Tax Question

[kcmetzy 0]

I really want new flooring in our house, so I am already looking forward to getting a tax refund. However, I do have a couple of questions since this is the first year my husband has been here.

It seems that it would be more beneficial for us to file separately this year. My husband worked from January 1, 2008 - April 25th(ish), 2008 in Canada and from June until (what will be) December 31, 2008 in the U.S.

If we file separately, on his portion of the tax return will he have to include his Canadian income? For some reason, I thought that we would only have to include "world wide income" if we were filing jointly. Since we are wanting to file separately, is it still necessary?

We still want to file separately even if he does have to include his Canadian income. Filing separately, will he still be able to exclude his Canadian income using form 2555?

Sorry guys for already starting the tax questions!!! I'm just really anxious to get new hardwood floors!

[zyggy 9]

Do NOT file seperately unless it is absoltely necessary. Filing seperately is VERY rarely going to get you the better deal. SInce your husband will be a tax resident of the US, he must report his worldwide income whether you file as MFJ or as MFS.

Trust me, I 've been doing people's taxes for a long time and I would hope some of the older people on here would attest to my knowledge on this topic. Always file as MFJ unless a very good tax advisor does your taxes both ways and can prove to you that you'll get a bigger refund that way. It almost never does, unless you both have such extremely high incomes that your deductions phase out and it won't matter. The tax code is written to encourage married couples to file MFJ by building in some pretty big differences in terms of deduction and exclusuion amounts. Either way, you must report the Canadian income that he earned before he resided in the US, but can subesequently exclude it using form 2555. Even if one of my clients spouses was a lying, tax cheating scumbag in an earlier life and subsequently owes to the US Goverment, I always have them file as MFJ and file an injured spouse claim with the return so the other spouse is not affected and gets their money back. The difference in refund between that and MFS is that significant

Reporting the foreign income and subesequently excluding it will result in a slightly higher tax than if it was not reported (since you only subtract the tax amount from the excluded income from the tax amount on the total income. Unfortunately, it does not compute the tax on the total minus the excluded amount itself), but I guarantee you that it will be a better deal for you than filing as MFS. If you file as MFJ, you will get a bigger refund which may enable you to get some cabinets on top of the hardwood floors.

Who would you rather have your money, the government or you for your home improvements.

Edited October 17, 2008 by zyggy

[kcmetzy 0]

Do NOT file seperately unless it is absoltely necessary. Filing seperately is VERY rarely going to get you the better deal.

File as MFJ, you must report the Canadian income that he earned before he resided in the US, but can subesequently exclude it using form 2555.

It will result in a slightly higher tax than if it was not reported (since you only subtract the tax amount from the excluded income, not actually the income itself), but I guarantee you that it will be a better deal for you than filing as MFS.

I have plugged it in both ways on hrblock.com calculator and filing separately seems to give us the most return. I have no idea why...maybe because he is self employed and is taxed so highly as it is?!

The first time I did MFJ, included my income, included his Canadian income, included his U.S. income, excluded his Canadian income (2555) and we would owe $4,257 dollars in taxes. (We will have $5,000 saved by the end of the year). Leaving us with a total of $743 dollars left over. YUCK!

When I typed in MFS, included my husbands U.S. income, included Canadian income, excluded Canadian income (2555), the total he owed was $3,645. I would actually get $516 dollars back from my portion of the return. The total that we get back by filing separately (even including his CAD income) is $1,871.

When I typed in MFS, inputted my husband's U.S. income only (did not include CAD income), the total in taxes that he owes is only $3,272. On my part, I would still get a $516 return. The total that we would get back would be $2,244.

Maybe the program doesn't handle complex cases like ours. I don't know. Thanks so much Zyggy for helping me.

[zyggy 9]

Do NOT file seperately unless it is absoltely necessary. Filing seperately is VERY rarely going to get you the better deal.

File as MFJ, you must report the Canadian income that he earned before he resided in the US, but can subesequently exclude it using form 2555.

It will result in a slightly higher tax than if it was not reported (since you only subtract the tax amount from the excluded income, not actually the income itself), but I guarantee you that it will be a better deal for you than filing as MFS.

I have plugged it in both ways on hrblock.com calculator and filing separately seems to give us the most return. I have no idea why...maybe because he is self employed and is taxed so highly as it is?!

The first time I did MFJ, included my income, included his Canadian income, included his U.S. income, excluded his Canadian income (2555) and we would owe $4,257 dollars in taxes. (We will have $5,000 saved by the end of the year). Leaving us with a total of $743 dollars left over. YUCK!

When I typed in MFS, included my husbands U.S. income, included Canadian income, excluded Canadian income (2555), the total he owed was $3,645. I would actually get $516 dollars back from my portion of the return. The total that we get back by filing separately (even including his CAD income) is $1,871.

When I typed in MFS, inputted my husband's U.S. income only (did not include CAD income), the total in taxes that he owes is only $3,272. On my part, I would still get a $516 return. The total that we would get back would be $2,244.

Maybe the program doesn't handle complex cases like ours. I don't know. Thanks so much Zyggy for helping me.

That fact that he is SE should't impact the final refund since the marriage penalty was taken away a few years ago. Those calculators are very simplistic are more written for people with a straight paycheck with straight deductions and tend to break down with more complicated cases, especially with SE issues. Remember that with MFS, only one of you can take the deductions. The other pretty much takes nothing, that may be why you're getting such a difference in your calculations. You may be adding in half the deductions for each of you or splitting the deductions in some way instead of giving it to only one. Do your return both ways when you get your final return to prove to yourself that you did the right thing. Always pick the route that gives you the bigger refund. But I'm pretty sure it's going to be MFJ.

Edited October 17, 2008 by zyggy

[kcmetzy 0]

Do NOT file seperately unless it is absoltely necessary. Filing seperately is VERY rarely going to get you the better deal.

File as MFJ, you must report the Canadian income that he earned before he resided in the US, but can subesequently exclude it using form 2555.

It will result in a slightly higher tax than if it was not reported (since you only subtract the tax amount from the excluded income, not actually the income itself), but I guarantee you that it will be a better deal for you than filing as MFS.

I have plugged it in both ways on hrblock.com calculator and filing separately seems to give us the most return. I have no idea why...maybe because he is self employed and is taxed so highly as it is?!

The first time I did MFJ, included my income, included his Canadian income, included his U.S. income, excluded his Canadian income (2555) and we would owe $4,257 dollars in taxes. (We will have $5,000 saved by the end of the year). Leaving us with a total of $743 dollars left over. YUCK!

When I typed in MFS, included my husbands U.S. income, included Canadian income, excluded Canadian income (2555), the total he owed was $3,645. I would actually get $516 dollars back from my portion of the return. The total that we get back by filing separately (even including his CAD income) is $1,871.

When I typed in MFS, inputted my husband's U.S. income only (did not include CAD income), the total in taxes that he owes is only $3,272. On my part, I would still get a $516 return. The total that we would get back would be $2,244.

Maybe the program doesn't handle complex cases like ours. I don't know. Thanks so much Zyggy for helping me.

Those calculators are very simplistic and tend to break down with more complicated cases, especially with SE issues. Do it both ways when you get your final return to prove to yourself that you did the right thing. Always pick the route that gives you the bigger refund. But I'm pretty sure it's going to be MFJ.

I 100% believe you over a hrblock calculator any day! I just couldn't seem to figure it out! Thanks a bunch Zyggy!! :)