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| Sunday, February 25, 2007 |
| More Tax Returns for International Students!!! |
Yannick and I have been students for so long that we were "forced" to become "sophisticated" senior students, at least financial-wise.
We came from China. There is an annual $5,000 exclusion of a student’s wages for the first 5 years. We were very happy back then, because we were optimistic that we could finish our PhD's in 5 years.
As you know now that we did not accomplish our mission within 5 years. In the 6th year, as we were grudging the loss of the "$5000 exclusion of students wages", we started extensive research on tax laws, treaties, and even attended a PhD level taxation seminar! (You see, there is a reason that we stayed in graduate schools for such a long time).
And you know what? Our efforts did get rewarded! Here is what we found: The tax treaty from the People's Republic of China (PRC) contains no time limit, and a Chinese student who qualifies for it may use the article for as long as he is still in valid F-1 status, including during that period in which he is engaged in practical training in valid F-1 status.
So, if you are from P.R.C, still a student after 5 years in U.S., and believe in "NO Taxation Without Representation", here is something we want to share with you. Hopefully this will save you some time, and help you get out of graduate school early.
Step by Step instruction to get you $5,000 tax exclusion:
I. Download Form 8833 .
II. Fill out the form like this:
1. Enter the specific Treaty position relied on:
(a) Treaty country: People’s Republic of China
(b) Articles: 20(C), Paragraph 2 of 04-30-1984 prot.
2. List the internal revenue code provisions overruled or modified by the treaty asked return position: IRC61; 871(b)
3. Name, identifying number of …. : N/A
4. List the provision(s) of the limitation on benefits…: N/A
5. Explain the treaty-based return position taken:
The taxpayer is a citizen of the People's Republic of China. He entered the United States on on an F-1 visa (student), and has remained in F-1 status continuously since. Under the residency rules of IRC7701 (b), the taxpayer passed the substantial presence test in and his residency starting date was 01-01-. This means that for 2006, the taxpayer is a resident alien and is filing form 1040 for 2006 as a resident alien.
Article 20(c) of the USA-China income tax treaty allows an annual $5000 exclusion of student wages from gross income. The article contains no time limit, and a Chinese student who qualifies for it may use the article for as long as he is a bona fide student in valid F-1 status. Paragraph 2 of the 04-30-1984 protocol of the USA-China income tax treaty contains the "saving clause" of the treaty, which normally acts to nullify the tax treaty's benefits once a resident of China has become a resident of the USA. However, paragraph 2 of the Protocol also specifies exceptions to the saving clause, among which is article 20 on student and trainees. This means that, even though the taxpayer has become a resident alien under the substantial present test of IRC 7701(b), he may still claim the benefit of article 20 of the USA-China income tax treaty. The taxpayer has elected to do this, and is claiming an exclusion from gross income for 2006 of $5,000 in student wages as allowed by article 20(c) of the USA-China income tax treaty. TOTAL EXCLUSION CLAIMED: $5,000
Gong Xi Fa Cai!Labels: International Tax Treaty, Tax |
posted by Jacqui @ 6:17 AM | Add to del.icio.us
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| Saturday, February 24, 2007 |
| Non-Resident Alien or Resident Alien? |
A blog friend started a discussion on tax filing for Aliens here . Yannick and I have been filing as Non-resident alien and then Resident alien for years, and we may have to file as "Aliens" for a few more years if the Green Card waiting lines gets longer :( So we can not help sharing our experience.
EDIT:
I realized that my discussion on the topic with mOOm and Golbguru was a bit too fragmented. Therefore, I am recompiling my comments in the following:
F-1 and J-1 student visa holders are generally considered nonresident aliens for any part of the first five calendar years they are in the U.S. in that visa status. F-1 and J-1 students who have been in the U.S. for more than five consecutive calendar years are considered to be resident aliens for tax purposes.
To know why, first you should know that IRS is mainly concerned with the number of years you've been to US, not your immigration status defined by INS (USCIS recently).
You can get the spirit of the tax law from the IRS publication :
"The residency rules for tax purposes are found in I.R.C. § 7701(b). Although the tax residency rules are based on the immigration laws concerning immigrants and nonimmigrants, the rules define residency for tax purposes in a way that is very different from the immigration laws. Under the residency rules of the Code, any alien who is not a RESIDENT ALIEN is a NONRESIDENT ALIEN. An alien will become a RESIDENT ALIEN in one of three ways:
(1) by being admitted to the United States as, or changing status to, a Lawful Permanent Resident under the immigration laws (the Green Card test);
(2) by passing the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States);
or (3) by making what is called the "First Year Election" (a numerical formula under which an alien may pass the Substantial Presence Test one year earlier than under the normal rules).
Under these rules, even an undocumented (illegal) alien under the immigration laws who passes the Substantial Presence Test will be treated for tax purposes as a RESIDENT ALIEN."
So the Substantial Presence Test is the relevant part for most F1 or J1 holders.
In the IRS Publication 519, US Tax Guide to Aliens, it says that you don't count any day you are an F1 student towards presence in the US for the substantial presence test. However, after saying students (F1) were one of the "exempt" cases, the "exempt" status were automatically taken away after 5 years.
"You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you establish that you do not intend to reside permanently in the United States and you have substantially complied with the requirements of your visa."
So enjoy the Resident Alien status which allows you to claim same number of deductions as a US Citizen after five years of consecutive F1 status and claim tax treaty benefit if your country has a tax treaty with the US. Even better, full-time students enrolled in a university and working part-time for the same university are exempted from FICA payroll taxes.Labels: Green Card, Non-Resident Alien, Resident Alien, Tax |
| posted by Jacqui @ 5:42 PM | Add to del.icio.us
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| Sunday, February 18, 2007 |
| 4 open houses in our complex of 80 units, just today!!!!!! |
On our way back from grocery shopping today, we saw numerous open houses along the street outside a condo complex we are staying. Once we drove into the complex, there were another 2 open-house signs, and once we get into the parking areas in our small circle, there were again 2 open-house signs!!!
Yannick did an online research right after. Our landlord purchased this condo 1 year ago, for $400K. Its listing price was $420K, because of the messy condition; while a comparable unit in good condition was listing for $440k in the same complex. The dirty kitchen, bathrooms and walls took my landlord a month and lots of resources to rehab.
Now the condo on the other side of the road is listed for $370, 000, with exactly the same structure, size, age, neighborhood, view ... And it has been on the market for over 7 months, still not sold.
Overall, Yannick's conclusion: Good that we did not buy a house!
Since I started my new job, Yannick and I have been looking at the housing market, locally, nationally. To save for our down payment, we rented a tiny place in a condo. It is a nice condo, and all our roommates are nice. However, it’s really not that convenient to share the condo with the landlord couple and a single guy. We have to take turns to cook; we can only watch TV shows on computers; when both of us work, one of us has to sit on the bed; when there are grocery deals out there, I can't buy because the fridge is full; when there is a deal with rebate, I have to ask whether my roommates have taken the deal... let me say, lightly, that this type of "sharing" is "not ideal".
I wanted a space of my own, even a tiny one. Actually, I was very happy with my cozy room in the graduate housing of my school. I have to admit that at that time "having a house of my own" is not in my agenda, and I never had time to dream it. Now, it becomes a possibility ... it also becomes pressure.
Despite my emotional attachment to a space of my own, Yannick is so "rational" that my "emotion" could not win. He predicted that the house price will come down even futher very soon (not really his prediction, who does not say this these days?), and he insisted that we hold the cash rather than putting it in some real estate.
We use majority rule in our family. Yannick controls 50% of the votes, I control 50% of the votes. However, in my 50%, 25% is controlled by my emotional attachment to a private, cozy space of our own, 25% is influenced by those warnings from the rational economists, those scaring housing statistics, and those who regret for their stumbling in the housing bubble ... final votes: 75:25 -- NOT buy. Labels: bubble, Housing, Real Estate |
| posted by Jacqui @ 3:27 PM | Add to del.icio.us
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| Saturday, February 17, 2007 |
| Is hunting deals a really bad "hobby"? |
I placed an order this morning for a 500W power supply. Free after Rebate.
Before I place the order, I first checked eBay
for its "reselling" price, then checked tax rate. then checked the review of the "rebate". I clicked the "place your order" button after I feel that the probability that I will lose money on this deal is less than 0.1.
I made up this 0.1 probability myself. Can't really pin down the probability" The UPC can be damaged, the power supply can blow, the check can get missing .... Nothing is really zero-probability, I just make up a number to make myself comfortable.
Initially, Yannick did not like my deal-chasing behavior. He considered it as "short-sighted", "waste of time", "waste of energy", "low taste".
After a long, long time, he finally stopped complaining about my deal chasing, because he finally figured that:
1. I am not chasing the deal, I am chasing the "feeling" of getting a good deal.
2. I may waste some "time", but I do not waste money. Some times "hot deals" can get really expensive. I do not do those un-nessary deals. I either purchase something we really need, or if somethinge not get used in 3 month, I sell them (except for my clothing). I always check "resell" price before I make a purchase. And I almost buy things online, I do not evey pay gas for it!
3. Getting a good deal is a hobby to me now! It relaxes me from my boring work, gives me a tiney, yet sweet feeling of "achievement".
Overall, getting a good deal is now (1) an inexpensive-hobby; (2) a good after dinner entertainment; (3) helping build frugal living style --- why stopping me?
Now, Yannick encourages me to be a shopper! As long as I am a shopper that brings in money and decrease budget, as long as I am a shopper who are happy over the deals I am making, he is a happy too. Win-win situation!
Not sure how many shoppers out there are like me. Maybe I should start a deal chasing blog myself, and get more friends in the circle!Labels: Bargain, Deal |
| posted by Jacqui @ 2:14 PM | Add to del.icio.us
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| Wednesday, February 14, 2007 |
| Hurry up! Ebay listing fee 50% off for Valentine day! |
Hurry up! I went to check my ebay listing, and found this:
"| When is it? | | One day only, starting Wednesday, February 14, 2007 between 00:00:01 PT (12:00 AM plus one second on Wednesday, February 14, 2007) and ending that same day Wednesday, February 14, 2007 at 23:59:59 PT(11:59 PM plus 59 seconds). |
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I am not a professional ebayer, but I do go there time to time. What is it best for? Clean your house, reduce your burden before moving to another apartment..., and use the income to buy a cup of drink after a day of hard work. |
| posted by Jacqui @ 7:27 PM | Add to del.icio.us
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| Tuesday, February 13, 2007 |
| What shall I get for Valentine? |
My colleagues asked me this question, my husband asked me this question too.
Everyone knows that I am "chocolateholic", so chocolate is a no brainer.
But I told my husband,
" You do not have to give me the chocolate on Valentine's day. Go and get it on 15th, or the weekend after the Valentine. All Valentine chocolate will be on sale then. "
A friend screamed " That's not very loving".
Why not? He is buying me chocolate to show his love, I help him save some money to show my love. Love-love situation!
I am happy that I am not a designer-freak, or diamond-lover, or anything like that. Saves both of us a lot of money, energy, and potential for argument.
Happy Valentine! |
| posted by Jacqui @ 6:12 PM | Add to del.icio.us
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| Sunday, February 11, 2007 |
| My comment on paying for Grad School |
I started reading more and more on personal finance blogs, and found this "Moomin Valley: Personal Finance, Investing and Trading" really interesting. And since I had such a long, bitter experience in graduate school, I can't help commenting. I got emotional there. But I just can't help. And I can't help posting here in my own blog too.
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At 6:43 PM, Jacqui said... My husband and I share similar experience with you, and I agree with you that paying for graduate school is not a very good idea.
As you can see from our blog http://latestarters.blogspot.com, we started everything late (including blogging), partially due to the graduate student life. Going for PhD was a bad investment particularly for me, becuase I ended up with 3 masters:(
Even though I got full funding for all my 6 years in graduate school (in fact, I had 50K in saving by living frugally and saving every penny from the stipend and RAship), thinking of the opportunity cost, it is definitely a terrible investment.
I think that the worst thing of being in a PhD program, particularly in top school, is that I was "brain-washed". I felt that nothing was worthwhile other than writing a paper. I will get an A in financial economics, and put all my money in savings account, because I do not really have time to study the real financial market.
Now I am back to real life, and the things I learned in graduate school are not of much use on the job market. I thought I could look for a job in finance, but found out that I am too old. Those I-bankings or hedge fund would rather have a fresh BA with good math "intuitions" than hire an old "ABD" who can only derive some "trembling hand perfection" equilibrium (what a wired name!)
I hope it will be better for my husband. At least he got his PhD. But he is in a different filed. He has to go through postdoc, which means minimum wage for another year or two :(
Maybe I should encourage my husband to work in Industry. But then we get our visa problem. It might be easier to get green card if he stays in acadmia. He could have applied long ago, but...... he was brain-washed too.....
Yes, overall, I agree that it is not a good investment to get a PhD, unless you really feel passionate about it, or you feel that you can get Nobel Prize, or it is in Finance, law, medicine....
I do not really regret coming for the PhD program. That was the only way I could get funding. I just regret that I did not realize that I was not the academia type. I regret that I did not wake up early when I was suffering.
I guess that I get a little emotional here. Hopefully time will eat my bitterness away soon. Labels: Economics, personal finance, PhD |
| posted by Jacqui @ 3:48 PM | Add to del.icio.us
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| Friday, February 9, 2007 |
| Yannick's Confession |
Hello, this is Yannick. I am glad that I will be the first to cheer for my dear wife Jacqui. I am the one who had been a graduate student for 9 years. Stipends were not much, however, enough for a happy student for so many years.
"Knowledge is power". I learned these words of Sir Francis Bacon in elementary school and had thought that I was pretty powerful in all aspects of my personal life. Yet, it was until three years ago that I started to realize that I was really powerless in terms of finance, ie. had almost zero knowledge in personal finance.
So what did a "professional" student do? Right, started reading about personal finance, even in a busy graduate student's schedule.
Jacqui really encouraged me and introduced me to audible.com, where I got tens of wonderful books, not limited to finance topics. I highly recommend it besides financial blogs. :-) |
| posted by Yannick @ 7:56 PM | Add to del.icio.us
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| Welcome to Late-Starters' Journey to Financial Freedom! |
This is our 1st post, Feb 09, 2007. We are Yannick and Jacqui, a happily married couple, both in our 30's already.
We are Late-Starters --- on blogging and on the journey to financial freedom.
We have already learned a lot of personal finance "theories", we have been reading personal finance blogs for years, ... yet, we did not start practicing the "theories" till recently, we did not post our own blog till today..... We are truly -- Late-Starters!
We had a lot of excuses to start late.
We did not learn English till secondary school, so we were scared of writing blogs in English.
We came to America after college. America is a completely strange world to us, we needed time to adjust.
We were in graduate schools for 6/9 years. The stipend to graduate students were so low that we thought it impossible to practice those personal finance theories!!!
Now, after reading so many people's stories to financial freedom, we know that we should not wait any longer. We need to work hard on winning our financial freedom right away.
This is a diary of our journey to financial freedom. We want to use this diary to share our experience on the journey, to encourage people in similar situations, and to hear from people on the same journey. Let's help each other, late-starters can catch up! |
| posted by Jacqui @ 5:29 PM | Add to del.icio.us
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