[shaktaar]

My son was born in Nov 2010 and stayed in India while I was in US, first as a F1 student (2005-July 2010) and then as a J1 postdoctoral researcher (Sep2010-till date). I am considered as a resident alien for tax purposes as I have completed 5 calendar years as NRA and so my days on J visa do not count towards exemption from the Substantial presence test.
My son was born in India in Nov 2010 but did not enter US in 2010. I called IRS and they said that I may be able to claim the child as a dependent depending on how one interprets the Indo-US tax treaty, and that they were not qualified to interpret the treaty. Can we invoke the technical explanation to Article 21(2) of Indo-US tax treaty for students and business apprentices and consider the child as a dependent (have the same benefits as US residents), even though the child was not physically present in US?
http://www.unclefed.com/ForTaxProfs/Treaties/inditech.pdf

[AtlantaTaxExpert]

In order to claim ANY child who is not a U.S. citizen or a U.S. resident as a dependent on your return, the child MUST be phycially located in the United States for at least PART of the calendar year.

For this reason, you CANNOT claim the child as a dependent. Sorry!

[MukatA]

For 2010 you will file resident tax return. You can file joint return with your spouse. You can claim you son only if he is US citizen or resident or was present in US for any duration during 2010.

[shaktaar]

Thank you for your responses. Could you please provide a follow up clarification on the tax treaty I was referring to in my previous post? I have provided more details to what I wanted you to consider below:-

From pg 50 of technical explanation to Article 22 of Indo-US tax treaty:-
"By virtue of the exception to the saving clause in paragraph 4)(b) of Article 1 (General
Scope) of the Convention, the saving clause does not apply with respect to a person entitled to
U.S. benefits under the provisions of this Article if that person is neither a U.S. citizen nor has
immigrant status in the United States. Thus, for example, am Indian resident who visits the
United States as a professor and becomes a U.S. resident according to the Code, other than by
virtue of acquiring a green card, would continue to be exempt from U.S. tax in accordance with
this article so long as he is not a U.S. citizen and does not acquire immigrant status in the United
States. The saving clause does apply to U.S. citizens and immigrants."

Does this tax exemption apply to my case? If not, briefly mention why?
Thanks,

[shaktaar]

What about temporary absence exception to residency for a child born in 2010. Can my case not be considered as an exception to the condition that the child must have the same principal residence as the taxpayer for more than half the year?

Thanks,
Abhas

[AtlantaTaxExpert]

I used to make the argument to the IRS that the child should be considered as a resident similar to the parent who was NOT in country, but they pointed out that the parent is a co-filer; there is NO requirement for the parent to be physically IN the U.S.

The child is a DEPENDENT, and the dependency rules apply, which DO in fact require the child be IN the U.S. for at least ONE day of the calendar year.

If you submit an ITIN request for a child and you cannot show the child as being present in the U.S. in 2010, the ITIN request WILL be rejected.

[shaktaar]

Thank you very much for clarifying this point further and sharing your experience.

[AtlantaTaxExpert]

Glad to help; sorry it did not turn out better for you.

[shaktaar]

I have a follow up on last year's communication. This year my son came to US on April 5, 2011. My wife's and my visa status, and resident alien status, has not changed. We filed jointly last year and will do so again this year. When I called the IRS they said that since my son is a non-resident alien (does not meet physical presence test) I cannot claim him as a dependent. Can we invoke the technical explanation to Article 21(2) of Indo-US tax treaty for students and business apprentices and consider the child as a dependent (have the same benefits as US residents), as the child was physically present in the US for more than six months in this calendar year?

[AtlantaTaxExpert]

In this case, the IRS interpretation is NOT correct.

If the child was in your custody or your wife's custody for the entire year, and the child spent at least ONE day in the United States in 2011, then you CAN claim the child as a dependent on your 2011 resident tax return (Form 1040 or 1040A).

I have successfully argued this with the IRS over the past 15 years, and handle such cases routinely in my tax business.

If you want my professional help, double-click on my title above and scroll down to my profile/signature. You will find my email address and websites there.

[shaktaar]

Thank you so much for your quick and detailed response. This is really helpful. Its great to benefit from your vast experience, and I will keep that in mind especially if the IRS rejects my claim.