Another Tax & AOS Question

[Ricca711 1]

Hello VJ'ers,

We just returned from getting our taxes filed at H&R Block. The tax preparer insisted that unless Samuel could show his green card that he is a non-resident alien. I did a significant amount of reading before we went and I even tried to show her the tax publication. She politely told me that she knew her job. My questions are: Will this come back to haunt us later, or should I leave this alone since we will receive a very nice refund?

Next question, I checked our AOS status today and the date was changed back to January 12th? Has anyone experienced this and what was the outcome?

Thanks,

Erika

[Mint518 0]

Hello VJ'ers,

We just returned from getting our taxes filed at H&R Block. The tax preparer insisted that unless Samuel could show his green card that he is a non-resident alien. I did a significant amount of reading before we went and I even tried to show her the tax publication. She politely told me that she knew her job. My questions are: Will this come back to haunt us later, or should I leave this alone since we will receive a very nice refund?

Umm... Did the tax preparer asked the date of entry of your husband to the U.S.? If he entered to the U.S. on 2008-06-15 (as shown in your timeline), I think he is a resident for tax purposes becasue he meets "substantial presence test " (He stayed in the US (i) over 31 days during 2008, AND (ii) 183 days during the period 2008 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006.

How did you file the tax return? Since non-resident alien cannot file joint tax return, both you and your husband filed "married filing separately"?

[payxibka 10,045]

she does not know her job.... there are two tests for resident alien... greencard and substantial presence...

What did you end up filing?

[Beebay 0]

He is a legal resident alien so long as he has an Alien Registration number (A#) and a valid SS#. Some of these so-called "I know my job" don't actually know what they are doing. You have the Tax Publication so don't worry or go somewhere else.

Hello VJ'ers,

We just returned from getting our taxes filed at H&R Block. The tax preparer insisted that unless Samuel could show his green card that he is a non-resident alien. I did a significant amount of reading before we went and I even tried to show her the tax publication. She politely told me that she knew her job. My questions are: Will this come back to haunt us later, or should I leave this alone since we will receive a very nice refund?

Next question, I checked our AOS status today and the date was changed back to January 12th? Has anyone experienced this and what was the outcome?

Thanks,

Erika

[payxibka 10,045]

He is a legal resident alien so long as he has an Alien Registration number (A#) and a valid SS#. Some of these so-called "I know my job" don't actually know what they are doing. You have the Tax Publication so don't worry or go somewhere else.

I apologize but only or simply having an SSN # and an A# is NOT a test to determine resident alien for tax purposes...

Edited February 1, 2009 by payxibka

[TBoneTX 45,313]

He is a legal resident alien so long as he has an Alien Registration number (A#) and a valid SS#. Some of these so-called "I know my job" don't actually know what they are doing. You have the Tax Publication so don't worry or go somewhere else.

I apologize but only or simply having an SSN # and an A# is NOT a test to determine resident alien for tax purposes...

I've read several of these "tax" threads and believe that confusion reigns, or at least conflicting and piecemeal information.

Hypothetically: Foreign fiancee reaches U.S. in 10/08, marries in 10/08, receives SSN, AOS was filed for and is in process (no green card). Foreigner had spent no time in the U.S. since 2004 or earlier.

1. Can the USC + Wife file "married-filing-jointly" as though they were a normal U.S. couple? If yes, what is the citation or precise source of your information? If no, what is the citation or precise source of your information?

2. If "no" to the above, what are the requirements to achieve "married-filing-jointly" -- include a letter in the 2008-filed-2009 tax return, saying that the couple wishes the foreign partner to be treated as a resident alien for tax purposes? Other?

3. If the letter for treatment as a resident alien is required, is it true that the foreigner's FOREIGN income (from the part of 2008 when not in the U.S.) must be included on the couple's joint tax return?

4. If the foreign income must be reported, on what IRS tax form must it be declared? How detailed are the reporting requirements, or is just a total figure required? What kind of supporting documentation is necessary? What happens if the IRS challenges the reported income figure?

5. If the foreign spouse's foreign income during 2008 was zero or close to it (unemployment, or business profit-&-loss that was a wash), what then -- are the extra paperwork steps above still necessary?

Anyone who answers, please cite the precise source of your information. This is for all readers of this thread. Thanks in advance.

Edited February 1, 2009 by TBoneTX

[Jesse and Hema 2]

she does not know her job.... there are two tests for resident alien... greencard and substantial presence...

What did you end up filing?

I agree.. And from personal experience I can say that H&R Block blows. You might get lucky and get a good agent, but it seems H&R will hire anyone that meets their minimum requirements. Nothing wrong with pursuing a second professional opinion, and you don't have to pay H&R money for a service you're not satisfied with...

[Nich-Nick 3,354]

This is for TboneTX

Publication 519 found at IRS.gov is the source of most information. This is the PDF version http://www.irs.gov/pub/irs-pdf/p519.pdf

Read the whole thing, all 72 pages of it. Like all govt forms, it's one-size fits the whole world, so it takes awhile to find what applies to you. I will point out some things having to do with your situation, so I suggest you open the PDF in a second window so you can jump back and forth. The problem you will encounter is this is the 2007 version of the publication and they don't have a 2008 version published. So when it says, "if you were married by Dec. 31, 2007", you've got to think 2008. I'm going to answer this based on the hypothetical case below, not every scenario.

I've read several of these "tax" threads and believe that confusion reigns, or at least conflicting and piecemeal information.

Hypothetically: Foreign fiancee reaches U.S. in 10/08, marries in 10/08, receives SSN, AOS was filed for and is in process (no green card). Foreigner had spent no time in the U.S. since 2004 or earlier.

Jump to page 4, chapter 1. That's where it starts telling about the green card test or substantial presence. Your wife has no green card and hasn't been in the US long enough to pass either test, so she is a non-resident alien. She hasn't earned any money in the US and doesn't need to file. That leaves Tbone "married filing separately." BUT he wants to file jointly for the tax advantage. Next....

1. Can the USC + Wife file "married-filing-jointly" as though they were a normal U.S. couple? If yes, what is the citation or precise source of your information? If no, what is the citation or precise source of your information?

Before you get lost in the pages following, jump to page 10 now. In the middle column there is a large bold heading Nonresident Spouse Treated as a Resident Two paragraphs following give you the rules. Tbone is USC, wife is non-resident alien but they can choose to be treated as US residents for the whole year and file jointly. Paragraph2 is where it tells you if you choose this, you must claim worldwide income for the whole year. That's any income wife earned in her country. Don't panic yet, because her income abroad can be excluded later under certain conditions.

2. If "no" to the above, what are the requirements to achieve "married-filing-jointly" -- include a letter in the 2008-filed-2009 tax return, saying that the couple wishes the foreign partner to be treated as a resident alien for tax purposes? Other?

3. If the letter for treatment as a resident alien is required, is it true that the foreigner's FOREIGN income (from the part of 2008 when not in the U.S.) must be included on the couple's joint tax return?

Still on page 10, top of column 3 is the heading How to Make the Choice That's where you get the details on the statement you must submit.

4. If the foreign income must be reported, on what IRS tax form must it be declared? How detailed are the reporting requirements, or is just a total figure required? What kind of supporting documentation is necessary? What happens if the IRS challenges the reported income figure?

Chapter 2 is full of every kind of income that would be reported. Remember to read the sections applying to Resident Alien now because Mrs Tbone has legaly elected to be that. Actually you can skim over that unless she had lots of income from things other than wages. Going to p 24 chapter 5 Figuring Your Tax - Introduction. It tells you that if you are a resident alien, then the rest of this publication is mainly dealing with nonresidents so use forms and instructions for regular US citizens.

Now you can close Pub 519 and look at the instructions for the Form 1040. PDF here http://www.irs.gov/pub/irs-pdf/i1040gi.pdf

See page 20 Income: Foreign Source Income. Paragraph 2 says If you worked abroad, you may be able to exclude part or all of your earned income. For details, see Pub. 54 and Form 2555 or 2555-EZ.

Here's Pub 54 in PDF http://www.irs.gov/pub/irs-pdf/p54.pdf Of particular note is page 6 where it repeats the Nonresident Spouse treated as a Resident information, but there's not a whole lot of important info in that publication.

5. If the foreign spouse's foreign income during 2008 was zero or close to it (unemployment, or business profit-&-loss that was a wash), what then -- are the extra paperwork steps above still necessary?

Here's IRS links to the Form 2555 and 2555EZ with instuctions. http://www.irs.gov/app/picklist/list/forms...bmitSearch=Find Take your choice and read the instructions. They are basically going to first try to determine if Mrs Tbone was a bonafide resident of her country. She was. They are trying to weed out the Americans who go on a short assignment to another country and try to exclude the money they earned abroad. You have to reside in the country by meeting certain criteria. Mrs. Tbone qualifies as a bonafide resident. If Mrs Tbone has basically no income, then don't even list it. Just press on like she's your US spouse who doesn't work.

Anyone who answers, please cite the precise source of your information. This is for all readers of this thread. Thanks in advance.

The only other info I can give you is I did my taxes yesterday for a Brit fiance/husband who also arrived Sept 30 and worked Jan- Aug in a normal Uk job. I used Turbo tax and I've sorted through the confusion. If you use TurboTax, here's a few pointers.

On the income part I entered my W2 info. Then you have to enter W2 info for Nick (UK). Well you get started by listing his income converted to US $. There's nothing to fill out but income, no other boxes like withholding, medicare, etc. At some point you say it is foreign income and you don't have a real W2 for him. So TurboTax asks if you need to complete a substitute W2 and takes you magically to another form 4852. I filled out the info on the US employer. It asks " How did you determine the amounts?" I said from UK payslip records and that pounds sterling were converted to US dollars. Next question says to to "explain your efforts to obtain a W2 from this employer." I said " None. It is a United Kingdom employer. They do not issue US tax forms." You have to remember this form would be for anybody that might not have gotten a W2 from a regular US company so it tends to read American. It's not strictly for a person with a foreign employer. So I answered best that I could.

Then Turbo Tax will ask if you want to exclude the foreign income and takes you magically to Form 2555. Skip all the part about her rent and excluding the cost of her residence. It's not something you exclude. Foreign income up to $87600 can be excluded. That's for a whole year in the foreign country. Somewhere TurboTax asked when Nick left UK or maybe it was enter US. Anyway that's because they determine he only was a UK resident about 3/4 of the year. So they use the dates and only give him 75% of that $87,600 exclusion. Not a problem because he only worked 8 months of the year so was only reporting part of a year's salary. So using some hypothetical numbers, lets say Nick earned $40k in the UK. After you finish the substitute W2 and the Form 2555 for foreign income exclusion, the Tax return 1040 will look like this:

Line 7: will include my income plus Nicks $40k

Line 21 Other income: will have written in by TurboTax FORM 2555 and the amount will say -40,000

That's minus so it subtracts it off again.

Edited February 1, 2009 by Nich-Nick

[BTalley 0]

That's interesting, but I'm afraid confusion still reigns.

My sister (a tax preparer) and my regular tax preparer tell me that Svetlana cannot have her "worldwide income" magically disappear, as some believe, by using Form 2555.

The best she can do is to get a partial credit for the taxes paid in another country.

Example:

Svetlana paid 13% in income taxes in Russia.

I am in the 25% bracket in the United States.

Thus, Svetlana's income in Russia MUST be included on our return, but I can get a credit for the 13% already paid to Russia. So we have to pay 12% of her income to United States (25%-13%=12%).

As usual, there is no one-size-fits-all formula, and given your situation, maybe you can actually ignore the spouse's income earned abroad entirely.

But if you do that, and the IRS comes calling, you will pay much more later in interest and penalties than you would pay now.

[Nich-Nick 3,354]

To BTalley--

I'm convinced my scenario works for me as I've read all the publications cover to cover, so I personally am not afraid of an audit.

If you have read Pub 519, page 10 then you know that she can be declared a resident alien for tax purposes to allow you to file joint.

It is also my understanding that a non-resident alien status person can't file joint with a regular USC. So I'm assuming that you are going to elect for Svetlana to be a resident alien if you plan to file joint.

Now on to form 2555. Perhaps Svetlana doesn't meet the Bonafide resident of her country test. You have to read all the instructions of Form 2555. You can only know if her income can be excluded on your joint return by reading the instructions to the Form2555. If it sounds like it fits Svetlana, then ask you tax consultant to review it. Maybe they don't deal with this scenario all the time. Maybe she doesn't qualify for the 2555 for some reason, so she's going by the rules of a Non-resident alien. But if she's going by non-resident, then you can't file joint. I got that from this statement

Married Filing Jointly

Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year. However, nonresident aliens married to U.S. citizens or residents can choose to be treated as U.S. residents and file joint returns. For more information on these choices, refer to Nonresident Spouse Treated as a Resident.

My sister (a tax preparer) and my regular tax preparer tell me that Svetlana cannot have her "worldwide income" magically disappear, as some believe, by using Form 2555.

If Svetlana had a huge income abroad then what can be excluded is limited by Form 2555. The equivalent of 87,600 US dollars worth for a whole year can be excluded on form 2555, or that amount is reduced based on the number of days spent abroad in 2008. If she spent only half a year abroad, then only half of the 87,600 can be excluded. Turbox tax asked me for dates and determine the exact number of days and the exact percentage of that 87,600 that could be excluded. In our case it was more than enough to exclude everything he earned.

[Liam and Sam 2]

Does anyone have any idea what to do if your fiance had stocks in a foreign country (through their previous employer there)? We decided to get rid of them last March and no Australian taxes were applied because they were sold for less than he bought them for... and their tax year is a bit different than the US so technically he's already paid taxes on his income for part of 2008. Should we just ignore that part of things (considering they were sold for less than bought) and just count regular income he made through salary?

I would really like to file married and joint for a better chance of a refund but don't want to run into any problems because of the stocks. This is such a mess..

Oh and a BIG thank you to Nich-Nick for answering all of those questions - they were exactly what I was looking for. Did you do Turbo-Tax online or actually go out and buy the program?

[Jack and Barbara 0]

Hello VJ'ers,

We just returned from getting our taxes filed at H&R Block. The tax preparer insisted that unless Samuel could show his green card that he is a non-resident alien. I did a significant amount of reading before we went and I even tried to show her the tax publication. She politely told me that she knew her job. My questions are: Will this come back to haunt us later, or should I leave this alone since we will receive a very nice refund?

Umm... Did the tax preparer asked the date of entry of your husband to the U.S.? If he entered to the U.S. on 2008-06-15 (as shown in your timeline), I think he is a resident for tax purposes becasue he meets "substantial presence test " (He stayed in the US (i) over 31 days during 2008, AND (ii) 183 days during the period 2008 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006.

How did you file the tax return? Since non-resident alien cannot file joint tax return, both you and your husband filed "married filing separately"?

The bolded text is plain wrong. As Nich-Nick, said, read IRS publication 529 as it clearly states a non-resident alien can be trated as a U.S. citizen for "tax purposes" only. Both the USC and the non-resident alien must file a joint income tax return. I am confused where the misinformation comes from. The IRS publication, although long and boring, is clear. People need to do their homework before commenting wrong information.

[Nich-Nick 3,354]

I bought the program because I like to do a bunch of different scenarios and be able to go from one to another. And I also do my ex in-laws taxes for them. So owning the software is what I personally prefer. I only bought the Basic ($29.88) version because I don't itemize or need the extra deduction help included with the next level.

TurboTax was a little confusing to me until I figured out I had to pretend my husband had a W2 in the income part of the "interview". I skipped that part at first because he didn't have a W2, thinking his income would be put in using the Foreign Income part. All it did was take his off my income. The refund was almost $10K and I knew that wasn't right. So I had to go back and search around to see how to show his income on line 7 before it took it off on line 21. That's when I dicovered the whole substitute W2 which you can mark as foreign income.

You can read about the stocks in that Publication 519. It goes into all the types of income. I didn't read all those since Nick only had salary. Considering it was a loss rather than a capital gain, it probably wouldn't fit into a taxable category. But read the publication. I found reading the tax info from the IRS in detail gave me a good idea of what to expect in Turbo Tax. For instance I realized his income wasn't in line 7, but was deducted in Line 21 so I must have skipped a critical step. I had aleady read about being a bonafide resident of another country, so when those types of questions were posed by TurboTax, I knew how to answer.

If you get stuck on Turbo Tax, just PM me if you want to know what I did. Not claiming to be a tax expert, but I spent days reading and re-reading and highlighting relevant parts of lots of IRS published material until I felt I understood how I was going to proceed. And I've done my own taxes for decades, by hand before computer programs, so I'm somewhat used to IRS-speak. LOL. Maybe I should try to get paid for doing this...hahaha.

I just learn and focus on whatever is my situation at the time. A few years back I was super knowledgeable about Estate returns and deceased taxpayers. Now it's aliens. Next year will be way easier.

[Liam and Sam 2]

I bought the program because I like to do a bunch of different scenarios and be able to go from one to another. And I also do my ex in-laws taxes for them. So owning the software is what I personally prefer. I only bought the Basic ($29.88) version because I don't itemize or need the extra deduction help included with the next level.

TurboTax was a little confusing to me until I figured out I had to pretend my husband had a W2 in the income part of the "interview". I skipped that part at first because he didn't have a W2, thinking his income would be put in using the Foreign Income part. All it did was take his off my income. The refund was almost $10K and I knew that wasn't right. So I had to go back and search around to see how to show his income on line 7 before it took it off on line 21. That's when I dicovered the whole substitute W2 which you can mark as foreign income.

You can read about the stocks in that Publication 519. It goes into all the types of income. I didn't read all those since Nick only had salary. Considering it was a loss rather than a capital gain, it probably wouldn't fit into a taxable category. But read the publication. I found reading the tax info from the IRS in detail gave me a good idea of what to expect in Turbo Tax. For instance I realized his income wasn't in line 7, but was deducted in Line 21 so I must have skipped a critical step. I had aleady read about being a bonafide resident of another country, so when those types of questions were posed by TurboTax, I knew how to answer.

If you get stuck on Turbo Tax, just PM me if you want to know what I did. Not claiming to be a tax expert, but I spent days reading and re-reading and highlighting relevant parts of lots of IRS published material until I felt I understood how I was going to proceed. And I've done my own taxes for decades, by hand before computer programs, so I'm somewhat used to IRS-speak. LOL. Maybe I should try to get paid for doing this...hahaha.

I just learn and focus on whatever is my situation at the time. A few years back I was super knowledgeable about Estate returns and deceased taxpayers. Now it's aliens. Next year will be way easier.

Thanks so much for the info. I was reading through a couple of the other forums that you posted and you have some really good information. I tried to figure this all out quite a while back but there are soooo many options! The Australian tax year being something like June-July doesn't make it any easier. I am about to try and find out what average to use for the exchange rate - the Australian dollar fell apart right after he arrived in the US... I'd rather use a crappier exchange rate because I don't want to go over that exclusion limit. Ahh!! Heading over to TurboTax now...

[Nich-Nick 3,354]

Hello VJ'ers,

We just returned from getting our taxes filed at H&R Block. The tax preparer insisted that unless Samuel could show his green card that he is a non-resident alien. I did a significant amount of reading before we went and I even tried to show her the tax publication. She politely told me that she knew her job. My questions are: Will this come back to haunt us later, or should I leave this alone since we will receive a very nice refund?

Umm... Did the tax preparer asked the date of entry of your husband to the U.S.? If he entered to the U.S. on 2008-06-15 (as shown in your timeline), I think he is a resident for tax purposes becasue he meets "substantial presence test " (He stayed in the US (i) over 31 days during 2008, AND (ii) 183 days during the period 2008 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006.

How did you file the tax return? Since non-resident alien cannot file joint tax return, both you and your husband filed "married filing separately"?

The bolded text is plain wrong. As Nich-Nick, said, read IRS publication 529 as it clearly states a non-resident alien can be trated as a U.S. citizen for "tax purposes" only. Both the USC and the non-resident alien must file a joint income tax return. I am confused where the misinformation comes from. The IRS publication, although long and boring, is clear. People need to do their homework before commenting wrong information.

Just a little comment on this. The bolded text is true in the strictest sense. It's just that there is a loophole whereby the actual non-resident alien can get treated as a resident alien if they are married to a US citizen. So I think the bolded comment was to the original poster who was told by H&R Block that her husband was strictly non-resident, no exceptions. So if he was a strictly non-resident like H&R Block said, then they shouldn't have filed jointly. Makes H&R Block look a bit uninformed.

Edited February 1, 2009 by Nich-Nick