Tax Question

[kolorin 2]

Hi guys,

We are trying to prepare our taxes for the year and still trying to figure out the best outcome. It's all so confusing! Oscar moved to the US in mid-October and has made about $21,500 in US dollars from his job in Mexico last year. I, his US Citizen wife, have made about $36,000. Right now we have the tax forms filled out as married filing jointly with the exclusion of his income? Without too much trouble, can anyone tell me from their experience if they think married filing separately would give a better return or if married filing jointly with the foreign earned income credit instead of the exclusion work better? Thanks in advance for any advice you have.

Oscar and Keri

[Lainie B 465]

Are you using Turbotax?

[kolorin 2]

My father uses H&R Block software I think. He is preparing it, and I've helped some but we are both still a bit confused.

[Nich-Nick 3,354]

Hi guys,

We are trying to prepare our taxes for the year and still trying to figure out the best outcome. It's all so confusing! Oscar moved to the US in mid-October and has made about $21,500 in US dollars from his job in Mexico last year. I, his US Citizen wife, have made about $36,000. Right now we have the tax forms filled out as married filing jointly with the exclusion of his income? Without too much trouble, can anyone tell me from their experience if they think married filing separately would give a better return or if married filing jointly with the foreign earned income credit instead of the exclusion work better? Thanks in advance for any advice you have.

Oscar and Keri

The only answer is to have your dad prepare 2 returns and look at the numbers. Everybody has a different tax situation and the only way to know is do both ways.

1. Married filing jointly- reporting your income and his foreign income and then excluding it.

or

2. Married filing separately (you); no return (him)--If he earned no income in the US in 2011 he does not have to file. You can not file single as you were married in 2011.

Things that usually make joint better.

Married filing separately is a higher tax category

You get more standard deduction plus an extra exemption for him but you won't be taxed on his income.

Rough example because there's more to taxes than a few simple math calculations:

Married filing separately

35,000 total income

-5,800 (1 person standard deduction)

-3,700 (1 person exemption)

_________

25,500 Taxable income

Look up on tax table and the tax for Married filing separately is $3404

(If this was a joint return, the tax for 25,500 is $2979) but there's more difference....

Married filing jointly

$35,000 her income

+21,500 his income

-21,500 his foreign income exclusion

$35,000 total income

-11,600 (joint standard deduction)

- 7,400 (2 person exemption)

_________

16,000 Taxable income

Look up on tax table and the tax for Married filing jointly is $1603

Your husband just saved you $1801.00

You may have other things on your return, but that will give you the simplest to understand example of the benefits of filing jointly when his income is going to be excluded.

Also let me say even if the new spouse earned $0.00 in 2011, you can still file jointly. I often read people saying we didn't file jointly the first year because I didn't work. Doesn't matter. Even if just one person had income you can file a joint return and get the benefit of the lower tax rate and the extra deductions.