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F1 student, as a non-resident, filing a joint tax return with US Citizen wife

My income through CPT, as a F1 student for 2012 was $42k, of which I have paid $1300 in state and federal taxes as I was a part time employee of a company from Jan - March 2012 (income ~$10k).

I then started working as a contractor for them from March 2012 and am liable to pay taxes on that income (~$32k).

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.

Since we are from California, I was wondering whether my following method of calculating income tax with us filing as married but filing separate is correct:

Since we are married, we are filing so but I am electing to be treated as non-resident so that I don't have to pay 15.3% FICA (on my "part" of the income)

  • say total income is $N (I am confused as to whether N = 42k or 32k) split the income into two?

  • "income" per person: $N/2

  • this $N/2 becomes the AGI per person.
  • Now pay additional 15.3% FICA on the "income" for citizen wife (although she's not employed?):

    FICA: 0.153 * $N/2

  • Apply standard deduction on each $N/2 to get $X

  • Pay tax on remaining taxable income for both

    me: Y% tax * $X

    wife: Y% tax * 0.9235 * $X

Where "Y% tax" = tax bracket for AGI of $N/2

I hope this is the complete calculations involved and I did not miss any step for Federal tax and FICA?

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marked as duplicate by Dilip Sarwate, littleadv, JoeTaxpayer, Feral Oink, C. Ross Jan 7 '13 at 14:52

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

    
@DilipSarwate Not a duplicate; tax filing status differs –  Chris W. Rea Dec 30 '12 at 16:04
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@ChrisW.Rea In that case, my comment on the other question applies here too. The calculations are incorrect, and the many questions that would need answering make this question unsuitable for this site. The OP would be better off consulting a professional, or using a tax preparation program. –  Dilip Sarwate Dec 30 '12 at 16:40
    
@DilipSarwate I don't see why the questions are unsuitable for this site. –  Chris W. Rea Dec 30 '12 at 20:32
    
@DilipSarwate: I tried to make the question as generic as possible for a couple with our tax status. I would value your inputs. –  sekharan Dec 30 '12 at 21:21
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@sekharan Your calculations are hopelessly confused and do not conform to US tax law. Married people filing separately each pay taxes on their own income, so there is no $N/2 income for each. Nor are the spouses liable for any tax that the other did not pay. Standard deduction is different for MFS as compared to MFJ. Your contract income is reported on Schedule C and not lumped in with your W-2 income. I strongly suggest you work with a tax professional or use a tax preparation program: your bank may be offering one for use on their web site for less than what you would pay to buy one. –  Dilip Sarwate Dec 30 '12 at 21:31

1 Answer 1

Thanks to feedback from community members I now have a better idea of the steps to file MFS.

I will attempt at answering my own question, but simplify the answer by considering the income from contract work as if I earned it as a FTE with a W2 (I still have not read up on Schedule C).

"IRS Publication 555" has been the guide to this information, specially the section 'Nonresident alien spouse' just above this: http://www.irs.gov/publications/p555/ar02.html#en_US_2011_publink1000168806

If you are a U.S. citizen or resident alien and do not choose to treat your nonresident alien spouse as a U.S. resident for tax purposes, treat your community income as explained next under Spouses living apart all year. However, you do not have to meet the four conditions discussed there. .. they must disregard community property law in reporting all their income from community property. They each report on their returns only their own earnings ...

This essentially implies that:

  1. My wife, having no income and having paid no taxes either for all of 2012, does not need to file a return at all (be it a 1040 or 540). In fact, filing an empty tax return can be deemed frivolous and would attract fines instead.

    I on the other hand, file Form 1040NR as 'Other married nonresident alien'

    I cannot check 7b, but I can claim my wife under 7c 'Dependents' (more on that below)

  2. My AGI for 2012 was $42k.

    The $500 interest that I earned from my school credit union deposits appears at 9b on the return as non-resident students do not need to declare it as income.

  3. Since I am non-resident I don't have to pay 15.3% FICA on any part of my income

    From this IRS document, I can see that I can elect to be a non-resident (exempt individual for the SPT) being a full-time student: http://www.irs.gov/pub/irs-pdf/p4011.pdf

  4. Apply standard deduction for Indian students as per treaty Article 21(2) mentioned in the same document above.

    An Indian student may take a standard deduction equal to the amount allowable on Form 1040 and may be able to claim the personal exemptions for a nonworking spouse and U.S.-born children.

    This goes at Line 38—Itemized deductions (if referring to the attached image, my entry for item 22 is in error)

    The standard deduction for single taxpayers in 2012 is $5,950. The deduction for married filing separately is $5,950.

    Nonresident aliens can’t file a joint return. Even though a student from India may be able to take an exemption for a nonworking spouse, this is not considered a joint return. Thus, the standard deduction for married filing separately must be used. In determining their tax liability, they must use the tax tables or tax rate schedules for married filing separately.

    Nonresidents from India may be able to claim their spouse and children as dependents. Everyone claimed on the return must have either a social security number or an Individual Taxpayer Identification Number (ITIN).

    The exemption amount for 2012 is 3,800.

    Also mentioned at: http://www.irs.gov/publications/p519/ch05.html#en_US_publink1000222446

  5. Apply personal and dependent wife's deduction = 2 * $3800, at Line 40, as total exemptions

  6. Figure out AMT (TODO)

  7. Arrive at total tax from which tax already paid is deducted (estimated taxes will be entered here as well)

  8. This provides the resulting tax. In the attached image, Line 73 exceeds $1k (which requires me to pay a tax penalty). This won't be the case in reality as I will be paying estimated taxes of ~$9k (and hence end up claiming ~6k tax refund in the actual 1040NR, or better yet, apply part of it to estimated tax for 2013!)


References not mentioned above:

http://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Alien---Figuring-Your-Tax

http://www.irs.gov/Individuals/International-Taxpayers/Aliens---How-Many-Exemptions-Can-Be-Claimed%3F

http://www.irs.gov/publications/p519/index.html

http://www.irs.gov/uac/Form-6251,--Alternative-Minimum-Tax---Individuals


The 1040NR after applying thee above steps stands as:

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4  
I really hope that the personal details you posted are bogus. This is a public searchable forum, you know that right? –  littleadv Jan 6 '13 at 7:45
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I'm talking about the "Dependents" section. –  littleadv Jan 6 '13 at 20:51
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It is interesting that the OP asserts that non-residents are allowed to claim their (US citizen) spouses as dependents by listing them on line 7c instead of checking Box 7b whereas for US citizens and residents, Publication 17, 2011 edition very specifically states on page 26 (in a discussion on who is your qualifying dependent) that "Your spouse is never considered as your dependent." I suspect that the OP is getting himself into a mess with the IRS by his adamant refusal to heed the advice proffered by many to consult a professional tax advisor. –  Dilip Sarwate Jan 7 '13 at 2:38
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Hello, I've removed the images with a social security number in them. I see that you mentioned they are placeholders, but I felt it better to be secure. Feel free to re-upload the images (with the SSNs either faked or blacked out) as you wish. Sorry for the trouble, I just didn't want to compromise your security! –  Aarthi Jan 7 '13 at 15:01
1  
@sekharan when I needed international tax returns, I had one of the big-4 firms do that and they did a lousy job. So, unfortunately, cannot recommend anyone in particular. I recommended a couple of UK firms in this question (see my comment), they'll cost more than US advisers but they will know everything you need and more. See here: money.stackexchange.com/questions/19129/… –  littleadv Jan 8 '13 at 5:51

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