[maliaari]

Hello,

This is my case:

01.02.05 to 03.20.05 ---> F1 (OPT) Working for Company A in NY (Federal & State taxes withhold)
03.23.05 to 09.31.05 ---> F1 (OPT) Working for Company B in CA (Federal & State taxes withhold)
10.01.05 to 12.31.05 ---> H1 Continue Working for Company B in CA (Federal & State & Social Security & Medicare taxes withhold)

I came to US on Dec. 2000. I'm single , not from India, have filed "1040NREZ+8843" for 2004 and before.

My questions are:

1 - I do not pass time test, cause I was in OPT for 273 days and on H1 for 92 days (2005).
But I came/was in US since Dec. 2000. Does 2005 is also counted towards 5 years? If yes, then am I R?
So how should I file? As R or NR or Dual-Status or 1st year choice?

2 - If I have more than 1 option, which one will give me higher refund?

3 - Should I file 8843 as well?

4 - Should I file both NY & CA state returns?

5 - What deduction are available for me?

6 - Do I need to get two separate W2 from Company B (since I was on F1 partially with no SS & medicare tax and then on H1 with all taxes paid) or 1 W2 is OK?

Thank you all for your help & advice!!

MA

[AtlantaTaxExpert]

Maliaari:

1 & 2) You should file under First Year Choice, just to get the $5,000 standard deduction.

3) If you file as a resident alien, Form 8843 is not required.

4) Regardless of how you file federally, you must file both NY and CA tax returns.

5) You will get the standard deduction of $5,000.

6) You should get two W-2s: one showing no SS or Medicare taxes paid, and the other showing the SS and Medicare taxes.

[maliaari]

Thank you very much AtlantaTaxExpert,

I was told that since I had arrived in 2000 on an F1 visa.
My FIVE years of being exempt were 2000, 2001, 2002, 2003 and 2004. So In 2005 I was no longer exempt, so *ALL* of my days as an F-1 student "count." I have 365 days of presence in 2005, so I am a resident alien FOR THE ENTIRE YEAR. (I am not a dual status alien; the first year choice is not an issue.)

What do you think?

If this is true, then I need to file 1040, 1040A, 1040EZ.

Moreover, if I was resident for 2005, I should have paid SS & Medicare for the period I was on OPT as well. Company A & B didn't withhold SS & Medicare cause they were doing the same for all OPT's. So is it going to be an issue? I do not want to do anything illegal, intentionally or unintentionally? Please advise if I need to take any step.

I appreciate your help.

[AtlantaTaxExpert]

Maliaari:

What is your source of information?

It is my understanding that you should not count all of 2000 since you arrived in December 2000. Hence, only the last month of 2005 "counts" towards Substantial Presence Test.

The good news on this is that the non-withholding of Social Security and Medicare taxes for 2005 was perfectly legal if my assumption is correct. Even if it is not correct, the IRS rarely goes back and tries to collect such taxes if an honest error was made. However, given what you now know, you do need to tell your employer to begin withholding for 2006, since your exemption has definitely expired for 2006.

If you file under the First Year Choice, it will have no effect on the Social Security and Medicare tax issue.

[maliaari]

A friend with similar case told me. But I did read a lot in IRS website. Frankly, it is not clearly indicated. But I found this example from this website:

http://www.irs.gov/businesses/small/...129427,00.html

"....When measuring an alien’s date of entry for the purposes of determining the five calendar years or the two calendar years mentioned above, the actual date of entry is not important. It is the calendar year of entry which is counted toward the two or five calendar years respectively. Thus, for example, a foreign student who enters the United States on December 31, 1998 counts 1998 as the first of his five years as an "exempt individual."

Based on this, I was resident in 2005.

The good news is, my employer started withholding SS & Medicare taxes when I changed status from F1 to H1. So, I have not paid these taxes for part of the year. Do you recommend that I better take any step to resolve this or I am OK.

If this is the case, shall I use 1040? Also I cannot file under the First Year Choice, right?

I appreciate your help.

[AtlantaTaxExpert]

Good research! I stand corrected.

Yes, you are a resident alien and should file Form 1040.

Take no action to correct the Social Security and Medicare not being withheld. The responsibility for determining what should be withheld rests with the employer, not you!

[chenzfi_inc]

If this is the case, I passed my five years calendar in 2005 since I came to USA after Aug. 2000. 2000, 2001, 20002, 2003, and 2004 are my five years as an "exempt individual". For 2005 I have to file 1040 form even not with first year choice. It means I can't get my SS and Med taxes back.:( But thank for the explanations.

[AtlantaTaxExpert]

Chenzfi:

You got it! Sorry for the confusion!

[chenzfi_inc]

Hi, I was so frustrated after I did my tax briefly last night. If I added my wages from W-2 forms and used standard deduction ($8200), I actually owed around 200 hundred bucks. This is not what I expected. I think the reason for this because I was only paying federal tax without any SS and Medicare taxes in the first two months in 2005 when I was a research assistant in my school on OPT. So my question is what I should do the tax for this part? Please help me here. Thank you very much. I appreciate it.

[chenzfi_inc]

One more question. Because I am from China, do I still get $5000 exemption when I was on OPT in 2005? Here is what I read from IRS.

"The treaty also provides that students have an exemption of up to $5,000 per year for income
earned while they are studying or training. In most cases, the student will become a resident for federal tax
purposes in their sixth calendar year. Students from China can continue to claim the treaty benefits on their
resident alien tax return (if they still meet the definition of a student)."

Thank you.

[AtlantaTaxExpert]

Chenzfi:

Social Security and Medicare tax withholdings have no effect on your income tax computation. They are separate, flat-rate taxes. As for having to pay $200, that is actually a good thing! Remember that a tax refund is an interest-free loan to the government! Proper money management principles state that you should only withhold enough to pay the bulk of your taxes, then make final payment with your tax return which you mail on 15 April 2006.

Yes, as long as you are a student, you can claim the Chinese treay exemption.