[indranil18]

Hello,

I was on F-1 from 07/2002 - 07/2007 and then on OPT from 07/2007 - 10/2007 and now I am on H1B from 10/2007. Am I a resident for tax purposes or a dual citiizen?

Thanks foe the help!

Best Regards

[Visa Taxes Expert]

Hello

Since you started your H1B in October, you do not meet the days to pass the Substantial Presence Test.

Hence you are considered a Non Resident Alien for Tax Purposes.

You have to File Form 1040NR .

(You need not file Form 8843, like you used to do in F1, as you no longer have FICA exemption, under H1B Visa)

Based on your country, you may get some Tax Treaty benefits.

Please feel to contact us for any Tax Preparation Services.

Hope this helps!

[indranil18]

Hi VTE,

Thanks for the clarification. Since, I have paid tax for 5 calendar years (2002, 2003, 2004,2005 and 2006), shouldn't I be resident for taxes in 2007?

Best Regards,

Indranil

[AtlantaTaxExpert]

Indranil:

VTE's guidance was accurate, based on what he knew when he posted his answer.

However, you ARE correct that you will file as a resident alien IF you arrived in the U.S. on your F-1 visa in 2002 and was under your F-1 visa from 2002 through 2006.

Your exempt status expired on 31 December 2006, and you gained resident status starting on 1 January 2007.

Additionally, you have the legal obligation to inform your employer of this fact so that he/she can decide on whether they should collect back FICA taxes for 2007. Make this notification in writing and keep a copy for your records.

[indranil18]

Hello ATE,

Thanks for your response.

My F-1 visa expired on 07/2007. I started working from 08/2007 on F1-OPT and then moved to H1B in 10/2007. I had given all my paperwork to my employer when I started working. My employer did not deduct FICA taxes till 10/2007 but after 10/2007, I have been paying SSN and Medicare. Do I still need to submit any additional paperwork to my employer?

Best,

Indranil

[AtlantaTaxExpert]

Yes.

On 1 January 2007, you became a resident alien due to the 5-year rule. You MUST inform your employer of that fact!

Here is why:

The IRS position on such matters is clear: It is the responsibility of the EMPLOYER to properly determine the tax status of its employees in order to decide whether to withhold Social Security and Medicare taxes and pay such employment taxes. If the employer fails to do so, the IRS holds the EMPLOYER responsible and does not even bother the employee in such matters.

There is, however, one exception to that rule, and that is if the employee is found to ACTIVELY CONCEAL his true tax status.

Up until you read my answering post, you probably did NOT know that you were obligated to pay Social Security and Medicare taxes starting on 1 January 2007. However, now that you DO know, you must inform your employer of that fact. If you do not, and your employer finds out about it, they can use the defense that you ACTIVELY CONCEALED YOUR TRUE TAX STATUS! If that happens, and the IRS concurs, then the IRS will come after YOU for the back FICA taxes.

Not only would the costs of such an action be odious (probably TWICE what you would have paid to begin with), but it would also probably cripple any chance you would have to get a Green Card.

More than likely, once you notify your employer about your changed status, they will DO NOTHING!

The reason is simple: If they attempt to collect the back FICA taxes from you, they will incur HUGE filing and late payment penalties (remember that the IRS expected them to have figured this out themselves last year). Once they determine that they will incur such a large fine, they may leave well enough alone and hope that no one at the IRS will ever notice. Statistically, the odds are in their favor that this will happen.

BOTTOM LINE: Tell your employer about your changed status in writing (email is good for this), then hope for the best.

[indranil18]

Hi ATE,

I appreciate your time and effort in answering my questions.

I worked part-time as a student at an university from 01/2007 - 08/2007 and as an employee for a company from 08/2007 - Present. My university also didn't deduct SSN and medicare taxes from 01/2007 - 08/2007. My company also did not deduct SSN and medicare taxes from 08/2007 - 10/2007.

1. I was on F-1 from 07/2002 - 07/2007, so did I attain resident status for tax purposes on 07/2007 or 01/2007?

2. What should I write in an email/letter to both my university and current employer?


Best,

Indranil

[AtlantaTaxExpert]

If you worked for the university part-time as a student, you are exempt from Social Security and Medicare taxes for THAT job. That exemption applies for ALL students, not just international students.

The company job that started in August, 2007 should have withheld Social Security and Medicare taxes. That is the company you must inform about your resident alien status for 2007, which started on 1 January 2007.

The time in 2002 counts as a FULL YEAR, even if you only spent as little as ONE DAY of 2002 on a F-1 visa. I actually had a client last year who entered the U.S. on their F-1 visa on 31 Dec 2001. For her, 2001 counted as a FULL YEAR.

[indranil18]

Hello ATE,

From some of your previous emails on a similar topic, I found out that you have mentioned that an employer can obtain unpaid SSN and medicare tax till 31 Jan 2008 for SSN and medicare taxes due in 2007.

But, I was looking at Publication 15 Circular E and on page 28 of this document, it says that the employer has time till the end of the calendar year to obatin unpaid SSN and medicare taxes from the employee.

So, is 31 Jan 2008 or 31 Dec 2007 the end of calendar year 2007 ?

Best Regards,

Indranil

[AtlantaTaxExpert]

Indranil:

The employer has until the 31st of January of the succeeding year to collect back FICA taxes.

The reason is that is the deadline to file their LAST quarterly employer's tax return (Form 941).

I have confirmed this TWICE with the IRS via the IRS International Tax Hotline.

[indranil18]

Hello,

Thanks for the helpful information.

My wife is on H1-B (since Oct 2007, previously from 2003 she was on F-1) .

She was thinking of filing as a non-resident. Can she take the standard deduction of $5350?

We think that her filing as a Non- resident and me filing as a resident will prove the best ofr us since we both earned our incomes in different states (I earned in IL and OH and she earned in IL). Any suggestions?

Best,

Indranil

[AtlantaTaxExpert]

Indranil:

She CAN file as a non-resident alien, and. Because she was a student from India (I assume india based on your name), she CAN claim the $5,350 standard deduction.

However, you can file jointly and you BOTH choose to be treated as resident aliens for all of 2007. You BOTH will be resident aliens in 2008 anyway, so there is really NO DOWNSIDE to filing jointly for 2007. It will be easier to file ONE joint return and TWO separate returns, and if you file jointly, you may be able to deduct tuition costs or claim a tuition credit.

Now, as for the state returns, filing married filing jointly almost always results in a lower tax bill than filing married filing separately. Your Ohio income will NOT be taxed by Illinois, nor will her and your Illinois income be taxed by Ohio.

The best way to go is probably to file jointly as resident aliens, and file jointly in Illinois and Ohio.

[indranil18]

Hi ATE,

Again, thanks a lot for the tips.

But, my wife was working on her F1-OPT from 01/2007 - 10/2007. During that time, her SSN and medicare taxes were not withheld. Now, if she files as resident, won't she have to pay SSN and medicare that she didn't pay during 01/2007 - 10/2007?

Best,

Indranil

[AtlantaTaxExpert]

The IRS will NOT go back and try to collect the back FICA taxes, because at the time of the withholding, she had NOT yet made the First Year Choice.

[indranil18]

Hello ATE,

That's nice to know. Do I need to attach any paper-work along with my returns to claim " First Year Choice" for my wife?

Best,

Indranil

[AtlantaTaxExpert]

You need to attach a SIGNED statement that says you BOTH qualify for First Year Choice and that you both CHOOSE to be treated as resident aliens for ALL of 2007. You BOTH must sign it.

[indranil18]

Hello ATE,

Thanks for your response. So, do I need to wait till some date to file my return or can I file my return in Feb'08?

Can you also please tell me where should I look in Publication 512 to find details on First Year Choice? I searched on the web, but found Publication 512 for 2006 and not for 2007.

Best Regards,

Indranil

[AtlantaTaxExpert]

The IRS pub is 519, and the 2006 version is the latest one available.

Based on your and your's wife's conversion to H-1B visa status in October 2007, you will need to wait until 2 June 2008 to file as resident alien.

If you have no credits to claim, you may want to file separately as non-resident aliens for 2007 because, as Indian student, you BOTH get to claim the $5,350 standard deduction and your own $3,400 personal exemption.

It is possible that filing jointly is no better than filing separately, and you can file separately RIGHT NOW!

[indranil18]

Thanks ATE. Before I put my query, I will mention my details again. Sorry for repeating the information, but after looking at the volume of emil that you respond to, I think stating my details again will be beneficial for you :). I sincerely appreciate the help that you provide on this website and it motivates me to also do likewsie for the areas that I am knowledgeble in.

I was a resident alien from 1 Jan 2007 (since I have been in USA since 2002) and my wife was on F-1-OPT from 1 Jan 2007 - 30 Sept 2007 and then she went to H1-B from 1 Oct 2007.

I read the part "Non resident spouse treated as a resident" in Publication 519 and from page 10, I infer the following things. Please let me know if my interpretation are correct or not:

1. Since I was a resident alien from the 1-Jan 2007, I and my wife can file as married filing jointly (resident alien) in Feb'2008 and I don't need to wait for any date (e.g. 2 Jan 2008).

2. Though my wife didn't pay any FICA taxes when she worked from 1 Jan-2007 to 31 Sept 2007, IRS DOESNOT expect her to pay that since she made a choice of being a resident alien in 2008.

Best Regards,

Indranil

[AtlantaTaxExpert]

Okay, I thought you were BOTH 1 Oct 07 H-1Bs.

Since you are NOT, then you do NOT have to wait. YOU are already a resident alien due to the five-year rule on F-1 visas.

Your wife will need to sign a statement staing that she is a non-resident alien spouse CHOOSING to be treated as a resident alien for all of 2007, but other than that, you can file RIGHT NOW if you want!