Atlanta Tax expert,

I read your earlier posts about this topic for last years taxes. Esp this one...
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Kmalhotra:

That is correct. If your H-1 started in Oct 2004, you do NOT meet the Substantial Presence Test and therefore are not dual status. You do not file Form 1040.

You do file Form 1040NR or 1040NR-EZ and claim a personal exemption of $3,100 and (because you are an Indian citizen) a standard deduction of $4,850.

For 2005 and beyond, you file just like U.S. citizens, filing Form 1040/1040A/1040EZ.
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is it the same situation this year as well?
1. I am a citizen of india
2. I had F1 till oct 1 2005
3. H1-B from oct 1 2005

so my total deduction = 3100 + 4850 (take these figures for e.g)


Thanks

Clapton

Clapton:

That was my position last year, and those who followed it probably did not get into any trouble because IRS enforcement is so lax.

However, it was incorrect. You should file either as a dual-status alien or wait until June 2006 to file as a resident alien under First Year Choice.

In either case, you will be able to claim a $3,200 personal exemption and a $5,000 standard deduction.

AtlantaTaxExpert,

I spoke with an IRS representative on Friday, and she told me that:
1. I am a non-resident for tax since I don't meet the substantial presence test
2. I cannot apply the tax treaty for Indian students since I wasn't a student for the full year
3. I am definitely not dual-status for the reasons pointed out in item 1.

I haven't really read much of the archived posts, but I am just curious to know where you got your information from. If it's from the IRS, then their inconsistency is really deplorable.

I am really confused about the whole F1-OPT-H1B tax issue. The IRS publications mention nothing about it. Has anyone contacted the IRS about this? If so, what did they tell you?

Clapton:

Okay, since you don't believe me, post your question on www.thetaxguy.com and see how he answers.

He specializes in taxes for resident and non-resident aliens.

P.S.

The IRS representative was wrong! You ARE dual-status and you CAN claim the standard deduction.

ATE... that wasn't me ;) I believe you

Clapton:

Sorry, I was just a bit peeved and a lot tired when I read the response.

http://pub33.bravenet.com/forum/2786.../fetch/644732/

That's the taxguy's say on the issue, and it's the same as what the IRS rep told me

I read the post linked above. It did not fully address the issue, and Dr. Gary Carter (who IS the Tax Guy) did not post any answers to the question. Someone with the moniker Triad answered the question. I am not sure who Triad is and what his qualifications are, but he answered another of my client's questions and it turned out, when we checked with Dr. Carter, Triad was wrong! Please excuse me if I do not have a lot of faith in Triad's answers.


That said, I just read an article in the Winter Issue of TaxPro Journal, the quarterly magazine put out by the National Association of Tax Professionals that seems to support my position. The exact quote from the article is: "If the taxpayer is a nonresident alien for even one day in a calendar year, that tax payer is a dual status alien [Reg.301.7701(b)-4(c)(2)]." The man who wrote the article is an enrolled agent specializing in expatriate taxation and tax treaty issues. My confidence in him is somewhat higher than my confidence in Triad.

May I suggest that you send an e-mail directly to Dr. Carter?

In the meantime, I will contact the National Association of Tax Professionals and see if they can give me an e-mail address to the esteemed author of the article cited above.

OK.. my bad.. I just assumed triad was thetaxguy since I saw him answer the few questions I saw.

I agree that if a resident for tax purposes is a non-resident for even one day, then s/he is dual status.

Since I do not meet the substantial presence test, I am not a resident for that year

July 2003 - arrived as a student
2004 - student the whole year
2005 - OPT till Oct 11, after which I have been on H1

So my understanding is that I am NR since I do not meet the test.

Nevertheless, I will contact Dr. Carter and also post his reply on this forum.

In the meanwhile, I have filed for an extension to file my taxes.

http://pub33.bravenet.com/forum/2786238237/show/636019

I finally found a post related to this, with Gary Carter's reply, and according to him, F1-H1 is not dual status if the substantial presence test is not met.

I read the post, and though he did not explicitly say that F1-H1 is not dual status if the substantial presence test is not met, his answer does imply that dual-status alien is not applicable.

I find this most interesting, and will e-mail Dr. Carter to get further clarification. Unfortunately, NATP has not yet sent me the author's e-mail address.

I will post the results of my consultation with both experts.

In either case, you will be able to claim a $3,200 personal exemption and a $5,000 standard deduction.

I am confused about this part of your reply. I thought if I am dual status I cannot claim a standard deduction.

Clapton:

First thing, read the Sticky Note post on the top of the forum.

Dr. Carter has provided me definitive proof that dual-status filing does not apply to persons who convert from F-1-to-H-1 status. So the point about claiming standard deduction while filing dual status is moot!

You can file as a non-resident alien (Form 1040NR or 1040NR-EZ) immediately, or you can wait until June 2006 and file as a resident alien (Form 1040, 1040A or 1040EZ). Either way, since Indian citizens can claim both the standard deduction and personal exemption, it is likely the tax will be the same.

The only reason to wait is to claim certain credits (such as the Education Credit) as a resident alien which you cannot claim as a non-resident alien.

Sorry for the confusion!

ATE,

All right I think all the confusion is cleared up.. time to file taxes!

Thanks a lot

Clapton

Don't mention it!