I am on H1B from June 1, 2004. I was on F1 until May 31, 2004 on OPT. I cleared the substantial presence test on H1 visa and stayed around 189 days in USA on H1 visa. While I was on my OPT (F1) I was self employed and received a 1099 MISC (non-employee compensastion). I guess I am a Dual -Status alien for 2004 and cannot make the first year choice as I don't meet all the conditions. p519 says that I can't claim standard deduction of $4850, but can only do an itemized deduction (whihc comes to arnd $1500). Since I satyed in USA for the whole year, I think it is only fair to use standard deduction. Do you have any input on this?

I am more than willing to give more info if reqd.

Thanks
B

bbarath:

I have filed several Form 1040-NRs over the past several years. You have my respect for trying to file the form yourself, as I know more than a few professional tax preparers who will not touch Form 1040-NR with a ten-foot pole. :)

That said, your reading of the instructions is accurate: you cannot claim the standard deduction. Whether it is fair or not is irrelevant, that is the law, and any attempt to claim the standard deduction will be rejected by the IRS. No one said the tax code is fair! :mad:

Hope this helps!

Atlanta Tax Expert

I'm facing identical issues. With the F1-H1B status, are you using an 1040NR form? How are you treating the social security taxes? Aren't F1 students on OPT exempted from that? What about the SS tax withheld under your H1B? Are you getting them back because of your NR status?

If you file with itemized deductions, are you allowed to use Schedule C for the 1099 portion of the year?

Can such a status be combined with a dependent? My wife is being supported by me because she is in school for the whole of 2004. She gets a small teaching stipend on a W2.

Taxi:

You cannot claim your wife as a dependent. You either file Married Filing Jointly (MFJ) or Married Filing Separately (MFS). MFJ is probably the best for you, because the stipend she receives is probably not large enough that it requires both the personal exemption and the standard deduction to cover the tax liability. However, if you file MFS, and she is a U.S. citizen, the normal condition that requires both spouses to either file Standard Deduction or both to itemize does not apply in your case.

I am not sure of this item without research, which I will not do without compensation. However, my gut tells me you are in fact liable for the social security taxes, so the withheld FICA taxes will not be refunded.

You can use the standard Schedule C/C-EZ to report the income received for the 1099-MISC.

Atlanta Tax Expert

I had been F1 student for 5 years and has worked for my current employer since I was in OPT from 7/1/04 to 12/14/04 and changed to H1B status on 12/15/04. I am so comfused that which Form I should use for my tax return. :confused:

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.

Hi bharath,

I think the deduction in your case would be 1500 + 3050= 4550

Check the example in chapter-6. Though you cannot claim standard deduction you can still claim personal exemption of 3050.
http://www.irs.gov/publications/p519/ch06.html

BE AWARE: I'M ALSO RESEARCHING ON THE SAME ISSUE. I DON'T KNOW IF WHAT I SAID IS TRUE. BUT IS WORTH CHECKING THE LINK. Don't TAKE THE INFORMATION I AM GIVING AS CORRECT... CHECK FOR YOURSELF.

also, can you tell me how you calculated your itemized deduction. Isn't that your state tax?

do you know how to included 1099 and 1099-G income? Thanks!

Raj

Hi bharath...

I now see what you are saying...

Normally it is 4850 + 3050
But when you chose itemized deduction it is 1500 + 3050...

Hmm... do you know if we can chose to be treated as a resident for the entire 2004? In that case do we have to pay social security and medicare?

Let me know if you have more information!

Thanks,
Raj

Rajkum2002:

If you choose resident alien status, you must pay Social Security and Medicare taxes.

Form 1099-MISC income is normally (though not always) listed on Schedule C/C-EZ as self-employment income.

Form 1099-G income is reported on Line 11 of Form 1040NR if the 1099-G income is for a state income tax refund on a return in which you itemized.

If the Form 1099-G is for unemployment compensation, then it is reported on Line 20 of Form 1040NR.

Thanks AtlantaExpert!

Yes, 1099-G income is for a state income tax refund.

1099:
I am exempted from paying social security and medicare taxes in 2001. But my employer has erroneously deducted that and refused to pay me directly. Instead he asked to file with IRS directly. I got these taxes after two years with interest. I recently got a 1099 form saying this interest is taxable and I should report it as income. Where do I specify it on 1040 and 1040NR?

Thank you!
Raj

Rajkum2002:

It's ordinary interest income. Report it on Line 9a of Form 1040NR.

Hello,
I am in a somewhat similar situation as Bharat. I was on H-1B from October 1, 2004 (92 days) and on F-1 visa prior to that. I don't think I pass the length test for resident alien.
Which form should I be filling now? Can I still claim standard deductions of $4850 (Tax treaty with India) although my status at the end of the tax year was H-1?

Thanks,
Mayur

Hi AtlantaTaxExpert!

Even I am from atl, and I face a similar situation.

My H1 approval notice is dated on April 26th, whereas the actual h1 visa approved date starts from October, 2004. Does this mean that my h1 period in 2004 was only for 3 months?

I was working on W2 from Feb 2004 using my F1 visa's OPT status. For the month of Jan 2004, I had worked on 1099-MISC. I am not sure, which forms I need to file for the tax returns.

Please let me know about if I qualify for dual status alien and.. if so, would I be benefited from it. I am getting confused if I have to file in 1040 alone, or even 1040NR is required.

Thanks in advance.

Arun

This post addresses the last two posts:

Mshah:

You are definitely a dual-status alien.

Yes, you may claim the standard deduction while filing for 2004 a Form 1040NR or Form 1040NR-EZ because you are an Indian citizen in country under a F-1 visa as part of an OPT.

Since you are dual-status, you should be exempt from Social Security and Medicare taxes. Ask your employer to refund those taxes to you. If they can or will not, then you should also file Form 483 to get any Social Security and Medicare taxes back from the IRS.

Next year, you will meet the Substantial Presence Test and be required to file as a resident alien. You will be able to use standard tax forms, but will also be required to pay Social Security and Medicare taxes.

Arunnc:

Assuming you are also an Indian citizen, everything noted above for Mshah applies to you as well.

The only difference is that you must file Form 1040NR with a Schedule C to account for the income reported on the Form 1099-MISC.

Since you live in Atlanta, you may want to discuss the matter in person. Contact me at [email protected] with a phone number and I will give a call.

My situation is similar to mshah. When I fill up the 1040 NR-EZ form, what do I specify my occupation to be? ( Its right where we are required to sign the form)
Also, what do we specify our purpose of visit -- Since it is employment now, should that be the answer?
Please reply.. thanks in advance.

maath:

Since you earned income, what did you do to earn the income? :confused:

Put your title in the block next to the signature. (BTW, the IRS collects this for demographic purposes; they really do not care if it is accurate). :)

As for the purpose of your visit, be careful what you put. If you are on a F-1 visa, your intent should not be "employment" but rather "education" or "training". If the visa is H-1, then employment is okay.

I started working with my current company on a student visa and have changed to H1B since oct 1 2004. Sorry for the incomplete information :o
Now since I am going to use the 1040 NREZ tax form (as suggested by you and others on this forum), I would like to know what my occupation should be on the form. My current occupation would do? Or do I have to say student/education ?
I guess my purpose of visit should be employment since that is my current visa status..
Thanks for the prompt response.. appreciate it!
:)

I started working from December 2003, with my current company on a student visa(OPT) and have changed to H1B since Feb 14, 2004. For the month of Jan and until Feb 14, I have a 1099-Misc (independent contractor).

I also received a 1099 for December month last year which I filed in the form 1040 nr-ez as HSH and also filed 8843. But I did NOT fill any other forms as schedule C/C-EZ. Do I need a tax correction?

This year's Tax:
Since I'm substancially present on H1(more than six months) I have to file 1040-NR( correct me if I'm wrong). Can I report 1099 on Line 21 of 1040NR and send a copy of 1099-misc to IRS?

I also need to know what are the standard deductions I can qualify for?

The taxes I paid for Social and Medicare taxes on H1, how are they accounted? Coz, I'm getting a huge difference of owing money to IRS.

Here's what I did on 1040 NR,
1.total taxable income from both W-2 and 1099-misc.
2. Just the federal tax withheld from W-2 (box 2)
3. zero deductions
4. Looking from the chart for the total taxable income I ended up with huge difference I owe. What did I do wrong here?

Appreciate any help or comments.

Mavin:

Technically, you reported the Form 1099-MISC income incorrectly on the 1040NR-EZ.

Such income (and corresponding deductions) should be reported on Schedule C and the bottom line income from the Schedule C should be reported on Line 13 of Form 1040NR. For this reason, you technically should file an amended return. However, since you were a nonresident alien, you were not liable for self-employment taxes, so I suspect the IRS will not challenge the tax filing for just one month of income. I recommend that you hold off on making any amendments and wait for an IRS query on your 2003 return. If you get no query, you are home free.

For 2004 taxes, you met the Substantial Presence Test and therefore will be treated as a resident alien. You must file Form 1040 (not Form 1040NR) with a Schedule C (as noted above). The Schedule C allows you to claim some deductions to offset the income from the Form 1099-MISC. This is important because, this year, you are liable for self-employment taxes, which are calculated on Schedule SE. Since SE taxes are 15.3% of every dollar over $400 (over and above any income taxes you may owe), a substantial tax bill may be awaiting you.

Since you are a resident alien, you can claim the standard deduction this year.

F1 student for 7 years, now on OPT, should I pay social security & medicare tax? I am from China. My H-1 may be approved for starting this Oct.

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.

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.

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

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

Deepa:

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

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

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.

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.

Quote:

---

Originally Posted by AtlantaTaxExpert

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.

---

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.

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

Quote:

---

Originally Posted by 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, 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.

---

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. :)

Quote:

---

Originally Posted by 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, 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

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

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.

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

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].

Quote:

---

Originally Posted by sdawara

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

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).

Quote:

---

Originally Posted by 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).

---

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

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.