CA part-year resident alien & TX part-year resident alien couple?

Posted by taohuang.tamu on February 7, 2007, 7:29 pm

Please log in for more thread options

I have some situation that I cannot figure out for the
federal income tax and CA state income tax for year 2006.
Following is my understanding. Could some expert read
through them and correct me? Thanks a lot! Sorry for the
length... (Both my husband and I are aliens. )

1) I was a F-1 student from 01/2003 to 09/2006. During
01/2003 - 03/2006, I lived in TX. Then I moved to CA with a
permanent job offer in 04/2006 and worked still as F-1
student (OPT status), till 09/2006. After that, I changed to
H1-B status starting from 10/2006. But I quit the job and
moved back to TX at the end of 10/2006. Then I worked as
H1-B employee in TX from 11/2006 till now.

So my understanding for federal income tax is: The presence
dates I had in 2006 was more than 31 days but I didn't
satisfy the substantial presence test. If I file extension
and wait until 10/16/2007 to file the tax return form, I
would have been resident alien by that time. So although I
was non-resident alien from 01/2006 to 09/2006, I can use
"First-year choice" to choose either to be treated as
partial non-resident and partial resident, or to be treated
as resident alien for whole year 2006;

2) My husband has always been a F-1 student from 09/2001
till now. Since he was treated as non-resident alien for his
01-05 tax return (4 calendar years and 4 months?), he was
also dual-status alien in 2006: 01/2006-08/2006 as
non-resident alien, and 09/2006-12/2006 as resident alien.
So he can also choose to be either treated as partial non-
residet and partial resident, or to be treated as resident
alien for whole year 2006, using "Dual-status statement".

3) For CA income tax. I am a part-year resident for CA, and
my husband is non-resident for CA, so we have to file
separately. Since both CA and TX are community property
states, supposing my income from CA employer was $50,000,
and my income from TX employer was $10,000, and my husband's
income from TX employer was $20,000, then for column A on
form 540NR, my wages should be ($50,000 + $10,000 +
$20,000)/2 = $35,000, and the same for his wages. Then what
the "CA amounts" should be?

And for the bank interests, should we add up all the
interests from all accounts (no matter joint account or not)
and divide it by 2? And what the "CA amounts" should be if
they're global banks, and only 1 of these accounts was
opened in a CA branch.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Katie on February 14, 2007, 10:21 pm

Please log in for more thread options

taohuang.t...@gmail.com wrote:

> I have some situation that I cannot figure out for the

> federal income tax and CA state income tax for year 2006.

> Following is my understanding. Could some expert read

> through them and correct me? Thanks a lot! Sorry for the

> length... (Both my husband and I are aliens. )

> 1) I was a F-1 student from 01/2003 to 09/2006. During

> 01/2003 - 03/2006, I lived in TX. Then I moved to CA with a

> permanent job offer in 04/2006 and worked still as F-1

> student (OPT status), till 09/2006. After that, I changed to

> H1-B status starting from 10/2006. But I quit the job and

> moved back to TX at the end of 10/2006. Then I worked as

> H1-B employee in TX from 11/2006 till now.

> So my understanding for federal income tax is: The presence

> dates I had in 2006 was more than 31 days but I didn't

> satisfy the substantial presence test. If I file extension

> and wait until 10/16/2007 to file the tax return form, I

> would have been resident alien by that time. So although I

> was non-resident alien from 01/2006 to 09/2006, I can use

> "First-year choice" to choose either to be treated as

> partial non-resident and partial resident, or to be treated

> as resident alien for whole year 2006;

> 2) My husband has always been a F-1 student from 09/2001

> till now. Since he was treated as non-resident alien for his

> 01-05 tax return (4 calendar years and 4 months?), he was

> also dual-status alien in 2006: 01/2006-08/2006 as

> non-resident alien, and 09/2006-12/2006 as resident alien.

> So he can also choose to be either treated as partial non-

> residet and partial resident, or to be treated as resident

> alien for whole year 2006, using "Dual-status statement".

> 3) For CA income tax. I am a part-year resident for CA, and

> my husband is non-resident for CA, so we have to file

> separately. Since both CA and TX are community property

> states, supposing my income from CA employer was $50,000,

> and my income from TX employer was $10,000, and my husband's

> income from TX employer was $20,000, then for column A on

> form 540NR, my wages should be ($50,000 + $10,000 +

> $20,000)/2 = $35,000, and the same for his wages. Then what

> the "CA amounts" should be?

> And for the bank interests, should we add up all the

> interests from all accounts (no matter joint account or not)

> and divide it by 2? And what the "CA amounts" should be if

> they're global banks, and only 1 of these accounts was

> opened in a CA branch.

I'll pass on the federal questions and deal with California.

You were only in California for a short period of time, and
you and your husband are both citizens of another country.
Unless you intend to settle in Texas and remain there
permanently, and not to return to your country of origin,
you probably have not created a domicile in Texas.
Instead, the division of income between the two of you
should be determined in accordance with the laws of your
home country, which continues to be your domicile.
Therefore, whether your husband (who was a full-year
nonresident of California) has any California source income
would depend on the laws of your home country, not Texas or
California community property law.

If your husband is a full year nonresident of California and
has no California source income, you may file either jointly
or separately in California (on Form 540NR). If you have
established a Texas domicile, or if your home country has a
community property law, his community half of your
California earnings belongs to him, and he has California
source income -- so your California filing status is
required to mirror your federal filing - joint if you file
jointly for federal, separately if you file separately for
federal.

If you do file separately, interest and dividend income
should be reported to California only to the extent it was
received or became available to you during your period of
California residence -- and only your community 1/2 of that
income, if it is community income, or the amount of interest
that belongs to you on a separate property basis. It does
not matter where the bank or other payer is located.

If you file separately for California, and community rules
apply, your California income (Schedule CA-540NR, Col. E)
includes your community 1/2 of your California earnings,
your community 1/2 of your husband's Texas earnings, and
your community 1/2 of the interest income. His California
income would include only his community 1/2 of your
California earnings.

If community rules do not apply, then your California source
income includes 100% of your California earnings and your
share of the interest income. The latter may be hard to
determine, and the easiest thing may be just to divide it in
half, particularly if it is primarily in joint accounts to
which each of you has contributed. You could go back and
determined who earned and contributed how much to each
account and prorate the interest income that way, but it may
be more trouble than it is worth. Your California income
would not include any of your husband's Texas earnings.

My first thought was that since you were in California only
for a few months of 2006, you should consider yourself also
a nonresident of California, rather than a part-year
resident. If you were a nonresident, your California source
income (Col. E) would not include anything but your
California earnings. None of your interest income would be
taxable in California, and California would not tax any part
of your husband's Texas earnings even if it is community
income. However, the fact that you came to California to
accept employment for an indefinite period lends some
credence to your establishing California residence. The
question is whether your presence in California was for a
purpose that was not temporary or transitory. If the answer
is yes, you were a resident, even though you were present
for only about six months. If you intended or expected your
stay to be limited, you were a nonresident.

I know this is complicated, but I hope it helps. You
probably should get professional help to do your taxes this
year.

Katie in San Diego

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>