[gnr2012]

Hi,

I graduated from my school in Jun 2012 and joined a firm in Jul 2012.

I was on F1 from Jan-Sept 2012 and then my status changed to H1b from Oct 2012. My wife and son (1.5 yr old) joined me in US in Jan 2012 and their status has also changed from F2 to H4.

1) How do I file taxes.
2) Which option will give me the maximum deduction for my wife/son.
3) I also have a student loan and would like to claim the $2500 deduction towards interest.
4) I also have moving expenses of about $2500
5) Can you please clarify the difference if I wait till Jun 2013 to file vs. filing it before Apr 2013.

Thank you very much.

[AtlantaTaxExpert]

It is probably most advantageous for you to file jointly with your wife, filing Form 1040 with Form 1116 to claim the Foreign Tax Credit.  Form 1116 is required because you must claim ALL world-wide income earned in 2012, and the Form 1116 allows you to claim a credit for the income taxes paid to your home country. Note that you must WAIT until sometime in June before you can file this joint return.

You will need to apply for Individual Tax Identification Numbers (ITINs) for your wife and child by submitting Form W-7, and that process has undergone some radical procedural changes this past year.  Instead of the simple notarization process, the IRS now requires that your home country certify the photocopy of your passport as a true copy.  This is due to rampant fraud in the ITIN submission process.  The notaries simply cannot tell the difference between a fake passport and the genuine passport.

This certification can be done by the Indian (I assume you are from India) embassy in Washington, D.C. or at one of the consulates in San Francisco, Chicago, Houston or New York.  Assuming you do NOT want to drive there, you need to call the nearest consulate and arrange to have this process done via the mail.  Since you must wait until June to file, you have time to get this done (the process, done via mail, can take up to three months to complete). My clients to date have had the best results by mail with the San Francisco consulate, getting the certified passport photocopies in less than 3 weeks.
Also, the IRS recently announced the opening of Tax Assistance Centers through which you may be able to have the passport verified as genuine, then submit the tax return and Form W-7 IN PERSON to be forwarded to the ITIN Processing Center in Austin, Texas for processing , without having to get the photocopies certified by your home country consulate.

You go to the TAC with your family, the passports, the SIGNED Forms W-7, and the completed and SIGNED tax return.

You leave the TAC with your family, the passports and a receipt for the Forms W-7 and the tax return

The list of the TACs are at the link below:

Taxpayer Assistance Center Locations Where In-Person Document Verification is Provided

A client who visited the TAC in Chicago last week said the wait was about 30 minutes and the process takes about 30 minutes.

The alternative is to mail in the actual passports themselves, something most of my clients are reluctant to do.

If you believe that you will need professional help filing this year, this IS what I do. Please double-click on my name (Atlanta Tax Expert) above to access my profile. You will find my email address in the signature portion of the profile (scroll down to the BOTTOM of the page).

[gnr2012]

Thank you for your response.

Could you also clarify the following:

2) Which option will give me the maximum deduction for my wife/son.
3) I also have a student loan and would like to claim the $2500 deduction towards interest.
4) I also have moving expenses of about $2500

And if I file my return in Jun 2013, do I have to notify the IRS.

I tried Turbo Tax and it threw a figure of $11900 for Federal and $422 for State Return. But I am assuming it does not take into account change in status from F1 to H1.

[AtlantaTaxExpert]

2) Filing jointly. It allows you to get a DOUBLE standard deduction of $11,900, your son's exemption of $3,800 PLUS a $1,000 Child Tax Credit.

3) You CAN claim the student loan interest whether you file by yourself or with your wife.

4) Easier to claim the moving expenses filing jointly.

[gnr2012]

Thanks again.

One local tax expert told me that I should file 1040 NR and not 1040. If I am married to a US citizen then I can file 1040 only. But in my case, my wife is Indian.

And if I file 1040 NR I cannot get deduction for my wife. I can get deduction only for my son. This is because I was on F1 from Jan-Sept and Oct-Dec count only 92 days. He further told me that filing in Jun will not change the deduction for 2012.

Also, the student loan interest deduction can be claimed only if the salary is below $75000.

Please help.

[AtlantaTaxExpert]

You need to find another tax expert, because BOTH wife and child can be claimed as dependents by Indian students on Form 1040NR.

However, filing JOINTLY is your best option, even if you have to wait until 1 June to file, because it raises the payment threshold for student loan interest to $120,000 because you are filing JOINTLY.

AGAIN, If you believe that you will need professional help filing this year, this IS what I do. Please double-click on my name (Atlanta Tax Expert) above to access my profile. You will find my email address in the signature portion of the profile (scroll down to the BOTTOM of the page).