[vivr]

Hi,
I have some specific questions concerning my case ,
I am currently on a H1B visa and my wife is a student on a F1 visa
For the previous year 2005 my wife 's visa status was H4.
I understand if I claim tax benefits for my expenses relating to her education ( tuition fees etc) for the year 2006, she will be considered a resident alien henceforth.
However for the year 2005, we did claim that benefit. So by converting her visa from a H4 to F1 , for tax filing purposes has her status gone from resident alien to non-resident ?
Which means if we claim benefits from her educational expenses for the year 2006, she will loose the SS/medicare tax waivers if she gets a job and is on OPT ?
Also she had no income for the year 2006 ( no W-2), so to claim benefits from her educational expenses we choose the MARRIED, FILING JOINTLY OPTION ?
What option do I choose if she we don't want to claim any benefits from her educational expenses and want to retain her status as non-resident ?

Thanks

[AtlantaTaxExpert]

She has a choice this year of filing by herself as a non-resident alien, or filing jointly with you as a resident alien.

If she chooses to file as a resident alien in 2006, it extends to 2007, so, yes, if she gets a job, she will be liable for Social Security and Medicare taxes.

To claim the education credits/deduction, she must file as a resident alien.

[vivr]

Thank you for your response,
Just to confirm
The option I choose if we don't want to claim any benefits from her educational expenses and want to retain her status as non-resident is MARRIED, FILING Separately ?
If I choose MARRIED, FILING JOINTLY then she automatically gets the resident alien status ?
Also since she has had no income for the year 2006 and no W-2 does she have to file at all ?

[AtlantaTaxExpert]

YOU file Married Filing Separately. She files as a married non-resident alien.

Yes, if you file jointly, she is automatically a resident alien.

If she has NO income, she is NOT required to file. However, by NOT filing jointly, you effectively WASTE $8,450 in tax deductions.

[taxsearcher]

You may not lose the social security exemption if she is a full time student working on campus. This is still available to residents. If she is not working on campus, you are right that she would lose her exemption from social security taxes.

[AtlantaTaxExpert]

The campus work circumstance strikes again! :-)

[vivr]

Hi,
Thanks a lot for your clarification.
Could you please explain how I would waste $8450 in tax deductions by NOT filing jointly ?
Also if she files as a non-resident alien and I file as married , filing separately, does the above still apply ?
Thanks
-vivek

[AtlantaTaxExpert]

Vivek:

You MUST file a tax return. If you file separately, you can, at best, claim your own personal exemption ($3,300) and MAYBE the standard deduction ($5,150; depends if you have been on H-1B for all of 2006).

If she has no 2006 income, she has NO filing requirement at all, so she could not claim either the personal exemption or the standard deduction.

If you file jointly, FOR SURE you get to claim TWO personal exemptions ($6,600) and a double standard deduction of $10,300.

Do the math!

[vivr]

Hi,
Thanks for your clarification.
It looks like I can claim 2 personal exemption even though I file as married, filing separately since I meet both of the conditions below
a) My wife had no income for 2006 and is not filing a return ( 8843 is something which F1 students file , but that is more to do with the Substantial presence test right)
b) she cannot be claimed as a depedent on another person's tax return


Also I have read of cases ( on this website and elsewhere) where the SS/medicare taxes were waived in the current year in spite of filing as a resident alien the previous year ?

Please confirm.
Thanks again

[AtlantaTaxExpert]

TaxSearcher and I have different attitudes about this.

While I agree that technically you should pay FICA taxes if you file as a resident alien, I foresee no practical case where the employer will willingly subject himself to a big fine by amending his Form 941 to collect these taxes if you chose to file as a resident alien for 2006.