I have another question for taxes for 2005.

I was in WIsconsin for 140 days till May 20th.

Rest I was in WAshington (no State Taxes)

On Nov 7th Moved my status from OPT(F1) to H1.

Will I get back the state tax I paid on my income in WI or is it gone. Also my understanding is that since I started my H 1 on 7th Nov I have dual status and cannot apply standard deduction. I am still working on my masters and paying some fees to the university , can I apply for a deduction.

Mehar

Mehar:

You need to file a Wisconsin state tax return to determine your tax obiligation for income earned while a resident of Wisconsin. More than likely, you have a refund coming.

You can file as a dual-status (Form 1040 with Form 1040NR as an attachment) or as a non-resident alien (Form 1040NR) or as a resident alien (Form 1040) under the First Year Choice.

You can claim your education expenses only if you file as a resident alien (Form 1040). Further, you must wait until you qualify for the Substantial Presence Test, which would be the first 183 days under the H-1 visa. That means you would file sometime in early May. You would have to file for an extension (Form 4868), but it may be worth the wait if you could claim both the standard deduction of $5,000 plus the education deductions/credits.

Hello ATE

Firstly thanks for your reply. Secondly, I am chalking a plan of action for myself. Just advice is this right or not.

Up to Mar 31st - File WI State Tax.
Up to Mar 31st - File 4868 Form for an extension to file federal taxes in May.
May 10th (after 183 days of my H1 status)- File my Federal Tax using 1040 . Apply the standard deduction as well as education expenses.

Questions
What could be the possible explanation for the delay in filing?
Isn't the Substantial Presence Test (183 days) for the tax year, in this case from Jan 1, 2005 to Dec 31 2005 or can it be considered the way you have explained it to me?
Can I even apply standard deduction of 5000 as I would be a resident?

Mehar:

The time you were under the F-1 visa does not count towards the Substantial Presence Test. That is why you must wait until May 10th.

You can file the Wisconsin tax return right now if you want, the sooner the better if they owe you a refund.

File the Form 4868 right now as well. That way, it is filed and cannot be forgotten. Keep a copy to attach to your tax return when you file it in May.

Yes, since you are filing as a resident, you are now entitled to a $5,000 standard deduction and a $3,200 personal exemption.

Hello ATE

What would be the reason I should state in 4868 for filing the taxes late. Also would you recommend taking a dedution or credit for my education expenses is their a limit to this. Should I use form 8863? I remember the state of Wisconsin wants that I should attach my Federal Return as well. What can I explain to the WI as the reason behind this delay?

And you ROCK, thanks for all your help

Mehar

Mehar:

You do not have to provide a reason for the extension, which is automatic to 15 October 2006. You should calculate your tax return to determine if you owe any money. If so, you should send a check with the Form 4868, because the extension request is a request for extension to file, NOT an extension to PAY. Same logic applies to the state of Wisconsin, who (I believe) will accept the Form 4868 as a valid extension request (a phone call to the Wisconsin state tax office will confirm this). If you do not want to wait on Wisconsin, you can attach a copy of the return you will file in May to the Wisconsin return. Even if they cross-check the return with the IRS (not likely; state tax offices have better things to do with their time), it will not be done until some time late in the year, well after you will file in May.

I cannot answer whether you should take the deduction or the credit. That needs to be determined when you prepare the return. Do it both ways and use the method which results in the least amount of tax (biggest refund).

There are limits as to the amount of deduction or credit you can take. The credit limits are $1,500 per student for the Hope Credit or $2,000 per return for the Lifetime Learning Credit. The Tuition and Fees deduction limit is $4,000. Generally, the credit(s) usually are more beneficial than the deduction, but NOT always.

Hi ATE

I was wondering when I do file after becoming a resident in US, will I have to pay the Social Security and Medicare too for the part I was working on student Visa.

Jan 05 to 6th Nov - 05 -- OPT - student Work Authorisation
7th Nov 05 to Dec 06 - H1 B

With Regards

Mehar

Mehar:

You have to pay Social Security and Medicare taxes for salary earned from the first day you are on the H-1B visa. You were exempt while you were under the F-1 visa.

How you file your income tax return (as a resident or non-resident alien) does not affect either visa status or whether yo have to pay Social Security and Medicare taxes.

Hello ATE,

I am trying to finish calculating my taxes this weekend so that I can calculate if I have to pay anything or not, Anyway I had some questions if you do get time please answer them.

I moved from WI to WA, What is the maximum amount I can put in as moving expenses and do I have to show any receipts or anything related to that because I think I have misplaced most of them. Oops did not know about this moving deduction.

If you scroll above you will find that I can file as a Dual Status Alien -- First Year Choice. Now my question is can I avail deductions as a resident and also as per my tax treaty (as I am an Indian Citizen).

With Regard
Mehar

Mehar:

If you file as a resident alien, you get to claim the $5,000 standard deduction and the $3,200 personal exemption, which, BTW, is what you get to claim as a dual-status alien (the standard deduction is the Indian Tax Treaty exemption).

As for moving expenses, there is no maximum or minimum. You can claim what you spent to:

- Move your personal effects (household goods, furniture, etc.).
- Transport yourself and your family (lodging costs on the trip from Wisconsin to Washington, mileage on the car at a rate of 15 cents a mile [22 cents if after August 31st]).
- Storage costs when you got to Washington.

And that is all. You cannot claim the meals while moving, nor any costs associated with looking for a house or apartment.

Thanks for the reply do I need any receipts for that

Mehar

I am getting confused, can I file as resident alien , the reason I want to know that is- in WI I can take a standard deduction if I file as a resident alien but if I file as non resident or as a dual status alien then I cannot.


Mehar

Mehar:

You can file as a resisent alien, but only if you wait until May 16, 2006 to file, which is when you qualify for the Substantial Presence Test. At that time, you can claim the Education Credit for your masters work in 2005.

Receipts for your move are advisable, but not absolutely necessary as long as the expenses you claim are reasonable.