[ahsq1]

My spouse and I were married in 2010, she is a nonresident alien student studying for a Master Degree in college while I am an US citizen. I decided to file a MARRIED filing jointly 1040 to receive better tax benefits.

She has 2 1042-S forms, which is $4,900 with code 18 (compensation for teaching) and $1,500 with code 19(compensation for study and aboard). She has $0 tax withheld. She also has a $800 1099-MISC.

I looked at the IRS website but am confused about its lingos.
According to the:

http://www.irs.gov/businesses/small/international/article/0, id=96370,00.html

…However, for the purpose of Chapter 3 withholding you may still be treated as a nonresident alien. Refer to Withholding of Tax on Nonresident Aliens and Foreign Corporations (Chapter 3 of the Internal Revenue Code) in Tax Withholding Types…In addition, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax. Refer to Aliens Employed in the U.S. – Social Security Taxes….

0. Does that mean her 1042-S' would be NOT on the 1040 form? Because for a Nonresident Alien she is exempted for $5,000 income on 1042-S under China's tax treaty.

However, the following says otherwise:

http://www.irs.gov/publications/p519/ch01.html#en_US_publink1000222193

…If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Neither you nor your spouse can claim under any tax treaty not to be a U.S. resident.You are both taxed on worldwide income….

1. Which one true?
2. If she does have to file the 1042-S' would they be considered Wages (line 7) or Sch. C income? (Line 13) or as Other Income?
3. Pub.519 says Nonresident Aliens would be exempted from 15.3% social and medical tax. But Resident Alien has to pay the 15.3%, Is she treated as a nonresident alien or as a resident alien according to the above mentioned paragraph, for the $800 1099-MISC?
4. How about the 1042-S's? Does she have to pay the 15.3% or not? (as Wage or as Sch. C)
Thanks So Much!

[AtlantaTaxExpert]

Your wife is lucky that she is Chinese, because the U.S.-China Tax Treaty has an exception to the Savings Clause that allows her to claim the $5,000 treaty exemption, even though she is filing jointly with you.

You claim the $5,000 treaty exemption on Line #21 as a NEGATIVE number.

You need to submit Form 8833 with the return to explain the treaty provision.

The $4,900 form 1042-S is probably taxable income. Not sure about the other Form 1042-S; I would have to see the form to be sure.

The withholding citation refers to FICA taxes. Her status as a F-1 student makes her exemptfrom FICA taxes, even though she is filing jointly with you.

You MAY want to consider professional help on your return; the Form 8833 citation of the treaty exemption by itself dictates the need for professional help. If you need MY professional help filing your return, email me at [email protected] or [email protected]. This IS what I do!