F-1 to Asylum Pending - resident or non-resident?

[vanadis]

I came to the US at the end of 2022 on F-1 visa and applied for asylum in 2023. Supposedly my F-1 status is still valid, but:

- I am about to get an asylum-based work permit, which a) technically contradicts F-1 regulations regarding employment; b) immigration lawyers tend to say that an unrestricted work permit comes with full tax obligations

- I am eligible for Medicaid and currently under consideration, which is a social benefit, so I guess I am supposed to pay social security tax like all the other tax residents

- 5-year exemption implies a temporary stay, while I clearly established my intent to stay in the US permanently when I applied for asylum. I mean, I literally have nowhere to "return" and no other home.

In addition, as far as I know, people who did not have legal status before applying for asylum file as tax residents.

The income I made was through on-campus employment. I also have SSN. To my understanding, even if I don't count the days of presence before I applied for asylum when I was just purely on F-1, I would definitely meet substantial presence criteria this year. So should I file 1040, 1040-NR, or both for dual-status, or 1040 with a first-year choice statement?

[Vanessa A]

If you meet the Substantial Presence Test or the Green card Test, then you can file as a US Resident.  There is nothing in Pub 519 that specifically excludes asylum seekers from claiming US Resident status based on the Substantial Presence test. 

As to which election to make, if you chose First year choice, it would depend on the day you met the substantial presence test (without regards to the asylum application) as to whether you would still need to file a 1040-NR.  If you did not meet the substantial presence test until part way through 2023, and you elected First Year Choice you would have to file as a Dual Status Alien.  You would need to file the 1040 form for the time you are treated as a US Resident Alien along with the statement of election and then you could use Sprintax.com to file the 1040NR for the part of the year that you are treated as a Non-Resident Alien. 

"If you make the first-year choice, your residency starting date for 2023 is the first day of the earliest 31-day period (described in (1) above) that you use to qualify for the choice. You are treated as a U.S. resident for the rest of the year. If you are present for more than one 31-day period and you satisfy condition (2) above for each of those periods, your residency starting date is the first day of the first 31-day period. If you are present for more than one 31-day period but you satisfy condition (2) above only for a later 31-day period, your residency starting date is the first day of the later 31-day period." Pub 519 US Tax Guide for Aliens

Basically, the options you listed are all possible based on what date you met the substantial presence test and how you would like to file.  

If you are married, it is possible that you could choose to be treated as a Resident Alien for the entire year.  

"Choosing Resident Alien Status 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. 

Note. If you are single at the end of the year, you cannot make this choice. If you make this choice, the following rules apply. 

• You and your spouse are treated as U.S. residents for the entire year for income tax purposes. 
• You and your spouse are taxed on worldwide income. 
•  You and your spouse must file a joint return for the year of the choice. 
• Neither you nor your spouse can make this choice for any later tax year, even if you are separated, divorced, or remarried. The special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you." Page 12 Pub 519

[vanadis]

Hi, thank you very much for your answer! It is more than I managed to get from any specialist I have talked to before.

I spent the whole year in the US, but I was in F-1 student status. I applied for asylum in December, so if I start counting my days from Dec 4th, 2023, technically I do not meet SPT criteria for the year 2023. But I will definitely meet the criteria in 2024. So I guess at this point I'm trying to figure out whether I'm eligible for first-year choice or not.

Additionally, do you know if I can add a cover letter for first-year choice if I file with TurboTax?

"If you are married, it is possible that you could choose to be treated as a Resident Alien for the entire year. "

Wait, so does it mean it's only for married people? I thought it should be based on an individual's status at the end of the year and being married to a resident is only one of the ways to first-year choice election.

[DaveF1006]

Yes you will be able to elect make the first year choice but you would need to file a 4868 extension because you will not meet the 183 day residency requirement by April 15. Here is some guidelines to consider.

You must attach a statement to Form 1040 to make the first-year choice. The statement must contain your name and address and specify the following:

• That you are making the first-year choice for the current year (2023).
• That you were not a U.S. resident in the prior year (2022). (You were non-resident because of the F-1 exemption).
• That you qualified as a U.S. resident under the substantial presence test in the following year (2024).
• The number of days of presence in the U.S. during the current year (2023). This includes days you were exempted as a F-1 visa holder.
• The date or dates of your 31-day period of presence and the period of continuous presence in the U.S. during the current year (2023).
• The date or dates of absence from the U.S. during the current year (2023), if any, that you are treating as days of presence under the first-year choice – see (2), above.

You cannot file Form 1040 or the statement for the current year (2023) until you meet the substantial presence test in the following year (2024). If you have not met the test for the following year (2023) as of April 15 of 2023 (the filing due date of the current year), you can request an extension of time for filing your Form 1040 for the current year (2023) until a reasonable period after you have met that test for the following year (2024). You will request an extension of time by filing form 4868. 

1. Open TurboTax.
2. Continue to your return.
3.  Go to Tax Tools
4.  Tools
5. Select file an extension.

You may make this choice single or married as I am unaware of a stipulation stating you can only make this choice if you are married.

[Edited 03/18/22|12:37 pm PST]

@vanadis 

[vanadis]

Thank you so much for the information!

• The number of days of presence in the U.S. during the current year (2023). This includes days you were exempted as a F-1 visa holder.
• The date or dates of your 31-day period of presence and the period of continuous presence in the U.S. during the current year (2023).

So if I count the days including my time on F-1 that means I am claiming residency from January 1st, 2023? (Given that I have not left the US since 2022) Not from December 4 2023 when I filed application for asylum?

[DaveF1006]

No, your days that will be considered for the Substantial Presence Test will start on Dec 4. Select the link and look under the section titled Exempt Individuals.

Your first point is asking for days you were physically present in the US but this is not the same thing as qualifying to be a US resident alien under the Substantial Presence Test.  There is a distinction. It did say not to include the days you were an exempt individual.

Now, all of this is contingent on whether or not you terminated your F-1 visa status. If your status is still active, you need to file a 1040 NR for 2023 and continue filing this until full asylum is granted. Here are some reasons to fall out of  status.

• Unauthorized withdrawal from classes.
• Unauthorized drop below full course of study.
• Unauthorized employment.
• Suspension or disqualification.
• Failure to enroll in classes.
• Failure to extend prior to the program end date.
• Authorized absence from the U.S.
• Change of non-immigrant status.
• Adjustment to permanent resident status.

The last two points would more than likely pertain to you. The International Students & Programs Office in your campus  is required to terminate F and J SEVIS records for a number of different reasons. Termination of a SEVIS record may take place because the student has departed the United States (U.S.), has obtained a different immigration status, or when a status violation occurs.

It would  be wise, I think, to maintain your F-1 Visa status until the final decision is made.

[vanadis]

Thank you for the clarification. I was under the impression that pending asylum would have priority over F-1 status (which is still not terminated but I will likely fall out of status before I even get to asyum interview) since I am eligible for an unrestricted work permit and a limited number of federal benefits (would make sense to pay FICA tax just like everyone else) which may or may not contradict F-1 status. I've encountered opinions that if you work using an asylum-based work permit and not an F-1-based work permit that technically already should lead you to falling out of status. But I suppose it is turning into more of an immigration issue, rather than a tax-related issue.

Again, thank you very much for your help!