difference in taxable income?
I am a non-resident, who worked in the USA in 2004, 2005 and 2006 for 4 months. For 2004 and 2005 I used the services of an intermediary agency for preparing my ax return. For 2006 I changed my agency and used another one. My gross income for 2004 is $5,110 and my taxable income is $1,887 so that the tax I have paid is $189. For 2006, however my gross income is $6,070 and my taxable income is $0 so that my tax is also $0. I have not changed my marital status (single), nor my filing status during those two years. More or less nothing has changed about me. Was there any change in tax laws in 2006, which would justify this? How would you explain this difference?
Public Comments
- An explanation might be that in 2004 you were a nonresident alien and in 2006 you were able to be classified as a resident alien. A resident alien is allowed a standard deduction ($3,300 in 2006), while a nonresdient alien has a zero standard deduction.
- If you changed your residency status, that could definitely have something to do with it. A resident alien is allowed to claim an exemption for him/herself, whereas a non-resident alien is not entitled to any exemption amount. However, if you did not change residency status, the you need to dig a little deeper. It is possible that the person who prepared your 2005 return was unfamiliar with non-citizen returns, and prepared it incorrectly. If I were in your position, I would call a reputable tax preperation company, and ask to speak with someone familiar with tax returns for non-citizens. Make an appointment to ensure you see the right person, and make sure to ask them how many of these types of returns they do in a typical year. I do around 5, but I am in a low-immigrant area. In larger cities, and near borders, that number should be much much higher. Take both tax returns in, and have them explain the difference to you, and amend the 05 return if it is incorrect. You should only pay for this consultation if they have to correct the return. May All That Is Bless You
- First use IRS publication 519 to verify your residency status. If you were a resident, the $8450 of standard deduction and personal exemption would be enough to wipe out the tax. If, on the other hand, you were a student and in year 3 of an F-1 visa, your taxes should have been done as non-resident. The difference would be about $300. If you are a student, there shouldn't be a huge amount of itemized deductions--students aren't allowed business travel expenses. Check your copy of the tax return. What form was it on? 1040/1040A and 1040EZ are US returns; 1040NR and 1040-NR-EZ are the non-resident returns. The IRS will catch the mistake, but by the time they do, it will 2 years later and you would be charged penalty and interest. If you need help with the residency question, answer the following: 1. Country you are resident of. 2. Days in the US for each of these years 2004, 2005 and 2006. 3. Visa (if any) that you were on. If it's a student/teacher visa, which year did you first arrive in the US.
