Tax Question

Hi Everyone,

I have a question about tax filing. For my 2008 filing, I was on a J visa the whole year and when it came time to file my taxes, I ended up filing a 1040 and not a 1040NR and received a refund. Please remember that on a J, I am also exempt from certain taxes like FICA.

After doing further research, I thought I was supposed to file a 1040NR and now need to file a 1040X. I went to H&R Block and they confirmed this telling me that it would cost me $250-300 to have them do this.

I then asked my friend who was also on a J and now on an O to refer me to his accountant. I just got off the phone with him and he told me that what I filed, the 1040 is fine and that a 1040NR was not needed because I've been here for over 30 days and that's considered a resident. He stated that there are a lot of stipulations but that I wouldn't get audited because there is nothing to audit since I have a W2 form, etc. He even stated that this year I would file the same even though my J visa ended in July and my H1-B started in October.

Does anyone have any insight into this situation or any recommendations? Or even still, if this sounds correct or completely misleading?

Thanks ahead of time.

-- Fri Jan 08, 2010 10:26 am --

To further my above post, I have just read about the 31 days presence in the United States clause. On the IRS Web site it states the below. I meet the first one which is what my account says.

"Substantial Presence Test - You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2008. To meet this test, you must be physically present in the United States on at least:

1. 31 days during 2008, and
2. 183 days during the 3-year period that includes 2008, 2007, and 2006, counting:
1. All the days you were present in 2008, and
2. of the days you were present in 2007, and
3. of the days you were present in 2006.

The accountant was wrong about the 30 days, since time on J status does not count towards any days in US. So, no, you were not considered resident because of that. If you read SPT rules more carefully, you will note that time spent on J status does not count towards SPT or presence.
http://www.irs.gov/businesses/small/int ... 52,00.html (see exempt individuals)
However, the fact that you are Cdn, allows you by treaty to file 1040. Most US accountants are clueless about treaty provisions because typically they don't apply to american citizens.

So the accountant was wrong about the reason, but you do not have to refile -- as long as you reported all world income on that 1040. The Fica is not an issue. But he should have known about the IRS rules on J status, so I trust you won't be dealing with him (don't ever bother with HRBlockheads either) in the future. Your taxes are simple and free software online can take care of you.

For 2009, you will aslo file full-year 1040, for the same reason as above. In 2010 you will file full 1040, becasue now you will be a US tax resident by SPT, and not relying on the treaty.

Hi agnelson,

Thank you for your reply and information. So just to be clear, when I filed a 2008 1040 not a 1040NR that was fine because of the treaty with Canada and the U.S.? I did not have any other income but what I made at my current job and what was reported on the W2. I did it through TurboTax and filled in the numbers as was written on my W2. I just found the amount of the refund to be a lot since I don't pay into FICA and some others that I can't remember.

Regarding 2009, you stated that I will be a resident due to the SPT and not because of the treaty but is this true even though I was on the J until July? I guess so because I was in the country for over 30 days on an H1-B from October onward?

Thanks, Janet

Regarding 2009, you stated that I will be a resident due to the SPT and not because of the treaty but is this true even though I was on the J until July? I guess so because I was in the country for over 30 days on an H1-B from October onward?

Please read carefully. I said "For 2009, you will aslo file full-year 1040, for the same reason as above." That is, by treaty as I had described right above that statement. Otherwise you would only be considered a part-year resident. In the eyes of IRS (without treaty) you only arrived in US in July 2009.

Also, read the requirement for SPT more carefully: it states you must be in US for 30 days and meet the 183 day requirement (not counting days in J status). Being in US for 30 days is not by itself enough for SPT, obviously. You don't even meet SPT for 2009. And even if you did, the best that would make you is part-year resident (ie dual status).

-- Fri Jan 08, 2010 11:17 am --

The tax software does not deal with non-residents very well, so the best is to treat yourself as resident like you did. You just need to know why you could do what you did. It wasn't because of any time you had or have spent in US -- its because of treaty.

Hi agnelson,

I have another quick question, I spoke to another accountant who told me that despite the treaty, because I possess a "J" visa, I still should file a 1040NR.

Do you have a link to the treaty page where I can read on it? I called IRS and they seemed to know very little as expected.

Thanks,
Janet

This is not a tax board. If you want more info, I answer these questions at forums.serbinski.com, were I specialize in cross-border issues.

Run-of-the-mill accountants typically don't know about treaties, and quite frankly, its hardly worth worrying about at this point.