Simsim,

I am sorry I am going to be harse on you too. I know you are more disoriented than Rekha, at least she has done research and looking at the right section of the code and publication. She is more certain (51%) that she can not claim her niece as dependent.

 Read my comments on her excerpts in RED.

 

"I know she doesn’t qualify as a dependent child; question is whether she qualifies as dependent relative. 

From my understanding, to claim as dependent relative, she must meet following criteria

1. The person is:

a. A relative, or

b. A full-time member of your household.

2. He or she is a citizen or resident of the U.S. or a resident of Canada or Mexico. SHE DOES NOT QUALIFY FOR THIS TEST.

3. He or she did not file a joint income tax return with anyone else.

4. You provided over half of his or her support.

5. The person in question has less than $3,500 of income for the entire year.

- Now the real question is whether she in considered US resident for US tax purpose, IRS Pub 519 states -- You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2007. To meet this test, you must be physically present in the United States on at least:

 

1. 31 days during 2007, and

 

2. 183 days during the 3-year period that includes 2007, 2006, and 2005, counting:

 

a. All the days you were present in 2007,and

 

b. 1/3of the days you were present in 2006, and

 

c. 1/6 of the days you were present in 2005. 

 

- So it seems that she may be considered an US resident for tax purpose, but I am not clear whether substantial present test applies to a person in B1/B2. IT DOES NOT APPLY TO ANYBODY WHO IS IN TEMPORARY VISA. I WAS A STUDENT IN 2005 AND WAS PRESENT IN THE US FOR 365 DAYS BUT FOR TAX RESIDENCY TEST I WAS NOT PRESENT HERE A SINGLE DAY. WHY ? I WAS IN A TEMPORARY (EXEMPT) VISA FOR THE WHOLE YEAR.

THIS SUBSTENTIAL PRESENCE TEST DOES NOT KICK IN UNLESS SOMEBODY IS IN PERMANENT VISA SUCH AS H1/GREEN CARD or others)

 

- IRS Pub 519 -- Exempt individual - Do not count days for which you are an exempt individual. The term “exempt individual” does not refer to someone exempt from U.S. tax, but to anyone in the following categories.

1. An individual temporarily present in the United States as a foreign government-related individual.

2. A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially 3. complies with the requirements of the visa.

4. A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.

A professional athlete temporarily in the United States to compete in a charitable sports event.

- IRS Pub 519 doesn’t say anything about B1/B2, so I am not sure whether she is an exempt individual or not.

- IRS Pub 519 also says -- Closer Connection to a Foreign Country - Even if you meet the substantial presence test, you can be treated as a nonresident alien if you:

1. Are present in the United States for less than 183 days during the year,

2. Maintain a tax home in a foreign country during the year, and (SHE MAINTAINS A TAX HOME IN NEPAL AS SHE IS JUST A VISITOR IN THE US. SHE DOES NOT INTEND TO WORK OR PAY TAX IN THE US, AT LEAST HER VISA STATUS SAYS.)

3. Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

- So the conclusion, I’m confused and looking for some expert opinions. I KNOW THE TAX CODE IS NOT FAIR. FROM A FAIRNESS POINT OF VIEW I ALSO THINK SHE SHOULD BE ABLE TO CLAIM HER AS A DEPENDENT. BUT FROM TAX CODE POINT OF VIEW, SHE CAN NOT CLAIM HER AS DEPENDENT.

LET ME SHARE MY OWN EXPERIENCE. BEING ALREADY IN THE US FOR THE LAST 3 YEARS IN 2006, I WAS NOT ABLE TO CLAIM MY WIFE AS MY DEPENDENT WHO WAS IN F2. I HAD TO PAY TAX AS A SINGLE PERSON WITHOUT ANY STANDARD DEDUCTION. WASN'T MY CASE MORE VALID THAN REKHA'S TO CLAIM MY WIFE AS MY DEPENDENT?

THE TAX CODE IS NOT FAIR ESPECIALLY FOR THE PEOPLE IN F1/J1. 

If she had a social security number, you could claim her as a dependent illegally and reduce tax liability because the chances of getting caught is very slim (less than 1%) for tax audit. However, I don't think IRS will issue an ITIN number for a person who is in B1/B2 visa. If you don't have an ITIN number or social security number, you can not claim anybody in your tax return.

Anyway, I do not intend to offense both of you Simsim and Rekha.