2013 Taxes: Advice for Routine Situation

[Aaron and Marina 24]

I think I'm in a pretty routine situation here; just need a little assistance if anyone knows for sure and is able to assist. Here's the simple breakdown:

- Wife arrived on a K-1 Visa 4 Dec 13. Married 28 Dec 13. She received an SSN this year (2014) along w/the EAD/AP card. Green card was approved 9 Apr 14 but not received yet.

- For tax purposes, she worked in Russia from 1 Jan 13 to about 25 Nov 13, earning about $10,000

Since I'm in the military, not all of my pay is taxed. For 2013, it ends up being about $43,500 taxable. When running different scenarios on H&R Block, I come up w/the following:

- Married filing jointly: Refund is $2643 if I don't input her $10,000 Russian income (but this is pretty much not an option or legal...)

- Married filing jointly: Refund plummets to $1143 when I input her $10,000 Russian income! Straight 30% tax rate for her income?

- Married filing seperately: My refund is $1281

- Don't know what single is becuase unless I'm mistaken, we were married by 31 Dec 13 so it is not legal for me to file as single.

My questions:

- What are my options? I know I have to file married either jointly or seperately. It seems to me that filing seperately is the better way to go? However, can I claim this foreign tax exclusion I've read about? And if so, how in the H do I do it? What is this 1040NR and when is it required? Is using Turbo Tax the way to go for filing? Is it better to hire a good CPA do this?

BTW, I'm deployed right now, so I have an automatic 180 day extension to do my taxes from the time I leave, so I'm way good for filing my taxes.

Again, this is a pretty routine scenario I think: I made some money, wife made some money, what is the best way for me to go? The only difference I can see is she made more money than is "normal" which brings the refund down substantially, so maybe married filing separetly is the way to go, unless I can claim the foreign tax exclusion? Not sure how it works or if it's possible though.

I just want to be sure I'm doing things correctly and getting the most refund (I'm not worried about doing things w/the least amount of effort...what's legal/required and biggest refund)

Thanks all in advance!

Aaron

[christeen 966]

Married filing jointly... You can exclude the foreign income using the IRS form 2555 (up to 97k ) provided she meets the requirements for living outside the USA (220 days I believe)... But look p the 2555 and you can see if you qualify to exclude her income (it is what we did ) ...

[Aaron and Marina 24]

Married filing jointly... You can exclude the foreign income using the IRS form 2555 (up to 97k ) provided she meets the requirements for living outside the USA (220 days I believe)... But look p the 2555 and you can see if you qualify to exclude her income (it is what we did ) ...

Thanks...I was just reading about that a little more; it's actually a 330 day min which fits the bill since she arrived 4 Dec, so I think I can do that? Although I'll have to pay for the higher end tax programs to be able to do this I think. How did you all do it? File yourself, online program or CPA?

Edited April 20, 2014 by Aaron and Marina

[y3ll0w 0]

Yes, she should qualify for the 2555, I believe. I hired a CPA and he helped me. Don't forget to write the letter that you'll both sign. That letter will have to include your name, address, social security numbers, and a brief explanation that you both want her to be treated as a US resident for tax purposes for the year 2013. You'll have to sign it.

Some CPA's can attach 1 PDF on an efile. In that case, you could write the letter, they could scan it, and attach it in their federal efile. Others can't do that, so you'd have to mail it in with that letter attached. See what your CPA can do. Or you can do it yourself and mail it.

H&R block was really helpful for us, although we didn't actually use them. But they were knowledgeable.

Refer to Pub. 519 if you go to a CPA because some of them are unfamiliar with this rare situation.

[christeen 966]

Thanks...I was just reading about that a little more; it's actually a 330 day min which fits the bill since she arrived 4 Dec, so I think I can do that? Although I'll have to pay for the higher end tax programs to be able to do this I think. How did you all do it? File yourself, online program or CPA?

Then yes, you can use this 2555... I have always used HR Block deluxe edition for 10 years (as I have a small business ES too) but it has a question regarding foreign taxes and income so it did it automatically ... I have discovered that many tax preparers (seasonal ones at least) are clueless when it comes to tax and immigration issues... So I prefer the software and DIY as. Can answer the questions etc...

[Aaron and Marina 24]

Thanks for the replies. I just ran this through Turbo Tax and went through the entire foreign tax exlusion section very slowly. It said that my wife qualifies for the tax exclusion, but then comes out to $0 when I get to the end? I went over it again and again. Everything seems right but I can't figure out why it's $0....

[Aaron and Marina 24]

Thanks for the replies. I just ran this through Turbo Tax and went through the entire foreign tax exlusion section very slowly. It said that my wife qualifies for the tax exclusion, but then comes out to $0 when I get to the end? I went over it again and again. Everything seems right but I can't figure out why it's $0....

Ok...that's weird. I clicked on a tab, went all the way back to the beginning and it clicked and changed. It said that the $10,000 excluded. I guess it's good?

[christeen 966]

Yes, you want the taxable amount on the foreign income to be $0 that means none of he income considered for taxes...

[Aaron and Marina 24]

Turbotax is a little glitchy I think. Everything was input correctly/verified, but I had to go back to the beginning and input her income again, and then it changed. Also, Turbotax's refund is $497 off from what H&R Block says on their program. It's not like I think Turbotax is bad at all, just really odd. Maybe I should get a CPA when I get back or carefully do it myself w/assistance from the online programs