My husband and I filed 1040 jointly with $10000 US-China tax treaty exemptions.

First of all, where should me file?

Secondly, if we sent our 1040 to a wrong IRS location, what should we do next?

Thank you so much!

Hi,

I think you mean you filed 1040NR or 1040NR-EZ right?
The address is:

Department of The Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

For you second question, I don't know. I hope other members have a clue.

Anthony Bu
IRS VITA, SPEC area 3

luck0bird:
Which form are you filing? Which visa do you have? If you are filing joint return as residents, then you do not get treaty deduction.

Hi,

I think you mean you filed 1040NR or 1040NR-EZ right?
The address is:

Department of The Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

For you second question, I don't know. I hope other members have a clue.

Anthony Bu
IRS VITA, SPEC area 3


Thanks for the reply. I filed 1040. Not 1040NR, 1040NR-EZ

luck0bird:
Which form are you filing? Which visa do you have? If you are filing joint return as residents, then you do not get treaty deduction.

Thanks for your help.

We filed 1040 jointly both with F1 Visa.
What if we filed federal return with tax treaty deduction?
What if we sent the forms to somewhere else, not Austin, TX?


Thank you so much!

On F1 you are nonresident for 5 years; you must file nonresident tax return.
Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents (http://taxipay.blogspot.com/2008/03/us-tax-filing-requirements-for-non.html)

On F1 you are nonresident for 5 years; you must file nonresident tax return.
Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents (http://taxipay.blogspot.com/2008/03/us-tax-filing-requirements-for-non.html)

Thanks for your reply.

On F1 you are nonresident for 5 years; you must file nonresident tax return.
Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents (http://taxipay.blogspot.com/2008/03/us-tax-filing-requirements-for-non.html)

My husband have been in US for more than 6 years and we are still holding F1 VISAs, I think we should be able to claim that tax treaty deductions on 1040 jointly as resident aliens.

I appreciate your help regarding this issue.

My concern is the destination of our 1040 form. We sent it to an address indicated on 1040 form. Not the IRS location at Austin, TX. Is there any problem here? What should we do to fix this?

Thanks again!

The China treaty is somewhat different from the rest as it omits the 5 year rule.
ARTICLE 20
(Students and Trainees)
A student, business apprentice or trainee who is, or was immediately before visiting a Contracting State, a
Resident of the other Contracting State and who is present in the first- mentioned Contracting State solely for the
Purpose of his education, training or obtaining special technical experience shall be exempt from tax in that
Contracting State with respect to:
(a) payments received from abroad for the purpose of his maintenance, education, study, research
Or training;
(b) grants or awards from a government, scientific, educational or other tax-exempt organization;
And
(c) income from personal services performed in that Contracting State in an amount not in excess of 5,000 United States dollars or its equivalent in Chinese yuan for any taxable year.
The benefits provided under this Article shall extend only for such period as is reasonably necessary to complete the education or training.

I do not see how the taxpayers could claim something over the treaty stipulated amount unless each is claiming the $5,000 exclusion. Interesting twist.
Further, I believe they are still NRA since they are not required to count days under treaty if they have satisfied the "reasonably necessary" test.

Additionally, it is interesting to note that since this article is excluded from the savings clause the Chinese may claim it even if resident by substantial presence. The Tech Expl. States:
This article is excepted from the "saving clause" of paragraph 2 of the Protocol, so its
Benefits are available to persons who otherwise qualify even if they become U.S. residents.
The question of which form they filed may be considered moot as far as their entitlement to the treaty exemption of $5,000.

The China treaty is somewhat different from the rest as it omits the 5 year rule.
ARTICLE 20
(Students and Trainees)
A student, business apprentice or trainee who is, or was immediately before visiting a Contracting State, a
resident of the other Contracting State and who is present in the first- mentioned Contracting State solely for the
purpose of his education, training or obtaining special technical experience shall be exempt from tax in that
Contracting State with respect to:
(a) payments received from abroad for the purpose of his maintenance, education, study, research
or training;
(b) grants or awards from a government, scientific, educational or other tax-exempt organization;
and
(c) income from personal services performed in that Contracting State in an amount not in excess of 5,000 United States dollars or its equivalent in Chinese yuan for any taxable year.
The benefits provided under this Article shall extend only for such period of time as is reasonably necessary to complete the education or training.

I do not see how the taxpayers could claim something over the treaty stipulated amount unless each is claiming the $5,000 exclusion. Interesting twist.
Further, I believe they are still NRA since they are not required to count days under treaty if they have satisfied the "reasonably necessary" test.

Additionally, it is interesting to note that since this article is excluded from the savings clause the Chinese may claim it even if resident by substantial presence. The Tech Expl. states:
This article is excepted from the "saving clause" of paragraph 2 of the Protocol, so its
benefits are available to persons who otherwise qualify even if they become U.S. residents.
The question of which form they filed may be considered moot as far as their entitlement to the treaty exemption of $5,000.

Let me clarify here:

$10000=$5000*2, which are tax treaty deductions for my husband and I.

My husband has passed the Substantial Presence Test. He is a resident alien, right?

We can file 1040 with tax treaty deductions as long as we are able to be considered as resident aliens for tax purpose and keep holding F1 VISAs.

I believe you would be classified as dual resident taxpayers.
While you may be residents of both China and the US under each county's tax laws, under close examination you would fail the third tie-breaker rule of habitual presence; you have been in the US for over six years and thus resident in America.
I think filing some form of 1040 is appropriate here. You are still entitled to the treaty benefit of 5,000 each as described earlier.

I believe you would be classified as dual resident taxpayers.
While you may be residents of both China and the US under each county's tax laws, under close examination you would fail the third tie-breaker rule of habitual presence; you have been in the US for over six years and thus resident in America.
I think filing some form of 1040 is appropriate here. You are still entitled to the treaty benefit of 5,000 each as described earlier.

Thanks for confirming this.

Five Rings or luck0bird,

My knowledge is limited, however, from what I understand, one cannot count the days on F-1 in the substantial presence test. In that case, wouldn't they be considered still non-residents? Or, am I missing a 5-yr rule here?. Please clarify!

Moniac, that is a very good question. Student exemption from counting is all spelled out in reg. sec. 301.7701(b)-3(7)(iii).
Our Chinese couple are trying to so arrange affairs as to keep taxes as low as possible. If they file as resident aliens because they have exceeded the 5 year rule and still may exclude 10,000 from income as they are permitted to do under treaty they have accomplished their goal admirably.

They do not wish to invoke the "closer connection" rule (to China) because that would mean they must file a 1040NR and lose the standard deduction.
They may have done this had they wished by receiving permission from the IRS Field Assistance Area Director.
(iii) Limitation on student exemption. An individual will not be able to exclude days of presence as a student if the individual has been exempt as a teacher, trainee, or student for any part of more than five calendar years, unless it is established to the satisfaction of the district director that the individual does not intend to reside permanently in the United States and has substantially complied with the requirements of the student visa providing for the individual's temporary presence in the United States. For purposes of this paragraph (b)(7), the facts and circumstances to be considered in determining if an individual has demonstrated an intent to reside permanently in the United States...

Thanks for the clarification, FiveRings!

Luck0Bird:

I actually think you filed correctly,

As Five Rings noted, you and your spouse ARE allowed to continue to claim the $5,000 treaty exemption under an exception to the Savings Clasue in the U.S.-Cina Tax Treaty.

Further, because your husband exceeded five years in the U.S. under his F-1 visa, he is considered to be resident for tax purposes starting on 1 January of the sixth year unless he chooses to continue his exempt status by claiming a "closer connection" to his home country. The emphasis on the word "chooses" is key, because he has the option of doing this. He can choose to file as a resident if he wants.

You, as his spouse, can also choose to be treated as a resident alien for all of 2008 as well. In fact, you needed to attached a statement to your joint return explicitly stating that you are making that choice.

Having done all this (hopefully), you would claim the treaty exemption by attaching Form 8833 to the Form 1040 and claim the $10,000 ($5,000 X 2) as a negative number on Line #21 of Form 1040.

As long as you adequately explain the treaty provision claimed on the Form 8833, the IRS should accept the exemption at face value and process the return.

If you failed to attach the Form 8833, expect the IRS to challenge the treaty exemption.