I am on H1B from June 1, 2004. I was on F1 until May 31, 2004 on OPT. I cleared the substantial presence test on H1 visa and stayed around 189 days in USA on H1 visa. While i was on my OPT (F1) i was self employed and received a 1099 MISC (non-employee compensastion). I guess I am a Dual -Status alien for 2004 and cannot make the first year choice as i don't meet all the conditions. p519 says that I can't claim standard deduction of $4850, but can only do an itemized deduction (whihc comes to arnd $1500). Since I satyed in USA for the whole year, I think it is only fair to use standard deduction. Do you have any input on this?

I am more than willing to give more info if reqd.

Thanks
B

AtlantaTaxExpert

bbarath:

I have filed several Form 1040-NRs over the past several years. You have my respect for trying to file the form yourself, as I know more than a few professional tax preparers who will not touch Form 1040-NR with a ten-foot pole.

That said, your reading of the instructions is accurate: you cannot claim the standard deduction. Whether it is fair or not is irrelevent, that is the law, and any attempt to claim the standard deduction will be rejected by the IRS. No one said the tax code is fair!

Hope this helps!

Atlanta Tax Expert

Taxi

I'm facing identical issues. With the F1-H1B status, are you using an 1040NR form? How are you treating the social security taxes? Aren't F1 students on OPT exempted from that? What about the SS tax withheld under your H1B? Are you getting them back because of your NR status?

If you file with itemized deductions, are you allowed to use Schedule C for the 1099 portion of the year?

Can such a status be combined with a dependent? My wife is being supported by me because she is in school for the whole of 2004. She gets a small teaching stipend on a W2.

AtlantaTaxExpert

Taxi:

You cannot claim your wife as a dependent. You either file Married Filing Jointly (MFJ) or Married Filing Separately (MFS). MFJ is probably the best for you, because the stipend she receives is probably not large enough that it requires both the personal exemption and the standard deduction to cover the tax liability. However, if you file MFS, and she is a U.S. citizen, the normal condition that requires both spouses to either file Standard Deduction or both to itemize does not apply in your case.

I am not sure of this item without research, which I will not do without compensation. However, my gut tells me you are in fact liable for the social security taxes, so the withheld FICA taxes will not be refunded.

You can use the standard Schedule C/C-EZ to report the income received for the 1099-MISC.

Atlanta Tax Expert

mk326

I had been F1 student for 5 years and has worked for my current employer since I was in OPT from 7/1/04 to 12/14/04 and changed to H1B status on 12/15/04. I am so comfused that which Form I should use for my tax return.

AtlantaTaxExpert

mk326:

What country are you from? Special rules apply for residents of certain countries.

Unless you are from one of the special-rule countries, you are considered a "dual-status" alien. You would file Form 1040NR or 1040NR-EZ.

As it stands right now, you cannot claim the standard deduction. That may change based on the answer you give top my first question.

rajkum2002

Hi bharath,

I think the deduction in your case would be 1500 + 3050= 4550

Check the example in chapter-6. Though you cannot claim standard deduction you can still claim personal exemption of 3050.
http://www.irs.gov/publications/p519/ch06.html

BE AWARE: I'M ALSO RESEARCHING ON THE SAME ISSUE. I DON'T KNOW IF WHAT I SAID IS TRUE. BUT IS WORTH CHECKING THE LINK. DONT TAKE THE INFORMATION I AM GIVING AS CORRECT... CHECK FOR YOURSELF.

also, can you tell me how you calculated your itemized deduction. isn't that your state tax?

do you know how to included 1099 and 1099-G income? Thanks!

Raj

rajkum2002

hi bharath...

I now see what you are saying....

normally it is 4850 + 3050
but when you chose itemized deduction it is 1500 + 3050...

Hmm... do you know if we can chose to be treated as a resident for the entire 2004? In that case do we have to pay social security and medicare?

Let me know if you have more information!

thanks,
Raj

AtlantaTaxExpert

Rajkum2002:

If you choose resident alien status, you must pay Social Security and Medicare taxes.

Form 1099-MISC income is normally (though not always) listed on Schedule C/C-EZ as self-employment income.

Form 1099-G income is reported on Line 11 of Form 1040NR if the 1099-G income is for a state income tax refund on a return in which you itemized.

If the Form 1099-G is for unemployment compensation, then it is reported on Line 20 of Form 1040NR.

rajkum2002

Thanks AtlantaExpert!

Yes, 1099-G income is for a state income tax refund.

1099:
I am exempted from paying social security and medicare taxes in 2001. But my employer has erroneously deducted that and refused to pay me directly. Instead he asked to file with IRS directly. I got these taxes after two years with interest. I recently got a 1099 form saying this interest is taxable and I should report it as income. Where do I specify it on 1040 and 1040NR?

thank you!
Raj