Hello tax experts,

Its been a while since I posted any questions to this forum. This forum is one of the best for tax questions and I appreciate the time taken by all of you answering these questions. You are the best.

I am in the following situation now and confused about filing 2008 taxes in April 09.

My Status situation:

1. I am in H1B since October 2006.
2. Filed 1040A (as Resident Alien for Tax Purposes) for Tax Year 2007.
3. In May 2007, got married. Wife was in H1.
4. Wife got OPT in October 2008 and Employed since Nov 1st.
5. Wife was a student in Arizona
6. I work and live in California
7. Wife is now working in Oregon.

2008 Income Situation:

1. 100% of my income in 2008 is in California
2. My wife had some income in Arizona as a student and moved with me to California in June 08
3. Now starting Nov 08, she has income in Oregon. Employer also paid Moving Expenses to her.
4. We both had about $100 interest income in California from June to Nov 08 through our joint bank accounts.

** We are planning to file Married - Jointly

Filing questions, If we decide to file married-jointly:

A. One Federal 1040A - No confusion here.
B. I file CA Resident State Tax - But does she have to file as non resident in CA or part year resident?
C. In Arizona - Does she have to file as part year resident and I file as non-resident?
D. In Oregon - Does she file has part year resident and I file as non-resident?

Now, if we file jointly:

E. Can I deduct her entire 2008 tuition expenses (almost $10,000 dollars) even if got married only in May?
F. Can I deduct her eligible moving expenses on joint return, since her employer has paid cash out and withheld at supplemental rate?
G. Can I claim her as a dependent? -- since I provided more than 50% of support??
G. In general are there advantages of filing jointly in terms of deductions?

If we choose to file married filing separately?

1.) What advantages exist compared to jointly in terms of deductions?
2.) Can I claim her as dependent?
3.) What about moving and her tuition expense deduction?
4.) Can I claim her as dependent? - If yes, what happens to educational expenses deduction since I read IRS does not allow tuition deduction if we are claimed as dependent on someone else's tax return.

Now, if married filing separately is the worst option for us, can both of us file single separately??


FICA / Medicare Tax Questions:

1. On my wife's first pay check, her employer withheld FICA/Medicare? She is in OPT.
2. How do we get this back? Is the employer obligated to refund it or we have to only go through IRS?
3. If we file married - jointly in April 2009 Can I get a refund for my wife's FICA/Medicare taxes for Nov and Dec 2008? What about for the year 2009? Do she have to pay Fica/medicare?
4. If we file married - separately, can she get a refund for FICA/Medicare for 2008?

Final set of questions:

Now lets say that after our request the employer has stopped witholding her FICA and Medicare. For Tax Year 2008, can we file Married - JOintly and claim her FICA/Medicare and deduct tuition?

And now for Tax year 2009, we do not anticipate any more tuition expenses. So just to save on Fica/Medicare, can we in April 2010, file married separately, so that I can just get a refund on her Fica/Medicare?

Thanks a lot for your patience in advance.

Gratefully,
Raj

File jointly! There are virtually NO advantages to filing Married Filing Separately.

By Law, you cannot file as SINGLE.

B/C/D) In each case, you must file jointly because you filed jointly with your wife on your federal return. But in each case, you will pay taxes ONLY on income earned within the respective state, because your wife is NOT a resident of California.

You will pay taxes on your California return on YOUR California income.

She will pay AZ taxes (filing as a part-year resident) on her AZ income only.

She will pay OR taxes (filing as a part-year resident) on her OR income only.

FICA TAXES:

1) Your wife should NOT be paying FICA taxes. See link below:

Nonresident Spouse Treated as a Resident

2) Once you show her employer's payroll department the link below, they should refund the FICA taxes already withheld, because they (the employer) gets money back as well.

3-4) It does NOT MATTER whether you file jointly or not, your wife is entitled to the FICA refund. If the employer refuses, she can get it back by filing Form 843 in 2009. Your filing status is irrelevent.

Hello AtlantaTaxExpert.

Thank you so much for your replies. You claried my questions with a right to the point answer.

So other question I had asked is,

Would I be able deduct her tuition expenses for 2008 if we filed jointly?


Thank you so much. I am actually looking forward to use your services professionally during the upcoming tax filing season.

Thanks,
Jay

Sorry I missed that the first time.

Yes, if you file jointly, you will be able to deduct some (though not all) of her tuition costs, or claim the Lifetime Learning Credit. The fact that these expenses were incurred prior to your marriage is irrelevent.

Thank you very much AtlantaTaxExpert. You have clarified my questions.

Glad to help!