Dear Experts,

I came to US as a F1 student in 2000,then I did my OPT between August and December 2005. I started my H1b in Jan 1, 2006. According to my understanding I need to file the tax return as a resident alien for 2005. According to the treaties between US and China, I am still eligible to claim them (Article 20 (c) for salary and Article 20(b) for scholarship) for 2005. I got both salary and schlorships. (1) Which form should I use for my tax return? 1040EZ, 1040A or 1040? (2) How can I claim the treaty benefits? (3) Where should I file the return? (4) what is the tax rate for bank interest?

Thanks
Nathan

Nathan:

For 2005, you must file as a NON-resident alien filing Form 1040NR or 1040NR-EZ. Claiming the treaty exemptions using those forms is not a problem.

The returns get sent to the IRS Center in Philadelphia, Pennsylvania.

Tax rate on bank interest is either your marginal tax rate (which depends on how much money you made) or 30%.

I am a little in doubt of this statement. As a F-1 Chinese resident being here for six years, I should be able to file 1040 and claim both treaty benefit AND personal exemption, according to page 49 in Pub. 519. Am I correct?

If you file Form 1040, you get the standard deduction of $5,000 and the personal exemption of $3,200, but not the treaty exemption.

However, since the treay exemption is $5,000 (like the standard deduction), it's a wash.

Thanks, ATE,

But p49 in Pub. 519 actually says that I am able to claim $5000 treaty benefit even though I file 1040 due to the "saving clause" in the US/China Treaty. I think I should be able to have both standard deduction and personal deduction as well as that's default in 1040 and I am not dual-status filing.

Some people tell me I should file 8833 for the treaty benefit, but according to 26CFR301.6114(c)iii, trainee/student is exempt from filing 8833.

I am also a little bewildered about that. Thanks again!

fancieryu

Claim the exemption. I have heard of cases where you can get the exemption as well as the standard deduction.

However, the IRS will look at it very carefully, and if they decide against you, the penalties and interest can be pretty heavy if they decide you claimed the exemption even though you were not entitled, so be warned!