Hi,
I needed some guidance on the taxes I can expect to pay at the end of 2011.

Background: I am a 2nd yr MBA student in Indiana and am currently doing my internship on CPT. I am designated a full-time employee during the internship period. I expect my total income not to exceed $25,000 for this year. By my research, I think I should file my taxes as a non-resident alien. Also, as per IRS handbook, I think I can claim $3650 as personal exemption and $5700 as standard deduction (Article 21(2) of the United States – India Income Tax Treaty).

I had the following queries:
1. Are my assumptions right?
2. Do I need to pay FICA? Note that the employer is NOT the university.
3. I am getting married in Nov 2011. My wife will come to the US in Jan 2012. Can I claim two exemptions? The reason I am asking is that Turbo Tax asks for marital status at END of financial year.
4. Can I claim rent during internship as expenses?
5. As per the latest paycheck, I am paying 28% tax all total (medicare+social+federal+state). Is this too much or too little?
6. What can I expect as refund or additional payment to be made?
7. Is there anything else I can do to minimize my tax outgo?
8. Any other relevant advice?

I know I am asking a lot of questions, but being a relative newcomer to this country, I can do with all the help I can get. Thank you for reading.

- Soummo.

1) Yes.

2) No. Non-resident alien student on J-1 and F-1 visas are exempt from FICA (social Security and Medicare) taxes for FIVE years.

3) Indian students can claim their wives as dependents, assuming they are married on or before 31 December 2011.

4) No.

5) You should NOT be paying the Medical and Socvial Security. Download IRS Pub 519 from www.irs.gov, print off pages 53-57, and show your employer that you are exempt from those taxes. The employer can refund taxes already withheld and stop future withholdings.

6) You should get a refund, albeit a small one.

7 & 8) Nothing else.

Sir,
Thank you so much for your response, especially since it is so favorable.
I had just one more question, if you don't mind.

A married classmate of mine, also from India, is expecting a child next month. He wanted to know if there are any tax advantages for a young child. I think he can include the child as a dependent, but is there anything else that he may have missed?

Thank you again for helping. I have seen you providing advice to so many people over the years, and I am sure we all appreciate it.

Regards.

Yes, there are definite advantages.

Assuming he is from India, he can claim the child as a dependent under provisions of the U.S.-India Tax Treaty. If the child is orn here in the U.S. by law, the child will be a U.S. citizen and thus qualifies for the $1,000 Child Tax Credit even though his father is filing as a non-resident alien.

Sir,
Thank you so much for your prompt advice.

Regards.

Glad to help!