Hi,

I have a similar issue... I was on f1 and transferred to h1b in March 2005 so I have been on h1b for more than 183 days. Which form should I fill in this case and what standard deduction would I be eligible for? I am from india too. Is there a form 2106 which gives h1b holders added deduction if filing as itemised deduction? Please help.

Oormi.

Oormi:

I already answered part of your question under the previous posting.

Regarding the Form 2106, that form will be available to you when you file the normal tax return (Form 1040). However, you must meet several conditions before you can file.

Form 2106 is used to report employee business expenses. However, those expenses must exceed 2% of your Adjusted Gross Income; i.e. whatever your employee business expenses are, 2% of your AGI will be subtracted from them on Schedule A. Further, these adjusted employee business expenses plus the rest of your itemized deductions must exceed your standard deduction to be worthwhile.

Thanks, your advices are really valuable. Great to have you on the forum.

Oormi.

Glad to help!

Hi everyone,

I am a single individual from India. I am trying to file taxes for year 2005 (actually just calculating to get an estimate). I have been on F1 from Sep 2001 till May 2005. I was never on OPT due to some mistakes made by my school. Also I did not have any earnings between Jan 2005 and July 13, 2005. I had filled my application for H1 in May 2005 and I got my H1 approved with start date of July 13, 2005 with a consulting firm.
Also, I have never left the US between Sep 2003 and now.

Now based on the posts in this thread and above information, please comment if the conclusions I have made are correct:
1. I do not pass the substantial presence test of being on H1 >= 183 days for 2005. That means I am considered a non-resident alien.
2. I can file the form 1040NR and can take standard deduction (which was $3000 for 2004) for 2005
3. I can take another deduction due to tax treaty with india (again $4850 for 2004) for 2005

I will sincerely appreciate all your help,

Thanks,
Parminder

Parminder:

Your are correct that you can file as a non-resident alien, in which case you, as an Indian citizen, are entitled to claim a personal exemption of about $3,100 and the standard deduction of $5,000.

Further, you have the option to file as a resident alien, which means filing a Form 1040/1040A/1040EZ. I believe you will find the tax to be the same (but do it both ways to be sure).

For 2006 onward, you will have to file as a resident alien.

I disagree with AtlantaTaxExpert's reply. Although s/he is correct in saying that you may claim a personal exemption of $3,100 for yourself, realize that you have changed your status from resident alien (F1/OPT from Jan 1 - Sep 2005 > 183 days) to non-resident alien (H1 from Sep - Dec 31, 2005 < 183). This status change should make you a dual status alien. According to 1040 NR (pg 5, under dual status alein section), your dual staus should restricts you from claiming the standard deduction of $ 5000.

AtlantaTaxExpert, isn't my disagrrement, a valid one??

SamPath:

Your objections may have been valid if the dates you cited [resident alien (F1/OPT from Jan 1 - Sep 2005 > 183 days) to non-resident alien (H1 from Sep - Dec 31, 2005 < 183)] were accurate and if you had not confused the visa status.

However, the dates Parminder cited were 1 Jan 2005 to 12 July 2005 for F-1 status (which does not count towards the Substantial Presence Test), and 13 July 2005 to 31 Dec 2005 for H-1 status (which is less than 183 days).

Also, a F-1 visa qualifies a foreign citizen for non-resident alien status and a H-1 visa qualifies a foreign citizen for resident alien status. Your statement gave the exact opposite definition.

Filing a dual-status return is an option, but not a requirement, for Parminder. Due to the complexity of filing as a dual-status alien, I never recommend such a filing if it can be avoided. However, it was the "First Year Choice" portion of the Dual-Status Alien section of IRS Pub 517 that allowed me to tell Parminder that he/she could choose to file a normal tax return. My read of her situation indicated that she qualified to file as a resident alien because she will definitely qualify for the Substantial Presence Test in 2006 and she meets the minimum in-country requirement while under the H-1 visa in 2005.

Hi,

I have a question on filing...

I am from Indonesia and transferring from F1/OPT to H1B on 4/1/2005. I have a wife and 2 children (wife+1child transfers from F2 to H4 on 4/1/2005 also, 1 other is born here). My wife is not working.

From reading the responses, I meet the substantial presence of 183 days, therefore I have dual-status and may file as a resident alien using 1040 form as a regular filing.

My main question is if I use the 1040 form, can I claim deductions on all my dependents (3)? Or is it prorated starting from 4/1/2005?

Separately, how do I file interests from the bank in 1040 form? Is it just combined with the W2 income?

Thanks.

FastClock:

Your assessment is correct. You should file Form 1040 or 1040A as a resident alien.

You should file jointly with your wife and claim both children as dependents. There is no proration of their exemption status.

If you have not already done so, you should get Individual Tax Identification Number (ITIN) for your wife and oldest child (by filing a W-7) and a Social Security Number (SSN) for your newborn child (by visiting a Social Security Adminsitration office with your child's birth certificate). Your spouse and children need either ITINs or SSNs to be claim on your tax return.

Hi Atlanta Tax Expert,

This is a tax query for 2005 with regards to the date status chnged question on 8843 and 1040NR-EZ.

I had been working on my F-1(OPT) and H-1B at different places. My OPT was valid till Dec 2005 and I worked on OPT till Nov 2005. However my H-1B start date was Oct 1st but I actually began working (payroll start date) only on Dec 1, 2005.

I would really appreciate it if you could let me know what my tax status was for Oct, Nov 2005. What date should I put on my 8843 with regards to date status changed since even though my H-1B started on Oct, I didn't work on it nor was on H-1 payroll on it for Oct, Nov. H-1B law allows for the receipient to start working on it up to 60 days after it is approved.

I would really appreciate your response. Thanks.

Hi all,

My visa was changed to H1b from F1 as of Oct. 1, and I have been working since Nov. 04 with F1 CPT/OPT. I am going to make the first-year choice for 2005. I'll need to file 4868 to extend the deadline to 08/2006 because I'll meet the 183 day test condition around 05/2006.

Pub 519 says "you can choose to be treated as a U.S. resident for part of 2004." (about 3 month for my case), but "no proration" in the above post. I checked 1040 form and there's one check box for dual-status alien, which leads to zero standard deduction.

My question is how much difference in tax this will make. That standard deduction is the only difference?
Say, 1040NR tax is $1000 and 1040 is $500. Can I get $500 returned? If not, how much?

Thanks.

Guy22G:

Claim Oct 1st as the H-1B change of status date on Form 8843.

Jdzorba:

The standard deduction is $5,000. At the lowest tax rate of 10%, that means an additional $500 on your refund. So, yes, it makes a big difference whether you can claim the standard deduction or not.

Submit the Form 4968, then submit the Form 1040 with the standard deduction.

AtlantaTaxExpert,

Thanks for your reply.
I thought I can't file a standard deduction because I'm a dual-state alien even if I make the first-year choice by submitting 4868. Because making first-year choice means "resident alien just for the partial year," so the difference is the standard deduction, isn't it?
I was hoping I could do that because I'm MFJ with dependents, but it doesn't look like it. However, filing 1040 instead of 1040NR will help a lot.

Jdzorba

Thanks AtlantaTaxExpert, appreciate your response.

Jdzorba:

You have three choices to file:
- As a non-resident alien.
- As a dual-status alien.
- As a resident alien under the First Year Choice.

If you file as a non-resident alien, you file Form 1040NR by April 15, 2006, in which case you cannot claim the standard deduction. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file as a dual-status alien, you file Form 1040 with Form 1040NR as an attached "statement" to document the income you earned while under the F-1 visa. If you file as a dual-status alien, then you will not be allowed to claim the standard deduction. Also, you would file your return prior to April 15, 2006, so Form 4868 would not be needed. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file under the First Year Choice, then you file as a resident alien, which means you can claim the standard deduction. You would file Form 4868 to apply for an extension to file (submitted with a check if your calculations determined that you would owe taxes) so that you would meet the Substantial Presence Test prior to filing your 2005 tax return. Since you are choosing to count your entire 2005 year as a resident alien, filing Form 4883 is not required for 2005.

In my opinion, the First Year Choice makes the most sense.

Thank you for the response.
That's very helpful.

FastClock:

Glad to help!

Hi Atlanta Tax expert.
You post great feedback with relevant answers which prompted me to post my query here.

1)My wife and I are both Indian citizens.
2)My wife was on OPT up to December 05. I have been on H1B since Jan 2001.
3)Wife converted to H1B visa starting December after getting a job in September.
4) No SS/Medicare taxes deducted yet from wife's paycheck since her pay- period is 1.5 months behind current date. So for her current paycheck her payroll date is the December 1st through December 15th.


What profession do we enter if we file as MArried filing jointly(Student? /Software? ) . I assume taxes are different if she enters profession as student.

Please advise which forms are required.

Thanks in advance for your help.

Pranav

Pranav:

Under "Profession", enter whatever you think appropriate. You can even leave it blank. It has no bearing on how your taxes are computed.

You (as a resident alien) must file Form 1040/1040A.

Assuming she was under a F-1 visa, she can still Form 1040NR. However, it is likely that there will be no difference in taxes owed if you file separately or jointly.

Given this fact, In my opinion, it makes sense for you to file jointly, simply because it is easier to file one return jointly than two returns separately.

Filing jointly will not affect your wife's Social Security and Medicare tax status. That is driven exclusively by your wife's visa status.

HI Atlanta Tax Expert.
Thanks for your response. Was not aware that profession does not change tax status (since Students are usually not charged the high Federal and State taxes that my wife's employer did charge.).

Your post greatly helps.

Thanks again.
Pranav

I’m a 24 year old single male from India. I came to USA on April 19, 2000 on an F-1 Student Visa and have consecutively since filed the 1040NR. My H-1B Work Visa got approved effective October 1, 2005 and I went to India on August 18, 2005 to get my visa stamped on my passport, which was stamped on September 22, 2005 and I returned to USA on September 29, 2005. August 17, 2005 was my last day at the on campus job. No Social Security or Medicare deductions were withheld from my paycheck for on campus job. But now that I’m on H-1B, Social Security and Medicare deductions are being withheld (effective October 1, 2005). What form(s) do I have to file this time? Also, do I qualify for either the Hope Scholarship or Lifetime Learning tax credits (for pursuing a Post Baccalaureate Certification in spring 2005)? I have a personal student loan in USA, Mutual Funds purchased with funds from a Non-Resident Indian Account in India and stocks purchased in USA with funds from my account at the local Credit Union. Taking all of this into consideration, what would be the best possible way to file my return? Please advise. Thanks.

Pranav:

While students do generally qualify for exemption from Social Security and Medicare taxes in jobs they have while at the university, it does not affect their income tax rates. I thought you were citing the block next to the signature on the tax returns.

Studfromhawaii:

You have three choices to file:
- As a non-resident alien.
- As a dual-status alien.
- As a resident alien under the First Year Choice.

If you file as a non-resident alien, you file Form 1040NR by April 15, 2006, in which case you cannot claim the standard deduction. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file as a dual-status alien, you file Form 1040 with Form 1040NR as an attached "statement" to document the income you earned while under the F-1 visa. If you file as a dual-status alien, then you normally will not be allowed to claim the standard deduction; however, that prohibition does not apply to you since you are an Indian citizen. Also, you would file your return prior to April 15, 2006, so Form 4868 would not be needed. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file under the First Year Choice, then you file as a resident alien, which means you can claim the standard deduction. You would file Form 4868 to apply for an extension to file (submitted with a check if your calculations determined that you would owe taxes) so that you would meet the Substantial Presence Test prior to filing your 2005 tax return. Since you are choosing to count your entire 2005 year as a resident alien, filing Form 4883 is not required for 2005. Only by filing as a resident alien can you claim either the Hope Scholarship or Lifetime Learning tax credits.

In my opinion, the First Year Choice makes the most sense in order to claim the Hope Scholarship or Lifetime Learning tax credits.

AtlantaTaxExpert
Thank you, it helps a lot.

AtlantaTaxExpert:

I appreciate your quick response to my question. The First Year Choice does make the most sense in order to claim the Hope Scholarship or Lifetime Learning tax credits. Under this choice, I would just file Form 4868 to apply for an extension to file (submitted with a check if my calculations determined that I would owe taxes) so that I would meet the Substantial Presence Test prior to filing my 2005 tax return first and then when I meet the Substantial Presence Test, which form(s) would I file next? Just the 1040 form right? How would I then account for my F-1 visa (exempt individual) time? There were no social security or Medicare deductions withheld from my paycheck for my on campus job. These deductions were only withheld for the work that I performed for my current employer on an H-1B visa.

Also, please clarify what entails meeting the Substantial Presence Test? In 2005, I was in the US on an F-1 visa until August 18, 2005. Then I went to India to get my H-1B visa stamped on my passport and returned to the US on September 29, 2005. My H-1B status is valid from October 1, 2005 to September 30, 2005. In my case, when would I meet the Substantial Presence Test? Please advise.

Thank you so much for your time.

Quote:

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Originally Posted by AtlantaTaxExpert

Pranav:

While students do generally qualify for exemption from Social Security and Medicare taxes in jobs they have while at the university, it does not affect their income tax rates. I thought you were citing the block next to the signature on the tax returns.

Studfromhawaii:

You have three choices to file:
- As a non-resident alien.
- As a dual-status alien.
- As a resident alien under the First Year Choice.

If you file as a non-resident alien, you file Form 1040NR by April 15, 2006, in which case you cannot claim the standard deduction. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file as a dual-status alien, you file Form 1040 with Form 1040NR as an attached "statement" to document the income you earned while under the F-1 visa. If you file as a dual-status alien, then you normally will not be allowed to claim the standard deduction; however, that prohibition does not apply to you since you are an Indian citizen. Also, you would file your return prior to April 15, 2006, so Form 4868 would not be needed. You would also have to file Form 4883 to account for your F-1 visa (exempt individual) time.

If you file under the First Year Choice, then you file as a resident alien, which means you can claim the standard deduction. You would file Form 4868 to apply for an extension to file (submitted with a check if your calculations determined that you would owe taxes) so that you would meet the Substantial Presence Test prior to filing your 2005 tax return. Since you are choosing to count your entire 2005 year as a resident alien, filing Form 4883 is not required for 2005. Only by filing as a resident alien can you claim either the Hope Scholarship or Lifetime Learning tax credits.

IMHO, the First Year Choice makes the most sense in order to claim the Hope Scholarship or Lifetime Learning tax credits.

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Sudfromhawaii:

Refer to page 9, IRS Pub 519 (which can be downloaded from www.irs.gov as a .pdf document) for details about First Year Choice. Please note that the IRS Pub 519 that is online is for 2004, but the provisions have not changed, so you need to add a year when you read about what to do in which year. i.e. read "2003" as "2004, and "2004" as "2005".

You must effectively be under your H-1B status and physically present in the U.S. for at least 183 days before you can file Form 1040. In your case, that would be sometime around 4 April 2006, which means you probably do not have to file for an extension. You will need to add the statement specified on page 9 of IRS Pub 519, and you would also need to file Form 8863 for whichever education credit you qualify for (see chapter 35 of IRS Pub 17, also downloadable) for details on the Education Credits.

As for accounting for your F-1 status, you claim income earned during the F-1 status on the Form 1040.

You will need to file Form 4883 one last time for 2005.

Your exemption from Social Security and Medicare taxes while on F-1 status still stands. Filing as a resident alien has no effect on that exemption.

You ROCK! Thank you so much.

No problem! That's what I here for!

Hello,

I am a citizen of India, single and was on F-1 until June 26, 2005. My OPT started on April 13, 2005 and I visited in India from May 2 - May 16 2005. Since my F-1 was still valid, I didn't get it extended. I was hired (with OPT) status on June 6, 2005 and my status changed to H1B on October 1, 2005.

I would appreciate if you would answer the following questions:

1) Which forms should I file for my tax returns for 2005?

2) Even though my F-1 expired on June 26, I was told by my student advisor that it would be okay as long as I don't leave the US after that until I got my H1B. That is all fine, but now I don't know how to account for this on the tax forms.

3) What kind of deductions can I claim (standard $3000 + $4500)?

4) My employer didn't deduct SS and medicare taxes while I was still on OPT, but did so after my status changed to H1B. Since my stay under H1B has been < 183 days in 2005, can I claim a refund for the SS and medicare taxes they deducted in 2005? If so, which form do I need to fill?

Please note that I worked at the university (on F-1 status) in Arizona from Jan 2005 until April 2005 and joined work in June 2005 in Oregon. In addition to filing tax returns for both AZ and OR, is there anything else I need to keep in mind while filling the forms?

Please advice. Thanks!

Deejay:

1) Please see my previous answers to StudFromHawaii for the three filing options. They apply to you as well. I recommend you wait and file as a resident alien under the First-Year Choice. You can file in early April after you have been on H-1B status for at least 183 days.

2) Filing as a resident alien relieves you of the requirement to account for your days under F-1 visa status (which is done by filing Form 4883).

3) Regardless of the option you take, because you are an Indian citizen, you will get a $3,200 personal exemption and a $5,000 standard deduction.

4) This last issue is problematic. Before you can claim a refund from the IRS, you have to request your employer refund you the withheld SS and Medicare taxes. If the employer refuses (and he probably will refuse), you must get the refusal in writing. Refer to page 46 of IRS Pub 519 for the details on how to submit a claim for the refund. The Form number is 483. However, the fact that you allowed the F-1 visa to expire, then got a H-1B visa, may cause the IRS to take the position that your intent was to get an employment visa, thus making you liable for SS and Medicare taxes as soon as the F-1 visa expired, if not sooner.

Finally, you should probably get professional tax help to file these forms. I am available if you want; you can contact me at [email protected] for rates and references.

Thanks! This is very helpful information!

Atlanta Tax Expert:

An Indian Citizen I know was in the US on an F-1 visa during the following period:

19th April 2000 – 28th June 2002
26th July 2002 - 19th December 2003
Jan 10th 2004 – July 4, 2004

She left the US on July 4, 2004 because her OPT ended and returned on an H-1B visa sponsored by the State on August 7, 2005. Her H-1B is valid from July 19, 2005 to December 1, 2007. She's filed the 1040NR consecutively all this time. Because of her length of stay in the United States and the change in her visa status, which form(s) does she have an option to file this year and what would prove to be the best way to file her return in your opinion?

StudFromHawaii:

She can file as a non-resident alien (Form 1040NR) because she clearly does not meet the Substantial Presence Test for 2005.

OR

She can file as a resident alien (Form 1040/1040A/1040EZ) under the First-Year Choice if she waits until the second week of Fenruary 2006 to file. By that time, she will have met the Substantial Presence Test.

She gets to claim the $5,000 standard deduction in either case, so it is likely there will be no difference in taxes paid. The requirement for a statement (as required by IRS Pub 519) means she cannot file electronically. She will have to mail the tax return in.

It's basically her choice.

Great. Thank you so much for your quick response. You've been extremely helpful.

Hi
I am a citizen of India and I had almost similar questions to others. But I would to please clarify the situation.
OPT Started from Jan 20' 2005 and is valid till Jan 20' 2006. My H1B was approved and started work on H1B from Oct 1 2005.
1) As I clear the substantial presence test, am I eligible to file form 1040 NR_EZ?
2) Am I eligible for standard deduction for year 2005? If so what is the standard deduction under the US income tax treaty?
3) Are the forms I would have to file for Federal Income Tax be 1040 NR_EZ and 8843 only?
4)I don't think I would come under dual status as I have met the substantial presence test. Is that correct?
5) Do I have to pay tax on any local bank gains / stock investment gains prior to Oct 2005?
6) Can I claim for stock loss (income - loss = net income) only after Oct 2005? Or can I claim it for the entire year?

Thanks in Advance

RAHUL BHOSE:

1) Yes, you can file Form 1040NR-EZ if that is your desire.

2) Yes, your standard deduction will be $5,000.

3) Yes, to my knowledge, those are your only required forms.

4) You do not qualify for Substantial Presence, at least not yet. If you did, you could not file Form 1040NR-EZ. You can wait until you do qualify for Substantial Presence, at which point you would file Form 1040 with the statemment required by IRS Pub 519.

5 & 6) Yes, you must pay on local bank interest and stock investment gains/dividends, but you can also deduct or stock losses or the entire year.

Thank You Atlanta Tax Expert for your very prmpt response. Just wanted to reclarfiy the following


1) From Your prvious posts of three choices
"You have three choices to file:
- As a non-resident alien.
- As a dual-status alien.
- As a resident alien under the First Year Choice.
"

Is there any tax benefit of one over the other?

2) I was assuming by filing 1040NR EZ, I can avail of the standard deduction which I don't think I could have by the latter two.

3) Would the bank dividends be considered as regular income for the full year or only from Oct 2005 onwards.

Thanks once again.

Regards,

RB

RB:

1) If you file as a resident alien, you may be eligible for certain credits (like the Education Credits) that you cannot claim under the other options. Other than that, the tax liability will probably be about the same.

2) You can claim the standard deduction on all three option.

3) Distributions from a bank are not dividends. They are interest, which will be considered ordinary income for all of 2005.

Thank You Very Much, Atlanta Tax Expert. The information and your prompt response has indeed been very helpful

You stated that "You will need to file Form 4883 one last time for 2005". Did you by any chance mean Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition? I looked on the IRS website and I wasn't able to locate the form titled 4883. Please advise.

Quote:

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Originally Posted by AtlantaTaxExpert

Sudfromhawaii:

Refer to page 9, IRS Pub 519 (which can be downloaded from www.irs.gov as a .pdf document) for details about First Year Choice. Please note that the IRS Pub 519 that is online is for 2004, but the provisions have not changed, so you need to add a year when you read about what to do in which year. i.e., read "2003" as "2004, and "2004" as "2005".

You must effectively be under your H-1B status and physically present in the U.S. for at least 183 days before you can file Form 1040. In your case, that would be sometime around 4 April 2006, which means you probably do not have to file for an extension. You will need to add the statement specified on page 9 of IRS Pub 519, and you would also need to file Form 8863 for whichever education credit you qualify for (see chapter 35 of IRS Pub 17, also downloadable) for details on the Education Credits.

As for accounting for your F-1 status, you claim income earned during the F-1 status on the Form 1040.

You will need to file Form 4883 one last time for 2005.

Your exemption from Social Security and Medicare taxes while on F-1 status still stands. Filing as a resident alien has no effect on that exemption.

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