Hi,

I am currently employed by US company. My H1B visa is issued on 2 Oct.
I am not married and wondering whether I have the option to choose my residency status?

I read somewhere that for SINGLE there is no option, I must file as a non-resident and pay a flat 30% and can't claim any tax credit. Would appreciate it if someone could confirm.

What is the plus of filing as resident vs non-resident?

As a non-resident, do I still have to pay social security taxes? If so, what is the percentage?

Thanks and Regards,
wyh

MukatA

When did you enter the U.S.?
If your residency period started from 2 Oct, then you can only file non-resident tax return. But it does not mean you will pay a flat 30%.
On the non-resident return you will not get standard deduction and will get itemized your deduction.

wyh

Hi MukatA,

Thanks for the reply.

I entered US on the 11 Oct.

So, what does that mean by itemized deduction?
What sort of deduction can I get?
If I don't pay a flat 30% will my tax rate be the same or differs from a resident?

Also if this time I file as a NR, does that mean next tax year I still file as NR or do I have to file as resident?

As a NR, I wouldn't get taxed on my salary that I received in other country before coming to US, correct?

Thanks and regards,
Wei Yin

AtlantaTaxExpert

MukatA is only partially correct.

He states that you can only file as a non-resident alien; that is not correctg. You CAN wait until early June, 2010, then file as a dual-status alien.

However, there are NO ADVANTAGES to waiting and filing this way. You will still NOT be allowed to claim the stnard deduction, you will have to itemize your deductions, and you will probably pay virtually the same amount in taxes.

This being the case, there is no reason to wait 5+ months to file. It is simple to just file as a non-resident alien, filing Form 1040NR or 1040NR-EZ for 2009.

In either case (non-resident or dual-status) for 2009, you will pay taxes ONLY on income earned while in the United States.

For 2010 and beyond, you will file as a resident alien, filing Form 1040, 1040A or 1040EZ, until you return to your home country. When you file as a resident alien, you must pay taxes on ALL world-wide income.

In the year you return to your home country, then you will likely file a dual-status return UNLESS you are scheduled to return to the U.S. in the following year.

wyh

Hi A

wyh

Hi Atlanta TE,

Thanks. That is very helpful.

Just to clarify on ALL world-wide income.

Does that include the dividends / gains I get from buying / selling shares (equities) on the stock exchange in my home country?

Another thing, is it possible to file 2010 and beyond as a non-resident alien?

Is there a difference in percentage of how much tax I will pay as a NR vs a Resident alient?

Thanks.

Five Rings

When filing as a resident ALL your income is included from wherever derived. So, if you received dividends, interest, capital gains, rent, etc. from ANYPLACE IN THE WORLD you must report it on your 1040 tax return.

You may take a credit for any tax you paid abroad on your US return using Form 1116 (foreign tax credit).

AtlantaTaxExpert

Yes, it DOES include the profits from the sale of equities on your home country stock exchange.

No, you have no choice: in 2010 and beyond, you MUST file as a resident alien.

As to how much of a difference, probaly not too much, because you can claim the Foreign Tax Credit to avoid double taxation.

wyh

Thanks Atlanta TE.

Five Rings, just to clarify, when you mention interest - does that also include the interest I received from my home country bank for my savings account? What about interest I received from my home country pension funds?

Additional questions:

1) What about Social Security Tax? Does both NR and resident alien have to pay SS?

2) Is it compulsory to also contribute to 401K? I am thinking that I don't want to because I am only going to be in US for about 2yrs and I will still get taxed and penalty with early withdrawal when I return to my home country.

Thanks.

AtlantaTaxExpert

1) Non-resident aliens who are in the U.S. for less than five years under a F-1 or J-1 student visa or less than two years under a J-1 trainee visa are exempt from FICA (Social Security and Medicare) taxes. Resident aliens under H-1, H-1B or L-1 visas are required to pay FICA (Social Security and Medicare) taxes.

2) No; 401K participation is strictly voluntary.