Hi,

Can anyone give me suggestions on my tax filing?

Starting from Sep 2004, I worked in a small university in USA under OPT. I have paid social security and medicare tax since then. In July 2005, I left USA permanently and got a new job in HK. Before I left USA, I was still on F-1visa and never applied for H-1. In 2004 and 2005, the small university withheld social security and medicare tax. It did not process the $5000 deduction under tax treaty 20(c), either.

This year, I will file 1040NR-EZ (since my income never exceeds the threshold for 1040NR). My questions are:
1) Can I claim the 20(c) deduction? If yes, how? Which line should I put it in?
2) Am I liable for social security tax and medicare? If not, can I claim back those withheld in 2004 and 2005. (I received an annual notice showing the total social security and medicare that were withheld.) What is the procedure to claim back?

Many thanks and have a wonderful new year.

Magnolia:

Review my answer to NITIN in the previous posting.

As noted, if you are in country and under F-1 visa status for 5 years or more as a student, you lose your F-1 exempt status, in which case you are liable for Social Security and Medicare taxes.

The linchpin is the five-year period as a student. If your total time spent in the U.S. as a student did not exceed five years, then the Social Security and Medicare taxes were withheld in error. You should first request a refund from the university. They will likely refuse, so get the refusal in writing (you will need to provide a copy of the refusal to the IRS). Using Page 46 of IRS Pub 519 as a guide, submit Form 843 to the IRS to request a refund of your withheld Social Security and Medicare taxes.

The $5,000 exemption applies to income taxes, not employment taxes. You can claim the $5,000 exemption on Line 6 of Form 1040EZ for your 2005 tax return. Be sure to cite the U.S.-China tax treaty.

You can also amend your 2004 tax return using Form 1040X to claim the $5,000 exemption.

Smith1234:

1) If there is no income, there is no requirement to file an income tax return. However, all aliens on a F-1 visa must file Form 8843 annually, even if it is the only form they file.

2) You cannot claim flights, accommodation and living expenses incurred as being a student against their taxes as a business expense in acquiring an education, at least not an a U.S. income tax return. Sorry!

3) All statements are correct except the one about still being exempt when you convert to the H-1B visa. The day your H-1B visa become effective is the day they begin collecting Social Security and Medicare taxes from your salary.