Am I resident of the USA for tax purposes under an OPT?

I was living in the US under an F-1 student visa for the last 3 years. The first two, I was a student working less than 20 hrs a week. Legally, I was only allowed to work on campus and my employer had a lot of international students so they knew not to deduct FICA or Social Security taxes. The international department at my school told me that I needed to fill out the 1040NR and 8843 tax forms for Federal taxes and then whatever my state tax forms where. I also filed my Canadian taxes.

For 2010, I got an OPT allowing me to work in my field for one year (like an extension of my schooling) still with an F1 status. I've contacted the IRS on numerous occasions regarding my personal taxes and they really have no idea what their talking about. The IRS mentioned something about a tax treaty and to deduct it, but really there is no place to do that on the form and I don't understand what that person was talking about. I got so many different answers from every person, so I was hoping you could help.

This is the first year I've made over $10,000, in fact I made $13,000. By following the 1040NR I paid $860 into federal taxes and would owe them another $177. My employer deducted FICA and SS tax and I've already talked with their accountant to fix it, because I was told that even if I worked under and OPT I was still considered a student but I don't understand why I would have to pay over 1000 in taxes.

I contacted a tax specialist here in Alberta, as my OPT expired and I'm now back in Canada and was told that if I lived in the US for more then 183 days, that I would be considered a resident for tax purposes and should fill out the 1040, but everything I keep reading either contradicts it or is something totally different. Does anyone know anything about this issue and what I should do?

Read IRS publication 519. It is really obscure, for example on question 6 on W-4 you're supposed to put down "non-resident alien student" and they're not supposed to withhold FICA - find me one US accountant who actually knows that. You can claim it back yourself on Form 843.

F-1 requires you maintain an abode abroad plus there is the non-discrimination clause under the tax treaty, so provided you were doing 1040NR and 8843 you are not resident in the US for tax purposes and never were, however you can file as a non-resident on 1040 under the non-discrimination clause of the treaty (if you want, as an individual with low income there's no advantage to it).

So basically you just do what you've been doing - 1040NR and 8843. You need to file the 8843 to get the FICA exemption. And an 843 to get it refunded.

You're basically in a very unusual area of tax law because (a) you were a student and (b) you're Canadian and put those two together and the US tax system works very differently.

... and don't forget to report the wages on your Cdn tax return (as you have been doing in the past). The US tax you finally owe will be credited to you on that return.

I am a Los Angeles based Attorney and CPA who handles cross-border US-Canadian tax matters. Feel free to reach me through this site if you need assistance with your US and/or Canadian tax filings.