Subject: How to file as dual status

From: [email-masked]
Date: Thu, 10 Mar 94 14:20:56 CST

When you finally determined that you CAN use dual status to file, you 
may ask:
1) How to file? and
2) Do I really want to do that? (because you have the option to file as 
resident alien for the whole year)

How to file
===========
Note: Since Form 1040A and 1040EZ are mere the simplified version of 
Form 1040, they do not present any crucial difference in many cases. 
I'll use only 1040 when refering to resident alien in the following 
text for illustration purposes.

a) forms
--------
Two major forms needed: Form 1040NR, Form1040.
Write "Dual-Status Return" across the top of the Form 1040, and
Write "Dual-Status Statement" across the top of the Form 1040NR. Notice 
the difference in two. (from section "Form To File", Chapter 6, Pub 
519).

b) Divide your gross income
--------------------------
Divide your income into two parts:

-the first is the amount you received during the time BEFORE the 
'residency starting date' (see my previous post, "Dual status 
or Resident alien"), this is your income as a non-resident alien, 
let's call it 'non-resident income' for convienece; 

-the second is the amount you got during the time AFTER 
the 'residency starting date,' let us call it 'resident income'. 

c) On 1040NR  form
------------------
Use the 'non-resident income' to file 1040NR.  Apply Sino-US tax treaty 
only to the 'non-resident income.' You CAN deduct up to 5000 in full if 
this part of income excesses 5000. (confirmed by IRS helpline) But if 
your 'non-resident income' is less than 5000, say only 3000, you CANNOT 
deduct another 2000 from the 'resident income' to make it up to 5000. 
This is right to say that this 2000 deduction is wasted in this case.

Do not calculate any tax on 1040NR, this is just a statement, remember?
It shows how much you are paid, how much you quoted from treaty, etc.

d) On 1040 form
---------------
add up you 'resident income' and the taxable income determined from 
1040NR and put use the sum to file 1040 form. Then you forget about form 
1040NR and go through all the precedures specified for 1040 filing.

Calculate the total tax on 1040.

e) Tax refund
-------------
If you got tax refund in 1993 form 1992 return, it may be taxable.
Here is how you judge it: if you itemized state and local tax withheld 
when you filed 1992 1040NR, then the refund is taxable, otherwise not.

If it is taxable, this amount goes to Form 1040NR (1993) IN FULL, 
because that was your income in 1992(!) as a non-resident alien. It may 
make a difference if your 'non-resident income' is slightly less than 
5000. 

f) Interest from bank
---------------------
Technically, you have to divide the interest from bank into two parts 
in the same way as you did for you gross income (see b) above). 
Put the part that you got in nonresident period on Form 1040NR and 
the rest on Form 1040. But if it will NOT reduce you tax when you 
put them ALL on 1040, you can do that and save some work.

g) Medical and dental expenses
------------------------------
The good thing about 1040 Form is that you have chance to itemize your 
medical and dental expenses on Schedule A. But you can only itemize the 
amount you paid (and charged to your credit card) during the part 
of 1993 you are a resident alien.

h) Exemptions
--------------
on 1040 form:
As a dual status taxpayer, "..., you can claim exepmtions for your 
spouse and dependents when you figure taxable income for the part of the 
year you are a resident alien." (from page 26, under "Exemptions", 
Chapter 6, Pub 519).

on 1040NR form:
No. (Pub. 519, Chapter 6, section "Illustration of Dual-Status Return)

i) Standard Deduction
---------------------
on 1040 form:
zero! see Form 1040.

j) itemize deduction
--------------------
on 1040 Form:
Yes!! (page. 26, "Restrictions for Dual-Status Taxpayers", Chapter 6, 
Pub. 519)

on 1040NR Form:
Yes!! (Pub. 519, Chapter 6, section "illustration of Dual-Status 
Return")

k) Restrictions
---------------
One fellow had a post earlier. He is correct. (also see Pub. 519, 
Chapter 6, "Restrictions for Dual-Status Taxpayers")

Do You Really Want To File as Dual Status?
==========================================

If your are a dual status taxpayer, you can elect to file as resident 
alien for the whole year. Do you want to do that?

No clear-cut answer here. The tax law allow you choose whatever is 
better for you when you have more than one LAWFUL options. So, do your 
own homework and figure out which way you will pay LESS tax.

YSZ