[Mayank123]

Hi,
I have been trying to understand my tax implications when I go to the US on an H1B Visa, accompanied with my wife and two kids (all on H4 Visa). I have read quite a lot of stuff on the IRS website but am a bit conused about some points. These are mentioned below:

1. What is a tax year by US tax laws, e.g. "2006 tax year" means tax on income earned between "Oct 1 2005 to Sep 30 2006"?

2. I have read about the Substantial Presence Test and also the First Year Choice. The only clarification that I require are (assuming the info in (1) to be correct):

a. If I reach US before Oct 1 2007, lets say on Aug 1, 2007, (such that I do not complete 183 days in calender year 2007) will I be able to make the First Year Choice for my effective period of "2007 tax year" i.e. from Aug 1, 2007 to Sep 30, 2007, assuming that I stay for more than 183 days in 2008?

b. What if I leave US within one month after filing for "2007 tax year", will it have any effect on my tax returns filed for the "2007 tax year"?

c. Again, if I leave US within one month after filing for "2007 tax year", what will my status be considered for "2008 tax year" i.e. for the income earned by me during Oct 1, 2007 to Aug 31, 2008.

3. If I am able to choose for the First Year Choice, will I be able to file as "married filing jointly" for both 2007 and 2008 tax year periods mentioned above?

If not (for any of the 2007 or 2008 tax periods as mentioned above), then what will be the my filing status (for the tax period as mentioned above for which it is not allowed) and will I be allowed exemptions for all three dependents of mine in that status?

4. Assuming a salary of 60K USD, a resident alien status with married filing jointly and exemptions for two dependents, other than my wife, from some tax calculator, my tax came to be just 7.5%, is this correct?

Thanks and regards,
Mayank

[AtlantaTaxExpert]

1) In the U.S. in 99% of the cases, the tax year is the 1 January through 31 December calendar year.

2a) If you arrive anytime after 2 July 2007, you have the option (since you are married) to file:

- as a non-resident alien, claiming ONLY your own personal exemption, but being taxed ONLY on U.S. income earned while in the U.S. You CANNOT claim the standard deduction, but rather must claim restricted itemized deductions.

- as a dual-status alien, claiming your personal exemption AND claiming your wife and children as dependents. Again, You CANNOT claim the standard deduction, but rather must claim itemized deductions as if you were a U.S. resident.

- you and your wife BOTH choose to be treated as resident aliens for ALL of 2007. This allows you to claim the standard deduction plus claim the Child Tax Credit, but it makes ALL world-wide income eanred in Calendar Year 2007 subject to U.S. taxes.

3. If you leave in 2008, you must file an expatriate dual-status tax return.

4. Your percentage is approximately correct, but it fails to consider the $2,000 credit you will get for the Child Tax Credit.