[pratiksgandhi]

Hi,

I came to USA in AUg 2006 on F1 visa. Finished my graduation in dec 2007 and from jan 2008 I started working as Fulltime on my OPT. my OPT is valid from Jan 2008 till dec 2008.

I got my H1B approved and its valid from OCT 2008.

Since Aug 2006 till date I have been in Pittsburgh, PA (for study and job as well).

So how can I get standard deduction for my student status for 2008?

Thanks
Pratik

[MukatA]

On F1 and OPT you are exempt from residency. You do not pay FICA taxes.
On H1-B, you must pay FICA taxes.

If you are not married, then for 2008 you will file non-resident tax return. For OPT period, based on tax treaty between the U.S. and India, you will get standard deduction instead of itemized deduction.
Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

[pratiksgandhi]

On F1 and OPT you are exempt from residency. You do not pay FICA taxes.
On H1-B, you must pay FICA taxes.

If you are not married, then for 2008 you will file non-resident tax return. For OPT period, based on tax treaty between the U.S. and India, you will get standard deduction instead of itemized deduction.
Read: Your U.S. Tax Return: U.S. Tax Filing Requirements for Non-Residents

Hi Mukta,

Thanks for reply.

My exact status is as follow.

I was unmarried for 2008 period. No Dependent. I was on OPT for period Jan to Sept 2008 and from Oct to Dec 2008 I was on H1B.

1) Can you tell me how much tax deduction can I get as a non resident alien for 2008?
2) My employer did not deduct any SSN or Medicare tax for whole 2008 period, then what (%) shall I pay for oct to dec 2008 pay period?
3) I got the bonus at the end of year (31st Dec 2008) do I need to pay SSN and Medicare on that?

Looking forward for your reply.

Thanks.
Pratik

[AtlantaTaxExpert]

Pratik:

1) For 2008, you are entitled to a personal exemption of $3,500 and a standard deduction (allowed for Indian F-1 visa holders by tax treaty) of $5,450.

2) You became liable for Social Security and Medicare taxes the date your H-1B visa went into effect (probably on 1 October 2008). Knowing this, you have the legal obligation to so inform your employer of that fact. You should so notify your employer in writing (email is good for this). Once this is done, it is up to your employer to correct the situation, begin withholding Social Security and Medicare taxes, and collect any back taxes due. If the employer fails to do so, the IRS will hold the employer responsible for any back taxes, fines and penalties.

3) Yes. The bonus is earned compensation that IS subject to Social Security and Medicare taxes.

[pratiksgandhi]

Pratik:

1) For 2008, you are entitled to a personal exemption of $3,500 and a standard deduction (allowed for Indian F-1 visa holders by tax treaty) of $5,450.

2) You became liable for Social Security and Medicare taxes the date your H-1B visa went into effect (probably on 1 October 2008). Knowing this, you have the legal obligation to so inform your employer of that fact. You should so notify your employer in writing (email is good for this). Once this is done, it is up to your employer to correct the situation, begin withholding Social Security and Medicare taxes, and collect any back taxes due. If the employer fails to do so, the IRS will hold the employer responsible for any back taxes, fines and penalties.

3) Yes. The bonus is earned compensation that IS subject to Social Security and Medicare taxes.

Besides persional exemprion and standard deduction is there any us - india treaty deduction or something like that ? As last year one of my fnds got approx 40000 of some us-india treaty deduction along with personal and standard deduction.

[MukatA]

If possible get details from your friend and let us know.

[pratiksgandhi]

If possible get details from your friend and let us know.

It goes something like this. Lets say my income is 60000 for financial year 2008.

I entered in USA for the first time in aug 2006 as a student. And till dec 2007 I was studying on f1 and the jan 2008 till sept 2008 I was on OPT and oct 2008 till dec 2008 I was on h1B.

No dependents and single.

Now as a student for 2 year since I entered in USA my income is non taxable. So for jan 2008 till aug 2008 my income will be non taxable so 40000 usd is going to be non taxable then on remaining 20000 I can take standard deduction and personal exemption. Which is arnd 8800 bucks. So my total taxable icome will come down to 11200 bucks. So putting 10% tax on it will come down to 1120 bucks.

So total federal tax I am suppose to pay is 1120. And lets say my company withheld approx 10000 bucks for federal tax then I should get back approx 8880 bucks.

And I need to fill 1040NR.

[MukatA]

Your OPT income is not exempt from income taxes.

[AtlantaTaxExpert]

I suspect that your friend deducted his daily living expenses on the supposition that, since he is in the country temporarily to attend school, he can do that.

The IRS does not agree. Temporary jobs that exceed one year are NOT temporary in the eyes of the IRS.

Further, an international student has NO tax home, so their move to another city for a one-year (or less) OPT is NOT considered to be temporary in nature, even if the student returns to the university to finish schooling after the OPT.

The IRS is aware of this abuse of the temporary job deductions, and closely reviews any tax return that claims such deductions. Your friend may be subject to a tax audit down the road.

If he is lucky, all he will get is a large tax bill after the deductions are disallowed, because filing a false tax return is grounds to have his visa revoked.