Q1: My mom from Hong Kong gave me $37,000 to deposit to my US bank, the original purposes was to pay my tuition in US college. I ended up getting a scholarship, so I had the money on CD and earn est. $1500 interest in a US bank in 2007. Would this interest counted as taxable income while I am using my OPT? My OPT starting from 10/3/2006, and I will change my status to H1 on 10/1/2007.

Q2: I am still confused about "First Year Choices," does that mean I can choose between 1040NR and 1040 for 2007 (the year I have status changed from F-1 to H1)?

Q3: When a student holding F-1 visa and stay in USA for more than 5 years, do they automatically consider as resident status and subject to Social security and medicare taxes on their income?

Q4: If the F-1 Visa is effective on 12/1/2002, does it still count as a year toward that 5 years limitation for resident status?

This is my first time ask a question, I hope I am not confusing.
Thanks a bunch!!

Q1: No, as a non-resident alien, that interest is actually tax-free.

Q2: No, the First Year Choice is actually a choice between filing as a non-resident alien or as a dual-status alien. Now, normally, it makes no difference tax-wise which was you file, and filing as a non-resident alien is a LOT easier. If, however, you are married, THEN you can file as a resident alien.

Q3: Yes.

Q4: Unfortunately, you must count ALL of 2002 towards the five-year rule. Hence, if you arrived in the U.S. ANYTIME in 2002 on a F-1 visa and spent ANY part of each successive year un the U.S. then, for 2007, you MUST file as a resident alien. You WILL be liable for Social Security and Medicare taxes.

If you have not already shared this information with your employer, you have a legal obligation to tell him immediately so that he/she canm begin withholding these taxes from your pay! Sorry!

BTW, if Q4 makes you a resident alien, then Q2 does NOT apply to you, and the interest earned in Q1 IS fully taxable in 2007 (but not in 2006).

Thanks a lot! That's very clear.

Glad to help!