[sachin_24n]

I have question related to my Virginia state filing status as resident or non-resident or PartYearResident.
I am single and lived in Virginia from 2005 to 2010 as a resident(alien).
I moved out of VA on June 2010 to my home country i.e India and donot plan to go back USA.
My stay in VA in 2010 was less than 183 days , i.e. it was around 160 days.
But during those 160 days my domiciliary i.e. my permanent residence was VA.
All my federal income received (W2, Bank Interest etc) was during those 160 days.
After that I didn't received any federal income, nor I received any foreign income after
Moving out of VA. So all my income received in 2010 was only during those 160 days
Stay in VA (with exception of bank interest which I received till dec).
I didn't lived or worked in any other State in 2010. Now my questions are

Q1) Do I qualify to file as Resident and get full (Standard deduction + exemption) ? Or
I need to file as PY Resident and pro-rate the deduction/exemption? I think that
Even if I file as PY resident, the pro-rating will result in same deduction/exemption
Since there is no other state income to prorate, is that correct?


Q2) I filed my federal taxes as a ResidentAlien , but I think I should have filed as Dual-Status ?
Or is there any exception condition in which I do qualify to file as Resident Alien.

Q3) I had a NRI bank account in India and got interest of $5K from Jan to Dec and also received
1099-INT for that. I have included that in my federal return(since I filed as resident so had to
Show worldwide income).. But in case if I file as PY resident in VA then how do I pro-rate
That interest income, I think this income is not considered to be from VA sources
So can I completely remove it from VA return in which case this never gets taxed in VA , is that correct ?

[AtlantaTaxExpert]

1) You file as a part-year resident. I believe that Virginia does NOT pro-rate the personal exemption, but I am not sure.

2) You CAN file as a resident in your last year in the U.S. but you must claim ALL world-wide income on the return. You avoid double taxation by filing Form 1116 to claim the Foreign Tax Credit for the Indian income taxes paid.

You also need to submit a Residency Termination Statement to notify the IRS of your changed status.

3) You pro-rate the interest (for BOTH accounts) on the Virginia return for the period you lived and worked in Virginia.

If you need professional tax help with this, email me at [email protected] or [email protected].

[sachin_24n]

As per VA site info below, if I file as PYresident,I get more tax saving since I donot have to show my NRI bank interest in Adj gross income.
Prorating deduction/exemption will not reduce it since there is no other state income to pro-rate.
On other hand if I file as resident I need to pay taxes on complete interest income. Am I correct ?

Part-year residents have several options for reporting and computing Virginia taxable income:
•Filing as a part-year resident: A part-year resident usually files as such on Form 760PY.
You must prorate your personal exemptions and standard deduction. A subtraction is allowed for non-Virginia income.
•Filing as a resident: If you are a part-year resident,but your entire federal adjusted gross income is from Virginia sources,
You can file as a resident on Form 760. Filing as a resident allows you to claim full personal exemption and standard deduction amounts

[sachin_24n]

Question is that does my NRI 1099-INT remains untaxed in VA state if I file as PY resident ? Or when I prorate deduction/exemtion I do it on basis of interest received in NRI bank account (althougt this is not connected to any State in USA)

[AtlantaTaxExpert]

While you were a VA resident, the NRI income is considered to be Virginia income, so you need to pro-rate the NRI interest.

All of the states take the same view as the U.S. government in that ALL world-wide income is subject to state taxation while you are a state resident.

[sachin_24n]

Since I qualify to file as all 3 status i.e. Resident , PY Resident and non-Resident, I think the best status to get max tax benefit will be to file as nonResident. Since filing as PY Resident will reduce by deductions due to prorating. Now to choose between filing as Resident or nonResident, I think if I file as Resident I will have my entire NRI bank interest $5.5k taxable since it comes under world wide income throughout the year.. But if I file as nonResident then I will have to just add a part of it to taxable income, it the part received during Jan to June , so I can save around $4k which I received after June saved from VA taxation.. am I correct ? So $4k gets taxed only in federal return and not in any STATE, while $1.5K gets taxed in both federal and VA return? Correct?

[AtlantaTaxExpert]

The income (interest and otherwise) has to be pro-rated.

[sachin_24n]

Interest in NRI account gets deposited every 5 months , so it got deposited on April , Sept and Dec..
My stay in VA was from Jan to June, so does it means that only April interest needs to be added to VA taxable income? Or other way is to add all 3 interest and prorate it from jan to June? Another thing I noticed is that my final payslip was deposited to my account in July and I left VA in June , so does it means that July payslip cannot be taxed in VA as I was non-resident in July...

[AtlantaTaxExpert]

You CAN approach that way if the interest is not that significant.

[sachin_24n]

I assume you mean to say , just add April interest and skip Sept and Dec interest.. how do I convert the April interest from Rupee to dollar , which days exchange rate will apply (april or dec or filing date), and is there any common place/website to obtain exchange rate for that day.. I know all banks give diff exchange rate..

[AtlantaTaxExpert]

You can use the average exchange rate for 2010 as published by the IRS, or you can use the exchange rate on the date the interest was credited to your account.

However, you MUST be consistent. In that, I mean that if you use the average exchange rate when posting the interest, you MUST use the average exchange rate in ALL OTHER monetary conversions throughout the tax return.

Similarly, if you use the exchange rate on the date the interest was posted, you must use the exchange rate for all other transactions on the date the transaction occurred.

[sachin_24n]

On VA state website, they mentioned that non-resident need not report bank interest, check below , so it means I can skip entire 1099-INT even if they were received while I was resident, bcoz I am filing as non-resident.

Nonresidents
A nonresident is a person who is not a domiciliary or actual resident of Virginia,
But who received income from Virginia sources during the taxable year.

NOTE: Interest received by a nonresident from a personal account held in a Virginia bank and
Pension or annuity payments made to a nonresident from a Virginia payer are not Virginia source income