HI,

I am studying in US since 2000, I became a faculty in a university since sept.2005 on my OPT. I am holding F-1 visa and I am married. Both my wife and I have china citizenship.
I have following questions regarding Taxes.

1. Should I pay social security and medical care? I paid social security and medical care for 2005, can I claim it back because I hear that I do not have to pay social security and medical care if I am on practical training. http://www.oiss.yale.edu/visa/f1optb.htm
2. Which Form should I file for 2006 tax return?
3. My wife is not working and she does not have a SSN, Is there a deduction which I can claim for her?
4. Can I claim China Treaty Benefits since I am still on F-1

Thank you very much,

Bo

Bo:

1) You are not obligated to pay Social Security and Medicare taxes while you were a student not on OPT status. That much I am pretty sure about. However, when you entered OPT status, I believe you should have applied for and received a H-1 visa. Once you do get a H-1 visa, you immediately become liable for Social Security and Medicare taxes. However, if you plan to only teach, give lectures or conduct research for a maximum period of three years, then your visa may be another type (maybe J-1). Consult IRS Pub 519 (which can be downloaded from www.irs.gov) and contact the Human Resource department of the university for whom you work to resolve this issue. If you are F-1 for part of the year and H-1 for the rest of the year, you should seek a refund from the university for the Social Security and Medicare taxes withheld for the period you were on F-1 visa status. If they refuse to refund the withheld taxes, get their refusal in writing and file Form 843 (see page 46, IRS Pub 519) to get the refund from the IRS.

2,3 & 4) Which tax form to file depends on the resolution of question #1:

- If your visa status changes to J-1, I believe you are exempt from ALL tax withholding and liabilities for up to three years.

- If you are on a F-1 visa for the entire year of 2005, then you need to file Form 1040NR or 1040NR-EZ. You cannot claim your wife as a dependent, so there is no requirement for her to get either a SSN or a Individual Tax Identification Number (ITIN). If you file Form 1040NR or 1040NR-EZ, you can claim the China tax treaty exemption for (I believe ) $5,000.

- If you are on a F-1 visa until Sep 2005, then convert to a H-1 visa, you can:

-- file Form 1040NR or 1040NR-EZ with all the restrictions/benefits noted above, OR

-- file as a dual status alien (a complicated process which actually serves no useful purpose and should be avoided if at all possible), OR

-- file as a resident alien under the First Year Choice. Under this option, you would file Form 1040/1040A/1040EZ. You would need to get your wife an ITIN, because yo0u want to be able to file jointly with her. You would lose the China tax treaty exemption, but that is more than offset by being able to claim the $10,000 standard deduction for a married couple filing jointly. After 2005, if you remain in the United States, you are then forced to file as a resident alien until you return to China.

Thank you very much. Now I understand better.

I entered US in the August of 2000 with a F-1 visa. I graduated in the August of 2005 and began my job in a university in September, 2005. My H-1 visa will not be valid until June,2006.

I was trying to explain to my HR department that my social security and medical tax should not be withheld since I am holding F-1 visa. But here is the reply for our university:

"...your tax status and, based on the length of time you have been in the United States, you are no longer eligible for the exemption from Social Security and Medicare. 2005 is your 6th year in the US and at this time you have passed what the Internal Revenue Service calls the Substantial Presence test. Your income in 2005 is to be treated as a resident alien for taxation purposes meaning you are subject to all employment taxes. You can apply for the tax treaty $5,000.00 benefit next year for your 2006 income. "

My question is:

Should my income in 2005 is treated as a resident alien or non-resident alien? I was holding my F-1 visa within the entire year. The reply from my HR department is consistent with your reply?

If I was resident alien, should I pay social security and medcare tax? How about non-resident alien?

I will appreciate if you can explain a little bit more!

Thanks and have a great day,

Bo

Bo:

In your original question, you did not state how long you had been in the United States under your F-1 visa.

It is my understanding that five years is the generally accepted limit for filing as a student non-resident alien. If you have in fact been in country for as long as the university's HR department states, your exemption as a student under the F-1 visa has in fact expired and their interpretation of the tax law is accurate. You are in fact liable for payment of both Social Security and Medicare taxes. This being the case, you should apply to the IRS for an ITIN for your wife and file as a resident alien.

If you file as a resident alien, the $5,000 exemption under the U.S-China tax treaty does not apply to you. However, that is a moot point, because filing jointly as a resident alien with your wife allows you to claim a $10,000 standard deduction that is otherwise not available to you, in effect making the loss of $5,000 exemption under the U.S-China tax treaty a wash.

You need to submit the W-7 for your wife's ITIN ASAP. Send it to the IRS office in Philadelphia, PA (see IRS Pub 519 for the address). Be sure to send copies of your's and your wife's visa and an explanation as to why you are applying for the ITIN. It takes 4-6 weeks to get an ITIN, and tax filing season has already started.

Thank you very much. I appreciate your help. Now I understand.

Bo

Glad to help!