[Jalpa1016]

I was on OPT status from Feb 2008 to Sept 2008 and on H-1 from Oct1 -12/31.My wife was also on OPT and became a H-1 on Oct 1. We both work for the same company from Fen -Dec while on OPT and H-1.

I know that we both have to file 1040 and then 1040NR as a statement. My questions are:-
(1) Do we need to file as married filing separate or single?
(2) On 1040NR -Can we each file as Single and each take the 5450 (standard deductions for India treaty) and one exempltion before calculating NR taxes?
(3) When we file 1040 -Can we file each as Married Filing Separate -Are we allowed to take the standard deduction and exemptions again?

[MukatA]

"I know that we both have to file 1040 and then 1040NR as a statement."
What ever you know is WRONG.

You have two choices:
1. Both of you can file separate returns as nonresidents. Or

2. You can file joint return as residents. You will have to wait for 5 months to file your tax return till you meet the Substantial Presence Test in 2009.
You will get standard deduction of $10,900 and exemptions for both of you.
Read about H1-B tax filing: Your U.S. Tax Return: The U.S. Visas