How to choose tax residency status for outbound person

[Tipina303]

Hi everyone, wondering if anyone has been in the same boat as me. I was a PhD student in the US from 2017-2023. I had filed the US income based tax returns for the first five tax years as non-resident alien and then for 2022 as resident alien. In early 2023 I returned to India and took up a job; I will file tax return in India for FY 2023. I would meet the substantial presence test in US for 2023 but I have been in India for more than 7months too. I am wondering what would be my tax status for 2023 when filing return in US? There is something called dual-status (https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-individuals) and IRS says to file 1040-NR and write “Dual-status return” on top but I am not too confident about this.
Thanks in advance for any help!

[DaveF1006 · Accepted solution]

Yes, you would be able file as a resident or a dual status citizen. if you file as a resident, you will need to report your world-wide income thus it may be more beneficial to file as a Dual-Status Alien.

Dual-status aliens must file a Form 1040 (resident income tax return) and a Form 1040-NR (nonresident alien income tax return) in the same year. Turbo Tax does not support preparation of the 1040NR return but you can prepare it through our affiliate at Sprint tax. 

To prepare your1040 resident return, you will need to purchase and install the Turbo Tax Desktop software because you will need to record information on a form that is not available using Turbo Tax online.  Here are the steps to preapare your Dual Status return.

1. If you’re a resident alien who gives up residence in the U.S. during the year and are not a U.S. resident on the last day of the tax year, Form 1040-NR is your main return . This is to be prepared first. Write Dual-Status Return across the top of the return. Attach an “informational statement” to your return to show the income for the part of the year you’re a resident. You can use Form 1040 as the statement, but be sure to write Dual-Status Statement across the top.
2. Fill out your 1040-NR. Print it.
3. Start filling out your 1040.
4. Open the 1040/1040SR Worksheet in Forms mode when you have completed the interview section of the 1040.
5. Scroll down to the Line 17z - Other Taxes Smart Worksheet on Schedule 2 Part II, Line 17(z) and enter the federal tax withheld from your 1040-NR.
6. Finish filling out your 1040. Choose to file by mail.
7. Print and sign your 1040. Write Dual-status return at the top of the form.
8. Mail your 1040 and 1040-NR together

If you aren’t enclosing a payment, mail your return and statement to: 

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215

If you’re enclosing a payment, mail your return and statement to: 

Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303

[Tipina303 · Accepted solution]

Thank you @DaveF1006 , this is vey helpful. Just wondering because I had traded in stocks and crypto, the procedure would be exactly the same?

[DaveF1006]

Yes, because it is treated as income.

[Tipina3031]

Hello @DaveF1006 thank you for your previous help. While opening the 1040 in forms mode I see only line 17 (Amount from schedule 2 line 3); I do not see 17z like you mentioned.

Initially the refund amount on turbotax is showing non-zero amount. But if I fill in the federal tax withheld in line 17, the refund amount in Turbotax becomes zero while from 1040-NR (obtained from Sprintax) I have some non-zero amount as refund. Is this what is supposed to happen? So then what amount does the IRS refund me: the one shown in 1040-NR or 1040 (which is zero)?

Would really appreciate if you can suggest. Thank you!

[DaveF1006]

To accurately to see how Turbo Tax is calculating your  return, we would like to see a diagnostic copy of your return. The information in this file is a sanitized copy meaning there is no personal information, only numbers so that we can troubleshoot in depth, check for calculation issues, and to see how certain items are applied. In your case. Here is how to order. 

For Turbo Tax online, go to tax tools>tools>share my file with agent.  When this is selected, you will receive a token number.  Respond back in this thread and tell us what that token number is. 

If you use the desktop version, go to the black stripe at the top of the program>online>send tax file to agent. Once you receive the token number, reply back in this thread and let us know what that token number is.

[Tipina3031]

Hi @DaveF1006, thank you. Here's the token number: 1195358.

[DaveF1006]

Yes. You have filed this correctly. Looking at my instruction above, line 17Z is a calculated entry. This reference must have been taken from an old Turbo Tax instruction post. You are correct to enter this in line 17 and you will be refunded the amount shown on your 1040 NR return

[Tipina3031]

Many thanks @DaveF1006 !