Dual Status Married Indian. Can I Claim Standard Deduction?

[JackRyan]

Hi,

I was on F1 until 9/30/2021 and then moved to H1b. I'm married and my wife was on F2 until 9/30 and then moved to H4 (via change of status). I want to file jointly. Below are my questions:

1. Can I make an election with my wife to file a full year married filing jointly tax return even when I was on dual-status? If so, can I claim standard deduction on this filing?
2. If I can't proceed as #1, then I believe I will have to file both 1040 and 1040-NR for dual status filing. But 1040-NR does not allow married filing jointly. How do I go about a joint filing in this case? Also, can I claim standard deduction for the 1040-NR part (I know I can't claim SD for the resident part).

[DanaB27]

No, for 2021 you are considered a nonresident since you haven't met the Substantial Presence Test you will have to file Form 1040-NR. TurboTax does not support Form 1040NR for a nonresident.  You can prepare your return through a company we partner with called Sprintax. 

You cannot file married filing jointly as nonresidents. Generally, you have to itemize on Form 1040-NR. 

But the "standard deduction for certain residents of India. Students or business apprentices may be able to take the standard deduction on Form 1040-NR, line 12a, instead of their itemized deductions if they are eligible for benefits under Article 21(2) of the United States-India Income Tax Treaty." (Instructions for Form 1040-NR page 21)

Please be aware, you start counting the days for the Substantial Presence Test on Oct 1, 2021.

[JackRyan]

Thanks. Can I not use the first-year choice and file as a resident alien after I meet substantial presence test in 2022 (which I'll be meeting sometime in June counting from Oct 1, 2021)?

[DMarkM1]

Yes, you will need to file an extension and pass the substantial presence test before filing.  It appears you can make the first-year election but the first day of residency is still 1 Oct and you and your spouse would non-resident before that. So dual status still applies.

Then having dual status in the same tax year and if you meet the remaining criteria on page 8 of Publication 519, you can then make the election to be treated a residents for the entire year. 

You will need to print and mail your returns and attach statements for both elections per the instructions on pages 8-9 of Publication 519 

First-year election: 

1.  Be present in the United States for at least 31 days in a row in 2021, and

2. Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2021. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States.

Election to be treated as residents for the entire year:

  You were a nonresident alien at the beginning of the year.

• You are a resident alien or U.S. citizen at the end of the year.

• You are married to a U.S. citizen or resident alien at the end of the year.

• Your spouse joins you in making the choice.

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

[JackRyan]

Thanks @DMarkM1. Really helpful information and sorry for an additional question (tax is complicated). Based on the first-year election criteria that you shared, both my wife and I are non-residents at the beginning of the year and residents by the end of the year.

In this case, do I fulfill 6013 (h) that says "the individual must be married to a U.S. citizen or resident alien at the end of the tax year for which the election is being made"? If yes, then my wife and I can have a joint statement to be treated as resident for tax purposes for 2021 (after fulfilling SPT in 2022) and file normal 1040 without the restrictions applied to dual-status aliens.

[DanaB27]

Yes, after you fulfill the SPT in 2022 you can choose to be treated as a resident for tax purposes for 2021 and file normal 1040 without the restrictions applied to dual-status aliens.

 As  DMarkM1 cited before,  Pub 519 states: 

"If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.

• You were a nonresident alien at the beginning of the year.

• You are a resident alien or U.S. citizen at the end of the year.

• You are married to a U.S. citizen or resident alien at the end of the year.

• Your spouse joins you in making the choice.

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year."

This applies to you and therefore you can make the choice.

[JackRyan]

Thanks @DanaB27. Finally, while filing for an extension, how do I calculate the payment? Should I base it based on resident alien filing 1040 or as a nonresident alien filing 1040 NR and the claim this payment plus the actual refund?

[DanaB27]

Yes, you can base it as a resident that is filing Form 1040. Please see How do I file an IRS extension (Form 4868) for additional information.

[JackRyan]

@DanaB27 a follow-up question - since I was on F1 from start of 2021 until 9/30, I didn't have to pay medicare and FICA taxes. After switching to H1b on 10/01, those taxes started.

If I choose to elect myself and my wife as resident alien for the entire year, does my tax burden on medicare and FICA increase as well (essentially, would my medicare and FICA taxes be calculated from start of the year instead of 10/01)?

I didn't find any explanation of that anywhere else.

[ThomasM125]

I'm not sure if you would be responsible for FICA/MED taxes retroactive to the beginning of the year, but there would be no practical way to pay them in if you were, as they are collected and paid by your employer. At a minimum, you would not pay the taxes in on your federal income tax return. 

@JackRyan