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My income through CPT, as a F1 student for 2012 was $50k, of which I have paid $300 in state and federal taxes as I was a part time employee of a company from Jan - March 2012 (income ~$13k).

I then started working as a contractor for them from March 2012 and am liable to pay taxes for that income (~$40k). My wife, a US Citizen, had absolutely no gross income during 2012.

To save myself from paperwork, I will submit my 1040 by Jan 31st 2013 so that I don't have to submit a 1040-ES in the meantime.

My intentions are:

  1. ... to file as a non-resident as this gives me two benefits:

    • I don't need to pay FICA, at all, on all my income
    • I get to use the Tax treaty in effect between India and the US that allows me to claim a single standard deduction
  2. ... to file jointly as I expect to be able to claim her standard deduction in my tax as well.

1 and 2 might be contradictory and this "double dipping" might not be something the IRS formally entertains and there might be clauses in the IRS code that specifically excludes such activity.

Perhaps if I were to file jointly with my wife, I would have to elect to be treated as a resident first (hence requiring to pay FICA on all the income so far?)

Hence, my questions are:

  • Can I file jointly (hence getting two standard deductions) as a non-resident (hence not requiring to pay FICA for 2012)

  • Would the joint filing rules be "different" for Federal and State (California) tax returns?

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3 Answers 3

up vote 2 down vote accepted
  • I don't need to pay FICA, at all, on all my income

Incorrect. FICA exemption on F1 is time limited. Check if you're still within that period of time. Similarly with the residency exclusion.

  • I get to use the Tax treaty in effect between India and the US that allows me to claim a single standard deduction

Incorrect again. You cannot use a single standard deduction, you're not single.

... to file jointly as I expect to be able to claim her standard deduction in my tax as well.

I didn't understand this portion. Are you going to file twice - once as a NR single, and once as US MFJ???

1 and 2 might be contradictory and this "double dipping" might not be something the IRS formally entertains and there might be clauses in the IRS code that specifically excludes such activity.

You bet.

Perhaps if I were to file jointly with my wife, I would have to elect to be treated as a resident first (hence requiring to pay FICA on all the income so far?)

You both either file MFS, or MFJ. If you file MFS - you can be NR (if your immigration status allows that). If you file MFJ - you chose to be treated as resident (if it is at all a choice in your case) by mere filing. You then file everything as a resident and cannot make treaty claims (unless specific claims are allowed for residents).

Can I file jointly (hence getting two standard deductions) as a non-resident (hence not requiring to pay FICA for 2012)

No.

Would the joint filing rules be "different" for Federal and State (California) tax returns?

Residency rules are different for Federal and State returns. You're most likely a California resident and file a resident tax return, regardless of your immigration status of lack of thereof.

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F-1 student visa holders are typically exempt from paying F.I.C.A. taxes for their first 5 years. It is a blanket exemption with the only qualification being that the person be a nonresident for tax purposes. I arrived here in Dec 2011 so I am "safe". By "single standard deduction" I meant "one" standard deduction of ~$5k. If I MFJ will I be requird to pay FICA? –  sekharan Dec 29 '12 at 2:39
    
This is the first time I am filing a tax return. Wife has always used family CPA and does not know the details (her income was 0 anyways and was claimed as dependent). Who files MFJ - me or my wife? In which case don't we have to pay FICA? –  sekharan Dec 29 '12 at 2:44
    
@sekharan "It is a blanket exemption with the only qualification being that the person be a nonresident for tax purposes" - you seem to have answered your own question. "single standard deduction" - yes. You cannot take that, you're not single. Standard deductions are not per person, there are different deductions for married people and for single people. "If I MFJ will I be requird to pay FICA?" - yes. "her income was 0 anyways and was claimed as dependent" - you should talk to a tax adviser. She does have income now. "Who files MFJ - me or my wife" - FJ means "filing jointly". ie: together. –  littleadv Dec 29 '12 at 3:36
    
How does she have income if she has no job? Is this something specific to the IRS? She is very much considered a "non-income person" by all financial entities we have worked with so far - she was not able to rent an apartment for us as she had no income (and I have no credit history even tough I have income). Anyways, for this question, I think it's better for me to file federal as married but filing single and not resident (as otherwise I will have to pay 15% to FICA!) –  sekharan Dec 29 '12 at 3:53
    
@sekharan she has income because she's married to you. As I said - California is a community state. If you don't know how it works - better have a professional help you with the taxes. You cannot file as single, you'll be breaking the law by doing so. You're married. You can file either as MFS or MFJ, no other option. If you file as NR, on your 1040NR you must chose checkbox #5 for your filing status. –  littleadv Dec 29 '12 at 3:57

Following is IRS response:

Dear Sir Madam I am a Resident alien for tax purposes for 2008. My wife is a Nonresident alien (F1 visa) for 2008. We have decided to take the choice of filing jointly and treat her as a Resident alien for tax purposes. Her FICA taxes were not withheld during 2008. In the IRS website when I looked at Nonresident Spouse treated as a resident, I saw the following: If you make this choice, you and your spouse are treated as residents for your entire tax year for the purpose of your federal individual income tax return, and for the purpose of withholding U.S. federal income tax from your wages. However, for the purpose of Chapter 3 withholding you may still be treated as a nonresident alien. Refer to Withholding of Tax on Nonresident Aliens and Foreign Corporations (Chapter 3 of the IRC) in Tax Withholding Types. In addition, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax. My question is, am I right in assuming that we do not have to worry about the FICA taxes that werent withheld for her in 2008? Also is there anything we need to do now, like as to report to the employer that it needs to be withheld from now on as we have made this choice of treating her as Resident alien for tax purposes? Thank you very much.

The Answer To Your Question Is: Hello. Thank you for your inquiry dated March 10, 2009. We apologize for the delay in responding to your inquiry. You have questions about the withholding of United States (U.S.) social security and Medicare taxes from your spouse’s pay.

You have not provided enough information to properly answer your question. We will summarize the information that you provided. 1. You are a U.S. resident alien for 2008. 2. Your spouse is a nonresident alien for 2008 (your spouse has an F-1 student visa). Your spouse’s pay for working in the U.S is not subject to the social security and Medicare taxes for 2008. 3. You and your nonresident alien spouse are making the election to treat the nonresident alien spouse as a resident alien, for income tax purposes, for 2008. You and your spouse are treated as residents for your entire tax year for the purpose of your federal income tax return, and for the purpose of withholding U.S. federal income tax from your wages. You and your spouse will not suspend or end the choice for a later tax year.

We need to know whether your spouse will be an F-1 student who is exempt individual pertaining to substantial presence test in 2009 or whether your spouse will have a green card at any time during 2009. If your spouse is an exempt individual pertaining to the substantial presence test for 2009 or if your spouse does not have a green card at any time during 2009, your spouse may still be treated as a nonresident alien for the purpose of withholding social security and Medicare tax.

A nonresident alien temporarily in the U.S. on an F-1 visa is not subject to social security and Medicare taxes on pay for services performed to carry out the purpose for which the alien was admitted to the United States. Social security and Medicare taxes should not be withheld or paid on this amount. This exemption from social security and Medicare taxes also applies to employment performed under Curricular Practical Training and Optional Practical Training, on or off campus, by foreign students in F-1 status as long as the employment is authorized by the U.S. Citizenship and Immigration Services. However, if an alien is considered a resident alien, that pay is subject to social security and Medicare taxes even though the alien is still in the nonimmigrant status. Any student who is enrolled and regularly attending classes at a school may be exempt from social security and Medicare taxes on pay for services performed for that school. However, the election to file a joint return with a U.S. resident alien spouse has no effect upon the nonresident alien spouse's liability for social security and Medicare taxes if the nonresident alien spouse is an F-1 student who is exempt from counting days of presence in the U.S. toward the substantial presence test in 2009.

Under the rules pertaining to the substantial presence test, your spouse is considered a U.S. resident alien for tax purposes if your spouse is physically present in the United States on at least: 1. 31 days during 2009, and 2. 183 days during the 3-year period that includes 2009, 2008, and 2007, counting: a. All the days your spouse is present in 2009, and b. 1/3 of the days your spouse is present in 2008, and c. 1/6 of the days your spouse is present in 2006. However, your spouse does not count the days of presence in the U.S. during the tax year that your spouse is an exempt individual. The term “exempt individual” does not refer to someone exempt from U.S. tax. An exempt individual is someone exempt from counting days of presence in the U.S. toward the substantial presence test. There are several categories of exempt individuals. One of them is a student temporarily present in the United States under an F-1 visa, who substantially complies with the requirements of the visa. The student will be an exempt individual for 5 calendar years.

If your spouse has a green card at any time during 2009, during that time your spouse will be a U.S. resident alien under the green card test and your spouse's pay will be subject to the social security and Medicare taxes.

Thank you for using our service.

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So first, as you might have noticed from the non-resident form, if you file as non-resident, you cannot file jointly (unless you are from certain countries like Canada, Mexico, South Korea). Therefore, to file jointly, both people must be residents; but, yes, you have the choice to elect to be treated as a resident, in order to file jointly with your resident spouse. So in this case you would be treated as a resident.

I don't need to pay FICA, at all, on all my income

According to the above linked article, it should make no difference for you: "In addition, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax."

I get to use the Tax treaty in effect between India and the US that allows me to claim a single standard deduction

What's the point? As a resident, you already have a standard deduction (in this case it would be the standard deduction for married filing jointly for the both of you).

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aha! nice answer. So I can file as a resident and still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax - EXACTLY what I wanted. But who files the tax return? just me? just wife? both in same form? This is so confusing –  sekharan Dec 29 '12 at 3:24
    
This is incorrect. "Resident aliens, in general, have the same liability for Social Security/Medicare Taxes that U.S. Citizens have." Source: irs.gov/Individuals/International-Taxpayers/… . If you're treated as resident - you're treated as resident for everything. About students, they say this: "The exemption does not apply to F-1,J-1,M-1, or Q-1/Q-2 nonimmigrants who become resident aliens." Explicitly. Same article. –  littleadv Dec 29 '12 at 3:31
    
@sekharan you must learn that what sounds too good to be true - is indeed too good to be true. This is what you wanted, but this is not what the law says. As to who files - you both have to file. You have to decide how, and your tax adviser can help you decide whether it is better to file as MFS for both of you or MFJ as resident. Remember, California is a community property state, so your assumption that your wife has no income is incorrect. She does have income. –  littleadv Dec 29 '12 at 3:33
    
@littleadv, thanks for going through this with a fine tooth comb. I see you are very well aware of CA laws, so I guess both of us will have to file state taxes. However, it seems it's best I file federal as married but filing single and not resident (as otherwise I will have to pay 15% to FICA) –  sekharan Dec 29 '12 at 3:50
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@sekharan you should have both ways prepared and chose the one most beneficial to you. Keep in mind that staying in the US - the more credits you have with SSA, the earlier the benefits start kicking in. –  littleadv Dec 29 '12 at 4:00

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