Hi,

My personal information:

1. P.R.Chinese Nationality, I was a student until June 30, 2007.
2. Single;
3. I have 401(k) account;
4. I have stocks;
5. I do NOT have a house or car;
6. I have 1099 forms from banks or stock broker;
7. I'm now working under H1B, and I have not applied for the Green Card;

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My experiences in the States:

1. July 13, 2006 ~ September 28, 2006: I worked in the US as a TRAINEE at a NON-academic company under my first J-1 visa, and during that period, I was still a student.

2. December 12, 2007 ~ December 13, 2008: I worked in the US as an INTERN at the same company above under my second J-1 visa. (I was NOT a student any more).

3. I was NOT physically in the States during the year of 2009, but I have US income in 2009 (Although I left the US on December 13, 2008, the company was very nice, and they even gave me bonus for 2008 performance, the payment (of course) was paid to me in March 2009, with a big bite of Federal & CO income tax withheld.)

4. March 1, 2010 ~ PRESENT (Today is March 9, 2011), I'm working here under my H-1B work visa at the same company in Colorado, USA.
I'm paying FICA taxes;
I have 401(k) account;
I have not applied the Green Card.

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Questions

1. For tax filing purpose, am I tax resident, or tax non-resident?

2. Which forms should I use for filing Federal Tax?

3. Which forms should I use for filing Colorado State Tax?

4. Does China-US tax treaty apply to me? If yes, which extra forms do I have to use?

5. Are there any other forms I have to use to maximize my tax return under the US laws?

Thank you very much!

Peter

Peter:

For 2006 through 2008, you were a non-resident alien and should have filed Form 1040NR or 1040NR-EZ plus Form 8843 and the Colorado state income tax return. You were probably eligible for the $5,000 treaty exemption under the U.S.-China Tax Treaty.

For 2009, you were also a non-resident alien, but the money received as a bonus would be considered deferred compensation by the IRS (and probably Colorado) and thus subject to U.S. and Colorado income taxes. Form 1040NR would need to be filed, along with a Colorado non-resident tax return.

Form 2010, you are a dual-status alien. Though you have met the 183-day Substantial Presence Test, you did not spend EVERY day in the U.S. in 2010, so you CANNOT file as a resident. There is no treaty exemption for 2010, and you cannot claim the standard deduction, but you can itemize and claim the Colorado withheld income taxes as an itemized deduction.

If you sold any stocks while physically in the U.S. in 2010, you need to report those sales on Schedule D while submitting BOTH Forms 1040 and 1040NR.

NOTE: The dual-status return is NOT for amateurs! Get professional tax help!

If you need professional help filing your return, email me at [email protected].

Hi Atlanta TaxExpert,

Thanks for your quick reply.

Actually I have done the tax filing for 2006~2009. I'm now doing the tax filing for 2010.

I read your suggestion about my 2010 Tax Filing, you said "Form 2010, you are a dual-status alien. Though you have met the 183-day Substantial Presence Test, you did not spend EVERY day in the U.S. in 2010, so you CANNOT file as a resident."

I could not understand why I have to be in the State EVERY day in order to file as Resident Alien.

I also checked the IRS website, and did not see any instruction about this condition.

Would you mind showing me where this is from.

Thank you so much. I appreciate.

Peter

Peter:

It is NOT stated explicitly that you have to be in the U.S. for every day of the year. In fact, it is implied that meeting the Substantial Presence Test is enough to file as a resident.

However, a noted expert in international taxation addressed this issue in an article he wrote for the National Association Of Tax Professional quarterly magazine. He contacted the IRS lawyers who confirmed that, to file as a resident, presence in the U.S. in the FIRST year is required to file as a resident.

This requirement is the reason the dual-status return exits to begin with! Think about it:

- If the requirement did NOT exist, those who MET the 183-day Substantial Presence Test could file as a resident alien.

- Those who did not could file as a non-resident alien.

There would be NO NEED for the dual-status return at all.

Hi Atlanta TaxExpert,

It seems American laws are kind of confusing.



Publication 519 (2009), U.S. Tax Guide for Aliens (http://www.irs.gov/publications/p519/ch01.html#en_US_publink1000222162)
First Year of Residency

If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date.

I was NOT even in the US from December 14, 2008 ~ February 28, 2010, so the first part (January 1, 2010 ~ February 28, 2010), I was nothing but a Chinese citizen without any income from US. If 1040NR is required for filing tax, then I should only use 1040NR for this time slot (but I had no US income, only 2 months of other income from another country [It does not make any sense to me that I have to pay tax to the US government if I worked these two months in China, where I would had already paid tax to China governement]).
For the rest of the year (March 1 ~ December 31, 2010), I have to use 1040 for filing tax.

Is this correct?

If this is correct, then actually there are 3 types of filing the tax:
1. Resident alien only;
2. Nonresident alien only;
3. Dual status (part is nonresident alien, part is resident alien)

My case in the case 3. Am I right? And I have to file both 1040 and 1040NR, right?

Thank you very much! I appreciate.

Peter

That is correct; you are a dual-status alien and you need to file a dual-status return.