[mavin]

I'm in the USA for the last 4 yrs on F-1 and OPT together starting from Jan 2001 to end of my OPT Feb 2004,So my question is should I have filed a 1040 for my last year(2003) taxes itself, because I was substantially present here as the requirement says. Do I need a tax amend here too?
Appreciate your comments.

[AtlantaTaxExpert]

Mavin:

Did you not understand my earlier answer?

Since you were on a F-1 visa and under OPT until 2004, you were an “exempt individual” for all of 2003. The Substantial Presence Test did not apply to you for 2003.

You should file Form 1040NR or 1040NR-EZ, plus Form 8843 for 2001, 2002 and 2003. You were exempt from Social Security and Medicare taxes for 2001, 2002 and 2003.

For 2004, the Substantial Presence Test does apply, so you will file Form 1040/1040A/1040EZ. You are also liable for Social Security and Medicare taxes.

Adpcit:

See answer for Mavin. The F-1 visa exempts you from Social Security and Medicare taxes.

That will apply for 2005 as well, since you will be a dual-status alien. If your H-1 visa becomes effective on 2 Jul 2005 or earlier, then you will meet the Substantial Presence Test and can then file Form 1040/1040A/1040EZ. You will also be liable for Social Security and Medicare taxes.

[deepatrix]

I am in the same situation as most people here. I changed from F1(OPT) to H1B on Feb 18th 2004. I have worked for the same employee since MArch 2003 and I got only a W2. I pass the substantial presence test for 2004. I see most people who change from F1 to H1 are treated as Dual status...

But I also see posts for a person in similar situation beign asked to file only a 1040 or 1040 EZ...

And my guess for people who don't pass the substantial presence test and changed from F1 to H1 is that your situation is the best as you should file as non resident 1040NR this year and 1040 (H1B) next year and will never face this dual status cofusion.

Can someone give a clear answer for my situation?

Atlanta tax expert-- is there a phone number I can reach you at?

Thanks,
Deepa

[deepatrix]

Oops I think I got the substantial presence test mixed up...

So if you have a H1B before July you are resident else you are dual?

I don't understand...

Deepa

[AtlantaTaxExpert]

Deepa:

Email me at [email protected]. I will e-mail you my phone number.

[rajkum2002]

Hello,

I am contributing small percentage of money to my retirement plan. This amount is exempted from taxes on my paychecks. Do I have to mention this in my taxes? For example 100,000 is my income without retirement deductions. I contribute 1,000 for 401k plan. So do I report 88K as my income for tax purpose? 1,000 was exempted from taxes on my pay chekcs.


Thanks for your help!
Raj

[AtlantaTaxExpert]

Rajkum2002:

That is reflected on your W-2. The box 1 income will be lower than the Box 5 income by the amount of your contribution to the 401K plan.

In Box 12, you should see a code "D" (for 401K contribution) and the amount of your total annual contribution to the 401K.

There is no requirement to report this on Form 1040.

[sdawara]

I'd like to confirm if I need to file Form 1040. I am a dual-status alien (F1 to H1B) for 2004.

- Santosh

<a href="http://www.irs.gov/publications/p519/ch06.html#d0e6820">p519</a>

Forms To File

The U.S. income tax return you must file as a dual-status alien depends on whether you are a resident alien or a nonresident alien at the end of the tax year.

Resident at end of year. You must file Form 1040 if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write “Dual-Status Return” across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040NR or Form 1040NR–EZ as the statement, but be sure to mark “Dual-Status Statement” across the top.

mk326:

What country are you from? Special rules apply for residents of certain countries.

Unless you are from one of the special-rule countries, you are considered a "dual-status" alien. You would file Form 1040NR or 1040NR-EZ.

As it stands right now, you cannot claim the standard deduction. That may change based on the answer you give top my first question.

[AtlantaTaxExpert]

Sdawara:

If you are F-1 to H-1 and was F-1 prior to 1 January 2004, you are technically dual-status. However, if you were in the United States during your F-1 status from 1 Jan 2004 until your H-1 status took effect, then all of your income was earned in the United States, so no "statement to your return to show the income for the part of the year you are a nonresident" is required. You can put "Dual-Status Return" on the top of your return, but, In my opinion, it is not really required if you met the Substantial Presence Test in order to be treated as a resident alien. Putting "Dual-Status Return" on the top of your return will cause the IRS to question the use of your standard deduction, if applicable. However, see the BTW below.

The Substantial Presence Test requires 183 days in the United States in 2004. Hence, if your H-1 visa took effect on or before 1 July 2004, and, due to you being in F-1 status for the remainder of the year prior to that date, you, In my opinion, are considered resident alien and should file a normal tax return. You should also file Form 8843 to account for the last few months of your F-1 status.

BTW, as a practical matter of taxes owed, this may all be irrelevant if you live in a high-tax state like California, New York or Massachusetts and your income level is relatively high, because the amount of state and local income taxes withheld will probably exceed the standard deduction of $4,850, and state and local income taxes withheld are a valid itemized deduction.

[sdawara]

Hi AtlantaTaxExpert,

Thank you for your view on things. You make a valid point. All of my income was connected to work in the U.S. However, I don't pass the 'substantial presence test'. I don't have 183 days as a resident alien.

I will be marking my 1040 - Dual Status Return. My 1040 will be including my Res. And Non-Res income earned in the U.S. I will be declaring the income earned as a Non-Res in my 1040NR-EZ, marked Dual Status Statement.

I can't use the Standard Deduction which sucks.

I can use an Itemized Deduction though, on 1040 as per p519. I plan to deduct tuition paid and local sales-tax + any state taxes paid over 2004. Do people also mail in copies of their receipts with the return to support the Itemized Deduction?

I am very interested in the *personal exemption*. From what I understand, Unmarried people without any dependents (or who aren't dependents) can claim one personal exemption - the last I checked that was $3100. There is no restriction on Dual-Status aliens from requesting that personal exemption.

- Santosh

Sdawara:

If you are F-1 to H-1 and was F-1 prior to 1 January 2004, you are technically dual-status. However, if you were in the United States during your F-1 status from 1 Jan 2004 until your H-1 status took effect, then all of your income was earned in the United States, so no "statement to your return to show the income for the part of the year you are a nonresident" is required. You can put "Dual-Status Return" on the top of your return, but, IMHO, it is not really required if you met the Substantial Presence Test in order to be treated as a resident alien. Putting "Dual-Status Return" on the top of your return will cause the IRS to question the use of your standard deduction, if applicable. However, see the BTW below.

The Substantial Presence Test requires 183 days in the United States in 2004. Hence, if your H-1 visa took effect on or before 1 July 2004, and, due to you being in F-1 status for the remainder of the year prior to that date, you, IMHO, are considered resident alien and should file a normal tax return. You should also file Form 8843 to account for the last few months of your F-1 status.

BTW, as a practical matter of taxes owed, this may all be irrelevent if you live in a high-tax state like California, New York or Massachusetts and your income level is relatively high, because the amount of state and local income taxes withheld will probably exceed the standard deduction of $4,850, and state and local income taxes withheld are a valid itemized deduction.

[AtlantaTaxExpert]

Sdawara:

I have requested an expert opinion from the National Association of Tax Professionals about whether aliens in your situation (F-1 to H-1 visa status) must file a dual-status tax return in the year they convert. When I get an answer, I will post a synopsis on this forum. I recommend that you wait until that posting.

If you do have to file a dual-status tax return and you are single, you cannot claim education credits. That includes writing off your tuition as an itemizied deduction. :(

Both Pub 519 and the 2004 Instructions for Form 1040NR are mute on the deductibility of sales taxes. The fact that these are not identified as being permitted, In my opinion, you cannot deduct them if you are in a dual-status tax year. Besides, for normal tax returns, the deduction of sales taxes is permitted only if they exceed the writeoff for state and local income taxes withheld. For the vast majority of people, their withheld state and local taxes are much higher than the sales tax deduction. You stated you are going to claim that state and local income tax deduction, so the sales tax deduction is not an option for you. :(

You can claim your personal exemption for $3,100. :)

[sdawara]

Sdawara:

I have requested an expert opinion from the National Association of Tax Professionals about whether aliens in your situation (F-1 to H-1 visa status) must file a dual-status tax return in the year they convert. When I get an answer, I will post a synopsis on this forum. I recommend that you wait until that posting.

If you do have to file a dual-status tax return and you are single, you cannot claim education credits. That includes writing off your tuition as an itemizied deduction. :(

Both Pub 519 and the 2004 Instructions for Form 1040NR are mute on the deductibility of sales taxes. The fact that these are not identified as being permitted, IMHO, you cannot deduct them if you are in a dual-status tax year. Besides, for normal tax returns, the deduction of sales taxes is permitted only if they exceed the writeoff for state and local income taxes withheld. For the vast majority of people, their withheld state and local taxes are much higher than the sales tax deduction. You stated you are going to claim that state and local income tax deduction, so the sales tax deduction is not an option for you. :(

You can claim your personal exemption for $3,100. :)

I do need to catch up ;). Your right, Dual status aliens cannot claim Tuition and Fees Deduction, I found that out earlier too.

Your earlier statement has left me confused :). I am actually filing a dual status income tax return (1040). I am also filing a dual status 'statement' on 1040NR. This is because I was a resident alien on the last day of 2004. I am simply following the examples given in Which forms to file? - p519 (IRS.gov). In the illustration, Sam claims his itemized deductions using Schedule A on 1040.

Anyhow, I do have something else to add here. Dual status aliens, who are also residents of India, might be able to claim the standard deduction just as they have been doing so when they were students. This is obviously a better alternative to claiming the itemized deduction (schedule A).
* See p519 (IRS.gov) Students and business apprentices from India
* I did go over the technical interpretation (IRS.gov) of Article 21 in the US-India tax treaty. It explicitly points out that if you were a student, and you transition to resident, as long as your still a non-immigrant - you may claim the standard deduction.

- Santosh

[naroowal]

Hello All,
I seek help for a question that might have been probably answered before. I was on OPT for the whole year of 2004. I earned a small income and I was issued a 1099-MISC. I wish to ask which form should I be filling in? If I interpretted everything right, I should be filling 1040-NR. So please help me in determing my status i.e. a student or should I be filling in 1040 A ?
Thanks,
Naroowal

[AtlantaTaxExpert]

Naroowal:

It appears that you are a student, so your visa status is probably F-1.

Are you from India? If so, you can file Form 1040NR and claim the standard deduction (due to provisions of the tax treay with India).

Even if you are not from India, Form 1040NR is the correct form. You will claim your own personal exemption of $3,100, plus selected itemized deductions. You will need to file Schedule C/C-EZ to account for the Form 1099-MISC income, and you can claim certain expenses on that Schedule C to offset some your income.

Due to your student status, you are exempt from Social Security and Medicare taxes, so no schedule SE is required.

[naroowal]

Your answer was perfect for me. Thank you.

Now my state tax remains. I have earned in two states but lived in one state but different counties. I am not sure about how to fill the state taxes. Do I have to pay state taxes for both the states and both the counties.
I am really confused. I would be very grateful if you would help me.
Thanks,
Narayana

[AtlantaTaxExpert]

Narayana:

I am happy to help, but I do need to know which states and which counties.

Generally, the states tax income earned in the state regardless of where the worker lives. Some counties also have income taxes.

If you want to continue this off this forum, contact me at [email protected].

[msrabc]

I do need to catch up ;). Your right, Dual status aliens cannot claim Tuition and Fees Deduction, I found that out earlier too.

Your earlier statement has left me confused :). I am actually filing a dual status income tax return (1040). I am also filing a dual status 'statement' on 1040NR. This is because I was a resident alien on the last day of 2004. I am simply following the examples given in Which forms to file? - p519 (IRS.gov). In the illustration, Sam claims his itemized deductions using Schedule A on 1040.

Anyhow, I do have something else to add here. Dual status aliens, who are also residents of India, might be able to claim the standard deduction just as they have been doing so when they were students. This is obviously a better alternative to claiming the itemized deduction (schedule A).
* See p519 (IRS.gov) Students and business apprentices from India
* I did go over the technical interpretation (IRS.gov) of Article 21 in the US-India tax treaty. It explicitly points out that if you were a student, and you transition to resident, as long as your still a non-immigrant - you may claim the standard deduction.

- Santosh

I have couple of question. AtlataTaxExpert said that if filing dual status then you can't claim any type of standard deductions. I qualify for substantial presence test (my h1 started on April 1st).
If I understand it correctly, I can claim deductions for personal exemption and standard deduction based on us-india tax treaty. So total exemptions on my 1040NR-EZ form would be 3200+4850.

Can I also claim personal exemption on 1040 form that I need to file for income on h1 status?

Thanks

[AtlantaTaxExpert]

First, you can only claim one personal exemption for yourself, and one for each dependent, and you claim it on the Form 1040 filed as a resident alien.

Second, you CANNOT claim the standard deduction because you are dual-status. My conversation with NATP confirmed this. However, I also read the technical interpretation Santosh cited, and it can be interpreted that you can claim the standard deduction. However, you cannot do it on Form 1040, only on Form 1040NR (my interpretation).

[sdawara]

First, you can only claim one personal exemption for yourself, and one for each dependent, and you claim it on the Form 1040 filed as a resident alien.

Second, you CANNOT claim the standard deduction because you are dual-status. My conversation with NATP confirmed this. However, I also read the technical interpretation Santosh cited, and it can be interpreted that you can claim the standard deduction. However, you cannot do it on Form 1040, only on Form 1040NR (my interpretation).

Interesting, so If I am dual-status resident Indian, and I file 1040NR as a return, I can claim the standard deduction. However, if I file 1040 as p519 requires (or suggests? I don't think that is an option) - I cannot claim the standard deduction. Honestly, I am confused all the more by the duality of the when the deduction is applicable :-S.

I would be very grateful if you could clarify your interpretation further. I don't understand the tax system for dual status aliens very well, at the same time my intention is not to offend. I just want to file first, and then get the best return.

- Santosh

[AtlantaTaxExpert]

Read my original posting. I made several corrections in bold red.

Synopsis:

- You actually file the Form 1040.

- The Form 1040NR is a "DUAL-STATUS statement" and filed with the Form 1040 as an attachment.

- Your personal exemptions (yours and your dependents) and the itemized deductions you accrue while on H-1 visa status are claimed on the Form 1040 and the Form 1040 Schedule A.

- You can claim the itemized deductions you accrue while on F-1 status on the Form 1040NR Schedule A. If you follow Santosh's interpretation, you can as an alternative claim the standard deduction under the U.S.-Indian treaty.

- All this applies only if you are dual-status, and you can be dual status only if you meet the Substantial Presence Test. To meet that test, you must convert to H-1 visa status on or before 2 July 2004.

- If you do NOT meet the Substantial Presence Test, then you are NOT dual-status and can file Form 1040NR as a nonresident alien for 2004 one last time, notwithstanding your H-1 visa status. In 2005, you will file as a residnet alien using Form 1040/1040A/1040EZ. You will not have to bother with being dual-status at all in 2005 or beyond.