NOTE: Enter a lottery before Noon Sunday (03/25) PT, for a free download of TaxCut Premium (Federal + State + efile) , retail value of $64.99. at my other web site: http://www.latestartersblog.com!
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!
Welcome to Late-Starters’ Journey to Financial Freedom!
February 10, 2007 — latestartersThis 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!