Dual-status alien higher tax burden

[bla_bla_123]

Hello, I have been a non-resident and an exempt individual under the substantial presence test from 2019-2023. In 2024, I was in the US as a non-exempt individual from Jan 6 to Dec 15. It is my understanding that I met the substantial presence test on July 6, 2024 (183 days of presence since Jan 6) and that therefore my tax residency started on Jan 6, 2024 (date I arrived). That would mean that I am a dual status alien for 2024, being a non-resident from Jan 1 to Jan 5 and a resident from Jan 6 to Dec 31. This means that I cannot claim the standard deduction on my 1040. Since I did not have any income from Jan 1 to Jan 5, it seems that I also cannot claim any benefits under the tax treaty the US has with my home country (Germany) on the 1040-NR I have to add as an attachment. This would result in me having a disproportionately high tax burden, as I believe my itemized deductions will not even come close to half the standard deduction of $14,600. Does anyone have any insight into my situation or can confirm if my reasoning is sound? Thank you in advance!

[pk]

@bla_bla_123 ,

While your analysis is of the situation is  generally correct, I still have  a few questions:

(a) from 2019 through 2023 you were her on F-1 or what?

(b)What was your visa status  for the year 2024 -- F-1   on OPT/CPT  with EAD or what ?

(c) Was you visa cancelled/ adjusted at the end of 2023 or what  ?

(d) The eligibility for standard deduction is  resident for the whole calendar year and not whether one had income on the first day of the year.  Why did you leave US  on  Jan  15th -- was that end of visa or just home leave/vacation ?

(e) Are you still in the USA or back in Deutschland ?

I will circle back once I hear from you 

[bla_bla_123]

Thank you very much for your response! 

(a) I was a J-1 student from 2019-2021. After graduating, I returned to Germany and obtained an F-1 visa. I started my new program on F-1 in 2021 and that has been my status since. 

(b) I have a research assistantship on campus and get paid for working under my advisor. In the summer of 2024, I completed an internship off campus under CPT.

(c) Nothing was adjusted at the end of 2023. The software my university uses for foreign student tax compliance just notified me that my status will switch to resident alien for tax purposes. After looking into it, I am aware that I can continue to be treated as a non-resident alien if I proof certain facts to the IRS. However, I do not know how easy that will be and I generally do not have an issue with being taxed as a resident. So that is not an avenue I was considering.

(d) The reason for my leaving was that I visited my family in Germany over Christmas/New Year's.

(e) I am still in the US as an F-1 student.

[pk]

@bla_bla_123 

Based on your response  and because your exempt period ended in 2023, you were a resident for tax purposes for the whole year of 2024 -- vacations and small absences  do not negate  " was here for the whole calendar year).

Thus you file form 1040 for the whole year using standard deduction .

Where in Deutschland are you from  /  I lived  in Pech bei Bonn for four year during the eighties.    The foreign minister Gensha used to live in the same place , except he was at the top of the hill and I was in lower part.

Is there more I can do for you ?

[bla_bla_123]

Thank you again for the response. I would prefer to just file as a resident alien of course, but on what basis can I claim to have been a resident for the whole year? I agree that a minor absence for a vacation should not negate that, but I read the following in IRS pub. 519, p. 10:

First Year of Residency

If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date.
Residency starting date under substantial presence test. If you meet the substantial presence test for a calen-dar year, your residency starting date is generally the first day you are present in the United States during that calen-dar year.

That makes it seem that my residency starting date should be Jan 6, which would render me a dual-status alien.

I am from Berlin! That is interesting that you lived in the same city as Genscher. I learned about him but he was before my time.

[DaveF1006]

No, that is incorrect. PK is correct when he states that you are a resident alien in 2024 based on the substantial presence test. You spent a minimum of 183 days in the US in 2024 so you are a resident alien for this year based on that fact.

@bla_bla_123  

[bla_bla_123]

@DaveF1006  @pk

I appreciate your help. I understand that I meet the substantial presence test for 2024 and am therefore a resident alien. However, the previously quoted passage from IRS publication 519 seems to imply that if I have not been a resident at any point during 2023, then I am a resident only for the part of 2024 that is after my residency starting date. It also suggests that as an exempt individual in 2023 I was not considered as present in the US during that year. My residency starting date would the be the first day of physical presence during 2024, which in my case is Jan 6, 2024.

The way I understand it I could only be treated as a resident for the entirety of 2024 under the first-year choice for 2023 as described in IRS publication 519, page 11. However, I do not believe that I am eligible to make this choice, as I was still an exempt individual for the entirety of 2023 and therefore not considered present during this year.

Thank you very much for bearing with me.

[pk · Accepted solution]

@bla_bla_123 ,  given that we are all telling you the same thing -- that  you are a resident for the whole calendar year -- (a) you met  SPT in 2024 and  (b) your first day  present in the  USA is Jan 1st 2024  ( because  at the end of 2023 you were not out of status, your visa status continued , you had short absence  ( for holiday / home leave etc. ).  Thus  you are NOT eligible to apply for "First Year Option".   

I don't know what more to  do for you .

This whole sage started because  you were sure that you are being forced  to use  itemized deduction because   of dual status  ( which you are not  )

Here is a page from the website (  Residency Start date  ) -->

Residency starting and ending dates | Internal Revenue Service

Is there more I can do for you ?

pk

[bla_bla_123]

@pk 

Thank you very much for your help.