Subject: Dual status or Resident alien

From: [email-masked]
Date: Thu, 10 Mar 94 11:16:15 CST

Here is a relative complete answer to the "Dual-status" questions 
raised recently in the net. The info sources are authentic but the 
interpretations are personal. Please let me know if you have different 
interpreations.

I believe the approaches presented here are very safe. Doesn't matter 
which of the following status you end up with to file :
1) resident; 2) nonresident; 3) dual status

1) Source of information
========================
First of all, the rules set forth in Pub. 519, U.S. Tax Guide for Aliens, 
Chatper 1, define very clearly when and how you use dual-status 
for tax purposes.  I strongly recommend everybody in concern to read 
through the chapter very carefully at least once, especially for 
those who never had chance to look at it before. 

While you reading it, I would like to draw your attention to the 
following subjects which I think are most relevant to CSPA students 
as well as first year H-holders: 
	i) Figure A. Nonresident Alien or Resident Alien?
	ii) Exempt individual (under "Substaintial Presence Test" section)
	iii) Residency starting date (subtitle of "First Year of Residency" 
				under "Dual Status" section)

2) Some oversimplified conclusions
===================================
I have seen some people in the net somewhat conclusively say that:
'if you had H-1 longer than 183 days, you should file as dual status,'
or
'if you were a resident for part of the 1993, you should use dual 
status.'

Please do not pass along these sayings without discrimination. They are 
not necessary correct in many cases. Better yet, just forget about these 
conclusions and go to Pub. 519 for the correct answers.

3) The key is the "Residency staring date"
==========================================
To settle whether you CAN or CANNOT use dual status for tax purposes, 
the key is to figure out the "Residency starting date."  Note that 
this term is only meaningful for those people who are in their first 
year of residency (that is, 1993 is the first year they meet the 
criteria of either "Green Card Test" or "Substantial Presence Test"
 or both). 

The rule states: "If you are a U.S. resident for any calendar year, 
but you were not a U.S. resident at any time during the preceding 
calendar year,  you are a U.S. resident only for the part of the 
calendear year that begins on the RESIDENCY STARTING DATE. Before 
that date, you are a non-resident alien." (from Pub. 519, Chapter 1,
 "Dual status" section)

Let me point out the important point implied by the above rule:

If your residency starting date is 1/1/93, then your nonresident 
alien period for 1993 is ZERO. This means that you practically 
become a resident alien for the entire year of 1993 for tax purposes, 
and CANNOT use dual status.

4) How to determine this 'residency staring date"
==================================================
So, how do you figure out your RESIDENCY STARTING DATE?? Here is the 
the rules defined by IRS: (for more complete definition and procedures, 
please see Pub. 519, Chapter 1, and "Dual status" section, 
subtitle "First Year of Residency")

i) If you meet the "Substantial Presence Test", the RESIDENCY STARTING DATE 
is the first date you are present in the States.

ii) If you meet the "Green Card Test," the RESIDENCY STARTING DATE is the
first date you become a lawful Permanent Resident. (see 5) for more)

iii) If you meet the "Green Card Test" AND the "Substantial Presence Test,"
the RESIDENCY STARTING DATE is the EARLIER date determined from i) and 
ii).

5) What date is your first day as PR?
=====================================
If you applied PR on 7/1/93, got the approval notice on 9/25/93, and 
received your green card on 12/5/93, what is your first date as PR?
It is printed on the back of your green card. For example, I have "EC6 
EAC 930927 245 32....", then the starting date for this is 9/27/93.
I confirmed this with INS officer recently.

6) My conclusions
=================
Now, no matter what situtation you have, first thing you have to do is 
find out what was your residency starting date in 1993. Then:
 
If your residency starting date turn out to be 1/1/93, then you 
CANNOT use dual status to file. You can only file as resident alien for 
the entire year of 1993.

If your residency starting date is other than 1/1/93, then you CAN file 
as dual status. For illustrations purposes, let us suppose your 
residency starting date was determined as 8/3/93. In this case, your 
file as a nonresident alien for the period before 8/3/93, and you file 
as a resident alien for the period after 8/3/93.

5) Case illustrations
=====================
 
Case 1:  
-------
Mr. Z was an F-1 student since 1/1/93, on 7/1/93, he applied PR under CSPA. 
He got green card with "XXX XXX 930901 XXX XXX..." printed on the back of 
the card. He didn't leave U.S. for any single day during 1993.

Analysis:
---------
Mr. Z met the "Green Card Test," no doubt about this. His residency 
starting date was then 9/1/93. He doesn't meet the "Substantial 
Presence Test," since there were less than 183 days (!!!) between 9/1/ 
and 12/31/93. (the days as an F, J, M student don't count, see 
"exempt individual", Chapter 1, in Pub. 519). This means he CAN file as 
dual satuts. 

Case 2:
-------
Mr. Y was an F-1 student since 1/1/93. He became H-1B starting 5/1/93. He
didn't leave U.S. for any single day during 1993.

Analysis:
---------
Mr. Y doesn't meet the "Green Card Test". But he met the "Substantial
Presence Test", since the days when he was an H-holder were more than 183
days. (The days as an F, J, M student don't count, see Pub. 519). So his 
residency starting date was 1/1/93, because he was in U.S. starting 1/1/93. 
He also has to fill as a resident alien for the entire 1993, not 
as dual status.

Thanks for sharing your time.

YSZ

---

From: Dabin Zhu <[email-masked]>
Date: Thu, 10 Mar 94 14:04:33 CST

I found this information by YSZ very clear and helpful.

I have some info and questions that I want to share with you

On March 8, a person representing IRS was invited by the CHINA CENTER at
the University of Minnesota to give a talk on Dual-Status filing
reguarding Chinese students. The main idea we got are:

(1) if 1993 is the 6th year that you are in US as a student(F,J,M),
    you have to file as US resident. (3rd year for non-student).

        I remember if you are a int'l student, you should always file
        1040NR no matter what. So where does this 5-year-only exampt 
        status come from?

(2) if you have GREEN CARD( or been a H-1, or both) for more than 183
    days in 1993, you have to file as resident for all 1993.

(3) only those who was in US later than 1/1/1989, have GREEN CARD for less
    than 183 days in 1993 can file dual-status.

===========================================
BUT there is one major confusion at the March 8th meeting, the IRS person
said repeatedly that the GREEN CARD test means you HAVE your GREEN CARD!
not just your I-485 approval notice. 

I am a CSPA priciple who has not received the CARD as of today, the IRS
person told me directly 3 time that I have to file 1040NR for 1993.

I think this is a big question mark. could anybody tell me where can I
clarify this? because some netters said filing as NR is risky.  

Dabin Zhu
U of Minn.