2010 Tax Return - Dual Status with foreign income

[EasternDE 35]

First my source:

IRS Site - Taxation of Dual Status Alien

Then a few facts:

- I arrived in the USA (as a K1) on March 29th 2010 and didn't leave since that

- My green card was issued on October 15th 2010

- I have no US source income for 2010 (not even related to US in any way)

- I do have french income (wage) for the whole year

After reading IRS site, I found I need to file a 1040 as a Dual Status Alien.

http://www.irs.gov/publications/p519/index.html

I will file with my husband (US citizen) and attach the "First choice statement"

According to the Taxation of Dual Status Alien section, I understand that I need to report my income for the time I have been a resident of the USA.

I understand that I do not need to report my income for the time I was not a resident as they are not US related.

Now, the question is: When did I start to be a Resident? The day I arrived or the day my Green Card was issued?

Any help or suggestion would be appreciated, especially for the people who still work for a foreign company even though being a US resident.

[YuAndDan 153]

Look closely at your green-card, it says "Resident Since" on it.

A K-1 is a NON-Resident until they adjust status and are approved for green card, at which point they are considered to be a Lawful Permanent RESIDENT, or LPR

[EasternDE 35]

Hmm good point, I never noticed that detail.

So I should report my income starting October 15th only...

Weird part is that in France, you stop to be a resident the day you leave (for tax purpose).

Well they care about where the job was performed. As it was performed in the US, they don't care anymore.

Therefore my incomes from the day I left and until the day I became a LPR fall into a void zone... I guess...?

[CarlosAndSveta 808]

First my source:

IRS Site - Taxation of Dual Status Alien

Then a few facts:

- I arrived in the USA (as a K1) on March 29th 2010 and didn't leave since that

- My green card was issued on October 15th 2010

- I have no US source income for 2010 (not even related to US in any way)

- I do have french income (wage) for the whole year

After reading IRS site, I found I need to file a 1040 as a Dual Status Alien.

http://www.irs.gov/p...p519/index.html

I will file with my husband (US citizen) and attach the "First choice statement"

According to the Taxation of Dual Status Alien section, I understand that I need to report my income for the time I have been a resident of the USA.

I understand that I do not need to report my income for the time I was not a resident as they are not US related.

Now, the question is: When did I start to be a Resident? The day I arrived or the day my Green Card was issued?

Any help or suggestion would be appreciated, especially for the people who still work for a foreign company even though being a US resident.

I think your best choice is to elect to be treated as a Resident Alien for the whole year and file a joint tax return with your husband. By making this election you will be taxed on your world wide income for the whole year but you can avoid double taxation by taking a Foreign Tax Deduction or Foreign Tax Credit on your French income. Look at page 9 of IRS Publication 519 - U.S. Tax Guide for Aliens. Here is a link but it is for preparing 2009 tax returns. Hopefully they will soon have the publication for 2010 tax returns.

Publication 519 - U.S. Tax Guide for Aliens

[EasternDE 35]

Ok so after more computing...

I will file with my husband jointly and choose to be treated as a resident for the entire year.

I will report all my incomes for the entire year.

Add 2555 EZ (foreign earned income exclusion) for the money I made the from 01/01/2010 to the date of my departure.

This time period is short (3 months), and therefore the amount I will be able to deduct is small.

I realized that filing a 2555 EZ is not always a good idea as it makes you to use a different tax worksheet.

So I will need to calculate both ways (with or without 2555 EZ) to see what's best.

Correct?

(I think I'm getting there finally...)

[CarlosAndSveta 808]

Ok so after more computing...

I will file with my husband jointly and choose to be treated as a resident for the entire year.

I will report all my incomes for the entire year.

Add 2555 EZ (foreign earned income exclusion) for the money I made the from 01/01/2010 to the date of my departure.

This time period is short (3 months), and therefore the amount I will be able to deduct is small.

I realized that filing a 2555 EZ is not always a good idea as it makes you to use a different tax worksheet.

So I will need to calculate both ways (with or without 2555 EZ) to see what's best.

Correct?

(I think I'm getting there finally...)

If you qualify for the Foreign Earned Income Exclusion that is great. You also might want to look into whether you would be better off not claiming the Foreign Earned Income Exclusion and seeing if you would be better off claiming a Foreign Tax Credit. I have no idea how the tax rates for France compare to those for the U.S.

[EasternDE 35]

In France, we will pay our income taxes for 2010 starting July 2011.

I probably won't have to pay any for just 3 months of incomes. So no tax credit for me.

Anyway, it's France, I'm pretty sure it will be less taxes here.

Thank you

[Nich-Nick 3,354]

Ok so after more computing...

I will file with my husband jointly and choose to be treated as a resident for the entire year.

I will report all my incomes for the entire year.

Add 2555 EZ (foreign earned income exclusion) for the money I made the from 01/01/2010 to the date of my departure.

This time period is short (3 months), and therefore the amount I will be able to deduct is small.

I realized that filing a 2555 EZ is not always a good idea as it makes you to use a different tax worksheet.

So I will need to calculate both ways (with or without 2555 EZ) to see what's best.

Correct?

(I think I'm getting there finally...)

This is a good plan. I don't understand why you think the Form 2555 isn't a good idea. Also you have to count all income you earned in 2010. You mentioned money was earned between leaving France and getting you greencard. That money doesn't fall into a void. It should be reported if you received it.

[EasternDE 35]

At the beginning of the post, I had it all wrong.

Well it would be this way if I would file alone as "Dual status" which would allow me to report only the income I earned starting the day I am a legal resident.

I called IRS and the agent told me that I actually wouldn't have to file for 2010 really...

But as I will have to file with my husband I need to make the "first year choice" and ask to be considered as a resident for the whole year.

Which made me thinking, do we really have to file jointly ? :x

[Nich-Nick 3,354]

Your choices are (if you earned no US money)

File jointly electing for you to be considered resident for tax purposes for the whole year

You: file nothing

Husband: files Married Filing Separately

Husband can not file single as he was married in 2010. You will find that Married Filing Jointly is a good thing money wise. His taxes will be less by adding you to the return and thus taking advantage of an extra person with only his income. I say that because you basically report yours, but it gets deducted via the 2555. If he has a lot of investments, it will affect his slightly if he has capital gains to report. So it's not always like add yours in and take it all away if you have a Schedule D to fill out. But if he figures his as Married Filing Separately, he will almost always find that filing jointly will be the best.

Figure both ways and choose the one that works out best. There is no requirement from the IRS that you file jointly.

[EasternDE 35]

According to the instructions of 2555 EZ, I can not deduct the amount that I have earned while being present in the USA.

Since I have been present since March 30th, the amount I will add to my husband is quite big. That is they key for my case I guess.

I kept receiving wage while being present in the US.

To my understanding, we have to file jointly for USCIS purpose.

In 2012, we will have to file for ROC.

Edited January 17, 2011 by EasternDE

[Nich-Nick 3,354]

According to the instructions of 2555 EZ, I can not deduct the amount that I have earned while being present in the USA.

Since I have been present since March 30th, the amount I will add to my husband is quite big. That is they key for my case I guess.

I kept receiving wage while being present in the US.

My interpretation: The income is "foreign earned", no matter when you received it in your bank account. Your residence abroad/tax home may have ended when you left March 30. That means you roughly spent 1/4 year abroad. The income exclusion is $91,500 but you can only take 1/4 of that ($22,875) as an exclusion, not the whole amount allowed for a full year abroad. The amount is figured as a percentage so thats why they count "days." So your tax home abroad was 89 days. 89/365 = .2438 therefore you only get to exclude up to 24.4% of that $91,500 maximum. If you earned more than that, then that's where some tax implications may come into your situation. Remember it's your income converted to US dollars. You will have to evaluate that vs husband's taxes as Married Filing Separately.

To my understanding, we have to file jointly for USCIS purpose.

In 2012, we will have to file for ROC.

USCIS does not dictate in any way how you have to file taxes. ROC wants proofs of co-mingling your finances. A joint tax return is just one way of many that you can show. You'll have a 2011 and maybe a 2012 together plus many other proofs by then. Don't pay higher taxes just because of your future ROC.

Edited January 17, 2011 by Nich-Nick

[EasternDE 35]

My interpretation: The income is "foreign earned", no matter when you received it in your bank account. Your residence abroad/tax home may have ended when you left March 30. That means you roughly spent 1/4 year abroad. The income exclusion is $91,500 but you can only take 1/4 of that ($22,875) as an exclusion, not the whole amount allowed for a full year abroad. The amount is figured as a percentage so thats why they count "days." So your tax home abroad was 89 days. 89/365 = .2438 therefore you only get to exclude up to 24.4% of that $91,500 maximum. If you earned more than that, then that's where some tax implications may come into your situation. Remember it's your income converted to US dollars. You will have to evaluate that vs husband's taxes as Married Filing Separately.

USCIS does not dictate in any way how you have to file taxes. ROC wants proofs of co-mingling your finances. A joint tax return is just one way of many that you can show. You'll have a 2011 and maybe a 2012 together plus many other proofs by then. Don't pay higher taxes just because of your future ROC.

Thank you very much for that confirmation.

That is what I understand too.

Phew I seem to have became a Tax expert in a few days. I guess it's kinda easy after dealing with USCIS.

I will have to do some calculation when I get my husband's W2 but I'm pretty sure that for us it will be better to file separatly, at least for this year.

[Liam and Sam 2]

Thank you very much for that confirmation.

That is what I understand too.

Phew I seem to have became a Tax expert in a few days. I guess it's kinda easy after dealing with USCIS.

I will have to do some calculation when I get my husband's W2 but I'm pretty sure that for us it will be better to file separatly, at least for this year.

Also note - you are allowed a personal exemption for your spouse if you file married/separate and the non-resident meets certain conditions: a) no income for US purposes b) cannot be claimed as a dependent on another taxpayer's tax return. The exemption definitely helps out if you're not filing joint.

The first year I did our taxes, we filed married/separate and I included a note that said "My spouse, <name>, a non-resident alien, had no income for US purposes in <year> and cannot be claimed as a dependent on another taxpayer's tax return. Accordingly, I am allowed a personal exemption for my spouse." Signed with my name and SSN For us it just worked out better; their tax year is also different so it was just too complicated to try and let the US tax his worldwide income when he'd only been in the USA for 3 months and hadn't been working. And not to mention he'd had just finished paying taxes in Australia that July.

[EasternDE 35]

Ok, I have used TurboTax to figure out my number.

TurboTax uses form 2555 and qualified me under the physical test presence.

What I am confused about is that under this test you only need to state your trips abroad during the period of 12months that I have used.

Basically because I was a resident of France for that whole period, it includes all my foreign incomes in the exclusion.

It doesn't sound right to me.

But it is the way that TurboTax suggests to use.

This is driving me nuts....

In case of an audit, would IRS understand that this is really complicated for us....?

Or could I see myself charged with crazy penalties and fees?