Hi,

For the year 2012, for the first 9 months I was on my OPT (during the 4th year of my F1) and for last 3 months I was on H1 visa.

I am married (since Dec. 2011) but my wife has not been in the US (though from Jan. 2013 she possesses a H4 dependent visa). She does not have an ITIN number.

Q1. I have heard I can still file as a non-resident for the entire year by filing the 1040NR or 1040NR-EZ. Is that correct?

Q2. My employer did not withhold my social security and medicare taxes for the last 3 months of the year (when I was on the H1 visa). If I file as a non-resident for the entire year do I still need to pay those taxes?
If yes, then is filing form 8919 the way to pay those taxes and what should fill I fill as a reason code (would it be 'H' as I have not received any SS-8 from IRS or a form 1099-MISC from my employer)?

Q3. I believe I can also file as a dual status or as a resident. Please could you advise me: are there any benefits of filing as a resident? (I know the answer might vary case by case... but in general or for a normal case from experience are there any better returns achieved by filing resident as oppose to a non-resident)?

Thanks in advance.

1) Yes, you CAN do that; NOT advised, but it is an option.

2) Do NOT file Form 8919, as that is a good way to get fired. Simply notify your employer that you should have been paying FICA (Social Security and Medicare) taxes for the klast three months of the year. Do this in writing (email is good for this), and then let your employer figure it out.

3) There is NO tax advantage to filing dual-status, but you CAN and SHOULD file jointly with your wife.

It is probably most advantageous for you to file jointly with your wife, filing Form 1040 with Form 1116 to claim the Foreign Tax Credit.  Form 1116 is required because you must claim ALL world-wide income earned in 2012 (possibly your wife's 2012 salary in the home country), and the Form 1116 allows you to claim a credit for the income taxes paid to your home country.

You will need to apply for an Individual Tax Identification Numbers (ITIN) for your wife by submitting Form W-7, and that process has undergone some radical procedural changes this past year.  Instead of the simple notarization process, the IRS now requires that your home country certify the photocopy of your passport as a true copy.  This is due to rampant fraud in the ITIN submission process.  The notaries simply cannot tell the difference between a fake passport and the genuine passport.

This certification can be done by the Indian (I assume you are from India) embassy in Washington, D.C. or at one of the consulates in San Francisco, Chicago, Houston or New York.  Assuming you do NOT want to drive there, you need to call the nearest consulate and arrange to have this process done via the mail.  Since you must wait until June to file, you have time to get this done (the process, done via mail, can take up to three months to complete). My clients to date have had the best results by mail with the San Francisco consulate, getting the certified passport photocopies in less than 3 weeks.

Also, the IRS recently announced the opening of Tax Assistance Centers through which you may be able to have the passport verified as genuine, then submit the tax return and Form W-7 IN PERSON to be forwarded to the ITIN Processing Center in Austin, Texas for processing , without having to get the photocopies certified by your home country consulate.

You go to the TAC with your family, the passports, the SIGNED Forms W-7, and the completed and SIGNED tax return.

You leave the TAC with your family, the passports and a receipt for the Forms W-7 and the tax return.

The list of the TACs are at the link below:

Taxpayer Assistance Center Locations Where In-Person Document Verification is Provided

The alternative is to mail in the actual passports themselves, something most of my clients are reluctant to do.

Thank you for the detailed reply, Atlanta Tax expert. Just to follow-up:

Q1. I still don't understand why is it "Not Advised"? It seems much more straight-forward process. Are the returns much lesser than those achieved by filing as a Resident?

Q2. So you mean to say the safer/better way is I need to ask the employer pay those taxes now... but even if he agrees to do it now... how would I prove that in my submitted 1040/1040NR?

Q3. The reason I don't want to file jointly is because it is too complicated:
- she is not here to sign the forms,
- she is not earning and hence we have no other worldwide income and hence no foreign tax to claim credit
- the ITIN process is very complicated (especially as there is no TAC for 100's of miles from where I stay: Pittsburgh) (Also, I tried filing for ITIN last year using the Indian government certified notarization and an Apostille... as required by the Hague convention rules... but it got rejected... so want to avoid ITIN hassle)

Finally if I wait till June to complete substantial presence test... is that not after the April 15th deadline for filing taxes? So is that not going to get me in trouble?

I still don't understand you insistence for filing as a Resident/Dual Status over Non-resident? If you give some information about the benefits or potential for savings, it would be helpful.

Thanks in advance.

1) Yes, the refund filing jointly can be as high as three times that of filing by yourself, especially if there are children on the return.

2) FICA (Social Security and Medicare) taxes are NOT addressed in the annual INCOME tax return. Your employer crewed up by not withholding the tax, and the IRS will hold HIM responsible. You just need to notify him of the error.

3) If you email me, I can help you with the process. I do it every year about a dozen times for couple who have one spouse here in the U.S. and the other in India. Use of email makes the process simpler, though it IS time-consuming. The MUCH larger refund makes it worthwhile, and once the ITIN is issued, an amended return for 2011 is easily submitted.

As for the filing delay until 1 June 2013, you can submit Form 4868 to get an AUTOMATIC filing extension to 15 October 2013.

If you believe that you will need professional help filing this year, this IS what I do. Please double-click on my name (Atlanta Tax Expert) above to access my profile. You will find my email address in the signature portion of the profile (scroll down to the BOTTOM of the page).