F1 VISA, FICA EXEMPT , SE TAX

[HOPE2]

Hi to all folks, god bless you.

Client as of Nov 2022 had been a F1 visa but on 15th Nov 2022 has become a green card holder.

He earned $120000 as self-employed and his employer had been in England. If we assume all income was associated with F1 visa period, I need a help to find out in what part of Sch C can enter this exemption, SE tax.

If $100000 was related to F1 visa period and $20000 for green card period, how can I consider SE tax for this situation?

Thanks for your help.

[BobKamman]

Looks like a dual-status alien to me.  But it's confusing when you indicate he is "self employed," but has an "employer."  What was his total income for the year?  Just the $12,000, or is that in addition to something paid from Britain?  

Resident Alien at End of Year

You must file Form 1040, U.S. Individual Income Tax Return if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents as the statement, but be sure to write "Dual-Status Statement" across the top.

https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens 

[HOPE2]

You right. He has a dual status. All his income came from England and he was an independent contractor for a company in England. Employer, what I said I meant that company in England. I have to ask how much he earned while he was nonresident (F2 Visa) right? And how much was for the other status. His wife had had F1 visa. His wife has 2 W-2s and both were non-resident before November. After Nov 2022 they were resident since they received green card. I think for both should file 1040NR separately and for part of resident period should file 1040. New question is how to allocate wife's W-2s for resident and non-resident period. I read the link it was super useful but I confused how can I make 1040NR and 1040 in Prosereis at the same time. Also, I confused when should Write : "Dual-Status Return" and when should Write "Dual-Status Statement" across the top. I am trying to complete this return for me it is very important to find out how to do this. 

Thanks for your help, God bless you.

[sjrcpa]

Use Publication 519 that is referenced at the bottom of the link Bob provided.

I suspect it won't be easy to do in ProSeries. You may need to set up 3 client files. 

[BobKamman]

I suspect it might be easier to do with pen and ink.  And then you could tell your grandchildren that you once did a return that way.  

[HOPE2]

Have you ever filed like this return in your tax life?

[BobKamman]

It might be a lot easier to elect to be taxed as resident aliens for the entire year, and file a joint return.  Do they have children who would qualify for tax credits?  This might cost some SE tax, but for some people that's a great investment because it buys an additional year of SS coverage for a relatively small price.  From Pub 519:

If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.
• You were a nonresident alien at the beginning of the year.
• You are a resident alien or U.S. citizen at the end of the year.
• You are married to a U.S. citizen or resident alien at the end of the year.
• Your spouse joins you in making the choice.
This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

[HOPE2]

They do not have children. I think filing 1040 would be easier as you told. I see on Schedule SE Adjustment worksheet part II line 7 I can eliminate SE tax and able to make a supporting statement for having F2 visa for non-resident source out of the U.S. income period. What is your idea?

[BobKamman]

You are farther ahead on the SE question than I am.  But it sounds like having your cake and eating it too -- if you want to be taxed as a resident all year, pay SE tax like a resident all year. 

[HOPE2]

His SE tax for all his income for non-resident period is more than $16000 too much. I know benefits of FICA and time to contribute SEP, IRA expired as well.

[sjrcpa]

If the return is on extension, SEP contribution can still be made.

I have done dual status returns, but not in a while. 

as Bob said - if you elect to be taxed as residents, it applies to SE tax as well. Can't pick and choose.

[HOPE2]

CA is on auto extension.

[abctax55]

Ca on auto extension 'because' of the disaster declaration?

[BobKamman]

It's not how much SE tax is paid. It's how much income tax might be saved with a joint return.