I have a somewhat complex international tax situation.

1) F1 non-resident or resident?

I was on an F1 visa from Aug 1999 - Jun 2003, and filed non-resident taxes.

I then returned home to Singapore from early Jul 2003 to late Sep 2007.
I am now back in the US on an F1 visa again for graduate school.

- does the 5-year clock for filing as non-resident start again from 2007, or does the earlier time I spent in the US count towards the 5 years?

- if I have to file as a F1 resident alien, and if my spouse is on an F2 visa, does she have to file as a non-resident or resident alien? She has never been in the US except as a tourist, and will only move here in Jul 2008.

- Additionally, my graduate studies are entirely supported by a scholarship from the Singapore government. This scholarship is tax-free in Singapore, but would it be taxable in the US if I file as a resident alien?

2) My wife received a job offer to come in on a H1B1 US-Singapore free trade agreement visa. The job would start Jul 2008 if she takes it up.

We are concerned about the worldwide income tax implications if she does take up the job as we expect to receive dividend income in Singapore (as well as my govt scholarship income).

My understanding from this forum is that she would have to file as a dual status resident for tax year 2008, and subsequently as a resident alien, whereas if I am a non-resident, I could elect to file separately as non-resident, or jointly as resident, until my 5-year F1 clock runs down, then we would both file as residents.

In either case, what kind of tax rates would we expect to get hit with for our Singapore-derived income if we file as residents?

As far as I'm aware, there's no tax treaty between Singapore and the US.

AtlantaTaxExpert

The 5-year clock does NOT restart. You must therefore file as a resident alien.

Your wife can file jointly with you and CHOOSE to be treated as a resident alien for all of 2007. Her physical locationj is irrelevent.

The scholarship is probably NOT taxable if it goes towards tuition and fees.

You file as a resident REGARDLESS of whether you file jointly or separately.

You wife can probably file as a non-resident alien for 2008 if she arrives on or after 4 July 2008.

To give you an estimate on the tax liability, I need to know your income levels.

MukatA

You were away from the U.S. from July 2003 to Sept 2007. You were non-resident for over three years 2004, 2005 and 2006.

In Pub 519, Chapter 4, p. 23 it deals with a situation where "Interrupted Period of Residence" is less than 3 years. Evidently, there is a different treatment if the interrupted period of residence is more than 3 years.
Does your clock for F1 starts again or not, there appears a need to find the necessary IRS text.

YL-Singaus

I looked at P519 C4 p23. I think the interrupted resident applies if you were a resident alien before, whereas i have been a non-resident alien all the while until now.

I did find the following:
Exempt Individual - Who is a Student

"When a Student is Not Exempt

You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years, unless you establish to the satisfaction of the IRS that you do not intend to reside permanently in the United States, and you have substantially complied with the requirements of your nonimmigrant status. The facts and circumstances to be considered in determining if you have demonstrated an intent to reside permanently in the United States include, but are not limited to:

Whether you have maintained a closer connection to a foreign country, and
Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident as discussed under Closer Connection to a Foreign Country.
If you qualify to exclude days of presence as a student, you must file a fully-completed Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition (PDF) with the IRS. If you are already filing an income tax return, attach Form 8843 to your income tax return. If you are not required to file an income tax return, you should mail Form 8843 to Internal Revenue Service Center indicated in the instructions for Form 8843. "

My scholarship agency pays tuition and fees direct to the university, but I also receive stipends directly. All of this non-US-source income is non-taxable in Singapore, but sounds like it becomes taxable if I have to file as resident alien. I'd rather not talk about exact amounts online, maybe I'll PM ATE direct.

So sounds like it would be advantageous to file as non-resident. How would I establish closer connection to Singapore? Does the fact that I have a contractual obligation to my scholarship sponsor to return home to Singapore to work for 4 years after graduation help? The contract comes with hefty financial penalties for non-compliance, in the range S$700,000+.

The relevant IRS info is here: The Closer Connection Exception to the Substantial Presence Test for Foreign Students

"The second exception to the substantial presence test for aliens is set forth in I.R.C. § 7701(b)(5)(D) and (E) and in Treas. Reg. § 01.7701(b)-3(b)(7)(iii). The exception is available only to alien students (not teachers/researchers, etc.), and contains four requirements for its application. The student—

does not intend to reside permanently in the United States;
has substantially complied with the immigration laws and requirements relating to his student nonimmigrant status;
has not taken any steps to change his nonimmigrant status in the United States toward becoming a permanent resident of the United States; and
has a closer connection to a foreign country than to the United States as evidenced by the factors listed in Treasury Regulation 301.7701-2(d)(1).
The burden of proof is on the student to prove these four factors. To claim the exception for students on an income tax return, a student should attach Form 8843 to his Form 1040NR or 1040NR-EZ."

AtlantaTaxExpert

I still do not believe that you can legally file as a non-resident alien.

However, you can call the IRS International Tax Hotline (you can get the phone number from Internal Revenue Service) and ASK. It is NOT a toll-free number, so when you look it up, do NOT use the 1-800 number.

MukatA

[quote=YL-Singaus]
"When a Student is Not Exempt
You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years, unless you establish to the satisfaction of the IRS that you do not intend to reside permanently in the United States, and you have substantially complied with the requirements of your nonimmigrant status.

Yes, you should contact IRS to find the exact situation. I feel that you have satisfactorily established that you do not intend to reside permanently in the U.S. as you left the U.S. and remained in Singapore for more than 3 years. For me, your situation is unique.

AtlantaTaxExpert

I do not think it matters. At least it has not in past cases where people came back after returning to their home countries.

MukatA

On the form 8843, in Part I, line 4a, student puts days in the U.S. for year 2007, 2006 and 2005. This proves that YL-Singaus is non-resident for 2007 without even excluding any days of current or prior F1 visa.

Now of Part III students, YL-Singaus had F1 visa during 2001, 2002 and 2003.
Line 12, is Yes as there are 6 years-- 1999, 2000, 2001, 2002, 2003 and 2007. So he must attach a statement to show that he does not intend to reside permanently in the U.S.
Line 13-- No if YL-Singaus never applied for immigration visa.
So it appears that YL-Singaus statement should serve the purpose. Yes, it is always better to check with IRS. Better he keeps completed form 8843 with statement handy.

YL-Singaus

Hi all,
For 2007, as MukatA pointed out, based on the Substantial Presence Test I am non-resident since I was in the US from Sep - Dec, and for 2-3 weeks in March, << 183 days. It's 2008 onwards that I'm concerned about of course. Anyway, thanks for the suggestions on the various options, and for the tip on checking direct with IRS, I didn't know you could do that. I shall do it soon.

I do have a quick, perhaps less complicated question.

If I am on F1, but have resident tax status due to the >5 year clause, is my spouse on an F2 dependent's visa considered resident or non-resident even though she has never been in the US except on a tourist visa (and that was several years ago)?

AtlantaTaxExpert

She has a choice.

She can choose to be a non-resident alien, in which case she would file her own tax return (Form 1040NR or 1040NR-EZ), but only if she has earned income while in the U.S.

If no income, then she can file jointly with you and CHOOSE to be treated as a resident alien for all of 2007. Her physical location is irrelevent. By doing this, you get to claim her $3,400 personal exemption AND a double standard deduction of $10,700. That would probably be the best option tax-wise.