We think that there are so many Indian / foreign students coming to the US that the tax calculating softwares already know about all the special cases. But as I soon found out, that is not the case. Going to a Tax consultant does not help either, because, as I said this is a special case. What we need to do is do some online search, and fill up your own forms. And it is not at all difficult.
I have to thank my senior friend who had told me long time ago, that tax is less while on F1. Thanks to that, I did not rely on the tends to zero number quoted by the tax software, and crunched my own numbers. This is just a summary of my net search to help other fellows in the same boat.
1. Medicare, Social Security:
No tax should be cut while on F1 for Medicare and Social Security. If it is cut, then you will get it back from the company itself once you point it out to the HR.
2. Resident alien or Non resident alien:
Note: this is for tax purposes
Substantial presence test: If days of stay in US while on H1 < 183 then you are non resident for tax purpose
Note: This applies only for the 1st year, when you are transitioning from F1 to H1. You will get the H1 sometime in October. So for the 1st year of transition you are a non-resident alien.
Forms: 1040 NR
Form 8843 to prove that you are Non resident alien: there will be columns to count your days in US while on H1B.
3. Tax Treaties
According to the country of residence, you are eligible for Tax treaties.
4. How to fill the form:
For Students from India: Refer worksheet 5-1. page 28 pub 519.
This number is your Standard Deduction.
Write the description for that as US-<your country> Tax Treaty
Write this number in form 38 of 1040NR or line 11 of Form 1040 NR EZ.
You can only use one deduction at a time, so if you have donated to charities etc you cannot claim tax benefit for that this year when using the tax treaty.
Rest of the form is pretty straightforward once you know the number in Line 38/ Line 11.
Gross Income - Standard deduction that you just found out = Taxable Income
There will be a huge table in the tax instructions (i1040nr.pdf). It is called Tax Table. See the tax according to your Taxable income range and Marital status.
Tax return = Tax that was cut from your salary - Tax according to the Tax table.
Reference:
http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test
http://immigrationvoice.org/ forum/forum6-non-immigrant- visas/23171-f1-opt-h1b-tax- filing.html
http://www.quora.com/Taxes/Is- Standard-deduction-benefit- under-US-India-Tax-Treaty- available-for-someone-going- from-F1-to-H1B-visa-in-a-tax- year
http://taxes.about.com/b/2007/ 01/31/refund-of-social- security-and-medicare-taxes- for-nonresident-aliens.htm
http://www.visataxes.com/ form1040nrez_home.php
http://www.askmehelpdesk.com/ advice/t-10381.html
http://answers.yahoo.com/ question/index?qid= 20110720125858AA6MsBq
http://www.irs.gov/ publications/p519/ch05.html
http://www.askmehelpdesk.com/ taxes/us-india-tax-treaty-f1- opt-h1b-448705.html
http://www1.umn.edu/ohr/pay/ nonresident/taxtreaty/index. html
http://www.fatwallet.com/ forums/finance/1079356/
http://www.askmehelpdesk.com/ advice/t-10%3C/t-7993.html.
http://www.irs.gov/ Individuals/International- Taxpayers/Claiming-Tax-Treaty- Benefits
http://www.irs.gov/Help-&- Resources/Tools-&-FAQs/FAQs- for-Individuals/Frequently- Asked-Tax-Questions-&-Answers
I have to thank my senior friend who had told me long time ago, that tax is less while on F1. Thanks to that, I did not rely on the tends to zero number quoted by the tax software, and crunched my own numbers. This is just a summary of my net search to help other fellows in the same boat.
1. Medicare, Social Security:
No tax should be cut while on F1 for Medicare and Social Security. If it is cut, then you will get it back from the company itself once you point it out to the HR.
2. Resident alien or Non resident alien:
Note: this is for tax purposes
Substantial presence test: If days of stay in US while on H1 < 183 then you are non resident for tax purpose
Note: This applies only for the 1st year, when you are transitioning from F1 to H1. You will get the H1 sometime in October. So for the 1st year of transition you are a non-resident alien.
Forms: 1040 NR
Form 8843 to prove that you are Non resident alien: there will be columns to count your days in US while on H1B.
3. Tax Treaties
According to the country of residence, you are eligible for Tax treaties.
4. How to fill the form:
For Students from India: Refer worksheet 5-1. page 28 pub 519.
This number is your Standard Deduction.
Write the description for that as US-<your country> Tax Treaty
Write this number in form 38 of 1040NR or line 11 of Form 1040 NR EZ.
You can only use one deduction at a time, so if you have donated to charities etc you cannot claim tax benefit for that this year when using the tax treaty.
Rest of the form is pretty straightforward once you know the number in Line 38/ Line 11.
Gross Income - Standard deduction that you just found out = Taxable Income
There will be a huge table in the tax instructions (i1040nr.pdf). It is called Tax Table. See the tax according to your Taxable income range and Marital status.
Tax return = Tax that was cut from your salary - Tax according to the Tax table.
Reference:
http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test
http://immigrationvoice.org/
http://www.quora.com/Taxes/Is-
http://taxes.about.com/b/2007/
http://www.visataxes.com/
http://www.askmehelpdesk.com/
http://answers.yahoo.com/
http://www.irs.gov/
http://www.askmehelpdesk.com/
http://www1.umn.edu/ohr/pay/
http://www.fatwallet.com/
http://www.askmehelpdesk.com/
http://www.irs.gov/
http://www.irs.gov/Help-&-





