How should I file my taxes when going from F1 to H1B

[thegoprogrammer]

I was on F1 since my arrival i.e 07/25/2013. My H1 B was approved on 10/01/2017. 

Details of my stay in the U.S:

2013: 159 days

2014: 347 days

2015: 365 days

2016: 332 days

2017: 365 days.

Should I be filing taxes for 2017 as a Resident Alien or a Non resident alien?

Can I go for the First Year Choice method?

Thanks

[bine22 · Accepted solution]

You do not count any days for the first 5 calendar years on F1. So you are a nonresident alien for 2013 to 2017. Turbotax does not support form 1040NR nor 8843. However, once you do meet the Substantial Presence Test in 2018, you could make the first year choice and be considered a resident alien starting the day you got your H1b visa. However, that would make you a dual status alien, which is not an easy return to file and might not be more beneficial. If you are married you could then also make the choice to be treated as resident aliens for the entire year, but you cannot do that if you are not married.

[thegoprogrammer]

Thanks a lot for the response. Just making sure I got your right. So, I am married. My H1 B was approved on October 1, 2017 (making me a resident for that last part of the year Oct- Dec 2017. ) Since my wife's H4 Visa (stamping) was done on December 9, 2017, she would be a Resident from 2018 onwards. Is that correct? I think I should take the First Year Choice and Opt for "Non resident spouse treated as Resident". Thanks.

[bine22]

The H1B does not make you a resident, you are still a nonresident alien for 2017, but the first year choice would make you a resident alien starting October 2017. Your wife is not automatically a resident for 2018. You area resident alien, hen you meet the Substantial presence test (or after making the choice to be treated as one). You need to carefully consider the choice, as you and your spouse would need to report worldwide income for the entire year 2017.

[thegoprogrammer]

I am confused between Fist Year choice and qualifying for the Substantial presence test. Assuming I am opting for First Year choice under ("Non-resident spouse treated as residents). Now, I and my wife will be treated as Residents for the entire year i.e 2017. We will file Form 1040 (married filing jointly) with the necessary attachments. How will Substantial presence test be assessed for 2018? As in, how will the days be counted, since when? My assumption is this: 1) 31 days during the current year,(31 days in 2018 for sure) and
2) 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year,(by end of 2018, we will be present in the U.S for well above 183 days on H1 B and H4 respectively)
1/3 of the days you were present in the first year before the current year(2017),: 121 days
1/6 of the days you were present in the second year before the current (2016) year. (55 days)                         
Will this be enough to qualify for passing the test for 2018?

[thegoprogrammer]

Sorry for the long questions.

[bine22]

There are two different choices. 1) The first year choice, 2) the choice to be treated as resident aliens for the entire year (in this case one of the spouses must be a resident alien at the end of the year).
Once you meet the substantial presence test in 2018, you can make the first years choice. That would change the residency starting date from January 2018 to October 2017. That would make you a dual status alien for the entire year 2017, but a resident alien at the end. Because of that, you can then make the choice, together with your spouse (this choice can only be made by married aliens), to be treated as resident aliens for the entire year. That choice will continue until revoked or you both are nonresident aliens again (for example after moving back).
To meet the test in 2018, you count all days in 2018 plus 1/3 the days of the year before plus 1/6 of the year before that. SO for example, you were in the US from October, that's roughly 90 days. That would count as 30 days in 2018, so you need another 153 days of presence in 2018 to be a resident alien. I would recommend filing an extension for the 2017 return, that will give you enough time to qualify. You will need to apply for an ITIN for your spouse together with the return.

[thegoprogrammer]

I'm assuming I am eligible to go for the second option, the choice to be treated as  Resident Aliens for the entire year. So, does that mean I cannot file returns until I meet the test in 2018? Can u please elaborate on that? I did not quite understand: SO for example, you were in the US from October, that's roughly 90 days. That would count as 30 days in 2018, so you need another 153 days of presence in 2018 to be a resident alien. (How would that be counted as 30 days?) Thanks a tonne

[bine22]

you are only eligible for the second option if you are also making the first choice. You need to make both choices explicitly in your statement. In 2018 your days of presence for 2017 count as 1/3, so three months of presence in 2017 would count as one month for the substantial presence test. So you could file your return making BOTH choices or ONLY the first year choice after another 5 months in 2018.

[thegoprogrammer]

Is it advisable to wait for 5 months into 2018, for filing the taxes for 2017? I understand that I have to make both choices explicitly in the statement.

[bine22]

zou cannot make those choices if you do not meet the substantial presence test. So you would have to wait until you do meet the test to file for 2017. If you do not want to wait, you could only file as nonresident alien

[thegoprogrammer]

Ok. Got it. But 2017 is the "current year" right?
The test:
31 days during the current year, and (
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and (is this what you mean when you say"count all the days of 2018?)
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year

[bine22]

but you need to meet the test in 2018 to make the first year choice for 2017.

[thegoprogrammer]

Okay.

1.31 days during the current year, (31 days in 2018)
2.  183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year (all days in 2018)
1/3 of the days you were present in the first year before the current year, (1/3 rd of 90 days presence in 2017 which is 30days)
1/6 of the days you were present in the second year before the current year (1/6 of the days in 2016)

Is this how I should I determine my substantial presence to make the First year choice for 2017?