[TaxHelpNeeded]

Hi,
I am on H1B, wife was on H4 (since Dec 2006). In 2007 we filed jointly with she electing to be treated as a resident. For 2007 and 2008 too we filed jointly. She recently (Feb 10, 2009) switched to an F1 and will be getting on campus employment. Also she is getting done with her studies this semester.

1) Am I correct in assuming we can still file jointly for 2009 next year?
2) If yes and we want to file jointly as residents next yr, do we need to attach a statement again saying she is making that choice to be treated as a resident as she will not meet the SPT on F1 for 2009?
3) Also if we are to file jointly, is she liable for the FICA taxes? What does she need to inform her employer?
4) Finally is there any benefit of revoking the treatment as resident for her and filing as a NR next yr (Obviously FICA will get eliminated) but I'm thinking our overall tax bill might be higher if we file separately in spite of that. (There's no more tution expenses I need to claim or lifetime/hope credits)

[MukatA]

1. Yes
2. No
3. Yes
4. You need to figure out both ways. Also for revoking the residents treatment, make sure to read tax treaty.

[TaxHelpNeeded]

Thanks MukatA! We're from India, so I the tax treaty you'r referring to is the $5000 exemption or somehting that students can claim? Hard to figure out right now which would end up being better, since she doesn't have a full time employment offer yet after she graduates.

[MukatA]

If on F1, your spouse files a nonresident tax return, she will claim standard deduction of $5,450 instead of itemized deduction (treaty deduction).

In on joint return she will not pay FICA taxes for 2008, but from 2009, she should start paying it. On resident return, you will get stimulus rebate.

[TaxHelpNeeded]

For 2008, we will be filing jointly as residents and hence will be able to get the stimulus rebate. She moved to F1 in Feb 2009, so I was asking about the 2009 returns and wasn't sure if she should file as a resident for 09, which means she will have FICA taxes deducted starting now or if she should file as a NR and not have them deducted.

[MukatA]

If she files 2008 as resident, then she must pay FICA taxes in 2009. She is resident in 2009 also.

[TaxHelpNeeded]

Hmm I'm confused. Why does filing as a resident for 08 mean she is resident for 09 too? Wouldn't it then mean that since she filed as a resident in 07, she would be treated as a resident in 08 too and can't file as NR?

[AtlantaTaxExpert]

Actually, she will NOT be liable for FICA taxes; see link below:

Nonresident Spouse Treated as a Resident

[TaxHelpNeeded]

My wife did inform her school that she will be filing as resident, but was told she would still be exempt from FICA. Hence her school did not deduct SS/Medicare taxes.
ATL, I believe you are referring to this line

"In addition, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax. Refer to Aliens Employed in the U.S. – Social Security Taxes." on the link above. I then followed the link to

Aliens emplyed in the US - Social Security..
(Aliens Employed in the U.S. ? Social Security Taxes) which lays out

"The following classes of nonimmigrants and nonresident aliens are exempt from U.S. Social Security and Medicare taxes" F1 students included herein.

So I guess since she can be treated as Resident for federal tax purposes, but can still be a NR alien for FICA purposes she is exepmt from FICA. Is my understanding correct. Thanks in advance.

[TaxHelpNeeded]

I'm hoping ATE or MukatA can help me out here. For 2009 tax year my wife clearly qualifies as a resident per SPT.

2009 : 41 days (Jan 1 -Feb10)
2008 : 365/3 = 122
2007 : 365/6 = 60

Net total : 220 days (- a few days we were out of the country in 07). So I'm guessing we don't need to file the form for days excluded (8843 I think)

Now she plans to file an OPT extension for this yr to get the additional 17 months for STEM. As a result she will not meet the SPT in 2010. Can we still file as residents next yr for 2010, by making the choice to file jointly and having her treated as a resident, similar to what we did for 2006? If yes, will I need to reattach a statement to that effect again or since we've not revoked our choice since 2006, there is no need for such a statement.

[AtlantaTaxExpert]

Your understanding is correct.

Even though she has CHOSEN to be treated asa resident alien for income taxes purposes, she is a non-resident alien for FICA tax purposes and is therefore considered to be exempt from these taxes.