Hi,
I would be going to the US on an H1B, accompanied with my wife and two kids (all on H4). Tax experts could you please answer the following doubts of mine:

1. For individuals on H1B, the only selection of tax year is a calendar tax year, right?

2. If I reach US somewhere on Oct 1 2007, I will be able to make the First Year Choice for my 2007 tax year i.e. income during Oct 1, 2007 to Dec 31, 2007 (assuming that I stay for more than 183 days in 2008) and will be able to file as a resident alien with "married filing jointly" status?

3. If I leave US by Sep 30, 2008, what will my status be considered for 2008 tax year i.e. income during Jan 1, 2008 to Sep 30, 2008? Will it still be considered as a resident alien with "married filing jointly" status?

If not, then what will be my status and what all type of exemptions (dependents etc) + standard deductions will I be able to claim?

4. Assuming a salary of 60K USD, a resident alien status with married filing jointly status and exemptions for two dependents, other than my wife, from some tax calculator, my tax came to be just 7.5%, is this correct?

Thanks and regards,
Mayank

AtlantaTaxExpert

1) Yes.

2) Yes.

3) Need to file a expatriate dual-status return; STRONGLY recommend you get professional tax help; that is NOT a return for a layman to prepare.

4) Percentage is correct, but it fails to factor in the Child Tax Credit.

Mayank123

Hi Atlanta Tax Expert,
Many thanks for the reply. Your reply leads me to another set of questions, please bear with me:

1. While you have mentioned that it will be a complicated return, but it will only be with respect to the returns for 2008 tax year, right? The 2007 tax returns would already have been done.

2. For the extension that I would be filing in 2008 for filing the 2007 tax returns, I can choose the date of filing or there are a block of dates provided by IRS from which to choose from?

3. I read about the "expatriation tax" on the IRS website and am sure that I will be leaving after June 3 and also neither my tax returns nor my worth will cross those very high figures mentioned in the website. I will defifnitely file the form mentioned in the website informing them that I have indeed complied with all the tax regulations of the US.

Then I suppose, the resident status only becomes "dual status" instead of "expatriate dual status", right? Or, will it still be "resident alien"? What will my filing status be for "dual status"?

What all type of exemptions (dependents etc) + standard deductions + child tax credit will I be able to claim under the said filing status and resident status as "dual-status"?

4. What is this "Child Tax Credit" and will it further bring my tax for the year down by the said amount i.e. $2000? I do not have to send my kids to any daycare or pay to any professional help to claim this, right?

5. I also heard about the hybrid car where you can claim tax credit for a specified make of car. Will this be applicable for both married filing jointly and the said status for dual status?

Regards,
Mayank

AtlantaTaxExpert

1) Yes, that is correct. the 2007 return should be much easier.

2) Why would need an extension? You have until 15 April 2008 to file the 2007 tax return.

3) The expatriation tax is essentially for U.S. citizens who are permanently leaving the U.S. It should NOT affect you.

4) The Child Tax Credit is a credit for U.S. citizens and resident aliens who have children under the age of 17, No day care is required (that's for the Child Care Credit).

5) The hybrid care credit IS available to you whether you file as a resident alien, a non-resident alien or as a dual-status alien.

Mayank123

Hi Atalanta Tax Expert,
From what I have gathered after reading all the posts and also from the answers, I must say you have the best expertise regarding US taxes on this site. Thanks again for all the replies. I have just two more queries with respect to my queries (2) and (3) in the previous post:

1. I would require an extension because I would not have completed 183 days till April 15, 2008 to claim entire 2007 tax year as resident alien. In that context I repeat my question: Can I choose the date of filing or there are a block of dates provided by IRS from which to choose from?

2. Assuming that expatriate tax won't affect me, I am still not clear about my resident status, filing status and the type of exemptions (dependents etc) + standard deductions + child tax credit that I will be able to claim for 2008 tax year. Could you throw some light on this?

Regards,
Mayank

AtlantaTaxExpert

1) By filing an extension, you have until 15 October 2008 to file your 2007 tax return. Make sure you have enough money withheld from your salary to cover your income tax liability, or you will have to make a payment with the extension request.

2) Filing dual-status requires you file as Married Filing Separately. You WILL be allowed to claim your spouse and children as dependents, but you CANNOT claim the standard deduction. I believe you will also be able to claim the Child Tax Credit.

Mayank123

Hi Atlanta Tax Expert,
Thanks again for the great answers. The final set of queries:
1. I can choose any date before october 15, 2008, right?
2. If I file as a "single", will I still be allowed to claim exemptions for dependents and child tax credit?
3. Infact being a married person, can I still be forced to file as a "single" because of not meeting any criteria for residentship? Or, will I always be "dual status married filing separate" irrespective of my resident status?
Regards,
Mayank

AtlantaTaxExpert

1) Right.

2 & 3) You CANNOT file as a single under dual-status if you are married. You MUST file as Married Filing Separately.

Mayank123

Hi Atlanta Tax Expert,
Thanks for all the answers.
Regards,
Mayank

AtlantaTaxExpert

Glad to help!