[jthomas123]

Hi
I reached US on October (H1B), my spouse and two kids accompanied me. Based on my reading I could understand following
- As far as tax filing for 2007 is concern it will be for "Nonresident Alien" and I will not be able to claim exemption for my spouse and kid. Will not be able to take the benefit of Child Credit.
- For next year (2008) filing, to be done in 2009. It will be "Resident Alien" status. So I will be able to claim all exception for spouse and Kids. Along with the I would be able to claim child credit also.

Please let me know whether my understanding is right.

Thanks in advance.

Kind Regards
John

[AtlantaTaxExpert]

John:

You can file as a non-resident alien if you want. You can claim ONLY your personal exemption plus whatever itenized deductions are available to you. You CANNOT claim the $5,300 Standard Deduction.

However, you can also file as a dual-status alien, which WILL allow you to claim your wife and child as dependents as long as their exemptions ($3,400 each) does NOT exceed what you earned in the U.S. from 1 Oct to 31 Dec 07. Under dual-status, you will only pay taxes on what you earned in the U.S. As above, you CANNOT claim the $5,300 Standard Deduction.

Under either option above, you can file as soon as you get your W-2 in Jan 08.

Finally, under First Year Choice, you and your wife can file jointly and CHOOSE to be treated as resident aliens for all of 2007. This will allow you to claim THREE personal exemptions PLUS a double Standard Deduction of $10,600, plus the $1,000 Child Tax Credit. However, ALL of your 2007 world-wide income becomes subject to U.S. income taxes. You can claim a Foreign Tax Credit (Form 1116) for taxes paid to your home country on that foreign-based income. It is possible that the deductions and credits will exceed your income, allowing you to pay LESS taxes if you file jointly. However, you will have to WAIT until you meet the Substnatial Presence Test in 2008 before you can file jointly, necessitating a witi until early June, 2008 before you can file.

Clearly, filing dual-status is better than filing as a non-resident alien, but a dual-status return is NOT a return to be filed by a layman, as it is somewhat complex.

I cannot say whether filing jointly is better than dual-status. The only way to know for sure is to prepare the returns BOTH ways and compare the results.

[jthomas123]

It was really helpful

[jthomas123]

Hi AtlantaTaxExpert
Thanks a lot for the answer
But One part of the question, if you can answer
- In Jan 2008 I have to provide w4 for tax withholding purposes. Even thought I am confident of passing 183 day in 2008. But in January I will still be "Nonresident Alien". So w4 form question 3 answer should be "Single". Or it should be "Married" as in 2008 I will pass 183 day's test.
- What is tax withhold % and slab for "Nonresident Alien"

Thanks in advance.

Kind Reagrds
Johnson Thomas

[AtlantaTaxExpert]

Mr. Thomas:

Put Married and FOUR exemptions (one for you, one for your wife, one for each child).

You do NOT want a large refund, as that is an interest-free loan of YOUR money to the government.

[jthomas123]

Mr Atlanta Tax Expert
That is the precise my question is. I am not looking for big tax refund, Ideally like to have my money with me rather then with Government (Not a rich guy to lend interest free loan).
We have to fill W4 form and send to Employer for Tax withholding. And it has to be submitted to my employer on Jan 2008. Now the problem is on Jan 2008, I would not have got the status as "Resident Alien". Definitely by July 2008 I will be able to attain the status of "Resident Alien". So in W4 form can I claim exemption even though, not a "Resident Alien" at that point of time ( Jan 2008) , on assumption that by July 2008 I will get the status.

Kind Regard
John

[AtlantaTaxExpert]

Yes, in 2008, file your W-4 as if you are a resident alien.

It will happen come July 2008.

[jthomas123]

Hi
Thanking you again for reply. But I have one more question in same series.
Let me give the background again
Reached US on October 30th 2007 on H1
Family consist of Me, My spouse and two kid
Salary less then 85K.
Now in 2008 w4, I calculated 9 as total allowance
Here are the Break up
1 for myself
1 for married holding one job and spouse not working
1 for spouse
2 ( 1 each for two kids)
4 ( 2 each as child tax credit)

Here is my question
1) Is this calculation right?
2) I am assuming myself as resident alien, even though legally I will be resident alien in June 2008?

Thanks in advance'

[AtlantaTaxExpert]

Nine may be a BIT much. You would be safe with SIX.

[jthomas123]

Hi
Thanks a lot for this reply.
But what about my calculation ( Total 9) . It is right or not?
Do you forsee any problem?

[jthomas123]

Hi
Again me!
Still wondering about 2)
Here is my question
1) Is this calculation right?
2) I am assuming myself as resident alien, even though legally I will be resident alien in June 2008?

Kind Regards
Johnson

[AtlantaTaxExpert]

The calculations appear correct on its face.

However, with a salary in the $80K range, claiming NINE exemptions will probably result in a rather large tax bill come 15 April 2009.

I am the first person to say that a large refund is NOT a good thing from a money management perspective.

However, a refund beats writing a check if you will not have the money to cover the check. Not a lot a people have.

My rough estimate is that, after factoring in the double standard deduction, four personal exemptions and $2,000 in Child Tax Credits, your final tax liability will be about $6,000. So you need to have about $215 withheld from your bi-weekly paycheck.

If you want, turn in the W-4 with NINE exemption, then see how much is withheld from the first bi-weekly check. If it's about $215, then you should be okay. If not, you need to re-submit the W-4 with a different exemption amount.