I came in Jul 08 and my wife also came the same time for her studies, In 2009, I filed 2008 taxes using 1040, now in 2010 I again filed our taxes using 1040 for 2009 returns. Recently I came to know that H1B should file taxes using 1040NR. How to go about in this situation?

You have it wrong. Persons on the H-1B visa actually file the same tax return that U.S. citizens file, i.e. Form 1040, provided they have met the Substantial Presence Test. For 2008, you would file Form 1040NR, but for 2009, you would file Form 1040.

Your wife, if she files by herself, would file Form 1040NR and Form 8843. She also has the OPTION of filing jointly with you on the Form 1040 for BOTh 2008 and 2009.

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