Mr Mukat or Atlantataxexpert.

History:
Wife came to US in 2008 on H4, changed to F1 in 2009 June. All 2010 she was on F1 and received a 1098T (Medicare and social service tax paid). Half way through 2011 she changed to H1 (1098T for 2011 does not show medicare and social service tax but he H1B W2 had these taxes). I have been on H1 since 2005. We filed jointly both in 2011 and 2012.

Based on the letter from IRS we received
The educational credits claimed on form 1040, line (S 49 and/ or 66), needs to be verified. Your eligible educational institution did not verify the amount claimed on your tax return on forms 1098T tuitions statement. Please provide copies of the document used to support the amounts claims.

I checked our returns we filed in 2012 as well (just to check if same mistake was repeated in 2012) and the tax consultant had again done the same thing and claimed both these credits which I now believe we should not have.

Should we have not taken these credits? I saw a comment from Mukata that if my wife had paid social security and medicare taxes in those years then we are residents and can claim these credits. Can you please advise.

Regards,
Chatur

Chatur:

Since you filed jointly, you ARE allowed the claim the education credits. Send the IRS copies of the Form 1098-T the university provided plus proof that you paid tuition and fees; you can get both from the university's registrar office.

That should resolve the issue with the IRS for 2010.

Atlantataxexpert,

Thanks for the reply. How about 2011, my wife was on F1 for 9 months of the year and H1B for the 3 months. We had filed jointly, are we OK to take that credit for 2011? Thanks.

Regards,
Chatur

Yes, by filing jointly, you are fine with claiming the American Opportunity Credit for 2011.

I checked Publication 519 and found something confusing

Nonresident Spouse Treated as a Resident
If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year.

Do they mean that I need to be "resident alien" as defined by Immigration (Green card holder) or Resident alien for tax purposes.

Can you confirm where the tax treaty confirms that since we filed jointly we are OK to take the credit. Sorry for the lengthy questions but I don't want to go back to IRS withoout getting the complete picture. Many thanks for your help.

When she files jointly with you, she is choosing to be treated as a resident, which requires she pay FICA (Social Security and Medicare) Taxes, bur also gives her the benefit of being able to claim education credits.

You can find this explicitly stated in IRS Pub 519.

Thank you very much for the confirmation. We will send the IRS the fees receipt and the 1098T. Thanks for the timely help and responses.

Regards,
Chatur

Glad to help!