[TaxHelpNeeded]

Hi,
I was on F1 opt from Jan -Sep 30th 06. I switched over to an H1B starting Oct 1st. I got married in Dec 06. Based on the SPT I am a non-resident for tax puposes. I want to count my wife as a dependent and file jointly. However the pub on 1040NR says that only if you're a citizen of S.Korea or Canda/Mexico can I claim my wife as dependent and get 2 personal exemptions. I am from India. There was a caveat there saying students from India can claim exemption under some criteria. Can somebody clarify what those are.

a) I read in the forum that it is possible to file an extension and wait till I qualify as a resident to claim the deductions. But if I'm filing for 2006, and do not qualify as resident, how is that a valid option?

b) If I do file for an extension, and wait till ~ Jun15 (I was here from Oct 1 - Dec 3 = 64/3 = 21 days + 165 days in 2007) can I claim the tax treaty available for Indian students?

[AtlantaTaxExpert]

If you file jointly with your wife, she is your EQUAL, not your dependent.

a) You need to wait until you qualify for Substantial Presence Test before you file.

b) If you file jointly, you will get a $10,300 standard deduction instead of the $5,150 you get under the tax treaty. That's WHY you want to file jointly.

[TaxHelpNeeded]

Thanks for the prompt reply.
a) I forgot to mention that my wife just move to the US from India on Dec 31st on an H4. Does that change anything in terms of her being able to qualify for filing jointly (other than extending the date to file to Jun 30th). In short can we still file jointly and treat her as an Equal rather than a dependent since she has no US income (had no income in India for the last yr).

b) If answer to a) is that we can still file jointly, treating her as an equal than does that mean I can deduct 10,300 + 6600 (2 personal expemtions).
If I can only claim her as a dependent, than should I wait till June to file as a resident? Also deduction in this case would be 5150 + 6600?

Appreciate your help.

[AtlantaTaxExpert]

a) Her physcial location in 2006 is irrelevent for filing jointly with her H-1B visa holding spouse.

b) Yes.

You CANNOT claim her as a dependent. If you do not file jointly, you CANNOT file as a resident alien. You would have to file as a non-resident alien, and, as an H-1B visa holder, you CANNOT claim depedents when you file as a non-resident alien.

BOTTOM LINE: File jointly!

If you need my professional tax help, contact me at [email protected].

[TaxHelpNeeded]

Thanks for the clarification ATL.
Once last question, if I file as a resident, would I have to pay social security & medicare taxes for the whole yr? As things stand, these were deducted from my paycheck starting only from Oct 1st when I switched to H1B.

[AtlantaTaxExpert]

No, the employer will not go there, as it open him up to some heavy fines.

You should already be paying these taxes when you started on H-1B. That is as it should be.

[TaxHelpNeeded]

Thanks a lot for your help!

[AtlantaTaxExpert]

Glad to help!

[TaxHelpNeeded]

Hi ATE,
Sorry to bother you again. But the question of waiting to meet SPT is still bothering me. From whatever I've read so far on it in the IRS pub related 1040NR or 1040, everywhere I see it says Resident status based on SPT till Dec 2006 for filing returns for 2006. You did previously answer this as

>> a) You need to wait until you qualify for Substantial Presence Test before you file.

My question is the IRS pub's seem to suggest residency status based as of Dec31 2006, so how come waiting till I meet SPT in 2007 qualifies me to file as resident for 2006. (Basically is there any place in the IRS doc's where they seem to indicate SPT based on date of filing)

[TaxHelpNeeded]

Okay did some more digging through and in pub519 (pg 9, I do not see a 2006 version of this pub only a 2005 version which I assume is the latest) I see this coming up under the 1st yr choice. I mee the 31 day consecutive requirement. My question now is relating to the 75%
I was here from Oct 1st (Date H1b started). I left the country on Dec 3 eve and I came back Dec 31st evening.

If I am to include both Dec 3 & Dec 31st as those present in the US it comes to a total 65 days. (that's the way the example counted it to) Days from Oct 1st - Dec 31st is 92.

65/92 = 0.706 unforutnately.

If however I can count 5 days of absence towards this then
70/92 = 0.760 which will qualify me.

a) Question is can I count these 5 days even though there were all consecutive and also can I include Dec 3rd and Dec 31st which the example suggests.

b) When I file for extension using for 4868, it says I should attach any taxes that I may owe as calculated based on NR status. I had interest income for the yr 2006, which has not been taxed and I end up owing around 100 odd dollars based on that. Is the interest earned as NR to be taxed? And hence should I include it as taxable income and sen in a check for the extra amount now?

c) Also should I file an extension for my wife too? She had no income for 2006 (in US or India) ? When I do file my 1040 I will need to include the W7 for the ITIN for my wife, right? Or should I be filing it now?

[AtlantaTaxExpert]

a) Yes, you can use the five days.

b) It WILL be taxed, because you are filing jointly and choosing to be treated as resident aliens for ALL of 2006.

c) The extension for yourself is all that is needed. Yes, include the W-7 for your wife.

[TaxHelpNeeded]

Thanks ATE
a) That's awesome.
b) Yes it will be taxed. But if I file an extension just for myself, should I be including just one standard deduction under 21(2) & 1 personal exemption to compute my taxes for the 4868 based on treating myself as an NR as per pub 519 ?
c) You mean, I should include the W-7 with the 1040 and not with the extension right?

Finally Thanks a lot. I'm much more tax educated now and I think I can handle this on my own. Nonetheless
d) How much would it cost me to get your professional services. I think I can file the extension myself. Just need the 1040 with the accompanying statements for 1st yr choice and treating NR spouse as a resident, once I've qualified as a R on 1st yr choice (I have bank interest & div (1099)). Actually how much would it cost if I were to also include the 4868.

Once again I just want to say thanks a lot.

[AtlantaTaxExpert]

b) No, include TWO exemptions ($6,600) and TWO standard deductions ($10,300), since you WILL be filing jointly.

c) Yes, include the W-7.

d) Contact me at the email address below. I cannot quote rates on this forum.

[muks7]

Hi Taxhelpneeded,
After reading your posts, it seems that your and mine case is exactly same, as I was on F1 till sep 31st, H1 started on 1 Oct, went to India on 3rd Dec, got married on 10th dec, came back to USA on 31st dec with my wife. I had almost the same ques you have and finally landed up having a tax professional help, but somehow not even convinced with him. I think based upon your exloration and my exploration, we can help each other and can come up with some relavant conclusion. Let me know at [email protected], if you are willing to exchange info we have so far. I am going to meet that erson again on Monday and would like to talk to you before that so that I can surely tell him that he is not right. I can be reached at 215-300-2613
Thanks

[AtlantaTaxExpert]

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