Regarding Tax Return file Advice

[AVISHEKROY]

I am a US tax resident for 2022,   I have little confusion about my US tax residential status. I went to the USA on 21st December 2020 and spent a total of 11 days in the year 2020, 343 days in the year 2021 and 347 days in the year 2022 and came back to my home country INDIA permanently on 13th December 2022. Now as per my home country tax rule I became a tax resident at my home country also for the year 2022 and I will file tax return for my home country also. 

Now I would like to know that can I file my US tax return for the year 2022 as a US tax resident (Form1040) and show only my US income on my US tax return based on US-INDIA TAX TREATY ARTICLE 4 or if I need to file as a nonresident alien (Form 1040-NR) based on US-INDIA Tax Treaty Article 4? Kindly let me know about this.

Thank you so much for your kind help and support.

[DaveF1006]

It depends.  Let's analyze this from a Substantial Presence Test perspective. To be considered a resident alien, you would need to be physically present in the US:

1. 31 days during the current year, 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, and
   • 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.

Your 343 days you were present in 2022 is enough to qualify you as a US resident for tax purposes. Now, since you moved to India in Dec, 2022, this does not cancel your obligation to report your Indian income on your return.  You still need to report your worldwide income.

What the treaty does allow you to do is claim a foreign tax credit (FTC) for foreign taxes that was paid to India for the amount of income you earned in December.  To claim the FTC, go to federal>deductions and credits>estimates and other taxes paid>foreign taxes.

Let us know if this helps and reach bac if you have additional questions.

[AVISHEKROY]

Hello DaveF1006, thank you so much for your reply. I understand that as an US resident for 2022 I need to report my worldwide income and I am going to do that. However, I have some queries about my tax filing process and required documents. Kindly help me in this regard. Last time I used Sprintax and that was very smooth and easy.

Let me first disclose my income types and questions:-

i) I got one W-2 form from my employer.

Can I claim my W-2 tax refund under India-US tax treaty Article 22 using Turbotax or I need to file any other form separately?

ii) I got interest from IRS last year for tax refund delay which is less than $100.

I don't have any 1099-INT, should I need to report this income on my tax return? If yes is it required to send any supporting document with my tax return for this?

iii) I got one form 1099-R for early withdrawn of my retirement deposit. 

Should I need to send this form 1099-R along with my tax return?

iv) Some bank interest income and small business profit income from my home country India.

Now my question is that can I use the exchange rate on the tax return filing date for currency exchange and should I need to send any foreign income proof document along with my tax return? 

In other case, I would like to know that can I use my non-US residential address for any kind of communication and receive tax refund? Thank you.

[RobertB4444]

So let's take your questions in order-

1- You don't need any additional forms in order to put your W2 on the tax return.  Just enter the information as it appears on the form.  You should attach a copy of your W2 when you mail in the return.

2- You should enter the interest received in the system as though you had received a 1099-INT from the IRS and include the total amount you got.  You don't need to have any documentation for this.

3- You do need to include the 1099-R on your tax return and you need to send in a copy if there is any withholding in box 4 of the form.  If box 4 is empty you do not need to include a copy of the form when you mail the return.

4- You should use the exchange rate from the end of 2022 if you have it.  If not use the exchange rate that you do have.  Just be consistent.

Make sure to do your Indian return first before you do your American return.  As @DaveF1006 notes you are entitled to a foreign tax credit but you'll need to file the Indian return in order to get the amount that you paid.  You are only entitled to a foreign tax credit for income that is also on your American return so be sure that if there is any income on your Indian return that is not included on the American return then you figure out the tax on that and don't include it.

@AVISHEKROY 

[AVISHEKROY]

Thank you so much for this clarification I will follow accordingly. I would like to know few more things:

i) Can I claim refund of my W-2 tax withhold under US-India Tax Treaty Article 22 using Turbotax?

ii) I came to India permanently on December 2022 so am I entitled for foreign tax credit for only month of December 2022 or whole 2022 financial year (January-December)?

Kindly let me know about this.

[ErnieS0]

You are dual-status for 2022 because you were not a U.S. resident on December 31, 2022.

You will file a dual return, reporting your income as a U.S. resident until Dec. 13, 2022 and as a nonresident for the period from Dec. 14. During the period of non-residency you are only taxed on U.S. connected income, such as corporate dividends.

TurboTax does not handle dual status returns but you can use TurboTax partner Sprintax.com.

They can answer your questions about tax treaties.

You can only claim credit for income tax is double taxed by the U.S. and India.

Learn more at How should I file my taxes as a dual-status alien?