I was on my F-1 OPT visa including cap gap from July 2017 - Sept 2018 & my H-1B commenced from Oct 2018.
I had filled 1040NR for that year and claimed for standard deduction as per the U.S-India tax treaty.
However, I received a Notice of Deficiency from IRS for claiming this standard deduction on my 1040NR.
I filled for my petition and am currently in talks with the IRS Appeals Officer.
The Appeals Officer is stating that since I had already graduated in 2017, & my "primary purpose" of stay was not education in 2018 (as I was employed & earning compensation on my F-1 OPT), I cannot avail the tax treaty.
It seems like the negotiation with Appeals Officer is not working out & I might need to go to the U.S Tax Court to handle this.
I need help with some useful information/resources which supports my case as the treaty does not clearly define the term "student".
@tax2020return , the US-India tax treaty ONLY allows for equal treatment for the Indian "student" i.e. treat just like US "student". US F-1 visa requires compliance with "student" requirement. In your case for the year 2018 you were on F-1 and then Oct. through Dec on H-1B. Thus the question about treating you as a student. One could argue that you were a student because of the visa ( F-1 ) but IRS would argue that since you were on CAP-GAP, you were effectively working as an employee ( not trainee ) because you had applied for . approved for H-1B. It is not a battle worth having.
If your whole aim is to be able to use the standard deduction, it would be far easier to exercise the first year choice for year 2018, file an amended 1040 return and thereby achieve your goal without raising the heckles of the IRS. That is my view
@tax2020return dual status person needs to file both a 1040 ( covering the world income for the resident portion of the year ) and 1040-NR ( covering the Non-Resident portion of the year and on US sourced/connected income ). The only deduction available to such person is Itemized deduction.
What you are asking for is to be considered a resident for the whole year , be taxed on your world income for the whole year and thus avail yourself of the standard deduction.
Does that make sense ?
@tax2020return , I don't think so --- as long as you are with F-1 and in required training as part of your education, there is no FICA. The question would be were you an employee or a trainee --- an employee is subject to FICA whereas a trainee is not. Once you are H-1B, you are an employee and therefore FICA is obligatory
I came on H1 on Oct 1 2018. Before that i was on F1 so i was an exempt individual until then. As I understand the date from which i can apply the first choice rule would be Oct 1, correct?
so I will be a dual citizen in that case.