Instructions for filing taxes with spouse outside of the country

[jeremiah2911 0]

She qualifies as a bonafide resident and that's all she needs to qualify on. Remember this form is also for US citizens who may be working abroad, so they want to make sure they were really residents of a country or there for a long time and not just trying to exclude some income because they went to Canada for a month.

Has anybody mentioned for those spouses not holding greencards yet, you must write a statement saying you both wish for the non-resident alien to be treated as a resident alien for tax purposes. It's on page 10 of Pub. 519....third column I think.

I am curious as to how we would then fill out the foreign tax exclusion form considering the IRS still wants to know how long the "bonafide resident" has been in the US during 2010. I've been present in Canada for 315 or 320 days during 2010 but am I Canadian citizen and haven't been in the US much in years prior to 2010. IRS told me I do not qualify as a bonafide resident because I haven't been in Canada for 330 days during 12 consecutive months. I have been if I base it on a 2009-2010 12 month period but that is not what is being asked on the 2555ez form. They want the actual dates for 2010. Is there any way around this? It seems almost impossible to evade the rules if I am requesting to be treated as a resident for 2010 rather than a nonresident.

[jeremiah2911 0]

It doesn't matter where you are in the world, if you were married as of December 31st, you have to claim either "married filing jointly", or married filing separately".

Married filing jointly usually has the best tax benefits.

It seems married filing jointly doesn't have the best tax benefits if the foreign spouse made income in their native country and do not meet the physical presence or bonafide residence test requirement. I presume this is because the foreign nationale is requesting to be treated as a resident for the tax year and therefore has to meet the requirements? Were you able to find a way around this? So far, married filing separately seems the easiest. My husband and I would have to pay over $3,000 in taxes if we file jointly because I have visited the USA more than 35 days in 2010 although am a Canadian and worked in Canada since 1999. Thanks for your input.

[CarlosAndSveta 808]

I am curious as to how we would then fill out the foreign tax exclusion form considering the IRS still wants to know how long the "bonafide resident" has been in the US during 2010. I've been present in Canada for 315 or 320 days during 2010 but am I Canadian citizen and haven't been in the US much in years prior to 2010. IRS told me I do not qualify as a bonafide resident because I haven't been in Canada for 330 days during 12 consecutive months. I have been if I base it on a 2009-2010 12 month period but that is not what is being asked on the 2555ez form. They want the actual dates for 2010. Is there any way around this? It seems almost impossible to evade the rules if I am requesting to be treated as a resident for 2010 rather than a nonresident.

I think you have been given bad information by the IRS. Based on the information that you gave in the above two posts, you would definitely qualify for excluding some of your Canadian income on your U.S. tax return. Are you doing your return manually or are you using some type of tax software?

Edited February 26, 2011 by CarlosAndSveta

[jeremiah2911 0]

I think you have been given bad information by the IRS. Based on the information that you gave in the above two posts, you would definitely qualify for excluding some of your Canadian income on your U.S. tax return. Are you doing your return manually or are you using some type of tax software?

We were using turbo tax online but will file manually as I would need an ITIN to file jointly as a US resident. The first time I entered my income in turbo tax online it stated I wasn't eligigle for the foreign income exclusion because I was out of the country more than 330 days when I listed my visits to USA for 2010. I just redid it again tonight and it stated I was eligle and showed a return (although the return was lower than before I began to fil out the foreign tax exclusion). I find the online turbo tax to be glitchy and the IRS agents just read off the info available on their website. Perhaps a tax specialist would be best or the actual software?

What then qualifies be to be a bonafide resident of the foreign country when I am asking IRS to treat me as a US resident for the 2010 tax year? Do I then not have to prove that I am a bonafide resident during this tax year but just any 12-month period? If that's the case, then I do see how I'd qualify considering I've lived in Canada since I was born.

[CarlosAndSveta 808]

We were using turbo tax online but will file manually as I would need an ITIN to file jointly as a US resident. The first time I entered my income in turbo tax online it stated I wasn't eligigle for the foreign income exclusion because I was out of the country more than 330 days when I listed my visits to USA for 2010. I just redid it again tonight and it stated I was eligle and showed a return (although the return was lower than before I began to fil out the foreign tax exclusion). I find the online turbo tax to be glitchy and the IRS agents just read off the info available on their website. Perhaps a tax specialist would be best or the actual software?

What then qualifies be to be a bonafide resident of the foreign country when I am asking IRS to treat me as a US resident for the 2010 tax year? Do I then not have to prove that I am a bonafide resident during this tax year but just any 12-month period? If that's the case, then I do see how I'd qualify considering I've lived in Canada since I was born.

I work for the IRS so I want to apologize for you being given bad information when you called to ask your questions. If you haven't done so, I suggest you read IRS Publication 54. There is a section there devoted to the Foreign earned income exclusion. If after reading this information you still have questions I will be glad to try and answer them for you. Here is a link to the publication:

Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Abroad.

[jeremiah2911 0]

I work for the IRS so I want to apologize for you being given bad information when you called to ask your questions. If you haven't done so, I suggest you read IRS Publication 54. There is a section there devoted to the Foreign earned income exclusion. If after reading this information you still have questions I will be glad to try and answer them for you. Here is a link to the publication:

Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Abroad.

I have read the publication and from it I understood that I was a bonafide resident considering I've lived for many years in Canada as a citizen paying taxes as I currently do. When I called IRS, the agent referenced the publication and asked me several questions and said I didn't meet the bonafide or physical presence qualifications. I will go with what I understood the publication to mean.....and if they have an issue well then they can help me fix it.

Thanks for your assistance.

[fermat 32]

I'm also using TurboTax, married joinly. I had my income entered and I was set to get a $4500 refund. When I entered my wife's foreign income ~60,000, it told me I qualified for the foreign income exclusion. Yay. But then it told me I OWED $176. Where did my $4500 refund go?

[fermat 32]

As soon as I enter her foreign income, the "Starting ammount" in the tax summarry goes up $3500. Also, when filing jointly I don't get any deduction for Tuition? What the hell is going on?

I've attached photos of before and after I enter the foreign income. It definitely tells me I meet the criteria for exclusion. Where is this $3500 increase in my tax liability coming from?

I'm also using TurboTax, married joinly. I had my income entered and I was set to get a $4500 refund. When I entered my wife's foreign income ~60,000, it told me I qualified for the foreign income exclusion. Yay. But then it told me I OWED $176. Where did my $4500 refund go?

[fermat 32]

I'm obviously having problems with the web version. I'm hesitant to pay for the downloadable version. What makes you think it will be any better?

You can proceed on Turbo Tax without the SSN IF you are not electronically filing. You simply leave the foreign spouses SSN blank, and it will warn you, but it allows you to carry on without actually entering it.

I sent my papers off yesterday. Just follow the instructions, and use Turbo Tax 2010 - the actual PC DOWNLOADABLE SOFTWARE, not the website version.

[CarlosAndSveta 808]

As soon as I enter her foreign income, the "Starting ammount" in the tax summarry goes up $3500. Also, when filing jointly I don't get any deduction for Tuition? What the hell is going on?

I've attached photos of before and after I enter the foreign income. It definitely tells me I meet the criteria for exclusion. Where is this $3500 increase in my tax liability coming from?

Based on the information that you have given, the only thing I can think of that might be causing this is if in Turbotax, under personal information, you have indicated that your wife is a non-resident alien. If you file a joint return and either you or your spouse were a non-resident alien during any part of the tax year then you are not allowed to claim the American Opportunity Credit or the Lifetime Learning Credit. See pages 9 and 21 of IRS Publication 970 under the part labeled "Who Cannot Claim the Credit." Be sure to check your Turbo Tax data to make sure that Turbo Tax is not treating your wife as a non-resident alien.

[fermat 32]

At the part where I report foreign income, it asks me about that and I stated she was a resident alien, as we chose to be treated as such. But don't you think it is strange that my taxes went up although my income has not changed according to that summary?

Based on the information that you have given, the only thing I can think of that might be causing this is if in Turbotax, under personal information, you have indicated that your wife is a non-resident alien. If you file a joint return and either you or your spouse were a non-resident alien during any part of the tax year then you are not allowed to claim the American Opportunity Credit or the Lifetime Learning Credit. See pages 9 and 21 of IRS Publication 970 under the part labeled "Who Cannot Claim the Credit." Be sure to check your Turbo Tax data to make sure that Turbo Tax is not treating your wife as a non-resident alien.

[CarlosAndSveta 808]

At the part where I report foreign income, it asks me about that and I stated she was a resident alien, as we chose to be treated as such. But don't you think it is strange that my taxes went up although my income has not changed according to that summary?

Your spouse's income is included in determining the modified adjusted gross income (MAGI) that is used to determine the limitation, if any, on the education credits. But for education credits purposes your MAGI has to be more than $180,000 for a joint return before the credits are limited. I agree that it is strange how much your tax liability changed just by including your spouse on your tax return even though all of her income is non-taxable under the Foreign Earned Income exclusion.

[fermat 32]

Thanks for clearing that up. Finally, I see no reason why my tax liability should increase by adding my wife's income so long as the ammount is less than the $91,500 exclusion limit, and I'm glad you agree. So at least we should not use Turbo Tax online version, and I'm not sure if I trust the CD version for that matter. I will try TaxAct next and see how it goes.

Your spouse's income is included in determining the modified adjusted gross income (MAGI) that is used to determine the limitation, if any, on the education credits. But for education credits purposes your MAGI has to be more than $180,000 for a joint return before the credits are limited. I agree that it is strange how much your tax liability changed just by including your spouse on your tax return even though all of her income is non-taxable under the Foreign Earned Income exclusion.

[fermat 32]

I get the exact same thing in TaxAct. When I add my wife's foreign income, the income is excluded sucessfully. Taxable income does not change but the tax goes up about $3500.

Thanks for clearing that up. Finally, I see no reason why my tax liability should increase by adding my wife's income so long as the ammount is less than the $91,500 exclusion limit, and I'm glad you agree. So at least we should not use Turbo Tax online version, and I'm not sure if I trust the CD version for that matter. I will try TaxAct next and see how it goes.

[jeremiah2911 0]

I get the exact same thing in TaxAct. When I add my wife's foreign income, the income is excluded sucessfully. Taxable income does not change but the tax goes up about $3500.

If I were you, I'd try the downloadable Turbo Tax program considering everyone else's success with it. Me and my spouse most likely will go that route as the web version is glitchy and seems to have many limitations. THat's probably why it's much cheaper too. Paying an extra $30 for the download is still much cheaper than hiring a tax consultant or accountant! They wouldn't even touch our file because I didn't have an ITIN....which makes no sense considering it has to be applied for along WITH the tax return! haha

All the best.