Ask Me Help Desk - On H1-B visa, Non-resident

Hi,

I was in USA from FEB 25TH 2001 to FEB 28TH 2003 on H1B VISA.I went back to India..

Then I came to USA again on JULY 23RD 2005.

Looks like I don't meet Substantial Presence Test.

I am married, I have a kid and they came with me to USA ON 23rd JULY 2005.

1. Do I need to file as Non-resident (1040-NR)? If so, what are the exemptions do I get?

OR

2. Can I make a First Year Choice (even though I was in USA previously)?
If I make a first year choice, do I become Dual-status resident for year 2005?
What are the exepmtions do I get If I make first year choice?

Thank you very much for your help.

Regards,
Sri

Sri:

Dual-status applies in your case, especially if you earned income (and paid taxes) in India. If you file dual-status, you get no standard deduction, and you cannot claim your wife or your child.

If you go the route of First Year Choice, you can definitely claim your wife by filing jointly, thus doubling your personal exemption to $6,400 and get a $10,000 standard deduction. You still cannot claim your child, however, because he does not meet the residency test nor did he live with you for at least six months in the U.S. Sorry about that!

It woulld help to know how much income you earned in India, how much you earned in the U.S. and where you live in the U.S.

Thanks for the reply.

I didn't earn any income in india since I came to USA. So can I go for First year choice.

Also I leave in Connecticut.

I have earned around 25k in USA.

Please let me know the process I need to follow based on the data.

Thanks.

Quote:

Originally Posted by AtlantaTaxExpert

Sri:

Dual-status applies in your case, especialy if you earned income (and paid taxes) in India. If you file dual-status, you get no standard deduction, and you cannot claim your wife or your child.

If you go the route of First Year Choice, you can definitely claim your wife by filing jointly, thus doubling your personal exemption to $6,400 and get a $10,000 standard deduction. You still cannot claim your child, however, because he does not meet the residency test nor did he live with you for at least six months in the U.S. Sorry about that!

It woulld help to know how much income you earned in India, how much you earned in the U.S., and where you live in the U.S.

Okay, Connecticut does not have a large income tax, so it definitely makes sense for you to use First Year Choice.

Download Form W-7 from www.irs.gov. Fill it in and have your wife sign it. Have a copy of her passport photocopied and nortarized as a true copy. You can get this done at any bank.

Attach the completed and signed W-7 with the notarized copy of the passport to the Form 1040EZ. Put your and your wife's name on the Form 1040EZ, and fill out the form as needed. Leave the section for your wife's SSN blank.

Now, you must wait until late May 2006 before you file in order to qualify under the Substantial Test before you file for 2006. You should apply for an extension using Form 4868. Put your and your wife's name on the Form 4868, and put the words "APPLIED FOR" where your wife's SSN should go.

Once late May arrives, file the Form 1040EZ, mailing it to the address on the W-7. The IRS will issue the ITIN, put in the ITIN on the Form 1040EZ and process the return. They will notify you by letter what your wife's ITIN is. Once you get that, you can then file your Connecticut tax return. You should apply for an extension for the Connecticut returnm; you can get the extension form off the Connecticut state government website.

You will be able to claim your child for 2006, but not 2005.

Thanks for the quick reply.

My wife already has ITIN. If you look at my first posting, I have mentioned that we have been to USA before ("I was in USA from FEB 25TH 2001 to FEB 28TH 2003 on H1B VISA.I went back to India..")...

So can I still make a first year choice even though I was In USA before.

Thanks again.

Quote:

Originally Posted by AtlantaTaxExpert

Okay, Connecticut does not have a large income tax, so it definitely makes sense for you to use First Year Choice.

Download Form W-7 from www.irs.gov. Fill it in and have your wife sign it. Have a copy of her passport photocopied and nortarized as a true copy. You can get this done at any bank.

Attach the completed and signed W-7 with the notarized copy of the passport to the Form 1040EZ. Put your and your wife's name on the Form 1040EZ, and fill out the form as needed. Leave the section for your wife's SSN blank.

Now, you must wait until late May 2006 before you file in order to qualify under the Substantial Test before you file for 2006. You should apply for an extension using Form 4868. Put your and your wife's name on the Form 4868, and put the words "APPLIED FOR" where your wife's SSN should go.

Once late May arrives, file the Form 1040EZ, mailing it to the address on the W-7. The IRS will issue the ITIN, put in the ITIN on the Form 1040EZ and process the return. They will notify you by letter what your wife's ITIN is. Once you get that, you can then file your Connecticut tax return. You should apply for an extension for the Connecticut returnm; you can get the extension form off the Connecticut state government website.

You will be able to claim your child for 2006, but not 2005.

Really?

Was the child with you for that 2-year stretch, or was that before he/she was born?

My family(wife & child) were with me starting March 2002 until we left the country.

Even my child has ITIN.

So can I still make a first year choice even though we were In USA before??

Nagamasr:

I did not realize that you were in country for two years from 2001 to 2003. In the eyes of the IRS, you and your wife are already resident aliens.

Given these facts, file as resident aliens, filing jointly with your wife and claiming your child. There was probably no paper trail for 2004, so the IRS will not expect a tax return for that year.

I suspect they will process the return and send you your refund, no questions asked.

Thanks. This is very encouraging...

But stilll I will not meet the substantial presence test for tax year 2005. Do you think I can file as resident now itself.

Days present in 2003 : 59
Days present in 2004: 0
Days present in 2005: 162

Do you think it is OK?

Thanks again.

It is true that you do not technically meet the Substantial Presence Test.

In your case, however, the IRS will not know that, and in fact would challenge the validity of a non-resident tax return (Form 1040NR), because you last filed a resident alien tax return. I am confident that you could file immediately and the return woulds process with no problem.

However, if you want to be safe, you can wait until May 9, 2006, and then file. At that point in time, you would qualify as a resident alien under First Year Choice. The there would be no issue at all whether your filing as a resident alien is legal or not.