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I worked on OPT (F1 visa) in 2016 till September 30th and then moved to H1B. After my research, I found out that I don't pass the substantial presnece test since I was under F1 student visa (OPT) for the year 2016 from January to September.

With this information, I tried filing my returns for 2016 using Sprintax. But Sprintax is not allowing me to complete my returns since I have HSA listed in my W2, box 12, category W. Because of this, I have the following questions:

  1. Do I need to file 1040NR along with form 8889 in place of 1040NR-EZ.
  2. If yes, can I use the Standard Deduction Allowed Under U.S. - India Tax Treaty Article 21(2) and where to add this?
  3. Or, I just use 1040NR-EZ with standard deduction rather than itemized deductions. Since my itemized deduction (state taxes) is less than the standard deduction, also my I am not sure where to add the itemized deductions. Moreover according to instructions to fill 1040NR for 2016 I fall under Exceptions (https://www.irs.gov/pub/irs-pdf/i1040nr.pdf) page 6.
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  1. Do I need to file 1040NR along with form 8889 in place of 1040NR-EZ.

Yes, because 1040NR-EZ does not support HSAs. (1040NR has it on line 25.)

  1. If yes, can I use the Standard Deduction Allowed Under U.S. - India Tax Treaty Article 21(2) and where to add this?

See Worksheet 5-1 from Publication 519 for instructions and to calculate your standard deduction. The result is entered on 1040NR line 38 (the line for itemized deductions), and you have to write "Standard Deduction Allowed Under U.S.-India Income Tax Treaty" in the space to the left of the line.

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  • Thanks for clarifying this. Rather than Standard deduction, I applied itemized deduction for state tax and HSA. They both came to an almost same amount. So went with the itemized one.
    – harshs08
    Commented Apr 16, 2017 at 23:45
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To the best of my knowledge, HSA employer contribution (listed in W2 under box 12) are not taxable for federal tax but taxable for state returns. So you should be fine with the federal tax with 1040NR-EZ but for state you would have to use a tax service that supports that column. I was on F1 OPT for all of the last financial year and I filed federal tax with Glacier tax prep without any problem with HSA, but while filing state tax using sprintax I got the same error that you mentioned.

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