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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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2 Answers

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  • 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
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up vote -1 down vote

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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