Hi,

My friend was on F-1 status for 2008. He is from India was was studying in Ohio. His annual income was $7600.

If we use the standard deduction of $3500 and the Treaty exemption of $5450 then the taxable income becomes negative. How are we supposed to handle such situations. He had federal withholding taxes and also State and local taxes.

Thanks for the help.

Taxable income is negative means you put 0. You will get refund of your federal tax withheld.
You must file nonresident tax return with Form 8843. Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents