Non Resident Alien

[Anarchrist]

I've done very few NRA returns so any advice would be appreciated.

New client from India was on a student F1 Visa until September 2007. She was on a H1B visa from October to December.

Am I correct that she is a dual status filer for 2007?

She worked for one company all year. The gave her a 1099 for her work through September. When she got her green card in October, they put her on a W-2. However, the W-2 has no FICA or Medicare withheld. Should I include Form 4137 or 8919 with the return for uncollected social security tax? She's still employed by the same company. What type of problems will they encounter because of the uncollected social security tax? They have started withholding the tax now.

Thanks,
Dave

[Koss]

Resident Alient

I've done very few NRA returns so any advice would be appreciated.

New client from India was on a student F1 Visa until September 2007. She was on a H1B visa from October to December.

Am I correct that she is a dual status filer for 2007?

She worked for one company all year. The gave her a 1099 for her work through September. When she got her green card in October, they put her on a W-2. However, the W-2 has no FICA or Medicare withheld. Should I include Form 4137 or 8919 with the return for uncollected social security tax? She's still employed by the same company. What type of problems will they encounter because of the uncollected social security tax? They have started withholding the tax now.

If she "got her green card in October," then she was not "on a H1B visa from October to December."

A person who has a green card is a resident alien, or permanent resident. A resident alien does not need, and generally cannot have, any type of visa.

I work with immigrants and other foreign status taxpayers on a regular basis. Sometimes they will tell you that they have applied for a green card, or that they are eligible to become permanent residents. That doesn't mean they have a green card, and it doesn't mean they are resident aliens.

So before you go any further, you need to clarify exactly what your client's status was at the end of the year. She may be trying to tell you that she got her work permit in October.

Fact No. 1

If she really got a green card, and became a resident alien before the end of the year, then she can choose to be treated as a resident alien for the entire year.

Fact No. 2

If she was not a resident alien at the end of the year, she may still be able to elect to be treated as a resident alien. There are two possible ways that this option may be available to her:

(a) If she expects to meet the substantial presence test during 2008, then there are some "lookback" rules that may allow her to choose resident alien status for 2007. Incredibly, the recommendation provided by the IRS in Publication 519 is to file an extension, so that she can file the 2007 return after the substantial presence test has been met for 2008. The extension is extremely important, because (1) the election cannot be made until the test is met for 2008, and (2) the election cannot be made unless the return is timely filed (including extensions).

Yes, you'll probably have to read that last paragraph a couple times. This gets really complicated really fast.

(b) India has a tax treaty with the USA with some very special rules for citizens of India. Rules that do not apply to people from other countries. Rules which in many cases allow a nonresident alien from India to elect to be treated as a resident alien even if the substantial presence test is not met. Rules that explicitly allow a nonresident alien from India to file Form 1040, use MFJ status if applicable, and take the standard deduction--all of which are impossible on a Form 1040NR.

So if the terms of tax treaty are applicable to your client, that loopy logic about filing an extension in order to meet the substantial presence test before the 2007 return is filed may not be necessary.

See Publication 519, US Tax Guide for Aliens, and Publication 901, US Tax Treaties.

Good luck. The only thing more complicated than the taxation of nonresident aliens is the taxation of Californians. In California, you might as well be living in a foreign country.

LMAO

Ohhh... as for the original question about no FICA on the W-2...

Don't worry about that. If it's only a couple months, it won't become an issue. And if it does, the IRS or the SSA will take it up with the employer, not the employee.

She probably didn't get a green card in October. Some nonresident aliens really are exempt from FICA. The company may be doing it correctly. The FICA is the least of your worries. Just let that go. Don't make an issue out of something that isn't there.

And BTW, if she exercises the option to be treated as a resident alien, either through the substantial presence test or through the tax treaty, that does not make her subject to FICA if she is otherwise exempt. It allows her to be treated as a resident alien for purposes of income tax. Social security and medicare are not authorized by the same code sections as federal income tax. If she isn't subject to FICA because of her alien status, the election to be treated as a resident alien won't automatically change that.

[thomtax]

Burton - It's good to know that there is someone here that is knowledgeable in this field.

LT