To All Who Have Read My Postings On This Issue:

After further consultation with NATP, I am making some additional editing changes, which will be in bold red. I have also been referred to a website maintained by a CPA with extensive credentials and experience doing returns for resident and non-resident aliens. The website is www.thetaxguy.com. Based on information from that website, I am adding guidance below in bold green. His website has a forum which may be an excellent medium to discuss nonresident tax returns.

Over the past two weeks, I have answering multiple questions regarding how to submit tax returns for foreign nationals who, in 2004, were in a F-1 visa status, then converted to a H-1 visa.

My initial interpretation was that aliens who met the Substantial Presence Test were not in a dual-status tax year and therefore should:

1) File Form 1040/1040A/1040-EZ, claiming all income for the entire year and claim the standard deduction, if applicable.

2) File Form 8843 to account for their time under F-1 visa status.

3) NOT file Form 1040NR/1040NR-EZ to account for the income while under F-1 status.

However, I could not find clear guidance on such conversion in visa status in either the 2004 Instructions for Form 1040NR nor in the 2003 version of IRS Publication 519. Since I got multiple queries on this matter, and given the fact that the guidance was neither clear nor explicit, I realized I could not rely solely on my own interpretation of these publication. For this reason, I queried the National Association for Tax Professionals (NATP) on this matter and requested an expert opinion.

They could not cite specific guidance either, but rather gave an interpretation, which is cited verbatim below:

Our interpretation of Pub. 519 is if a taxpayer is a resident for part of the year and a nonresident for part of the year, this would be a dual status year. Taxpayers under an F-1 visa are considered nonresidents for that period. Therefore, based on the situation you described below, your client would be dual status in the first year her status changes and would not be allowed the standard deduction.

I read too much into NATP's original statement and assumed that two return were required. That is NOT the case.

First, to file under dual-status (as noted by Deepatrix below), you MUST meet either the Substantial Presence Test or the Green Card Test. To meet the Substantial Presence Test requires that your F-1 visa convert to H-1 visa no later than 2 July 2004.

If you meet the requirement to file dual status, you are in effect preparing two returns. The first one is as a resident alien, using Form 1040 to account for income earned while under H-1 visa status. Print the word "DUAL-STATUS RETURN" on this Form 1040. You cannot claim the standard deduction. You claim your personal exemption(s) on the Form 1040. The second return, as a nonresident alien, is Form 1040NR/1040NR-EZ to account for the income earned while under F-1 visa status and is actually a "dual-status statement" that will be filed as an attachment to your resident alien return (Form 1040). Print the words "Dual-Status Statement" on the Form 1040NR/1040NR-EZ.

Since you cannot claim the standard deduction on either return, you can claim itemized deductions on both returns. Use the appropriate Schedule A for each return. On the Form 1040NR Schedule A, you can claim charitable donations, state and local income taxes paid, casualty and theft losses, employee business expenses and miscellaneous expenses (as detailed on Form 1040NR's Schedule A). Note that if you live in a high-tax state such as New York, California or Massachusetts, it is very possible that the state and local income taxes paid will exceed the standard deduction. If you have only one W-2 for the entire year, you need to prorate the income to account for the time on F-1 status. You were still be exempt from Social Security and Medicare taxes while you were under the F-1 visa status. If your employer withheld these taxes during that period in error, request a refund from your employer. If that is not possible, you can file Form 843 requesting a refund from the U.S. government.

The dual-status rule is different if you are from India, however. If you are an Indian citizen, you are eligible to claim the standard deduction on the Form 1040NR "DUAL-STATUS Statement" up to the amount of income earned while on the F-1 visa, but not more than $4,850. Example: The income earned under F-1 is $2,500. You can claim a standard deduction of $2,500. Second Example: The income earned under F-1 is $10,000. You can claim a standard deduction of $4,850. Since you are claiming the standard deduction, you CANNOT claim any itemized deductions on either the Form 1040NR "DUAL-STATUS Statement" nor on the Form 1040. For this reason, you should prepare the returns BOTH WAYS (claiming the standard deduction on Form 1040NR or claiming itemized deductions on both returns) and use the one which produces the least amount of taxes owed.

File Form 8843 to account for your F-1 visa status. This should be the last time you need to file this form.

Be sure to sign the Form 1040. Mail all documents in the same envelope to the following address:

Internal Revenue Service Center
Philadelphia PA 19255

Now, if you do NOT meet either the Substantial Presence Test or the Green Card Test, this is NOT a dual-status year for you. You are considered a nonresident alien for the entire year for income tax purposes, even though your visa status changed from F-1 to H-1 sometime after 2 July 2004 and even though you began paying Social Security and Medicare taxes when you converted to H-1 visa status. You should file JUST the Form 1040NR or Form 1040NR-EZ. If you were eligible, as an Indian citizen, to claim the standard deduction, you can do so again for 2004. When you file for 2005, you will be considered a resident alien and you will not have to worry about the dual-status issue for 2005.

I apologize for the confusion on this issue.

Thanks for your reply... but this is even more confusing... According to your reply we should file 2 forms. But IRS website states something different..

================================================== ========
Resident vs. Non Resident

The U.S. income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year.

Resident at End of Year

You must file Form 1040, U.S. Individual Income Tax Return if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents as the statement, but be sure to mark "Dual-Status Statement" across the top.

Nonresident at End of Year

You must file Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents if you are a dual-status taxpayer who gives up residence in the United States during the year and who is not a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a resident. You can use Form 1040, U.S. Individual Income Tax Return as the statement, but be sure to mark "Dual-Status Statement" across the top.

Vasant:

I understand your confusion. Remember that I stated that neither the Pub 519 nor the Form 1040NR instructions properly addressed the F-1 to H-1 conversion process.

The instructions you cite below deal with the circumstances of dual-status aliens coming into the U.S. (and having to file Form 1040) or leaving the U.S. (and having to file Form 1040NR).

Remember that the people under the F-1 visa are considered nonresident aliens, but in fact are physically located in the U.S. and therefore have to file a Form 1040NR or 1040NR-EZ to account for any income they earn while they are under the F-1 status. That income is subject to U.S. income taxes, but under different rules and at a different tax rate than what they pay as a resident alien.

Given those circumstances, I see no choice but to file two separate returns.

AtlantaTaxExpert:

If we file 2 forms, we can take personal exemption + Standard deduction for F-1 status and again personal exemption + Itemized deduction for H-1 status. Now isn't that too much deduction?

For all those who fail the substantial presence test - you are non resident the whole year... go to figure one in Pub 519..

If you are non resident - just file 1040 NR or NR EZ... and claim std. deduction if you are indian.

Dual status happens only if you pass the test and you had a F1 or non resident period

If you are dual status... you cannot claim std. deduction... even the instructions on 1040 NR says this.

Next if you see the example for a dual status return in Pub 519... the NR is just a statement of how long you were in the US and how much you earned as non resident...

Your W2 has total wages and social security wages the difference is what you earned as non resident.

You carry over this amount in total to the total wages on form 1040... and do itemized deductions and complete the tax form...

For people who don't have much to deduct you may owe the IRS money...

So does that mean we can get all the social security back ?

Does anyone know anything about this?

This is copied from Pub 519

Residency starting date under substantial presence test. If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year. However, you do not have to count up to 10 days of actual presence in the United States if on those days you establish that:

You had a closer connection to a foreign country than to the United States, and

Your tax home was in that foreign country.

See Closer Connection to a Foreign Country, earlier.

In determining whether you can exclude up to 10 days, the following rules apply.
You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10.

You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded.

Although you can exclude up to 10 days of presence in determining your residency starting date, you must include those days when determining whether you meet the substantial presence test


----if we are on F1 and present in the US as of Jan 1st 2004 are we resident and file only 1040?

I really appreciate your help to all of us. I qualify for substantial presence test as my h1 started on Apr 1st 2004. So as I understand,
I need to file 1040NR-EZ for income for first 3 months on F1 status and a 1040NR for income for next 9 months on H1 status. I can not cliam any standard exemptions. I have few questions.

1.Can I claim personal exemption twice (once in each form)?

2.Can I claim itemized deductions (donations to charity etc.. ) twice ?

3. I can't claim deduction because of US-India tax treay at all, not in any form.

Thanks once again,

MSR

Msrabc:

Read my posting again, especially the red parts.

This is a dual-status year for you. You must file Form 1040 (not Form 1040NR/1040NR-EZ) for the last nine months you were under H-1 visa. You prepare the Form 1040Nr/1040NR-EZ as a "DUAL-STATUS statement" to account for income earned while under F-1 visa status.

1) You claim your personal exemption only once, on the Form 1040.

2) You do claim the itemized deductions you incurred during the specific period. Example: The state income taxes withheld during the F-1 visa period are claimed on the Form 1040NR Schedule A. The state income taxes withheld during the H-1 visa period are claimed on the Form 1040 Schedule A. If you only have one W-2 which covers both period, prorate the tax withholding (one-fourth on the Form 1040NR Schedule A, three-fourths on the Form 1040 Schedule A). So for charitable deductions, if you gave $200 in January and $2,000 in July, you claim the $200 on the Form 1040NR Schedule A and the $2,000 on the Form 1040 Schedule A.

3) You cannot claim the standard deduction on either form. Because you are "dual-status", use of the standard deduction is prohibited, even though you are an Indian citizen.

Msrabc:

Read my posting again, especially the red parts.

This is a dual-status year for you. You must file Form 1040 (not Form 1040NR/1040NR-EZ) for the last nine months you were under H-1 visa. You prepare the Form 1040Nr/1040NR-EZ as a "DUAL-STATUS statement" to account for income earned while under F-1 visa status.

1) You claim your personal exemption only once, on the Form 1040.

2) You do claim the itemized deductions you incurred during the specific period. Example: The state income taxes withheld during the F-1 visa period are claimed on the Form 1040NR Schedule A. The state income taxes withheld during the H-1 visa period are claimed on the Form 1040 Schedule A. If you only have one W-2 which covers both period, prorate the tax withholding (one-fourth on the Form 1040NR Schedule A, three-fourths on the Form 1040 Schedule A). So for charitable deductions, if you gave $200 in January and $2,000 in July, you claim the $200 on the Form 1040NR Schedule A and the $2,000 on the Form 1040 Schedule A.

3) You cannot claim the standard deduction on either form. Because you are "dual-status", use of the standard deduction is prohibited, even though you are an Indian citizen.

Thanks a lot. Being a newbie this is exactly what I wanted. THanks once again.

Thanks for your detailed reply. I tried to contact IRS twice, I got two different answers from this issue. One is filing dual-status, and the other is filing resident status only.

When I firstly asked the IRS, I just mentioned my questions very simply: (I entered the US in 2000 with F-1. I held my F-1 until Jan 2004 and started from H-1 in Feb 2004), then they replied in email by saying that I should file dual status.

However, I doubt their answer because I thought that I could pass the substantial presence test. So I called IRS again. Finally the person replied by phone. I asked that person very detailed regarding this issue. Finally they said that I should file resident status because:

1. I pass the substantial presence test in 2004.
2. My last day in the US in 2004 was resident (>183 days)
3. During the transition from F-1 to H-1, I didn't leave the US, i.e. I have been physically present in the US for more than 183 days.
4. The difference to determine the status by using substantial presence test and dual resident is that Dual status involved the person whether he/she has left the country during the F-1 to H-1.

Anyway, what do you think about the answer from IRS? When I look at your answer, yours still make sense. So what should I do? Will you check with IRS?

Kkm:

I am going to modify the guidance I have provided. Changes will be in green.

However, I stand by my original guidance as to the requirement to file dual-status if you meet the Substantial Presence Test. I have checked with NATP, and have cross-checked with the website of a CPA with extensive experience doing returns for non-resident aliens.

Here is his website: www.thetaxguy.com. If you want, you can repost your question to him on his tax forum.

I would not put too much credence into the guidance from the IRS unless you are talking to an agent who works exclusively with returns from nonresident aliens. Studies have shown that the IRS advice lines put out incorrect advice about 40% of the time on general tax subjects. I suspect the percentage is even worse for specialized tax areas such as this.

Thanks for your reply.

That's why I was so confused after I got the reply from IRS because I got two different answers from them. I don't know which one I should trust. When will you repost the guidance?

Repost is complete!

Sorry, Where is the repost?

It's at the beginning of this thread.

Hi, thanks for your prompt reply. I would like to know if I was determined to be dual status in 2004, how about my State tax? I'm from Hawaii. I don't know whether I'm a resident (more than 200 days in Hawaii) or part-year resident?

Kkm:

Almost universally, you will be a part-year resident unless you live in the state for the full year. Some states don't have part-year provisions, but only tax you on income earned in that state.

Also, most states treat resident and nonresaident aliens the same. They file normal state income tax returns just like the citizens.

ATE (Atlamta Tax Expert),

The green part of the bold red and green message says if I am an Indian and I gain by taking $4850 as std deduction in 1040NR, I can do so (Provided I don't take any deduction in my 1040). [Others: I am not taking about any exemptions here, so don't get confused]

But your reply to Msrabc below (posted after the "bold red and green" posting) says

Msrabc:
3) You cannot claim the standard deduction on either form. Because you are "dual-status", use of the standard deduction is prohibited, even though you are an Indian citizen

The p519 clearly says "NO STD DEDUCTION" :(, if I follow the bold green message, am I risking too much? (If I take the std deduction, IRS owes me money, but if I itemize, I owe money to IRS ;), hence the dillema )

Another question that I have:
After preparing 1040 (return) and 1040NR (statement),
1)1040NR - I have to pay $100
2) 1040 - I get back $500

Should I do the math and expect $400 as returns?

And if it's the other way around, i.e
1)1040NR - I get back $100
2)1040 - I have to pay $500

Should I just pay $400 or should I pay $500 and wait for the $100 return?

Thanks for your patient replies. I appreciate your efforts ATE.

bbarath



Msrabc:

Read my posting again, especially the red parts.

This is a dual-status year for you. You must file Form 1040 (not Form 1040NR/1040NR-EZ) for the last nine months you were under H-1 visa. You prepare the Form 1040Nr/1040NR-EZ as a "DUAL-STATUS statement" to account for income earned while under F-1 visa status.

1) You claim your personal exemption only once, on the Form 1040.

2) You do claim the itemized deductions you incurred during the specific period. Example: The state income taxes withheld during the F-1 visa period are claimed on the Form 1040NR Schedule A. The state income taxes withheld during the H-1 visa period are claimed on the Form 1040 Schedule A. If you only have one W-2 which covers both period, prorate the tax withholding (one-fourth on the Form 1040NR Schedule A, three-fourths on the Form 1040 Schedule A). So for charitable deductions, if you gave $200 in January and $2,000 in July, you claim the $200 on the Form 1040NR Schedule A and the $2,000 on the Form 1040 Schedule A.

3) You cannot claim the standard deduction on either form. Because you are "dual-status", use of the standard deduction is prohibited, even though you are an Indian citizen.

Bbarath:

The guidance changed a couple of times over the past two weeks.

The guidance in bold green is accurate: you can claim the standard deduction.

Now, as for the dual-status return: The Form 1040NR is a statement of income, not a return in and of itself.

Put ALL of your income on the Form 1040.

Claim the standard deduction on the Form 1040. Attach a statement to the return stating that you are claiming the standard deduction as allowed under the U.S.-Indian Income Tax Treaty.

Attach the Form 1040NR with "DUAL-STATUS STATEMENT" print on the top to the return to show how much income was earned while you were under F-1 visa status.

If you have Form 1099-MISC income which was earned while under F-1 visa status, you show the income on both the Form 1040 and the Form 1040NR using a Schedule C/C-EZ; no self-employment taxes are due.

If the Form 1099-MISC was earned while under the H-1 visa, then show it only on the Form 1040 using a Schedule C/C-EZ; a Schedule SE will also have to be prepared because self-employment income is due.

Sorry I did not answer your e-mail. Yesterday was real hectic!

ATE,
Thanks for the prompt reply. Turnaround time of less than 10 -12 hrs can't be termed as a "delay" :).

I am claiming standard deduction (under India Income Tax treaty). I am planning on adding a separate sheet explaining this special case situation to IRS:


FORM 1040, Line 39
-I am a Dual Status Alien
O NOT because this is my first year in USA
O BUT because I changed from F-1 (Student from India) to H-1B.

Though Publication 519 says that One cannot claim standard dedution on a "Dual Status Return", It does not deal with this special case situation where students (F1) from India change their status to H1B.
Note: This is NOT my first year in USA.

After talking to IRS helpline and NATP, I understood that, since India Income Tax treaty allows Indian students to claim Standard deduction on 1040NR, I can claim this standard deduction for the part of my Income which I obtained as a Non Resident F1 student from India.


Do you think I am escalating the problem or making my stand clear to IRS in attaching this ?
I am sure that there is no single correct answer for this question. I just want to know your thoughts on this.

Thanks
Barath.

Hi, I don't understand how to prorate my income when I file dual status tax return for 2004. I only had one month of F-1 status in January, and 11 months of H-1 status from Feb to Dec. However, I worked for the same job in the whole 2004 (12 months). Therefore, I only have one W-2 to reflect to total income for 2004. When I looked at the dual status filing example on Publication 519, it seems like we need to fill out the total income including the non-resident period on Form 1040. Then I have the following questions:

1. Acutually based on my case, Form 1040NR is just the Dual status statement. Does it mean that this form is only for reflecting my income during non-resident period? On the form 1040, I still should include the whole year income, itemized deductions, state tax withheld, federal tax withheld for the period of resident AND non-resident?


2. When I have itemized deductions, should I prorate the state tax withheld and charitable donations for the period of resident and non-resident, and then fill out on both Form 1040NR and 1040?

3. I cannot claim standard deduction, but for the personal exemption ($3100), I have to claim it on BOTH 1040NR and 1040, or EITHER form?

4. After the calculations, IF I found that I got refunds on both of the forms, what will IRS do? Will they refund twice based on the two different forms? IF I found that I have to pay tax on one form, while I can get refund on another form, what should I do?

I do feel confused when I looked at the example on Publication 519. I hope you can help me!

Bbarath:

Attach the proposed statement. The IRS welcomes any clarification of the individual's situation.

Kkm:

To answer your questions in order:

1) Yes, all of your income and deductions is reported on the Form 1040.

2) You do prorate your income and deductions (1/12th on the Form 1040NR), but you report ALL income and deductions on Form 1040.

3) Your personal exemption is reported on Form 1040.

4) Remember the Form 104NR is just a statement provided for information purposes. It is NOT a tax return. Since all the income and all the deductions are reported on the Form 1040, the taxes reported due on the Form 1040 will be the taxes assessed (assuming they are computed correctly). Hence, the refund on the Form 1040 is the refund you will receive.

Hi,

Thanks for your reply. As you said, since I have to report all the income from last year on Form 1040, it seems to me that there's no difference to file as resident only. The only difference is I cannot claim standard deduction for dual status. If the itemdized deduction is lower than standard deduction, filing dual status has to pay more tax than filing resident status. Is that Right?

Kkm:

If you cannot claim the standard deduction and your itemized deductions are less than the standard deduction, then, yes, you will pay more taxes.

Is that fair? Probably not, but no one said taxes are fair.

All I can say is that the way I told to file is the correct way to file.

You probably could file like a resident alien, and the IRS may never catch it.

Of course, if they did catch it, they would assess you the additional taxes plus a negligence penalty of 25% of whatever the additional tax was, plus interest. If they suspect that you knowingly filed incorrectly, the penalty could go up to 100% of whatever the additional tax was, plus interest. Further, the IRS is always about 18 to 24 months behind on reviewing returns, so if they caught the discrepancy, it would not be until sometime in 2007, which means there would be about two years of interest on any additional tax and penalties they assessed.

Finally, In my opinion, if they decide to press the issue and file charges for tax fraud, and you were found guilty, at the minimum you could expect to be deported!

It's your choice and your decision, but given the possible consequences, I do not think it's worth the risk!

Hello!

I'm also dual-status alien for 2004. Would you please tell me Where on 1040 I should specify 4850 std. ded?

Thanks,
Raj

ATE,

I am a student from India. I was on OPT till Sept 04 and my H1 started from Oct 04.. I didn't work while on OPT(from Jan-sept) and started working only from Oct.
1) As I fail the substantial test & can I file the 1040NR form.
2) Also should I also file the 8843 for the period on OPT even though there is no earnings.
3) What would the standard deduction amount for me.

Please do help me in understanding this.. Thanks a lot...

2goldie:

While you are waiting for ATE, here is my $0.02 on this:

1)Since you fail the substantial presence test (For once its good to fail a test :) ), you are not a dual-status alien. You are a NR for tax purposes. So you can file either 1040NR or 1040NREZ.

3) India Income Tax treaty allows you to claim standard deduction of $4850 on a 1040NR / 1040NREZ.

2)You must file 8843 to let IRS know that you are excluding "so many" days in 2004 for calculation of substantial presence.
Hope this helps

I would suggest that you wait for comments from ATE, before filing.

Thanks
Barath

@goldie:

Bbarath's comments are totally accurate.

I have nothing to add.

Thanks Barath for the info.

Atlanta Tax Expert,

I know you have a lot of cases here but here mine out as well. I received an H-1B from my employer in January 2005 but chose to stay on my OPT till May 31, 2005 when it was valid till. In essence, between January and May 2005, I was not paying SS and Medicare Taxes. Now my question is, what tax form should I be filing. I am not an Indian resident, (British National) so the Indian rules do not apply to me presumably. I visited H&R Block yesterday and according to them I should file a simple 1040 since I meet the substantial presence test. Please give me your input on this.

Thanks.

Mohussain81:

I understand why you are asking for a separate interpretation, since most of the posting involved citizens of India.

I must assume you made a small error and that all dates are in fact 2004 vice 2005. If it is 2005, then your tax return issues will not be addressed until next year.

If it is 2004, then I agree with H&R Block in that you meet the Substantial Presence Test. However, I do not agree that you should file the normal tax forms by themselves, since you meet the classic definition of "dual-status".

Please refer to IRS Pub 519, Chapter 6 for procedures on how to file a Dual-Status tax return.

BOTTOM LINE: You need to file a Form 1040 with a Form 1040NR as an attachment to account for your income while under the OPT as specified by Chapter 6, IRS Pub 519. Further, assuming you were formerly under a F-1 visa, you also need to file Form 8843 one last time.

Atlanta Expert:

Thanks your prompt reply on this and yes I did have the years mixed up on this. One more thing, on which form do I claim my personal exemption, the 1040 or the 1040-NR. From what I gathered from the previous threads, you can only get an exemption on one form. So for example if I don't get the exemption on my 1040-NR, won't I end up owing taxes, I mean the personal exemption is my saving grace there. I know its not fair but your advice on this would be appreciated.

Remember that the Form 1040NR in the dual-status return is a statement, NOT a second tax return.

For this reason, your personal exemption, as well as all your wages, are reported on the Form 1040.

Atlanta Expert:

So let me get this straight here. I will file a 1040 Form, in which I will report all my wages for the year, only claim the personal exemption and deduction for state and local taxes and NOT claim the standard deduction of $4850. On the 1040-NR , I will report the wages that fall in my OPT period i.e. Jan-May 2004 and use a deduction for the state and local taxes with held in the period. In short, my refund or payment will be determined by the amount that on the form 1040. The form 1040-NR just shows what I earned during the OPT period. Am I getting this right? If not, is there a way to discuss this with you on the phone? I am still confused by this.

Thanks

Mohussain81:

What you said is true, except that you would claim all the itemized deductions (as specified by the Form 1040 Schedule A) on the Form 1040. Unless specifically addressed in a tax treaty, dual-status filers cannot claim the standard deduction.

Send me an e-mail to [email protected] with your phone number and I will call you.

Hi
I started my H-1 on October 1st and I was on F-1 (student from India) prior to that, so I understood from your post that I can file as a Non Resident. Once on H-1 my social security taxes were not fully withheld from October 1st so I have to pay this tax. Also in 2003 my SSN was withheld for a month which I wanted to adjust with the amount that I have to pay. What form would I have to file (would 1040NR be sufficient).
Thanks
Rd

I was on OPT from Jan 04-Oct04 & on H1 from Oct 04. I filed the 1040NREZ with std deductions of $4850.
While filling the form 8843, I came across a Q which is "Enter the number of days in 2004 you claim you can exclude for purposes of the substancial presence test".
1. should this be the total days I was on OPT in US or
2. the days on H1B

Bcos the according to the instructions on 8843, it looks like I pass the SPT.:(... its just confusing to me... Plz let me know..
Thanks

The number of days you are under F-1 visa status while on OPT is the number of days you put.

Do I have to pay Social Security tax for the year if I elect to pay as a resident?
Rd

If you had money withheld to pay Social Security and Medicare taxes, you will not be able to claim a refund for those taxes if you file as a resident.

Hi,

Let me be clear about my status. I am working on H1 right now and I converted my status from F1 to H1 on Oct 1st 2004. So, I am considered to be a non-resident alien and I should be filling out form 1040 NR or 1040NR-EZ.
Is that true ? Please help!

Thanks,

Yes, you may file as a non-resident alien for 2004, which means filing Form 1040NR or 1040NR-EZ.

However, you have an option. You may file as a resident alien under the "First Year Choice", which means filing Form 1040/1040A/1040EZ, since you met Substantial Presence on 1 April 2005.

I suggest you prepare the return both ways, then file the return that produces the least amount of tax.

For 2005, you will have to file as a resident alien.

I have a similar situation. I am from India. I was on F1 status and got converted on H1-B from Oct. 1. I understand that I have an option of filing as a non-resident alien or resident as I completed the substantial presence. I have another thing. My wife entered USA on F2 visa and right now on F1 visa. SHe has earned some income from her teaching Assistanceship. Can we file jointly in 1040NR/1040 NR-EZ or we have to file using 1040.
Thanking you in advance.
Amit

Amit:

If you file jointly, you must file Form 1040/1040A/1040-EZ.

If you file as a nonresident alien, you each must file your own Form 1040NR or 1040NR-EZ.

Hi Atlanta Tax Expert
Thank you very much for the reply. Further adding to the question.

If I file 1040 can I claim standard deduction $4850 for both of us?

Also if I file using 1040NR can I claim the std. deduction?

Thank you in advance
Amit

Amit:

Assume your wife is Indian as well.

If you each file Form 1040NR, you each can claim a $4,850 standard deduction.

If you file jointly using Form 1040/1040A/1040EZ, your standard deduction is $9,700.

Hi Atlanta Tax Expert,

Had a question regarding your post below (April 9), since I am in a similar situation to ilovesai -

>>ATE: "However, you have an option. You may file as a resident alien under the "First Year Choice", which means filing Form 1040/1040A/1040EZ, since you met Substantial Presence on 1 April 2005.">>

If the current year is 2005, how can one meet the substantial presence test?

i.e.. Current year (Jan - Mar 31) - 91 days
+ 1/3 of days in 2004 -> Oct 1 - Dec 31 - 92 * 1/3 = around 31 days.

Hence, that only comes out to 122 days, give or take a day. < 183, hence failing the substantial presence test for for April 1, 2005.

I'm obviously missing something... what is it?
Thanks so much.


--------------------------------------------------------------------------------
Previous Post:
Yes, you may file as a non-resident alien for 2004, which means filing Form 1040NR or 1040NR-EZ.

However, you have an option. You may file as a resident alien under the "First Year Choice", which means filing Form 1040/1040A/1040EZ, since you met Substantial Presence on 1 April 2005.

I suggest you prepare the return both ways, then file the return that produces the least amount of tax.

For 2005, you will have to file as a resident alien.
__________________
Hope This Helps!

Atlanta Tax Expert

CoffeeGal:

You are correct; I made a computational error.

However, the First Year Option still applies if the person delays filing his/her return to wait out the Substantial Presence Test requirement.

Details can be found on Page 9, IRS Pub 519. Be sure to properly substitute the years, as IRS Pub 519 was published for Tax Year 2003 and has been updated (but is still valid).

I am in a similar situatation as many on this thread - I was on F1 (OPT) till Mar 2004 when my H1-B was approved. My question:

I understand I should file the form 1040 as a resident but if I had no earnings while in F1 status would I still have to attach the form 1040NR marked 'Dual Status Statement'? Or would it be sufficient to send form 8843 along with my 1040 (marked 'Dual Status Return')?

I apologize for any inconvenience if this question was answered elsewhere and I failed to find it. I'd appreciate any direction in this regard.
Thanks in advance.

Narayan:

To be on the safe side, submit the Form 1040NR "Dual Status Statement", even though it has no income data. I know that does not make much sense, but it is a requirement from the IRS, and it's best not to ignore it.

As I understand from the previous posts, if my H-1 started October 1,2004 and I was on F-1 (OPT) prior to that.. I can file:
Form 1040 NR and 8843
Correct me if I am wrong?
Now, in form 8843. line 11 the Q is:
Enter type of visa you held during
2000 __ 2001__ 2002 F1 2003 F1. If the type of visa you held during any of these years changed, attach a statement showing new visa type and date of change..

So basically the visa I held during these years (f1)changed to H1 in 2004..
Am I required to attach some statement.. As such I haven't got my H1 stamped.. I only have the approval.. Not sure if we need to attach H1 approval or anything here?

Thanks in advance for your help.
Regards,
Keyur.

Keyur:

My previous research indicates you key on the approval date of the H-1B. Yes, you do need to attach a statement as to why you changed to H-1B status. Don't put too much concern into it, though. Your H-1B has already been approved.

You can file Form 1040NR and Form 8843 as a non-resident alien.

You can also file Form 1040 as a resident alien under the First Year Choice Program if you wait until 2 June 2005 to file. You must file an extension (For 4868) and pay any taxes if you will owe taxes by 15 April 05. If you are due a refund, just file the extension, which can be done by mail, on the telephone or via the Internet (www.irs.org).

ATE,
Thank you so much for answering all these questions. I don't think I would have had a clue what to do without this website.

I have a couple of questions in follow-up to what you posted earlier:

1. If I'm an Indian filing a dual-status tax return, do I list the standard deduction and personal exemption on 1040NR-EZ or just leave these blank? (I'm claiming both these on 1040)

2. Since I'm claiming the standard deduction and won't be taking any itemized deductions, I won't be including Schedule A (Form 1040), with my return. Am I correct in doing this?

I know this is an 11-th hour post but it would really help me if you would clarify these two points. Many thanks in advance,
Jo

While you wait for ATE's reply...

1.) Do not list std deduction and exemption on 1040 NR/EZ

2.) No harm including it with a note on it "India income tax treaty ... $4850"


Thanks
Barath

I am a French citizen, married to a Taiwanese woman. I entered the US in Jul 2002 to study and graduated in May 2004.

I started to work in June 2004 under the F1 visa (OPT). I transferred to H1B on the 1st of October. I already got the social security taxes from my employer for the period June-Sep.

A. If claim the first-year choice:
1. I will file in the end of May 2005 when I will meet the substantial presence test (90 days in 2004 *1/3 + 150 days = 180 days)
2. I need to file a 1040NR now for the whole period June-Dec and pay the tax. When I meet the residency requirement, I refile the whole period as a 1040.
3. Since I am dual-status, I do not get the benefit of being married and I do not have any standard deduction. I only benefit from the personal exemption of 3,100 dollars and the state taxes (itemized deduction)
3. I do not get any tax break for the tuition I paid last year

B. If I simply file a 1040NR for the whole year
1. I do not get the benefit of being married
2. I only benefit from the personal exemption of 3,100 dollars shown on the 1040NR explanation sheet and the itemized deduction of state taxes
3. I do not get a tax break on tuition

Therefore, the results are the same and it seems it is better to file the 1040NR because it is less of a hassle and I can forget the whole first-year choice thing.

I probably get something wrong. Please tell me where I am mistaken.

Caezar

Thanks Barath.

To Josie:

Bbarath has given you correct answers. I have nothing to add.

To Caesar:

I am assuming you are filing taxes on the calendar year.

You are making this more complicated than it is. I see no requirement to file Form 1040NR at all if you are electing to file as a resident under First Year Choice. The First Year Choice would over-ride the Dual Status issue, for which you cannot qualify in any event because you cannot meet Substantial Presence in Calendar Year 2004.

You should file an extension (Form 4868) and wait until you qualify to file as a resident alien under the Substantial Presence Test (end of May), then file Form 1040. That will allow you to file jointly with your wife, claim the standard deduction plus two personal exemptions, and claim the education credit or deduction. There is NO requirement to file any other forms.

Hi! I am confused over your interpretation of becoming a dual-status taxpayer in F-1 to H1-B scenario in this and many other topics.

Quote from p519: Alien (not a U.S. citizen) is considered to be a NONresident alien UNLESS he/she meets either one of the two tests: Green Card test or Substantial Presence (SP) test... Even if you DO NOT meet either of the tests, you MAY BE ABLE TO CHOOSE to be treated as a U.S. resident (i.e. be a resident alien) for part of the year (which effectively consitutes so-called dual-status). Please note that if you are an alien then you're a nonresident alien for tax purposes BY DEFAULT. Also, note that dual-status is a CHOICE, not a requirement.

Given this, I have a bit of a problem dealing with the statements that:
-first, in order to qualify for Dual-Status one MUST meet a SP test (completely opposite to what p519 says), and
-second, if person converts from F-1 to H1-B he/she MUST be in a dual-status for that year no matter when during the year this change occurred (seems to wrongfully insist on dual-status).

This is how I see this issue in the nutshell, please correct me if I am wrong:

In 2004 I held a student status under OPT classification through 6/29. When my status changed to H1-B on 6/30 I have no other choice except becoming a resident alien for income tax purposes for the entire year 2004, according to p519 (through passing SP test).

If my status changed on 7/10 instead then I have 2 tax options for 2004 (since I don't pass SP test). First option is to be a NONresident for the entire year. Second option is a dual-status taxation. But there is more. If I choose dual-status option and given that my wife is a nonresident for the entire year, there is another, even more liberal, tax election available - IRC Sec. 6013(g) known as "Nonresident Spouse Treated as Resident". This election allows both me and my wife be treated as residents for the entire 2004, therefore I convert from dual-status to resident and she converts from nonresident to resident for the ENTIRE year.

I will appreciate your clarifications.

P.S. Double-posted on www.thetaxguy.com forum
http://pub33.bravenet.com/forum/2786238237/fetch/578232/1

Dear all,

I finally asked "The Tax Guy" to help me file taxes and I highly recommend his service. He is obviously very knowledgeable about the subject and it was a pleasure to work this him. I have seldom experienced such professional service.

Caezar

Hi,

I was working on OPT till end of September 2004 and then on H1 visa from October 1, 2004. I was also outside US for 30 days in November 2004. I am filing my taxes for 2004 now. Reading through all the posts I understand that I will need to file 1040NR as I don't meet the substantial test.

I am from India. Can I claim the standard deduction under US-India treaty article 21(2) as I was on OPT (associated with student visa) till September ? The treaty says something like it is for students and business apprentices who are residents of India.

One more question, I had filed the taxes for "2003" through a CPA. I was on F1 visa for 2003 but I checked now and found that he had filed 1040 for me. As I was on F1 visa then and was a non resident he should have filed 1040NR.

If I will be filing 1040NR for 2004 do I also need to amend for 2003 and file amended 1040NR.

Please advise me what's the correct way for me to go.

Thanks,
Gud

Gud:

For 2003, you need to file Form 1040X to amend your return. You should attach a completed Form 1040NR to the Form 1040X to file properly as a non-resident alien. You should amend your 2003 return before you file the 2004 return, and send the amended 2003 return to the Philadelphia IRS Center. If you need more detailed guidance, contact me at [email protected].

For both 2003 and 2004, you may claim the standard deduction due to your OPT status.

Hi
I converted from F1 to H1B status on 1st Oct. My company has deducted Social Security and Medicare for the entire biweekly period although I should have ideally been taxed only for one week when I converted the status. I understand that I need to file the 1040NREZ form since I have been on F1 most of the year under OPT and I can claim standard deduction as an Indian citizen. How do I claim for my one week of Social Security and medicare tax for 2005? Thanks
Regards
Sushmita

Sushmita:

I have answered your queries via e-mail. Contact me if you have further questions.