Spouse must report her foreign income?

[bongos777 0]

Hello everyone. Shortly after she entered the US on a K-1 visa, I married my Filipino bride in July 2014. She received her Permanent Resident ('green') card about two months later.

I understand that we can file our 2014 tax return as "married filing jointly."

She has received very little US income during 2014, but she had income in the Philippines from her job there before she moved to the US.

What I don't understand is: is she required to report that income from the Philippines on our US tax return? The way I read the instructions for Form 1040, she does. But that would mean the same income is being taxed by two countries....which seems odd.

Anyone have any advice, or know where to look for clear information?

Thank you.

[Umka36 781]

I recommend starting here:

http://www.irs.gov/instructions/i2555/index.html

[Dohan 133]

If you use TurboTax to do your taxes, the guide there will ask you questions to determine that. Otherwise you can just ask your accountant. I've read through IRS forms numerous times and then it always turns out that there is even more loopholes

[Dave&Roza 748]

Hello everyone. Shortly after she entered the US on a K-1 visa, I married my Filipino bride in July 2014. She received her Permanent Resident ('green') card about two months later.

I understand that we can file our 2014 tax return as "married filing jointly."

She has received very little US income during 2014, but she had income in the Philippines from her job there before she moved to the US.

What I don't understand is: is she required to report that income from the Philippines on our US tax return? The way I read the instructions for Form 1040, she does. But that would mean the same income is being taxed by two countries....which seems odd.

Anyone have any advice, or know where to look for clear information?

Thank you.

Two options are to file MFJ or MFS. If you decide to file a joint return (MFJ) then you have a couple of options as to how to treat her income and it is based on when she entered the US and became a LPR--if she is a LPR. You can write a letter stating you and your wife want her to be considered a LPR for TAX purposed for the entire year and then you enter her income from the PI in US dollars and complete the return. She does need a SSN for this option. If she qualifies to be considered a non-resident alien (NRA) based on when she became a LPR, you can exclude her PI income--in your case I see she is a LPR for only 4 months so she does qualify to be a NRA unless you decide to have the IRS consider her a LPR for TAX purposes. Unless she made more than her standard deduction in the PI, it would benefit you to have her consdered a LPR for tax purposes and get the difference between the standard deduction and her income off of your taxes. My wife and I got married Decemebr 30th and we claimed her income as it benefitted us greatly to have her standard deduction take off my AGI amount.

You need to see which method causes you to owe the least amount in taxes and go with that method.

Dave

Edited January 30, 2015 by Dave&Roza

[jft 12]

We did exactly what Dave suggested with our 2013 taxes (we married in November 2013) and we claimed my wife as s NRA and thus was able to exclude all of my wife's income that year. The only gotcha is that you have to submit a sworn statement that you are claiming such which means you have to file on paper, you can't do it electronically.

[bongos777 0]

Thanks for the information. She qualifies as an LPR and we will file MFJ. The only thing I'm still not clear about is Form 1116 (Foreign Tax Credit). If I'm reading the IRS rules correctly, I believe we can file Form 1116 to exempt the wages she made in the Philippines from taxable income on our 1040.

We report her Philippines wages as regular income on the 1040 (converted into USD), but then use Form 1116 to exempt those wages from tax, since they have already been taxed in the Philippines.

But I'm just not absolutely sure I understand this correctly, the IRS information is somewhat contradictory....I realize VisaJourney is not really the place for serious tax advice, but if anyone out there could let me know if I'm the right (or wrong) track, I'd appreciate it.

[Anoushka Drew 5]

hi

My husband and I encountered the same issues. Before we submitted our taxes, we did a lot of reading from the IRS website.

We created a statement that the non-US spouse choose to become resident alien. Both of you should sign the statement.

We filed our taxes jointly and included my foreign income (convert it to pesos using the average price from the IRS website, but we choose 45 pesos for a dollar, it would not matter anyway since the exemption is $99, 200)

On form 1040 line 21, write 2555EZ, put a parenthesis for the amount which means less/deduction since it is considered an exemption provided it doesn't exceeds $99,200. (foreign income translated to US dollars)

Don't forget to add the same amount to your income.

Fill out the form 2555EZ.

I hope it helps.

[Dave&Roza 748]

Thanks for the information. She qualifies as an LPR and we will file MFJ. The only thing I'm still not clear about is Form 1116 (Foreign Tax Credit). If I'm reading the IRS rules correctly, I believe we can file Form 1116 to exempt the wages she made in the Philippines from taxable income on our 1040.

We report her Philippines wages as regular income on the 1040 (converted into USD), but then use Form 1116 to exempt those wages from tax, since they have already been taxed in the Philippines.

But I'm just not absolutely sure I understand this correctly, the IRS information is somewhat contradictory....I realize VisaJourney is not really the place for serious tax advice, but if anyone out there could let me know if I'm the right (or wrong) track, I'd appreciate it.

The foreign tax credit applies to those countries that have a tax treaty with the US. Not all countries do. So I had to claim my wife's income and not get the foreign tax credit.

Yes, you use the Form 1116 to deduct her income that qualifies for teh foreign tax credit which is all of i tunless she managed to make almost $100,000. Net result is you add her income and then deduct it, but you still get her standard deduction of $6,200 thus lowering your AGI.

Dave

[jft 12]

So now its one year later and my wife has no foreign income. Do I just remoke the examption on Form 2555 or do I need to attach a separate statement requesting to revoke it? If it makes any difference my wife had no income in 2014.