[ss1980]

Hi,

I was a F-1 student, beginning August 2002 and filed 1040 NR-EZ for each year from 2002-2004. I'm a citizen of India, so was claiming the exemptions each year. In 2005, I was working on my OPT till May 23rd (when my H1B petition was improved, however I only got the visa stamped in July 2005). I have been on H1B status since then. So I'm guessing I'm a dual-status alien for tax purposes, and being from India can still claim the tax-treaty exemptions on the 1040-NR portion of the return. However, my W2 gives me just the total amount for the entire year, and not the amounts earned and taxes paid on the two different statuses. How do I determine these? Will it be easier for me to just file as a resident (or do you think the standard exemptions are worth filing as dual-status alien)?

Thanks a lot.

[AtlantaTaxExpert]

SS1980:

In my opinion, the critical date is when the H-1B visa was approved, not when it was stamped. If it was approved prior to 1 July 2005, then you should file as a resident alien. If not, then a dual-status return is needed.

As you already know, you can claim both the personal exemption and standard deduction on both returns, so your tax liability will probably be the same. However, the resident return is a LOT easier to file.

As for pro-rating your salary (if dual-status is necessary), just do the math based on what your average daily salary was. That's one method. You can also determine how much of your salary was subject to SS (6.2%) and Medicare (1.45%) taxes by doing the math using the percentages I just posted. The iRS will accept either method of pro-ration.

[ss1980]

Thanks a lot for replying to my query. My H1-B got approved on May 23rd. I think I made a typo in ym earlier post. So, I guess you're saying that I should file as a resident, hence 1040? Also, I'm a little thrown off by what you mentioned about the exemption and deduction? Can I use the India-US tax treaty exemption if I file as a resident also? And the deduction, were you referring to the deduction used by all aliens?

Thanks!

[AtlantaTaxExpert]

SS1980:

Aliens of Indian nationality are permitted to claim the standard deduction
($5,000) if they are students or business apprentices under a F-1 visa.

Because you qualify under the Substantial Presence Test, you should file as a resident alien.

[ss1980]

Hi there,

Thanks a lot for getting back. Yes, I think I will file my taxes as a resident alien. However, I'm still confused by your reply (Sorry if I seem too dense, maybe it's just early in the day for me):) .

But anyway, in your post you suggested I file as a resident alien and then you said I could claim a standard deduction as "Aliens of Indian nationality are permitted to claim the standard deduction ($5,000) if they are students or business apprentices under a F-1 visa." But if I file as a resident alien, how can I claim a deduction for non-resident aliens (like F-1). Will I be indicating on the form that I was on my OPT for 5 months, and then H1-B for 7 months?

Also, is this standard deduction the one that's covered under India-US tax treaty?

In addition, will I also be claiming the 5000$ deduction that all single residents claim?

How about the personal exemption of $3250? Can I claim that as well?

Thanks a lot for the information. I know a lot of these queries are repititive, but I just want to make sure I understand clearly. Thanks for your patience!

[AtlantaTaxExpert]

Yes, the standard deduction permission is the same treaty exemption mentioned in the India-U.S. Tax Treaty. You cannot claim the standard deduction and another $5,000 deduction for the treaty exemption.

The personal exemption is $3,200, not $3,250.

The reason you should file as a resident alien is that you meet the Substantial Presence Test because you were on H-1B visa status for over 183 days.

[ss1980]

Thanks a lot for your answers and advice. I really appreciate it!