I am on H1B from June 1, 2004. I was on F1 until May 31, 2004 on OPT. I cleared the substantial presence test on H1 visa and stayed around 189 days in USA on H1 visa. While I was on my OPT (F1) I was self employed and received a 1099 MISC (non-employee compensastion). I guess I am a Dual -Status alien for 2004 and cannot make the first year choice as I don't meet all the conditions. p519 says that I can't claim standard deduction of $4850, but can only do an itemized deduction (whihc comes to arnd $1500). Since I satyed in USA for the whole year, I think it is only fair to use standard deduction. Do you have any input on this?

I am more than willing to give more info if reqd.

Thanks
B

bbarath:

I have filed several Form 1040-NRs over the past several years. You have my respect for trying to file the form yourself, as I know more than a few professional tax preparers who will not touch Form 1040-NR with a ten-foot pole. :)

That said, your reading of the instructions is accurate: you cannot claim the standard deduction. Whether it is fair or not is irrelevant, that is the law, and any attempt to claim the standard deduction will be rejected by the IRS. No one said the tax code is fair! :mad:

Hope this helps!

Atlanta Tax Expert

I'm facing identical issues. With the F1-H1B status, are you using an 1040NR form? How are you treating the social security taxes? Aren't F1 students on OPT exempted from that? What about the SS tax withheld under your H1B? Are you getting them back because of your NR status?

If you file with itemized deductions, are you allowed to use Schedule C for the 1099 portion of the year?

Can such a status be combined with a dependent? My wife is being supported by me because she is in school for the whole of 2004. She gets a small teaching stipend on a W2.

Taxi:

You cannot claim your wife as a dependent. You either file Married Filing Jointly (MFJ) or Married Filing Separately (MFS). MFJ is probably the best for you, because the stipend she receives is probably not large enough that it requires both the personal exemption and the standard deduction to cover the tax liability. However, if you file MFS, and she is a U.S. citizen, the normal condition that requires both spouses to either file Standard Deduction or both to itemize does not apply in your case.

I am not sure of this item without research, which I will not do without compensation. However, my gut tells me you are in fact liable for the social security taxes, so the withheld FICA taxes will not be refunded.

You can use the standard Schedule C/C-EZ to report the income received for the 1099-MISC.

Atlanta Tax Expert

I had been F1 student for 5 years and has worked for my current employer since I was in OPT from 7/1/04 to 12/14/04 and changed to H1B status on 12/15/04. I am so comfused that which Form I should use for my tax return. :confused:

mk326:

What country are you from? Special rules apply for residents of certain countries.

Unless you are from one of the special-rule countries, you are considered a "dual-status" alien. You would file Form 1040NR or 1040NR-EZ.

As it stands right now, you cannot claim the standard deduction. That may change based on the answer you give top my first question.

Hi bharath,

I think the deduction in your case would be 1500 + 3050= 4550

Check the example in chapter-6. Though you cannot claim standard deduction you can still claim personal exemption of 3050.
http://www.irs.gov/publications/p519/ch06.html

BE AWARE: I'M ALSO RESEARCHING ON THE SAME ISSUE. I DON'T KNOW IF WHAT I SAID IS TRUE. BUT IS WORTH CHECKING THE LINK. Don't TAKE THE INFORMATION I AM GIVING AS CORRECT... CHECK FOR YOURSELF.

also, can you tell me how you calculated your itemized deduction. Isn't that your state tax?

do you know how to included 1099 and 1099-G income? Thanks!

Raj

Hi bharath...

I now see what you are saying...

Normally it is 4850 + 3050
But when you chose itemized deduction it is 1500 + 3050...

Hmm... do you know if we can chose to be treated as a resident for the entire 2004? In that case do we have to pay social security and medicare?

Let me know if you have more information!

Thanks,
Raj

Rajkum2002:

If you choose resident alien status, you must pay Social Security and Medicare taxes.

Form 1099-MISC income is normally (though not always) listed on Schedule C/C-EZ as self-employment income.

Form 1099-G income is reported on Line 11 of Form 1040NR if the 1099-G income is for a state income tax refund on a return in which you itemized.

If the Form 1099-G is for unemployment compensation, then it is reported on Line 20 of Form 1040NR.

Thanks AtlantaExpert!

Yes, 1099-G income is for a state income tax refund.

1099:
I am exempted from paying social security and medicare taxes in 2001. But my employer has erroneously deducted that and refused to pay me directly. Instead he asked to file with IRS directly. I got these taxes after two years with interest. I recently got a 1099 form saying this interest is taxable and I should report it as income. Where do I specify it on 1040 and 1040NR?

Thank you!
Raj

Rajkum2002:

It's ordinary interest income. Report it on Line 9a of Form 1040NR.

Hello,
I am in a somewhat similar situation as Bharat. I was on H-1B from October 1, 2004 (92 days) and on F-1 visa prior to that. I don't think I pass the length test for resident alien.
Which form should I be filling now? Can I still claim standard deductions of $4850 (Tax treaty with India) although my status at the end of the tax year was H-1?

Thanks,
Mayur

Hi AtlantaTaxExpert!

Even I am from atl, and I face a similar situation.

My H1 approval notice is dated on April 26th, whereas the actual h1 visa approved date starts from October, 2004. Does this mean that my h1 period in 2004 was only for 3 months?

I was working on W2 from Feb 2004 using my F1 visa's OPT status. For the month of Jan 2004, I had worked on 1099-MISC. I am not sure, which forms I need to file for the tax returns.

Please let me know about if I qualify for dual status alien and.. if so, would I be benefited from it. I am getting confused if I have to file in 1040 alone, or even 1040NR is required.

Thanks in advance.

Arun

This post addresses the last two posts:

Mshah:

You are definitely a dual-status alien.

Yes, you may claim the standard deduction while filing for 2004 a Form 1040NR or Form 1040NR-EZ because you are an Indian citizen in country under a F-1 visa as part of an OPT.

Since you are dual-status, you should be exempt from Social Security and Medicare taxes. Ask your employer to refund those taxes to you. If they can or will not, then you should also file Form 483 to get any Social Security and Medicare taxes back from the IRS.

Next year, you will meet the Substantial Presence Test and be required to file as a resident alien. You will be able to use standard tax forms, but will also be required to pay Social Security and Medicare taxes.

Arunnc:

Assuming you are also an Indian citizen, everything noted above for Mshah applies to you as well.

The only difference is that you must file Form 1040NR with a Schedule C to account for the income reported on the Form 1099-MISC.

Since you live in Atlanta, you may want to discuss the matter in person. Contact me at [email protected] with a phone number and I will give a call.

My situation is similar to mshah. When I fill up the 1040 NR-EZ form, what do I specify my occupation to be? ( Its right where we are required to sign the form)
Also, what do we specify our purpose of visit -- Since it is employment now, should that be the answer?
Please reply.. thanks in advance.

maath:

Since you earned income, what did you do to earn the income? :confused:

Put your title in the block next to the signature. (BTW, the IRS collects this for demographic purposes; they really do not care if it is accurate). :)

As for the purpose of your visit, be careful what you put. If you are on a F-1 visa, your intent should not be "employment" but rather "education" or "training". If the visa is H-1, then employment is okay.

I started working with my current company on a student visa and have changed to H1B since oct 1 2004. Sorry for the incomplete information :o
Now since I am going to use the 1040 NREZ tax form (as suggested by you and others on this forum), I would like to know what my occupation should be on the form. My current occupation would do? Or do I have to say student/education ?
I guess my purpose of visit should be employment since that is my current visa status..
Thanks for the prompt response.. appreciate it!
:)

I started working from December 2003, with my current company on a student visa(OPT) and have changed to H1B since Feb 14, 2004. For the month of Jan and until Feb 14, I have a 1099-Misc (independent contractor).

I also received a 1099 for December month last year which I filed in the form 1040 nr-ez as HSH and also filed 8843. But I did NOT fill any other forms as schedule C/C-EZ. Do I need a tax correction?

This year's Tax:
Since I'm substancially present on H1(more than six months) I have to file 1040-NR( correct me if I'm wrong). Can I report 1099 on Line 21 of 1040NR and send a copy of 1099-misc to IRS?

I also need to know what are the standard deductions I can qualify for?

The taxes I paid for Social and Medicare taxes on H1, how are they accounted? Coz, I'm getting a huge difference of owing money to IRS.

Here's what I did on 1040 NR,
1.total taxable income from both W-2 and 1099-misc.
2. Just the federal tax withheld from W-2 (box 2)
3. zero deductions
4. Looking from the chart for the total taxable income I ended up with huge difference I owe. What did I do wrong here?

Appreciate any help or comments.

Mavin:

Technically, you reported the Form 1099-MISC income incorrectly on the 1040NR-EZ.

Such income (and corresponding deductions) should be reported on Schedule C and the bottom line income from the Schedule C should be reported on Line 13 of Form 1040NR. For this reason, you technically should file an amended return. However, since you were a nonresident alien, you were not liable for self-employment taxes, so I suspect the IRS will not challenge the tax filing for just one month of income. I recommend that you hold off on making any amendments and wait for an IRS query on your 2003 return. If you get no query, you are home free.

For 2004 taxes, you met the Substantial Presence Test and therefore will be treated as a resident alien. You must file Form 1040 (not Form 1040NR) with a Schedule C (as noted above). The Schedule C allows you to claim some deductions to offset the income from the Form 1099-MISC. This is important because, this year, you are liable for self-employment taxes, which are calculated on Schedule SE. Since SE taxes are 15.3% of every dollar over $400 (over and above any income taxes you may owe), a substantial tax bill may be awaiting you.

Since you are a resident alien, you can claim the standard deduction this year.

F1 student for 7 years, now on OPT, should I pay social security & medicare tax? I am from China. My H-1 may be approved for starting this Oct.