Does foreign income count on the I-864 count?

[zatarra 1]

My dad and I are using TurboTax to take care of this and submit amended tax returns. We are having a very difficult time doing this without TurboTax telling us that I owe a hefty chunk of money to the IRS. It doesn't make sense because all the income is foreign and doesn't amount to more than $15,000 for any single year.

There were a few "qualifying questions" to make my income exempt from federal and state income tax. One of them was asking if I stayed in the foreign country for more than 330 days of the year. For one of the years, I only worked 6 months in South Korea. So I failed this qualification. It looks like the 330-day rule is not necessary, but it is one of the things that can qualify me for the tax exemption. There are other ways to qualify for this tax exemption, but we haven't figured it out yet.

Anyway, we've finally decided to talk to a tax professional that has experience in this kind of situation. Does anybody know why I'm having trouble making this work? Hopefully the tax professional will get things sorted out, but I just wanted to check back on here to see what advice I can get.

[BBCC 16]

Perhaps our own circumstances might help answer this question.

I am the USC and lived in the US while we were working toward her CR-1. In our case, I lived near the US-Canadian border. My employer is Canadian, however, my permanent residence was just across the border on the US side. I am a cross-border commuter. We file our IRS return each from the US, declaring Canadian-sourced income. We were concerned about whether I would be able to file as the sponsor on my spouse's I-864 in this case. We were completely open and indicated this on our I-864. In the end, the answer was Yes. They approved our I-864 with me as the sponsor.

Let me also point out that when you earn foreign earned income, you place these amounts on the same line was "Wages, Tax, Tips" that you do for any W-2, 1099 or other income.

The only difference is that there usually is not a W-2 to go along with it. At least, this is our case. You still include the foreign earned income amount there on that same line.

I won't go much into the tax aspects of this as I don't want to go off topic. But let me briefly state that you are allowed to get credit for foreign taxes paid in any one of three ways:
1) The well-known Foreign Earned Income exclusion (subject to a physical presence or substantial presence test, where you are living outside the US... wasn't an option for us as I lived in the US during the I-130/DS-260 processing)

2) Foreign Tax Credit (Form 1116....does NOT require you to live outside the US. You can reside in the US, earn foreign earned income and file the return within the US- this what we use)

3) Straight deduction. (If you own a home in the US, you are probably already itemizing your deduction. In this case, you can just toss any foreign taxes paid in with the itemized deductions)

The point of noting those three options above are to show that it is possible to live in the US, earn foreign income and still file as the I-864 sponsor.

The most important thing to keep in mind is that you need to have filed your IRS return from the US and not your foreign address. This is just one indication that you maintain your permanent residence in the US.

It perfectly legitimate to commute to locations outside the US from your US residence for the purposes of work and still file yourself as the sponsor for the I-864. I am not aware of any time requirements to be physically present in the US by USCIS or any other government agency involved in this process. Is anyone aware of this, otherwise?

As someone has already mentioned in this thread, you could and definately should file an amended return with your foreign sourced income as you are legally required to do so for all income worldwide, including that earned outside the US. You could probably file an amended return if there are any previously undeclared foreign earned income amounts from prior returns. You could also file those amended returns from your US address, indicating you are maintaning a permanent US residence, then submit these copies of your amended return for the I-864. For one of our tax years, this is what I did. Foreign Tax Credit, instead of the Foreign Earned Income exclusion, may make more sense since you are filing from the US. When you file the amended return, it is *possible* that taking credit for your foreign taxes paid will zero out anything due to the IRS and would incur no penalties or interest for any previously undeclared foreign income. BUT BUT BUT this is critically dependent on your own circumstances and of your amended return.

The only time we have had a problem with claiming the Foreign Tax Credit is when we had both US *and* foreign sourced income. If you study the Form 1116 used to claim it, there is a formula where you calculate what proportion of your total income is foreign earned. If you don't earn 100% of your income outside the US, then you are limited as how much Foreign Tax Credit you can claim. In other words, it is possible that the Foreign Tax Credit you end up with is less than the foreign tax you paid and you end up owning the IRS for part of your foreign income. This happened to us in the year my spouse landed and became a LPR.

Hope this helps.

Edited July 14, 2014 by BBCC

[pushbrk 12,910]

Actually, the tax aspects ARE the topic of the post you responded to, NOT whether the income will qualify the person as sponsor. They have the right idea though in that they have a tax question for a tax professional, not an immigration question for this forum. It's the question that's off-topic. Your answer simply doesn't answer the question in any meaningful way. Neither does mine, except to say they need a tax professional.

[zatarra 1]

BBCC, thank you for the thorough reply but I don't think you understand my situation. I'm filing amended tax returns for some periods of time in the past few years that I worked outside the US (South Korea and Japan). In S. Korea, I got paid by a S. Korean company and paid taxes to the S. Korean government. Now I'm currently working in Japan and it's the same situation. I just want to file the amended tax returns without having to pay more taxes to the IRS. This should be possible.

As for the I-864, obviously my employment history needs to match my tax info which is submitted with the I-864. Right now it doesn't, because I didn't know I had to submit tax paperwork when I worked outside the US. My dad will be the joint-sponsor, and he makes plenty of money to make up for my lack of employment in the US.

Anyway, your reply does have some useful info, so thank you. I'll share this with my dad and hopefully we can figure this out.

[BBCC 16]

Hi Zatarra,

My apologies if my post was confusing.

I had hope to explain how it is possible for you to get IRS credit for the income taxes you paid to both South Korea and Japan. In this way, it is possible that you will not owe any amount to the IRS when you file your return with them. The three ways I mention are how you can do this. Turbo Tax should help you explore each of these three options to see which method may result in a zero amount owed to the IRS.

In order to be the sponsor on your I-864 as the petitioner, you need both to meet the required income threshold for doing so and reside in the US. To do this, it was my intent to show how it is possible to file your IRS return as well as indicate your required US residency for the purposes of filing your I-864.

Good luck with everything!

[zatarra 1]

Hi Zatarra,

My apologies if my post was confusing.

I had hope to explain how it is possible for you to get IRS credit for the income taxes you paid to both South Korea and Japan. In this way, it is possible that you will not owe any amount to the IRS when you file your return with them. The three ways I mention are how you can do this. Turbo Tax should help you explore each of these three options to see which method may result in a zero amount owed to the IRS.

In order to be the sponsor on your I-864 as the petitioner, you need both to meet the required income threshold for doing so and reside in the US. To do this, it was my intent to show how it is possible to file your IRS return as well as indicate your required US residency for the purposes of filing your I-864.

Good luck with everything!

I'm sorry, I misunderstood what you were getting at. I will try to look into the things your mentioned and hopefully I'll find something that works.

For the I-864, we both need to meet the required income threshold? Are you sure? What is the threshold?

I'm finishing my job here in Japan in 2 weeks and returning to the US. I will most likely be unemployed when I submit my I-864. Is this going to be a problem? As I said before. My dad will be a joint-sponsor and I'm sure he meets the income-threshold.

[BBCC 16]

For the I-864, we both need to meet the required income threshold? Are you sure? What is the threshold?

The way the I-864 works is you need to first fill it out as the petitioner, even if you do not meet the income threshold or residence requirements.

If you don't meet either or both requirements, then you will designate someone who does actually meet those requirements. They will also complete their own I-864 and submit as the joint sponsor.

To see what the income threshold requirements are, see I-864P document. In it, there is a table where you look up the income threshold for the qualifying sponsor based on total household size.

So, no obviously, you don't both need to meet the income and residency requirements. Either you or a joint sponsor would do so.

Edited July 16, 2014 by BBCC

[zatarra 1]

I just read this from one of the recruiting websites that helped me get a job in Korea: http://www.footprintsrecruiting.com/teacher-community/news/7-tax-tips-expats

For all intents and purposes, U.S. citizens who have income from any source are required to file a U.S. tax return even if they live outside American borders. The only exception is for citizens whose income is below statutory filing limits. In 2012, these limits based upon filing status were as follows:

• Single: $9,750; if 65 or older, $11,200
• Head of Household With Dependent: $12,500; if 65 or older, $13,950
• Married Filing Jointly (Both Spouses): $19,500; if 65 or older, $21,800
• Married Filing Separately: $3,800

My income was less than the numbers listed here that apply to me when I worked abroad. So, I don't think I need to file a income tax return at all. I think I can forget about these amended tax returns and just go ahead and submit my I-864. Jeez, that's so relieving. Am I missing anything?

[Dave&Roza 748]

I just read this from one of the recruiting websites that helped me get a job in Korea: http://www.footprintsrecruiting.com/teacher-community/news/7-tax-tips-expats

For all intents and purposes, U.S. citizens who have income from any source are required to file a U.S. tax return even if they live outside American borders. The only exception is for citizens whose income is below statutory filing limits. In 2012, these limits based upon filing status were as follows:

• Single: $9,750; if 65 or older, $11,200
• Head of Household With Dependent: $12,500; if 65 or older, $13,950
• Married Filing Jointly (Both Spouses): $19,500; if 65 or older, $21,800
• Married Filing Separately: $3,800

My income was less than the numbers listed here that apply to me when I worked abroad. So, I don't think I need to file a income tax return at all. I think I can forget about these amended tax returns and just go ahead and submit my I-864. Jeez, that's so relieving. Am I missing anything?

You will need to submit PROOF that you were not required to file an income tax return. The USCIS worker has a check list and if the tax returns or a reason they are not included is not with your package, you will get an RFE for those tax returns. You will need to show your income and the information above from the IRS and state that due to your income falling below these limits, you are not REQUIRED to file an income tax return. Most people find it easier to submit back tax returns to the IRS and then submit tax transcripts to the USCIS to show that you complied with the US tax law. Even if you are required to FILE a tax return, the chances of actually OWING taxes is quite small as the limit for income earned in a foreign country that is taxable in the UIS is somewhere above $95K. YMMV.

Good luck,

Dave

Edited August 14, 2014 by Dave&Roza

[NikLR 13,227]

You will need to submit PROOF that you were not required to file an income tax return. The USCIS worker has a check list and if the tax returns or a reason they are not included is not with your package, you will get an RFE for those tax returns. You will need to show your income and the information above from the IRS and state that due to your income falling below these limits, you are not REQUIRED to file an income tax return. Most people find it easier to submit back tax returns to the IRS and then submit tax transcripts to the USCIS to show that you complied with the US tax law. Even if you are required to FILE a tax return, the chances of actually OWING taxes is quite small as the limit for income earned in a foreign country that is taxable in the UIS is somewhere above $95K. YMMV.

Good luck,

Dave

No you just need to submit a letter saying why you were not required to file.

[pushbrk 12,910]

Doesn't even need to be a letter. You can just hand write in the tax return section of the affidavit, "Not required to file. Income below threshold." It's more powerful than a letter, because the affidavit itself is signed under penalty of perjury.

[zatarra 1]

Great, that's simple. Thanks.