[jesalap]

Can someone please help me with my questions?

For 2008 IT filing, here are my questions/confirmations. I'd appreciate if someone can confirm this and/or answer.

Situation:
I am US Citizen with a spouse (USC) and 2 kids (USC). I was in India for entire 2008 (moved in Dec 2007); however I earned/paid in USD for first 4 months and then earned in INR for rest of the year. Non-working spouse. I received W2 with Fed tax withheld and state tax withheld. I am using taxact 2008

Questions/confirmations:

1. Can I file using taxact?
2. My Foreign employer's compensation amount should Or should not include allowances components of Indian Salary (i.e. HRA, conveyance, medical)??
3. Can I put total of all allowances (HRA, conveyance, medical under 'Cost of living and overseas differential)? If not, how do I come up with this figure?
4. Do I get back state income tax withheld as I never stayed in the state but my tax was withheld since company paid me from that state?
5. When do I have to file? If I want to file before April 15th, do I calculate my income from India based on my salary slips? Or do I need to file after I get form 16 from my indian employeer and file US taxes late?

I really appreciate any information on this.. Thanks, Jesal

[MukatA]

On your return, you must report your world wide income. If you paid taxes in the foreign country, you will claim credit for taxes paid in the foreign country by filing Form 1116 or can file form 2555 Foreign Earned Income Exclusion.
Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

1. Can I file using taxact? Yes
2. My Foreign employer's compensation amount should Or should not include allowances components of Indian Salary (i.e. HRA, conveyance, medical)?? This must not be excluded. In U.S. commuting miles are not deductible. Medical expense is itemized deduction. House rent is not deductible unless you can use Form 2555 and take Housing Expense deduction

3. Can I put total of all allowances (HRA, conveyance, medical under 'Cost of living and overseas differential)? If not, how do I come up with this figure? No. See if you qualify for Form 2555 Earned Income Exclusion

4. Do I get back state income tax withheld as I never stayed in the state but my tax was withheld since company paid me from that state? It is tricky. Normally, state will come after you. You can email me at [email protected]

5. When do I have to file? If I want to file before April 15th, do I calculate my income from India based on my salary slips? Or do I need to file after I get form 16 from my indian employeer and file US taxes late? For you the due date is June 15, 2009 without applying for extension but you must pay tax due by April 15, 2009.

[AtlantaTaxExpert]

I agree with all answers except Item #4.

If the OP moved to indian and all income was earned in India, the OP has chnaged his residency to India and the state has no legal standing to tax the India-sourced income!

[IntlTax]

I agree with MukatA. State tax residency can be tricky. If you do not plan to remain in India indefinitely, you may still be subject to state taxes. The rules vary by state. It depends which state you resided in prior to your departure from the U.S.