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smsthss · Jun 24, 2006, 05:40 PM

Hi Tax Expert:

This site is extremely helpful. My question is regarding F1 to H1B conversion in 2005 and though this is extensively covered, my case is slightly different.

From August 2001 to August 15 2005, I was on F1 visa. I got married in May 2005, and my wife got F2 visa in June 2005 and she came to US in Aug 2005 on F2. My wife and I converted to H1 and H4 status on Aug 18, 2005 and we are in the same status till now. But when I was applying for Taxes (in Apr 2006), I did the following things:
(1) I applied it as a Non resident.($3200 personal exemption)
(2) I claimed my wife as a dependent ($3200 exemption)
(3) I did not claim my $5000 standard deduction (mistake! )

So the total deductions I claimed are state tax + $6400. But I got a letter from IRS that I cannot claim my wife as a dependent becaise I applied as a Non-resident and I owe them money now.

But after seeing this site, I understand that I can now apply it as First-year resident choice. So Tax expert can you please tell what exemptions should I make? Is it $3200 + $3200 + $5000 +$5000 = $16400? I am little confused. What is the best action to take now? Thank you very much for the help.

- Gopi

AtlantaTaxExpert · Jun 24, 2006, 07:50 PM

For the 2004 tax year (filed in 2005), you appeared to have filed correctly (non-resident Form 1040NR, claiming your wife as a dependent and NOT claiming the standard deduction). However, if you were an Indian citizen, then you were entitled to claim the $4,800 standard deduction AND you can claim your wife as a dependent. You should amend the return using Form 1040X and attach a new Form 1040NR, claiming the standard deduction as explained in the 2004 version of IRS Pub 519. You willneed to provide the IRS a copy of your visa showing that you are an Indian citizen. If you are NOT Indian, I need to know what nationality you are to properly advise you.

For the 2005 tax year (filed in 2006), because you are married, you have the option to be treated as a resident alien for the entire year of 2005, even though you were H-1 and your wife was H-4 for only part of the year. You meet the crtieria for this option. You need to file Form 1040, 1040A or 1040EZ and attach a statement to the return stating that you wish to be treated as a resident alien for the entire year. That will enable you to claim $3200 + $3200 + $5000 +$5000 = $16400.

smsthss · Jun 24, 2006, 08:11 PM

Hi Tax Expert: (Thanks for a prompt reply)

I am sorry that I said April 2005 referring to the time when I applied for taxes. It is actually April 2006. My question was not related to 2004 taxes at all. It is all about 2005. I changed my status from F1 to H1b in Aug 2005, so I can't be resident alien for whole 2005. I am posting my question again w/ few changes. Please read it again. I am resident of India.

My question is as follows:

From August 2001 to August 15 2005, I was on F1 visa. I got married in May 2005, and my wife got F2 visa in June 2005 and she came to US in Aug 2005 on F2. My wife and I converted to H1 and H4 status on Aug 18, 2005 and we are in the same status till now. But when I was applying for Taxes (in Apr 2006) for the year 2005, I did the following things:
(1) I applied it as a Non resident.($3200 personal exemption)
(2) I claimed my wife as a dependent ($3200 exemption)
(3) I did not claim my $5000 standard deduction (mistake! )

So the total deductions I claimed are state tax + $6400. But I got a letter from IRS that I cannot claim my wife as a dependent becaise I applied as a Non-resident and I owe them money now.

But after seeing this site, I understand that I can now apply it as First-year resident choice. So Tax guru can you please tell what exemptions should I make? Is it $3200 + $3200 + $5000 +$5000 = $16400? I am little confused. What is the best action to take now? Thank you very much for the help.

- Gopi

AtlantaTaxExpert · Jun 26, 2006, 09:00 PM

Since you filed as a non-resident and are a citizen of India, you can file as a non-resident and claim your personal exemption plus the $5,000 standard deduction plus claim your wife as a dependent. Not sure why the IRS says otherwise; IRS Pub 519 is pretty clear.

However, it would be better if you filed Under First Year Choice AND, because you are married, you and your wife chosse to be treated as resident aliens for the ENTIRE YEAR. That allows you to claim $3200 + $3200 + $5000 + $5000 = $16400. You need to amend your 2005 return and file it with the IRS; that should take care of the IRS notice for payment.