[KJY]

Hi,

I received a 1099-G regarding state tax refund I got 2005 and I know I have to include it as income in Form 1040. And I also received another 1099 form saying "Statement for Recipients of Interest Income", "Calendar Year", "Total Interest Paid or Credited-$36.67". My questions are,

1) I followed instruction for 1040 and in worksheet to figure out whether this refund is taxable or not. The result showed that it is not taxable. Can I trust this worksheet?

2) Do you know what the second form I received and what do I do with it?

3) I have an option to report either as a dual-status or a resident alient. Could you tell me which one has more benefits? I am from Korea, so I may be able to have benefit from tax treaty for $2,000. But, when I chose to be a dual-status, 1040NR form is going to be used only as a statement and the actual form to be used will be 1040, isn't it? Then, I end up having any tax treaty benefit, don't I?

Thanks in advance.

[AtlantaTaxExpert]

1) Yes, you can trust the worksheet.

2) That is a Form 1099-INT, which is used to report interest income you earned from money in a bank, credit union, or other savings account.

3) If you file as a resident alien, you will, more than likely, lose your $2,000 treaty exemption. However, that is more than offset by the fact you can claim a $5,000 standard deduction.

Now, if your itemized deductions exceed $3,000, then file dual-status, because you will be able to itemize and still get the $2,000 treaty exemption.

[KJY]

Thanks for the answer. My follow-up questions are,

1) The second form wasn't from bank. It was from Internal Revenue Service and it says Form 1099. Any idea what I should do with it?
2) If I file as a dual-status, Do I simply subtract $2,000 from my total income and put that income as final total income in the form? Would IRS know?

Thanks again.

[AtlantaTaxExpert]

1) If you file a return late and got a refund, the U.S government paid your interest on the refund. That interest is taxable, hence the Form 1099-INT.

2) You claim the treaty exemption on Line 39 of Form 1040NR and Line 6 of Form 1040NR-EZ.