the same tax obligations, which include Social Security and Medicare taxes.

Therefore, if you do First Year Choice, you cannot claim a refund for Social Security and Medicare taxes.

kichubhai99

Thanks Atlanta Tax Expert , i hope i am not eating away your precious time in all my questions. Does filing the First year Choice benefit for a long term or is it just to complete the substial presecnce test. Also if i am filing the EZ form then i can take the Standard dedcution of 4850 mentioning the INDIA -US tax Treaty and 3100 for personal exemption right for the year 2004?? Also do i need to send in he copies of the 1099INT along with the 1040NREZ o 1040NR. Regarding the refund of the social security taxes and medicare taxes if i cannot get to furnish a leter from the employer that he will no refund the social and medicare will that jeopadize my refunds because when i asked not deduct the taxes in the first place they say they dont want that botheration etc...

i think with these questions i will be done for my taxes. Thanks
Atlanta Tax Expert Once again.

AtlantaTaxExpert

First Year Choice is just that: a choice for your first year's tax filing in this country. The wait is detailed earlier is required to establish Sunstantial Presence. Regardless of whether you file resident or nonresident for 2004, you will have to file as a resident in 2005 and beyond.

If you file Form 1040NR-EZ, you can claim the $4,850 standard deduction and the $3,100 personal exemption.

The lack of the employer's letter may make the refund process a bit harder, but you can substitute a statement of your own explaining the situation.