Hi,

I am from India and staying in US since sept. 2005. I was on F1 visa till sept. 30th, 2008 and I am now on H1b since oct. 1st 2008. I worked on OPT from January 1st 2008 to sept. 30th 2008. I got married in April 26th 2008 and my wife joined me in US on July 24th, 2008. She came on F2 visa and switched to H4 visa on Oct. 1st 2008.

My wife does not have any income in India or in US. I had income on OPT and then on H1b. While on OPT there was no SSN/FICA taxes.

I know that I do not meet SPT and therefore I can file as non-resident alien right now or wait till June 2009 and then file as dual status alien.

I have following questions:
1) As non-resident alien, I can not file jointly. Can I file under married filing separately with my wife as dependent because she did not have any income (and I think Indian non-resident aliens can take credit for dependants)? Would it be a better option than making first year choice?
2) What do I need to do now (i.e. which form) to make first year choice. (I do not own any taxes, I am eligible for refunds)
3) If I make first year choice, I have to file two tax returns - one for part of year when I was non-resident and other for the part of year when I was resident. For first part of year, can I file jointly with my wife? For second part of year, can I file jointly with my wife?
4) If I make first year choice, is it possible that I may have to pay SSN/FICA tax (which off course I would like to avoid) for the period on which I was on OPT?

Your help will be appreciated.

Small remark: I think you don't need to wait till June 2009 to file as dual status alien. If you make you first year choice you can regard yourself as resident alien since Oct 2008.

1. You can file resident tax return as Married Filing Jointly. You will have to wait for 5 months to file your tax return till you meet the Substantial Presence Test (of 183 days) in 2009.

You will get standard deduction of $10,900 and exemptions for both of you.

You will complete forms W7 (application for ITIN) for your spouse and attach with your tax return.

2.3. &4. If you decide to file as Married Filing Jointly as First Year Choice, you must attach a statement signed by both of you to your return stating that you qualify to file as residents as First Year Choice and that you CHOOSE to file this way.
Read about H1-B tax filing: Your U.S. Tax Return: The U.S. Visas (http://taxipay.blogspot.com/2008/08/us-visas.html)

Thank you Mukata.

Now that I have decided to make first year choice and I am filing for extension. In June 2009 when I will file my tax return, I will file under "married filing jointly".

I have only question left. For first nine months of 2008, I was working as international student on OPT, (F1 visa) and there was no social security tax and no medicare tax withheld. (I think international students are not supposed to pay that because of being non-resident alien).

My question is that when I make first year choice, do I have to pay medicare and social security tax on the income which I earned while I was on OPT (international student)?
If yes, the benefit of making first year choice will disappear completely?

My feeling is that I don't have to pay medicare and social security tax for first nine months. Am I right?

Thank you.

You do not pay FICA taxes for the period you were on F1/OPT.

If you elect to file jointly, you will be treated as a resident for the entire year and you will owe FICA taxes for the whole year (even when you were on OPT).

How about FICA taxes during the F1 part of the year if you file jointly as a resident?

If you elect to file jointly you are treated as a resident for the entire year. You are not exempt from FICA during the period which you are a resident. Since you will be a resident for the entire year (if you elect), then you will owe FICA for the entire year.

IntlTax may be correct.
But this is very interesting situation.
If you must pay FICA taxes during the period you are resident, then what is the procedure to pay it. You can not pay it by yourself.

It has to be collected by the employer. Employer did not withhold because you were exempt on F1/OPT.

Now if you later on choose to be treated as resident why should employer pay for it? If employer does not pay, who will pay employer's part of the taxes.

Dear tax experts, any final decision?

Ask AtlantaTaxExpert.

Thank you all for your help. I learnt a lot about my tax filing and I found mistake in my friends tax return, he had the same case as mine but he filed 1040 which was wrong, now he is filing amendment.

Since I have to pay FICA and medicare, it does not make sense to file jointly as resident after making first year choice.

However, some findings I would like to share with you:
1) If you are indian student, you can claim standard deduction (which I have been doing for last three years).
2) If you are indian student, you can claim personal exemption of your own as well as your spouse as long as spouse does not have any income and dependent on you.
3) If you are indian student, you can file jointly as non-resident if one spouse does not work. (I seriously doubt this one. I found this info on case 15 of University of Cincinnati - International Student Services Office (http://www.isso.uc.edu/index.cfm?fuseaction=taxInformation.casescenarios) ). I could not find anything regarding this on any official source. Has someone heard this?


It turns out that the married filing jointly and married filing separately has difference of only one standard deduction (of my spouse). However, saving on FICA and medicare is much more than that when filing separately as non-resident.

Interestingly, after knowing all this I still have couple of minor questions:

1) Does my wife has to file her tax return separately. (She did not have any income and was non-resident too).
2) If yes, her ITIN request will accompany her return or my return. (I have to take her personal exemption on my return, I would need to fill the column for her ITIN or attach her W-7)
3) If her w-7 has to accompany her tax return, what should I say for her ITIN in my tax return. (Should I file for extension of my return and wait for her ITIN and then file my return).

kknnbb, thanks for your posting!

So we actually need to pay FICA for the F1 part of the year if we file jointly as residents? MukatA mentioned that it is not clear who should pay thouse taxes since they weren't deducted at that time. Do you know the answer?

Also how did you calculate the amount of FICA you would need to pay for the F1 part of the year?

aleles,

I don't know where and how to pay FICA and medicare. Let me tell you that I made a call to IRS about this and it turned out to be the case that the guy was too not sure of it. However he concluded based on IRS document 519 that international students are not liable for FICA and medicare tax.

As far as how to calculate these taxes is concerned, I know that these taxes are some fixed percentage of total income. I think FICA is about 6.2% and medicare is 1.3 % total is about 7.5%.

So in your case 7.5% of your F1 income turned out to be more than the difference in your total refund based on two standard deductions of about 5000 each and based on one?

I also remember that for Indian guys standard deduction is about the same as standard deduction for resident aliens, right? I'm not Indian and for my country the exeption is about 3000, so as dual status I'll probably get smaller refund.

Why if you file separately your spouse doesn't get the standard deduction?

Hi,

I'm in a similar situation too.I have been on h1B since oct 2008 and on f1/opt from 2005 to sept 2008 I was not able to decide if 1040 would work good for me or 1040 NR married filing separately. What I gather is that if we wait till June, we could file as residents but as MukatA said, I'm not sure how to pay FICA taxes for entire 2008.

Would appreciate any help.

Lalitha

Lalitha,

From what I understood after all the discussions here about FICA taxes during F1 period, you don't need to care about them since you cannot pay them by yourself anyway.

However, if Mukat or other experts can cleraly confirm it here, we would greatly appreciate it. Maybe we should start a new question. It's worth a topic.

In our situation the best option is to wait till June (file for extension) and then file 1040 jointly as residents for the whole year. In this way we will get two standard deductions and two exemptions.

Thanks aleles ,

Yes, that is true. It is hard until we find out how to calculate FICA taxes. Even I was thinking of waiting till June and file as resident. Do you know if we would benefit the stimulus check too if we file in June as residents if we did not receive a stimulus check last year? Also, what is the procedure to file for extension?

Thanks,
Lalitha

There is a short form 4868 that you need to file to get federeal extension. Many states accept federal extension and don't require to file additional forms if you don't owe them any money. You can read about it on their web sites.

Stimulus check is a good question. I think we will get it once we file as residents after we meet SPT. Here is the dicussion where it is mentioned https://www.askmehelpdesk.com/taxes/stimulus-plan-182003.html Again, a confirmation from tax experts would be very helpful. (I hope tax experts will find this discussion =))

aleles,

You already seem to be on your way to becoming an expert :) Thanks for your reply.
Just one more question :) My husband is on F1 and he received a scholarship grant in 2008 which is non-taxable. So, when we are filing jointly, I guess a non-resident spouse would be treated as resident. So which form should I fill? 1040 or 1040 EZ? In 1040 or 1040 EZ there is no column to report the scholarship grant. In 1040 EZ , I see that there is a provision only for taxable scholarship grant.

Did I ask too many questions?

Thanks,
Lalitha

lol, I'm an expert =) those guys probably have been studying this stuff for years!

If you can fit everything in 1040ez, then you can probably file it. I will file 1040, because I have a taxable refund (form 1099g that I got because last year as a non-resident I put my state taxes as itemized deductions). This is line 10 on 1040 and there is no such item on 1040ez.

I definitely cannot answer about the grant. However, your husband should have tax preparation sessions in his school (at least I had). I guess you can come together and they will help you both.

See this link.
Aliens Employed in the U.S. – Social Security Taxes (http://www.irs.gov/businesses/small/international/article/0,,id=131635,00.html)

It says about limitation to exemption of FICA/Medicare tax to F1 visa:

Limitations on exemption:

* The exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status.
* The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which they were admitted into the United States.
* The exemption does not apply to nonimmigrants in F-1,J-1,M-1,or Q-1/Q-2 status who change nonimmigrant status to a status which is not exempt or to a special protected status.
* The exemption does not apply to nonimmigrants in F-1,J-1,M-1, or Q-1/Q-2 status who become resident aliens for tax purposes.


Fourth item makes sure that you have to pay FICA if you treat yourself as a resident alien by making first year choice. Just because you don't know to pay the FICA tax, it doesn't mean you don't have to pay. I read in one of the threads on this forum, that you should notify your employer of the fact that you are treating yourself as resident alien and the employer will have to amend the FICA taxes.


So, I decided that I am not going to make first year choice.

I am going to file as non-resident alien, I get my standard deduction, my personal exemption and my wife's personal exemption.

see this link.
Aliens Employed in the U.S. – Social Security Taxes (http://www.irs.gov/businesses/small/international/article/0,,id=131635,00.html)
...
So, I decided that I am not gonna make first year choice.

I am going to file as non-resident alien, I get my standard deduction, my personal exemption and my wife's personal exemption.

kknnbb, thanks for clarification.
So you are getting your standard deduction as a non resident because you are from India, right?

That's correct. Students from India are eligible for standard deduction. I think you can find it in pub. 519 or 501.

Thanks for the clarification.

So I file as non-resident alien married filing jointly?

Lalitha,
You can not file jointly if filing as non-resident. However, you can take personal exemption of your spouse if spouse does not have any income last year apart from interest on checking and saving accounts and also spouse need not to file tax return.

If spouse has income, then non-residents will have to file as married filing separately... and both will have to file.

I wonder why tax experts suggested to all in our situation to file as residents. Has anyone tried to follow this approach and pay FICA taxes for the F1 part of the year?

The reason it may be better to file jointly as residents is that you can take a standard deduction of $10,900 if you file jointly as residents. The benefit of the additional deduction needs to be compared to the additional cost of the FICA. If the cost of the additional FICA is more than the benefit of the additional deduction, you should not file jointly.

The reason it may be better to file jointly as residents is that you can take a standard deduction of $10,900 if you file jointly as residents. The benefit of the additional deduction needs to be compared to the additional cost of the FICA. If the cost of the additional FICA is more than the benefit of the additional deduction, you should not file jointly.

IntlTax, thank you for your reply. What is the procedure to pay FICA taxes? Should we ask our school to take care of it? Also what is the percentage or how to calculate FICA taxes?

Thank you!

I have the same question. How do I incorporate the FICA taxes that were not deducted last year? What do I say in my return?

You should try to get your employer to pay the proper FICA taxes. This may be difficult if you are no longer employed by that employer (partly because you have to pay half of the FICA taxes). If you are unable to get the employer to correct, then you should pay your portion of the FICA taxes on Form 8919, with an attached explanation as to the circumstances.

You will NOT owe FICA taxes for your F-1 period if you opt to file jointly.

Thanks AtlantaTaxExpert,

I have already filed as married filing separately. If I do not have to pay FICA for my OPT period, I should have filed jointly and got some refund.

I guess - I can still file the tax amendment.
Could you please tell us where did you get this information about not filing FICA for OPT period.


Thank you.

Conversations with the IRS International Tax Hotline.

Hi,

Could you guys please share what you did eventually for tax return and what happened to your tax return, I mean accepted or rejected.

My wife's ITIN request is rejected. Probably because of W-7 application and tax returns were not kept together, although I submitted both together.

I am requesting again to reconsider W-7 by sending copy of tax return.

If not accepted, I will file as married jointly and make first year choice.
What do you say? Did anybody come to know anything about FICA taxes?

Thank you,

Hi,

It worked for me! Thank you experts and all who participated in many our discussions here. I filed jointly in June after I met the SPT along with W7 for my wife. We just got her ITIN and the refund. No questions asked about FICA for the F1 period. I'm now filing state and local returns to two states. Will post here later.

Cheers!

If you filed jointly for 2008, you are NOT liable for FICA (Social Security and Medicare) taxes for that year retroactively.

This issue was resolved on other posts several times over the past five months.