Hi everyone,

I have some questions about this year’s tax return and wonder whether you can help me. Any comments or suggestions would be greatly appreciated.

I, a Chinese Citizen, came to the U.S. in August 2010 and graduated in May 2012. I then found a job in September 2012. My OPT ended in July 2013 and my H1-B started in October 1st, 2013. My wife is on H-4 status and my son was born in the U.S. in 2012. Additionally, I bought a property in April 2013.
Here are my questions.
1. As I understand, for 2013, I should file as a non-resident and use the form 1040NR or 1040NR-EZ, assuming that I don’t file for extension.
If that’s the case,
a. Am I able to contribute to an IRA account and deduct the contribution on my 2013 tax return ( I have enrolled in my employer’s 401(K) in October 2013)?
b. Am I able to deduct the property tax I paid for my house in 2013 ? Or any other fees I can deduct ?
c. Do I have to pay income tax for the bank interest I received in 2013?
d. Do I have to report my world income for 2013?

2. I know that I am exempt from FICA (Social Security and Medicare) taxes for OPT period. Many people will request a refund for FICA they paid. However, if I want to stay in the U.S. and eventually become a green card holder or even U.S. citizen, does that make any sense for me to ask for a refund? I mean, the more FICA tax I pay, the more SS money I will get when I retire here, is that right?


Thank you in advance for your help.

Best,
George Wu

First, go to your employer and ask for a refund of the FICA taxes withheld while on OPT. You can better use the money than "invest" it in the sinking Social Security fund. If the employer will not refund the money, get a refusal letter on company letterhead and submit Forms 843 and 8316 to get the money back from the IRS.

1) You will probably want to file as a resident; see below.

a) IF you are eligible, you can contribute to a traditional IRS up to 15 April 2014.

b) You can deduct the property tax ONLY IF you file as a resident, and then only if your itemized deductions exceed the $12,200 joint standard deduction you get when filing a joint resident return.

c) Yes if you file as a resident; No if you file as a non-resident.

d) Yes if you file as a resident; No if you file as a non-resident.

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 2013, and the Form 1116 allows you to claim a credit for the income taxes paid to your home country. Note that you must WAIT until 1 June 2014 before you can file this joint return.

You will need to apply for an Individual Tax Identification Number (ITIN) for your wife by submitting Form W-7, and that process underwent some radical procedural changes in 2013. 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.

FIRST ALTERNATIVE: This certification can be done by the Chinese embassy in Washington, D.C. or at one of the consulates in cities across the country. 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 usually 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).

SECOND ALTERNATIVE: The IRS also have 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 wife, her passport, the SIGNED Form W-7, and the completed and SIGNED tax return

The IRS official verifies the passports, asks a few questions, completes the certification paperwork, checks the Form W-7 and tax return, then returns the passports with a receipt for the tax return and Form W-7, which is sent to Austin, Texas for processing.

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

You would get the ITIN about six weeks after you left the TAC.

The tax returns are NOT processed at Austin, Texas, but rather forwarded to the regional IRS centers for processing, so the refund will come about one month AFTER you get the ITIN letters.

The list of the TACs are at the link below:

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

THIRD ALTERNATIVE. I am a Certifying Acceptance Agent, and I can certify the passport if the TACs are not close.

You would mail the passport and the SIGNED Form W-7 and SIGNED tax return to me. I would contact you via SKYPE, conduct a brief interview with your spouse, certify the passport, attach the certification to the SIGNED W-7 and sign both documents. I would also sign the tax return, then paperclip the W-7 with certification to the tax return, and then mail them to the IRS ITIN Processing Center in Austin, Texas.

The passport I would mail BACK to you via tracked PRIORITY MAIL, so the passport would be out of your possession for about a week.

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

If the IRS gets the passport, they hold it for about TWO months.

If you need my professional help, please email me at the email address in my profile.

Hi AtlantaTaxExpert ,

Thank you so much for your help.

I am still unclear about Question 1 (a). If I am eligible to contribute to a traditional IRA in 2013 and I file as a non-resident, would I be able to make any deduction on my tax return (I know the deduction varies based on your income level) ? Can you confirm that ? Thank you.

Best,
George

I cannot tell without seeing your actual tax documents. The fact that you are invested in the 401K MAY make you ineligible for the traditional IRA.

Got it. Thank you. I will email you later for further discussion.

Excellent! I will be waiting for your email.