Hi, I am on Opt until this Oct 2007 and transferred my payroll to H1 Status in Oct 2007. I earned 12000 dollars in Opt Period and going to earn 15000 dollars by the end of this Dec 2007 on H1. I heard that if the income is lessthan 28000 per year, we can get the whole tax amount back. Can you tell whether its correct or what is the maximum limit to get whole tax amount back? (I am from India)

I appreciate your help.

Harisy:

That is not correct.

You cannot LEGALLY avoid taxes with an income level of $28,00 if you are single.

If you are married, then MAYBE you can avoid the income taxes IF you have children.

I believe that you are working under the popular belief that you can deduct your daily living expenses while on OPT under the theory that the OPT is considered a temporary work assignment.

The IRS does not agree with that position, and the Tax Court agrees with the IRS. The OPT period is NOT considered to be a temporary assignment away from your permanent tax home because, as a student/trainee, the foreign national on a F-1 visa has not established a permanent tax home yet (your home country does not count).

Many foreign nationals have filed returns like this over the past decade. The IRS is aware of this abuse and has put together a task force to examine those returns. I expect a fair number of audit notices to be delivered to those former students with very hefty back-tax-due bills attached. If they are lucky, all they will have to do is pay the taxes. They may find themselves on the next plane home with their work visas REVOKED, because the IRS could take the position that these returns were filed FRAUDULENTLY, which makes it a CRIME in the eyes of the IRS.

In my opinion, it is NOT worth the risk.

Now, the FICA (Social Security and Medicare) taxes are collected ONLY on the income earned while under the H-1 visa. You are exempt from FICA taxes while under the F-1 visa. If the company withheld FICA taxes while on OPT, go back to that employer and ask for a refund of those taxes. If they refuse, get the refusal in writing and submit Form 843 to request the refund from the IRS. I can help you with the process professionally if you wish; contact me at the email address below.

Maximum deduction is $5,350 standard deduction plus $3,400 exemption deduction. If you are married, and file as Married Filing Jointly then you get the same deductions for your spouse also, which means total of $17,500.
So if you are single, then your taxable income is $27,000 minus $8,750 that is $18,250.

Noted!