US india tax treaty on F1 H1b

[ruturaj1989]

I was on F1 visa until September of last year and after October I was on H1b. I was searching for how to file tax return given my circumstances, I found good info in here https://ttlc.intuit.com/questions/3198853-opt-to-h1b-tax-filing-for-2015. I went with Sprintax as I thought it would file in the way mentioned after big however in the link. It gave me 1040NR EZ claiming US India tax treaty. I am pretty sure I can't as I was on H1B at the end of the year. Their customer support is saying that it is right. Can someone confirm?

[Anonymous]

How did you file the taxes in 2018 finally? Were you able to claim the tax treaty exemption?

[ruturaj1989]

I filed as dual status resident, procedure was long. If you are looking to file your 2018 taxes, just file regularly as because of recent tax changes, dual status won't save you in taxes.

[Anonymous]

So if I file as Non Resident can I still claim the tax treaty? I converted to H1 last year and unfortunately I cannot opt for first year choice.

[rbh9982]

Okay seems like to get 12,000 in deduction you will have to file as a dual status resident. You will have to file for extension, when you are eligible for this year as resident by qualifying by substantial presence test,  file then as dual status resident by opting for first year choice. Dual status filing is little complex. Lear filing 1040 and 1040NR (you will need both).

[bine22 · Accepted solution]

You can claim the treaty exemption, but the exemption is limited to the money you earned while on F1. So if your income earned on F1 was lower than the standard deduction, the standard deduction you can claim would be that lower amount.

[ruturaj1989]

In my case it is. So how that should be on tax return? A single 1040 is enough or does it have to be two 1040 filed as dual status with the first-year choice?

[rehan]

@bine22 - can you provide reference supporting your answer?

[DS30]

It depends - They prepared your return correctly - you can file your 2017 return as a nonresident alien because you only became a H1B in Oct of 2017 and you would be able to claim the treaty exemption.

The days that you were an F-1 visa holder do not count towards the substantial presence test, Therefore only the days that you are on the H1B visa count. So if you switched to H1B in Oct, you will not meet the substantial presence test because Oct to the end of the year is less than 183 days in 2017.

However, if you want to make the first year choice, then you will need to wait to file your 2017 taxes until you meet the substantial presence test in 2018 (so you would need to file an extension for filing your 2017 US income tax return until Oct 15th). You would need to let them know that you want to make the first year choice. In this case, you would file as a dual-status resident. I am not sure that Sprintax prepares dual-status returns.

Refer to the First Year Choice area, under Dual-Status Aliens, of Chapter 1 in Publication 519, U.S. Tax Guide for Aliens.

See this link for additional information US Tax Guide for Aliens.

[ruturaj1989]

I did not understand the part "you can file your 2017 return as a nonresident alien if you only because an H1B in Oct of 2017 and you would be able to claim the treaty exemption". Also if I can claim treaty exemption then there is no reason to as a dual status, right?

[DS30]

OK, the days that you were an F-1 visa holder do not count towards the substantial presence test, Therefore only the days that you are on the H1B visa count. So if you switched to H1B in Oct, you will not meet the substantial presence test because Oct to the end of the year is less than 183 days in 2017.

If you claim the treaty exemption, there is no need to file a dual-status.

I updated my answer to include this information.

[ruturaj1989]

I do understand this part. I think your initial comment which I asked about, was missing few words, typo maybe? I feel my original question is still unanswered or your answer wasn't clear to me. Since I switched to H1B in Oct of 2017, am I still eligible to claim US India tax treaty?

[DS30]

yes - you are still eligible for the US -India tax treaty since you are considered a nonresident alien for all of 2017.

[ruturaj1989]

Okay, thank you for clarifying, follow up question/query, isn't the tax treaty just for students as article title is "Payments Received by Students and Apprentices"?

[DS30]

ARTICLE 21
Payments Received by Students and Apprentices

ARTICLE 22
Payments Received by Professors, Teachers and Research Scholars