Thousands of Indian citizens relocate to the United States each year for jobs, higher education, or permanent residence. However, most CPAs don’t understand the Dual-Status Alien filing rules, and treat every newcomer as a full-year resident or nonresident. This leads to incorrect tax filings, double taxation on Indian salary, disqualified deductions, and even IRS notices.
At Kewal Krishan & Co, we specialize in cross-border tax filings, especially for those who migrate mid-year. Our accurate dual-status filings ensure zero IRS penalties, maximum legal deductions, and full treaty benefits for Indian taxpayers.
What is a Dual-Status Alien?
Under U.S. tax law, a dual-status alien is someone who is both:
- A nonresident alien for part of the year, and
- A resident alien for the other part of the same year
This usually occurs when:
| Situation | Example |
|---|---|
| You moved to the U.S. on H-1B, L-1, F-1, or O-1 visa during the year | Rajesh came to the U.S. on H-1B in June 2025 |
| You met the Substantial Presence Test (SPT) after arrival | You stayed >183 weighted days in 2025 |
| You became a Green Card holder mid-year | You received GC in Sept 2025 |
Relevant IRS Forms & Code References
| IRS Form | Purpose |
|---|---|
| 1040 (Partial Year) | Report U.S. income as resident |
| 1040-NR (Partial Year) | Report nonresident income before arrival |
| W-2, 1099, 1042-S | U.S. income documents |
| Schedule OI (Form 1040-NR) | Overseas income reporting |
| IRC §7701(b) | Residency & dual-status definitions |
| Pub 519 | U.S. Tax Guide for Aliens |
Example Scenario
Priya, an Indian software engineer:
- Lived in India from Jan to May 2025, earned ₹12L salary
- Entered U.S. on H-1B on June 1, 2025
- Earned $90,000 from June-Dec 2025 via W-2
She meets the SPT, so she is a dual-status resident.
Tax Treatment:
- Indian salary (Jan-May): Not taxable, unless she makes 1st-year election
- U.S. salary (Jun-Dec): Taxable
- Must file: Dual-status return with 1040-NR as main form, attach 1040 as statement
Step-by-Step Filing Guide for Dual-Status Returns
Step 1: Determine Your Residency
Use the Substantial Presence Test:
- 31 days in current year AND
- 183 weighted days (Current year ×1 + Year-1 ×1/3 + Year-2 ×1/6)
If you pass the test after arrival, you are dual-status.
Step 2: Gather Income & Residency Documents
- Indian salary slips + Form 16
- U.S. W-2, 1099s
- Arrival date stamp or I-94
- Passport for tax residency proof
Step 3: Prepare the Dual-Status Return
- Form 1040-NR – Use this as your main return
- Attach Form 1040 – For resident portion only
- Cannot file jointly (MFJ); must file Single or MFS
- Standard deduction not allowed
- Itemized deductions (e.g., state taxes, charitable) are allowed
- Foreign tax credit (Form 1116) can offset Indian TDS
Step 4: File FBAR and FATCA (if applicable)
If you had foreign bank accounts or mutual funds during the year:
- FBAR (FinCEN 114): If balance > $10,000
- Form 8938: If total assets > $50,000 (Single) / $100,000 (MFJ)
Step 5: Choose 1st-Year Election (Optional)
You can elect to be treated as full-year resident by filing Form 1040, if:
- You’re married, and
- Your spouse is a U.S. resident or files jointly with you
But beware: you must report global income from Jan 1
Conclusion
Dual-status tax filing is mandatory for most Indians moving to the U.S. mid-year. Filing the wrong form (1040 only or 1040-NR only) leads to IRS mismatch, wrong refunds, and potential audits. A properly structured dual-status return keeps you compliant and minimizes your U.S. tax burden.
Call to Action
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant in the U.S., authorized as an Enrolled Agent to represent clients before the IRS. He assists Indian professionals with dual-status filings, Indian salary exemption, and foreign income reporting with full compliance under the U.S.-India tax treaty.
About Our CPA
Anshul Goyal specializes in cross-border U.S.-India tax filings. He helps H-1B, L-1, OPT, and Green Card holders legally reduce taxes, correctly file dual-status returns, and avoid double taxation with India.
Disclaimer
This blog is for educational purposes only and does not constitute legal or tax advice. Please consult a licensed tax professional for guidance specific to your situation.
Top 5 FAQs
1. Do I need to report my Indian salary on a dual-status return?
Only if you choose to be treated as a full-year resident or received income in the U.S.
2. Can I file jointly (MFJ) if I moved to the U.S. mid-year?
No, dual-status filers must file as Single or MFS, unless they make the first-year election.
3. Will I get the standard deduction as a dual-status filer?
No. You can only claim itemized deductions.
4. Do I need to file FBAR for Indian accounts held before I moved?
If the balance crossed $10,000 at any time in the year, yes.
5. Can I e-file dual-status returns?
Not always. Dual-status filings usually need to be paper filed with both 1040-NR and 1040.