Ask Me Help Desk - Dual status and Home buyer's credit

Hello Experts,

I have searched through the site for dual status aliens' tax responsibilities and was reasonably sure of the procedure until last week when I re-read pub519 and had to alter my mind.

I was employed on F1 visa (OPT) from Jan 14 2008 - Sep 30 2008. I was on H1B visa between Oct 1 2008 - Dec 31 2008 (72 days in US, 20 days away from US). For filing my taxes, I could do

1. file as a non resident as I do not clear the substantial presence test
2. file for an extension in 2009 and use the 31 day test to claim 2008 as the first year of residency.

While option 1. is clear and seems the best way to proceed, I have some questions about option 2.

If I file for an extension and claim 2008 as my first year of residency,

Sub a) will I file as a resident for entire period of 2008 or
Sub b) only part of 2008? (I think it is part of 2008).

If I file 1040 based on option 2 sub a (considering entire year as a resident) how do I treat FICA (social security and medicare) taxes? I did not pay FICA as a student for the period between Jan 14 2008-Sep 30 2008.

If I file as a part year resident option 2 sub b, what are the forms I need to fill? Do I fill in 1040 NR and 1040 separately? I will have a single W2 statement that indicates FICA taxes withdrawn between Oct 1 2008 - Dec 31 2008. How do fill the two separate 1040 and 1040 NR forms?

Why would someone want to file an extension and claim 2008 as a resident year based on 31 day test?:confused:

If I would buy a home in 2009, I could qualify for the first time home buyer's credit (file with 2008 tax return) provided I was a resident for tax purposes in 2008. If I claim dual status residency for 2008 based on the 31 day presence test,

1. I could qualify for the credit iff the program allows part year residency status eligibility.I have no information on that. (assuming I file as a resident for part of 2008 after claiming the first year residency choice).

Or

2. I would be filing as a resident for tax purposes in 2010 for my 2009 taxes and could claim the credit in 2010 with my 2009 tax return. I am not sure about this either.

Could you all please provide answers to the above mentioned multiple questions?:D

The ONLY way you can file as a resident alien is if you are married.

If you are single, your choices are filing as a non-resident alien, or waiting until you jhave met the Substantial Presence Test, then filing as a dual-status alien. In either case (non-resident or dual-status), you are NOT eligible for the First-Time Home Buyer's Credit.

Wait until you file your 2009 return to claim that credit.

Most of the time, it makes no sense to file dual-status, because it offer NO ADVANTAGE tax-wise, and you have to WAIT to file dual-status.

So, if you are single, file as a non-resident alien for 2008.

Thank you AtlantaTaxExpert,

That makes it a lot less simpler. I was fairly sure of this 1040NR filing for this year but I guess greed and interpretation of the tax publications often confuse people. :D

One final question, If I were to fill the 1040NR form, would my visa status be F1 or H1 for the question for type of entry visa? Should I even mark "dual status return" on my forms?

Thank you again

Quote:

Originally Posted by AtlantaTaxExpert

The ONLY way you can file as a resident alien is if you are married.

If you are single, your choices are filing as a non-resident alien, or waiting until you jhave met the Substantial Presence Test, then filing as a dual-status alien. In either case (non-resident or dual-status), you are NOT eligible for the First-Time Home Buyer's Credit.

Wait until you file your 2009 return to claim that credit.

Most of the time, it makes no sense to file dual-status, because it offer NO ADVANTAGE tax-wise, and you have to WAIT to file dual-status.

So, if you are single, file as a non-resident alien for 2008.

If you are filing as a non-resident alien, then do NOT make the return "dual-status" anywhere; it will only cause confusion.

Your entry visa was F-1; you state on Page 5 that you changed to H-1 and when the H-1 became effective.