[Deol]

I have read threads on this forum and if somebody can help me, I just want to be clear on this. I was on F1 from Aug 2001 to Octo 2004 (OPT Dec - 2003 to October 2004), I worked on OPT from Jan 2004 up to October 2004 and change my status to H1 from October 1st. Now, since my H1 status for 2004 was under 183 days and before that I was on F1, Can I file with 1040NR-EZ with standard deduction ? (because with my understanding this particular case doesn't count as Dual staus).

Please advise.

[AtlantaTaxExpert]

Deol:

Read my answer to "The Martian" about the timing of conversion from a F-1 to a H-1 visa.

Based on that timing, you are a dual-status alien and should file Form 1040NR-EZ.

You may be able to claim the standard deduction IF you are a citizen of India.

[Deol]

Kudos to you for great info and quick reply.

[AtlantaTaxExpert]

Deol:

A modification to my guidance to you:

Under a special rule for students and business apprentices from India (such as those under OPT programs on F-1 visas), such Indian citizens can claim the standard deduction. This provision is covered in IRS Pub 519, pages 24-25.

Now, later in Pub 519 (In Chapter 6), they specifically state that duel-status aliens cannot claim the standard deduction. They cited special instructions regarding the students and business apprentices from India for exemptions, but not for the standard deduction. Also, in the Question and Answer section of the Pub 519, they reiterate that dual-status aliens cannot claim the standard deduction.

Based on these facts, and after reviewing the Pub 519 most of yesterday evening, I concluded last night that students and business apprentices from India who are also dual-status aliens cannot claim the standard deduction. If they were permitted to claim it, it would have been spelled out somewhere in Pub 519. It was not.

Other than this revision on the stnadrd deduction, all the other guidance still applies.

[Deol]

First let me thank you again for updated info. Now going through some of the IRS instructions for 1040NR - EZ, I read (under Dual Status Tax Year info) that A dual status year is one in which you cange status between nonresident and resident alien.

Now, If someone does not clear either green card test or substantial presence test then that person is never in the Resident Alien status.

Am I missing somehthing here ? With this basically if you do not pass the either of the test then you are not in dual status.

If I really am in dual status then instruction also says attach a statement showing your income for the part of the year you were a U.S. resident. Which part then I have to consider here and what kind of statement they are talking about.

I would really really appreciate your expert guidance on this.

With my thanks,
Deol

[AtlantaTaxExpert]

Deol:

Dual status normally occurs in the first and last year you are located in the United States. It was designed for aliens first coming into the United States to work under an H-1 visa. Now, since you were on a F-1 visa, you were an "exempt individual" who, for tax purposes, was never in the United States.

That's why I put such emphasis on the timing of your conversion. For the Substantial Presence Test, the IRS considers that you first entered the country on the date your visa converts to H-1 status. Simply put, the time when you were under the F-1 visa does not count.

The Income you earned before 1 October 2004 is income during the "nonresident" status. Post-1 Oct income is "resident status" income.

[AtlantaTaxExpert]

See my separate posting on this issue!

[deepatrix]

For all those who fail the substantial presence test - you are non resident the whole year... go to figure one in Pub 519..

If you are non resident - just file 1040 NR or NR EZ... and claim std. deduction if you are indian.

Dual status happens only if you pass the test and you had a F1 or non resident period

If you are dual status... you cannot claim std. deduction... even the instructions on 1040 NR says this.

Next if you see the example for a dual status return in Pub 519... the NR is just a statement of how long you were in the US and how much you earned as non resident...

Your W2 has total wages and social security wages the difference is what you earned as non resident.

You carry over this amount in total to the total wages on form 1040... and do itemized deductions and complete the tax form...

For people who don't have much to deduct you may owe the IRS money...

[Deol]

I thought I should share this as an end to this... I filed through H&R and they seem to agrees with the last comment... thanks to alll for yr inputs

[kmalhotra]

So according to the last post - if my H1 started on Oct 1st, 2004 and before that I was on F1, I file 1040NR. And if am an Indian I can claim the std deduction? So I don't have to file the 1040 at all?

[AtlantaTaxExpert]

Kmalhotra:

That is correct. If your H-1 started in Oct 2004, you do NOT meet the Substantial Presence Test and therefore are not dual status. You do not file Form 1040.

You do file Form 1040NR or 1040NR-EZ and claim a personal exemption of $3,100 and (because you are an Indian citizen) a standard deduction of $4,850.

For 2005 and beyond, you file just like U.S. citizens, filing Form 1040/1040A/1040EZ.

[kappapilla]

Hi ATE,
Thanks for your posts.

I am in Dual status as per the discusson in other posts here.. and I decided to file using 1040 NR and 1040 & Schedule C .

I had 7000$ 1099 -MISC income when I was in OPT.(I assume I don't need to pay soc sec and med)

I had 17000$ with W2 on H1(they dedcuted appr soc sec and med)

Now how do I split the amount in the 1040 and 1040NR,. I have this question because if I file 1040 online and enter 1099 -misc info.. its deducting the soc sec and med stuff.

And if don't use standard dedcution do I really save any?

Please suggest me


Apprecaite your time

Naveen

[AtlantaTaxExpert]

Naveen:

First and foremost, you cannot file a dual-status return online. It must be mailed because you are manually marking both the Form 1040 and the Form 1040NR as "Dual-Status". See IRS Pub 519 on how to porperly prepare a dual-status tax return.

Second, all income, deductions and exemptions, as well as tax computations, are reported and performed on the Form 1040. The Form 1040NR is only a statement used to identify what part of your income was earned while you were on F-1 visa status. Therefore, you report the Form 1099-MISC on Schedule C, Form 1040NR and Form 1040.

The W-2 income is shown only on the Form 1040.

The standard deduction is not available to you unless you are a citizen of India. If you are Indian, then you can claim a standard deduction of $4,850 on the Form 1040.

You are correct that you do not have to pay Social Security or Medicare or self-employment taxes while you were under F-1 visa status. For this reason, do not prepare or file Schedule SE.

Filing dual-status is not an option, it is a requirement if you meet the criteria! That being the case, whether you save anything or not is irrelevant.

Now, you probably have the option of filing as a resident alien (Form 1040) for the entire year under the First Year Choice Program. If you do that, however, you will have to pay self-employment taxes on Schedule SE which, on $7,000, comes to $1,071. This being the case, I suspect the dual-status process saves you that $1,071 in self-employment taxes.

[kappapilla]

Hi ATE,

Again , appreciate your time for the posts and replies.
I am an indian citizen.
Now, I undestand that I have to file as Dual Status( OPT till May 2004 and H1 from June 2004).. I did fill the paper file for
1040(Total wages irrespective of status) with Schedule C (OPT income on 1099), I didn't put the standard deduction of $4850 in that form.. 'coz of the above mentioned statement on 1040NR(dual Status).

if I do the following is that correct?

1040 > 25134$-4850-3100 =17184

Tax for the above comes int actually 2219$
W2 had withheld 3135$

so I get the tax returns of 916$


did I get it right?

in schedule C ,I just filled the gross reciepts to be 7520$(1099-Misc)
---- I had 17614$ on w2 (h1)--

and the 1040 NR(can I use EZ?) too , I just filled the 7520$ assuming I just have to mention I earned as a non resident!

also, I understand that they are using 1040NR kind of as a verification!

Please suggest me if have got the whole thing right!

Thanks man I owe u a treat!

Naveen

[AtlantaTaxExpert]

Naveen:

Your math is good. You seem to have it correct. The fact that the Form 1099-MISC income is on the Form 1040NR will make it clear that you earned it while under F-1 visa status and is therefore exempt from self-employment taxes.

Be sure to print on the top of the Form 1040 "DUAL-STATUS RETURN" and on the top of Form 1040NR "DUAL-STATUS STATEMENT". I highlight these printings in yellow to draw attention to them.

Be sure to fill in page 5 of the Form 1040NR (regarding visa status) as accurately as possible.

Use the Form 1040NR (not Form 1040NR-EZ). The IRS Pub 519 calls for the Form 1040NR, and it is not that much harder to use than Form 1040NR-EZ.

Do not forget to attach a copy of the W-2 to the Form 1040. Do not attach a copy of the Form 1099-MISC.

[kappapilla]

Thanks ATE,

I just finished filing my taxes! Whoa! I actually put some effort in learning tax regualtions this time ! And your posts were the most I browsed

Will catch your posts next year , but I won't be on dual status though :)


Well, I will be waiting for the returns to spend on something really stupid


I appreciate everybody who posted in here especially ATE!

EnjoY Madi

Naveen

[AtlantaTaxExpert]

Glad to help. Do not be too foolish!

[maudlin2001]

Hi!

This is my first post.
I am currently on OPT and a resident of India. My company might try to file my application in this new quota that has been launched for students with a masters from a US university.
I am not sure if they are allowing us to choose the start date of the vISA, I heard it can be immediate.
In case we are allowed to choose the start date do you think it is better to delay it a little to avoid the 183 days substantial presence test.
Do you think its going to save me money?

Thank you for your replies in advance.

Regards,
Dev Khosla

[maudlin2001]

Dear All,

I also wanted to know if it is okie to be getting a w-2 during your OPT or should I be getting a 1099?

Regards,

Dev

[AtlantaTaxExpert]

Dev Khosla:

RE W-2 VS 1099: As long as you are on a F-1 visa and exempt from Social Security and Medicare taxes, it really does not matter which one you get. To my knowledge, there is no legal restriction on either form of tax reporting for students on OPT. However, once you revert to resident alien status, then you should endeavor to be paid under a W-2 so to pay only the employeer half of Social Security and Medicare taxes (7.65%). Self-employed persons who get Form 1099-MISC pay both sides (employer and employee) of Social Security and Medicare taxes (15.3%).

Now, delaying your conversion to H-1B until after 2 July 2005 so as to miss the Substantial Presence Test will save you money in that you continue to remain exempt from Social Security and Medicare taxes. That fact saves you 7.65% of your salary in taxes under a W-2, and 15.3% under Form 1099-MISC.

Since you are an Indian citizen, you get to claim the standard deduction and one personal exemption. If you are married, you get to claim your spouse and children as dependents (assuming your spouse does not work). This being the case, the income taxes you pay as a non-resident alien is the same as a resident alien pays. There are some credits and deductions which you cannot claim, but, for the most part, you could not claim those credits or deductions even if you were a resident alien. The most significant restriction is the fact that non-resident aliens cannot claim the deduction for mortgage interest paid.

BOTTOM LINE: If you rent (do not own nor contemplating buying a house) and all other issues being equal, it is to your advantage to delay your conversion to H-1B status for as long as possible.