[manbeing]

Hi,

I am really confused about my dual status Federal tax filing for the year 2007.

My situation is:
1. I was in F1 status from 1/1/2007 to 1/10/2007 and was in H1B status after 1/10/2007. I was single in the whole 2007.
2. I am holding H1B status in the U.S for over 183 days.
3. Suppose my incomings during the F1(non-resident alien) were $1,000, and my incomings during the H1b(resident alein) were $4,000.

I went through the publication 519 charpter 6 in terms of Dual-Status Tax year carefully, but I still have couple questions which are not in the publication sample.

1. I had taxed incomings ($1,000) during F1 status in 2007. According to U.S-China tax treaty, the Federal tax of first $5,000 incomings can be broken, but my employer withheld it. According to the sample on pub.519, 1040NR Form is just a statement attached to 1040. So how could I put my overpaid non-resident Federal tax on 1040 Form for returning purpose?


2. According to the sample in Pub.519, "Sam reports on line 7, Form 1040,all wages received during the period he was a resident of the United States ($21,800) and the wages received during the period he was a nonresident alien ($6,500) that was effectively conneted with his U.S. trade or business. This income is taxed at the graduated rates."

Why did IRS put Sam's whole year wages (non-resident + resident) on line 7, Form 1040? My understanding is that for line 7 on Form 1040, he only needs to fill his resident wages ($21,800) and fill his non-resident wages on 1040NR. Am I right?
Thanks,
Jim

[AtlantaTaxExpert]

Answered via email.

[MukatA]

Atlanta Tax Expert: Readers will appreciate if you post your answer here also.

[AtlantaTaxExpert]

Okay, that is reasonable.

Jim must file dual-status due to his 10-day F-1 status. Unfortunately, if you spend EVEN ONE DAY as a non-resident alien, you CANNOT file as a resident alien unless you are married. Jim made it clear in subsequent emails that he was single.

The F-1 income is reported on Form 1040NR, but NO taxes are calculated on that form.

ALL income is reported on the Form 1040, and all tax calculations are done on that form.

The $5,000 treaty exemption is debited off his annual income on Line #21 of Form 1040 as a NEGATIVE number, with the entry "U.S.-China Tax treaty exemption" neatly printed on the dotted line to the left of the negative $5,000 entry. Given that his income is only $5,000, this will result in ZERO taxable income.

Note that, due to the savings clause of the U.S.-China tax treaty, Jim gets to claim this $5,000 exemption for as long as he is in the U.S. under his H-1B visa even though he will be filing as a resident alien and claiming the standard deduction. He in effect gets to have his cake and eat it too.

[MukatA]

Thanks for posting.
manbeing post confused me. With F1 till 1/10/07, then how can he complete 187 days on H-1B in 2007?

Since he is single, he can file only as nonresident or dual status resident. On dual status, return Form 1040, he will get $5,000 exemption under treaty, $3,400 personal exemption and no standard deduction.

For 2008, he can file as resident and get standard deduction and personal exemption and no special tax treaty exemption of $5,000 (as the exemption is only for students).

[AtlantaTaxExpert]

MukatA:

He started his H-1B on 10 January 2007, so he has OVER 350 days on H-1B.

Dual status is his only option for 2007; he can file NRA only if you converted after 2 July 2007.

He WILL file as a resident alien in 2008.

He gets the treaty exemption of $5,000 every year he is here due to the saving clause in the treaty.

[bravomod]

My Status is similar to this. I am from India and was on OPT for the same period in 2010 and then moved to H1B after that.

1. To report the income on 1040NR do I need to have a separate W2 i.e. should I have a W2 for the period I was in F1-OPT (10 days) and another W2 for the period I was on H1B (01/10/2010 onwards)

2. If a single W2 is to be used, for the income to fill out in Form 1040NR can I calculate the income for 10days i.e. (monthly salary/3)?

3. Since I was on F1-OPT can I still use the Indo-US Tax treaty - Article 21(2) which gives an exemption of $5700 (for 2010)?

[AtlantaTaxExpert]

A single W-2 is all that is needed, because, for the INCOME tax return, we need only box #1 and Box #2 informaion.

Yes, you can still use Article 21(1) to claim the standard deduction.

[bravomod]

As per your answer, I suppose then the following is correct in that case (please confirm)
". If a single W2 is to be used, for the income to fill out in line #3 of Form 1040NR -EZ can I calculate the earnings for 10days in this way - Wages,Earnings on 1040Ez = (monthly salary/3)?"

Also where should I include the Indo-US Tax treaty exemption amount?
Since dual-status cannot use standard exemption I guess I can specify the exemption information on line #21 of form 1040?

Should I fill all the information in page 2 of Form 1040NREZ or should I use form 1040nrez only for reporting wages while on OPT?


To Summarize...
1. Form 1040NREZ : Check "Single non-resident alien" line#1.
I report my wages/earnings(taxed) in line#3 and total taxable income in line# 14 of form 1040NR-EZ, and do not specify any other deductions or information (i.e. simply report the wages as non-resident alien)
2. total taxed amount = non-resident wages + resident wages i.e. amount in W2. Print this in line #7 form 1040
3. Claim personal exemption in line #6a, 6d and 42(3650 for single) + exemption from Indo-US Tax treaty in line #21 of form 1040
4. Write "Dual-Status Return" at the top of both forms as specified by IRS
5. Fill out other information like name, ssn etc. in both forms

Please confirm on the above, it would be great help.

Thanks

[AtlantaTaxExpert]

Bravomod:

The dual-status return IS NOT FOR AMATEURS! Get professional tax help by someone who has experience filing these types of returns.